Middle mile providers: Complementary, not competitive

It was interesting to see news break last week that Qwest is considering, and I underline considering applying for broadband stimulus grant funding when the National Telecommunications and Information Administration (NTIA) and Rural Utilities Service (RUS) launch the second round. What's motivating them to take another look at going after funding is a change in rules about the definitions of "underserved" and "unserved" communities. We all know that when the NTIA and RUS launched the first round of broadband stimulus funding, Qwest along with fellow RBOCs actually joined other tier 2 ILECs (CenturyLink, Windstream and FairPoint) and cable MSOs sat on the sidelines.

Putting aside the last mile proposals for a minute, I think these same incumbents that are fighting could benefit from the "middle mile" network build outs that will connect the last mile networks to major Internet hubs and provide necessary backhaul. Of course, that's just not happening. Instead of working with these providers, they are just instead did what they do best--protest applications whenever and wherever they could with limited affect. Biddeford Maine-based GWI argues that its three ring binder middle mile network that spans the state could actually help the bankrupt ILEC FairPoint expand their broadband dreams.

"It doesn't have to be a threat," said GWI's president Fletcher Kittredge said in an NPR article. "If they involved themselves in it, and fully understand what the opportunities are for them, they could really make a lot of this."

Still, I can't help but see the irony in protesting middle mile network proposals. What's interesting is that many of these middle mile providers, who have been supplying connectivity their rural ILEC constituency long before the middle mile term was coined, tell me the real growth is coming from the incumbent carriers, cable operators and wireless operators that want either traditional TDM or IP-based connectivity.

One example of middle mile carriers that already sell capacity to large carriers is New York's Independent Optical Network (ION). Since 2004, the operator has run a SONET and DWDM network initially serving 13 local rural telcos in upstate New York. But like other middle mile providers such as Idaho-based Syringa Networks, ION is finding that more of its revenue is coming from larger carriers and even wireless operators. After facing a protest from Time Warner Cable, ION prevailed and won a $39.7 million broadband grant to complement its New York footprint with 1,300 additional miles of fiber network in Vermont and Pennsylvania.

"They pretty much protested everybody everywhere," explained Jim Becker, President and CEO of ION. "We understood why they did but it didn't make sense why a last mile provider was protesting a middle mile application. We're bringing middle mile to areas that those guys don't serve now so we like to think they could use us to expand their services." 

Not surprisingly, the only thing that Becker would reveal to me was that he was currently working with some big name operators for wireless backhaul. Wireless backhaul is an obvious opportunity where the incumbent carriers, especially those that have wireless assets and even standalone wireless operators (Metro PCS and T-Mobile Americas), could find that these middle mile providers could be an alternative source. Both AT&T and T-Mobile Americas publicly stated that they would need to increase their backhaul capacity with various methods. These middle mile providers no doubt would likely be happy to sell capacity to these carriers to connect into secondary markets where neither operator could justify installing their own facilities.  

But instead of seeing the opportunity in front of them, most of the incumbent carriers have done nothing yet but throw tomatoes at these applications. Instead of just getting in the way, I think the incumbent carriers should realize that the very thing they are protesting could be their ally. --Sean

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