Industry Trend Analysis - Dig Once Positive But Details Crucial - MAY 2017

BMI View: Passage of Dig Once will positive for fibre investment in the US, as it would reduce the cost of rolling out advanced networks in the country. However, details will be crucial to ensure that it also benefits competition, and not just one provider in each market.

"Dig Once" is back on the legislative agenda in the US. The policy would mean that any time a new road or sidewalk is built, there would need to be a conduit, where fibre infrastructure could subsequently be run. This would avoid heavy disruption when telecoms operators are looking to roll out fibre networks. The policy has bipartisan as well as industry support, but details will be very important. Still, we believe the policy will be positive for telecoms investments in the US, but we caution that it is a very early stage in the legislative process, and might not come to pass.

Cable Dominates High-Speed Broadband
Technology Share Per Speed (%), 2015
Source: FCC, BMI

Fibre is very expensive to roll out, with much of that cost being in the initial phases. Dig Once would alleviate some of that initial pressure, and bring greater fibre investment to the market, with latest FCC figures (dating from end-2015) saying that fibre services only represented over 10mn of the 102mn fixed broadband subscriptions in the country. Telecoms operators have prioritised wireless services, first LTE and now 5G, and have a limited fibre footprint as they have decided not to upgrade a large part of their copper network. This means that cable operators have taken the lead in terms of fixed broadband connections, with close to 60mn, a domination which further increases the higher the broadband speed.

Both Investment And Competition Needed
Number Of Providers By Speed (%), 2015
Source: FCC, BMI

The lack of competition has meant that many areas are only served with one broadband provider, which is why the details of the Dig Once policy will be crucial. Having conduits will help investments but not necessarily competition, unless it is explicit that several providers can run their own infrastructure, as wholesale unbundling is not an option. The worry is that legislation will prioritise the first provider over the rest, or prevent municipal networks from running their own infrastructure against the current incumbents. Such an outcome will bring benefits to telecoms operators, whose costs will be reduced, but not to customers, as services will continue to be expensive and competition limited.