Next Century Cities Initiative: One More Push Toward Marginal Cost Pricing

The Next Century Cities initiative was launched in October 2014 by 32 communities to speed up deployment of gigabit high speed Internet access. By July 2015, the member roster has grown to 151 members.

Though most of the group’s emphasis is on policy, the group does note the potential value of city involvement in directly building and operating middle mile networks.

Many states have regions where one or a small number of ISPs dominate the backhaul market. Building middle mile connections, most notably open access approaches that ensure multiple providers can use the infrastructure, will allow ISPs (particularly small private and community networks) to offer higher capacity connections at reasonable prices.

Replacing leased lines with state-owned fiber (the need for which will only increase) and adding extra capacity to lease to others may even be less expensive than continuing to lease lines from incumbent providers, Next Century Cities argues.

The point is that if a growing number of communities view Internet transport and access services as a form infrastructure like schools and roads, the way is opened for new forms of supply that necessarily affect access provider and app provider business prospects.

It is one more element of the marginal cost pricing dilemma that seems to pose a growing risk in the telecommunications business.

Simply put, if more and more providers price at marginal cost, not full cost, retail prices will tend to move, over time, towards zero.