Is Google Fiber a model for Municipal Networks?

Leo Bicknell bicknell at ufp.org
Mon Feb 4 17:05:30 UTC 2013


In a message written on Sun, Feb 03, 2013 at 09:53:50PM -0600, Frank Bulk wrote:
> Sure, Verizon has been able to get their cost per home passed down to $700

To be fair, Verizon has chosen to build their FIOS network in many
expensive to build locations, because that's where they believe
there to be the most high profit customers.  While perhaps not the most
expensive builds possible, I would expect Verizon's FIOS experience to
be on the upper end of the cost scale.

> Real-world FTTH complete overbuilds among RLECs (rural incumbent LECs) are
> typically between $2,000 and $5,000 per home served (that includes the ONT
> and customer turn-up).  Slide 13 of
> http://www.natoa.org/events/NATOAPresentationCalix.pdf shows an average of
> $2,377 per home passed (100% take rate).  You can see on Slide 14 how the
> lower households per square mile leads to substantially greater costs.  

Rural deployments present an entirely different problem of geography.  I
suspect the dark fiber model I advocate for is appropriate for 80% of
the population from large cities to small towns; but for the 20% in
truely rural areas it doesn't work and there is no cheap option as far
as I can tell.

> And for Verizon's cost per home passed: "Consider the total project cost of
> Verizon's FiOS, $23B, and then divide that not by the 17M homes passed (as I
> did), but with the actual subscribers (5,1M), This would result in a cost
> per subscriber of $23B/5.1M = $4,500."

But Verizon knows that take rate will go up over time.  Going from
a 5.1M -> 10M take rate would cut that number in half, going to the
full 17M would cut it by 70%.  Fiber to the home is a long term play,
paybacks in 10-20 year timeframes.  I'm sure wall-street doesn't want to
hear that, but it's the truth.

> Remember that Google cherry-picked which city it would serve, so it was able
> to identify location that is likely less challenging and expensive to serve
> than the average.  A lot of Google's Kansas City build will not be buried

True, but I think it means we've bound the problem.  It appears to
take $1400-$4500 to deploy fiber to the home in urban and suburban
areas, depending on all the fun local factors that effect costs.

Again, if the ROI calculation is done on a realistic for infrastructure
10-20 year time line, that's actually very small money per home.  If
it's done on a 3 year, wall street turnaround it will never happen as
it's not profitable.

Which is a big part of why I want municipalities to finance it on 10-30
year government bonds, rather than try and have BigTelco and BigCableCo
raise capital on wall street to do the job.

-- 
       Leo Bicknell - bicknell at ufp.org - CCIE 3440
        PGP keys at http://www.ufp.org/~bicknell/




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