Access to tax-exempt financing does not begin to explain the sizable rate differences between municipal and private cable providers. It explains only about one percentage point of the 20, 30, or 40 percentage points that private cable rates were above those of municipal systems.
Fiber Optic Network
Fiber-optic networks have been used for decades to transmit large volumes of traffic across the country. The economics of fiber networks have only recently allowed for connecting the fiber directly to the home, creating a fiber-to-the-home (FTTH) network. Much of the following information comes from "Municipal Broadband: Demystifying Wireless and Fiber-Optic Options."
If you are on the Internet, you are using fiber for some portion of your connection. Both DSL and cable modem system networks rely heavily on fiber for parts of their network, but the actual connection to your house (frequently called the 'last mile') uses copper phone lines or coaxial cable lines. The bottleneck generally occurs over the last-mile.
Neither phone lines or cable can offer the speeds we need to remain competitive in the digital economy. The CEO of AT&T admitted that DSL is obsolete compared to cable. DSL over phone lines is limited by distance; the signal degrades for those living more than 1 mile away from the central office. Even for those living close to a central office, the top speeds are not comparable to speeds commonly offered with an all fiber connection.
Cable systems tend to offer faster download speeds than DSL (especially those using the DOCSIS 3 standard) but cable systems use a shared network to cover the last mile. This means all the houses in the diagram to the right have to share bandwidth. In most situations, the loop is shared by hundreds of houses. If a few of them are hogs, everyone's performance suffers.
As more people go online and those online use more and more bandwidth, a shared cable system will not be able to keep up. This is why communities are increasingly looking toward full fiber-to-the-home networks. These networks are the most expensive over the short term, but the safest investment in the long term.
Community fiber networks around the country offer the fastest speeds at prices similar or below the prices we are currently paying for slower speeds. These faster speeds and affordable prices can be a lifeline for smaller businesses that cannot afford thousands of dollars per month for the faster connections generally available.
The FCC has recognized the unique benefits of all fiber networks [pdf] (page 76):
As broadband needs continue to grow, fiber emerges as the only last-mile technology capable of meeting ultra high-speed needs. So, any solution that brings fiber closer to the home by pushing it deeper into the network puts into place an infrastructure that has long-term strategic benefits.
Much like copper networks installed 100 years ago, fiber networks will be used for decades. Additionally, fiber networks are less expensive to maintain than cable or copper. Though fiber cables can be cut occasionally by accident - just as cable and phone lines can be cut, well designed fiber networks are redundant -- meaning a network has to fail in multiple ways to cause an outage. Some cities have gone years without a minute of downtime from fiber cuts.
Fiber is not half as fragile as some believe. When strung on poles in an aerial deployment, fiber is generally placed with strong steel cabling that prevents it from breaking even when a utility pole is severed at the base. In Burlington, VT, the fiber network has proven more resilient to utility pole accidents than the electrical network. Such networks have survived vicious ice storms, tornados, and hurricanes around the country.