Yes, there are indeed situations where a second -- or third -- overlapping network can be financially viable. Especially if the local governing body changes the rules to make it easier for the new entrant.
In the CenturyLink case cited on Bill's original post, the City of Seattle changed the rules: it removed the requirement that CenturyLink provide service to the entire city. As Dudley's article notes:
I suspect that CenturyLink essentially gave the city two choices: remove the buildout requirement or "forget it -- we're walking away." Faced with this choice, the city agreed to CenturyLink's demands.
I also suspect that the city may have relaxed other obstacles, particularly pole attachment fees, street-opening fees, street-level equipment cabinet rules, and permitting requirements.
Of course these are just guesses on my part: I have no inside information about these negotiations. But an article about Google Fiber, written by the city's former Chief Technology Officer, bolsters my suspicion:
And speaking of Google I have a further suspicion: the city may be laying the groundwork for Google to enter the market with Google Fiber. The city no doubt understands that if Google ever applies for a franchise, it will expect the same deal that CenturyLink got.
As Google makes clear in its "Google Fiber City Checklist," it expects the city create a smooth process for such things as pole attachment permits ands street-opening permits. Although the checklist doesn't say anything about buildout requirements, that issue would certainly come up if Google ever applied for a franchise.
So why don't the incumbent cable TV franchisees sue the city if it changes the rules to make it easier for new competitors? Even if the city were to extend the same concessions to the incumbents, the incumbents would still have a case: their huge sunk costs resulting from compliance with the original franchise requirements.
Stay tuned. We haven't seen the end of this story yet.