The O-PPOE windmill

I feel like I need to provide some justification for the crusade against On-Premise Priority One Equipment (O-PPOE) that I launched in my last blog post.

Unfamiliar with O-PPOE?  See my 2006 blog post on the matter.  Here's a concrete example: your ISP installs a router worth $2,000 in your school as part of its service contract.  The ISP can charge you $2,000 for that router as part of a Priority One service, as long as it meets a bunch of criteria.

I've never liked it.  I have three main objections.

First, it's a waste of money.  The service provider can charge you the full cost of the equipment, but you only get to use it for the term of the contract, then the service provider gets the equipment back.  How is that more cost-effective than you buying the equipment?  It's only cost-effective because the E-Rate discount skews the calculations.

Second, the fee that service providers are allowed to charge is way too high.  The equipment can cost up to 67% of the total cost of the first year.  That doesn't sound unreasonable, but with a little algebra, I figured out that it means the one-time cost of equipment can be up to 24 times the monthly cost of the service.  So if you're paying $1,000 a month for a 10 Mbps Internet connection, you can pay $24,000 for a router.  That's a mighty big router. Way too big for a 10 Mbps Internet connection.

I've saved my biggest objection for last: one of the conditions is a total crock.  Here's the condition, as stated by USAC:

Must Allow Sharing of Facilities. The underlying concept of the on-premise Priority 1 approach is that service providers can choose to locate some of their own infrastructure at the applicant site if certain conditions are met. The FCC Order indicates that service providers must have the flexibility to make this infrastructure available on a shared basis to other customers, since such sharing arrangements can result in reduced costs. The applicant may be the only party using the equipment, but there can be no contractual, technical, or other limitation that would prevent the service provider from using equipment that would normally be shared in other similar arrangements with other customers. Applicants must be willing to accept the possibility that the service provider would use the on-premise Priority 1 equipment for additional customers.

Oh, please.  The main use of the O-PPOE loophole has been for ISPs to install a router in the client's building.  How is that router going to be shared?  The client is paying for the circuit to the ISP's NOC, and if I'm the client, I'll hit the roof if someone else's traffic is going over my circuit.  And why would an ISP want to daisy-chain clients?  OK, I could see back in the T-1 days in a remote area maybe it would make sense to deploy a NOC in a client's building to reduce mileage charges.

Wait a minute, though.  My ISP wants to put a NOC in my building (using my rackspace, electricity, cooling, conduits, etc.) to help them serve other customers, and then wants to charge me for the equipment?!  Hell, no!  You want to put your router in my building, in addition to buying your own damn router, you can damn well pay me a co-location fee.  That's the way it goes in "similar arrangements."  OK, maybe I'd let you have some free rackspace for a router to be shared with other clients (and even let you pull other clients' circuits into my MDF) if it means you're going to let me use the router for free, but I'm not going to let you charge me for your router.  There is no way I'm going to pay the full cost of a router, then only get to use it for 2 years, and over those 2 years I have to share it with my ISP's other clients.

And if we're talking about O-PPOE to run my district's WAN, all the objections above are doubled, plus I want to understand how I can be secure with someone else's traffic running through routers which are behind my firewall.

So the sharing that the FCC thinks could happen, and the resulting reduced costs, are illusory.  In the rare cases where infrastructure installed in a client's building will be used by outsiders, the client shouldn't pay for that infrastructure.

I have no problem with service provider equipment installed in a client location.  Sometimes it will be cheaper for a service provider to install equipment in a client's building.  In that case, there should be no charge for the equipment, since installing it is cheaper than not installing it.

I do have a problem with the E-Rate program subsidizing parts of a service provider's infrastructure that will be shared by ineligible entities.  And that is what O-PPOE is supposed to do: equipment partially funded by the E-Rate is supposed to be available to service provider clients that are ineligible for E-Rate funding.


O-PPOE is an ill-considered loophole poorly created for a single applicant which is now being abused by thousands of applicants. It's based on an idea of sharing which is fictional, but if it were true, would be a diversion of E-Rate funds to ineligible entities.

O-PPOE needs to go.