According to Brad Reed at Network World, the Yankee Group has been telling fiber-based Internet carriers in the U.S. that fiber penetration is much more important than grabbing average revenue per user. For this reason, the Yankee Group suggests that carriers start wholesaling the fiber out to smaller companies.

What’s interesting about this is that for years we in the U.S.have watched the rest of the industrialized world (with the notable exceptions of Australia and New Zealand) leapfrog us in the quality and penetration of broadband. According to the New York Times:

In Japan, broadband service running at 150 megabits per second (Mbps) costs $60 a month. The fastest service available now in the United States is 50 Mbps at a price of $90 to $150 a month.

In London, $9 a month buys 8 Mbps service. In New York, broadband starts at $20 per month, for 1 Mbps.

In Iceland, 83 percent of the households are connected to broadband. In the United States, the adoption rate is 59 percent.

One of the big differences between U.S. and them is the fact that many of the other companies have more competition among carriers, in many cases because larger telcos are required to offer fiber wholesale to resellers; the resulting competition drives prices down, leading to greater adoption, leading to faster speeds, etc. Why hasn’t the U.S. done this?

Mostly because in 2005, the U.S. Supreme Court ruled in the Brand X decision that cable operators are not required to open their broadband networks to other Internet service providers – specifically, they classified broadband as an “information service” rather than as a “common carrier” for communications. There are fewer regulations on information services than common carriers, and the political mood in Washington in 2005 was to trend towards deregulation, rather than regulation – which the FCC did.

This is why certain apartment complexes in Austin, for example, have only one choice for broadband.

On the other hand, other countries have ruled differently – that broadband Internet is a common carrier service.

The Yankee Group, however, has suggested that not selling broadband wholesale has been shortsighted for telecommunications companies, as it slows the rate of fiber adoption – even in areas of high population density.

"The copper networks that all broadband services rely on its more than 50 years old and it's dying," said Felten. "Soon or later it will need to be replaced with fiber. Fiber is the endgame and the telcos know it."

Reselling fiber may be slightly less profitable per user, but it is less risky, and it may increase the overall number of users – by creating lower prices through competition, by having multiple retailers increase product awareness through separate, overlapping marketing and advertising efforts, etc. Additionally, resellers can subsidize fiber rollout to a particular small market and focus all efforts there; a larger company might not do so, preferring to focus on only a few markets at one time, only rolling out fiber when they can be assured that enough people will buy the service to make it profitable. With wholesaling, they make a (smaller) profit immediately, and multiple retailers can market in multiple markets simultaneously.

Poor (or insufficient) broadband to the home is one of the things holding back adoption of remote computing and telecommuting. And while having people in the office may be easier from an IT perspective, it can hamper the business, as the added cost of floorspace for each employee may be a considerable factor as IT gets cheaper and real estate gets more expensive. So upgrading the public Internet infrastructure can be an overall good investment for private enterprises. The problem is, of course, that there are only a handful of companies that make decisions about U.S. broadband infrastructure – and quite frankly, your enterprise is not their problem.

Maybe that’s the best argument for allowing wholesale of broadband.