BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.
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SUMMIT COVERAGE Profting From Broadband At the 2013 Broadband Communities Summit in April, many presenters tackled the subject of making broadband a financially sustainable proposition. Here, three of the magazine's regular contributors recap their own Summit presentations and panels. Eight Customers Per Mile! By Steven S. Ross / Broadband Communities T oday's high cost of borrowing for FTTH builds scares many potential rural deployers. However, a look at the revenue side of the equation may change their thinking. You can build and proftably operate a fber network with as few as eight customers a mile even if lenders charge 10 percent interest on the money you need to build the system. Tis is not mainly a matter of cost cutting. Although economies and logistical tricks can cut the need for up-front cash by 10 percent to 20 percent, the real path to frst-mile fber is not on the cost side. It is in realizing revenue potential. Verizon has fgured it out. With an average monthly revenue per customer (ARPU) of more than $150 (and rising – it was $143 a year ago), Verizon enjoys a gross proft before overhead and marketing costs of at least $50 per customer per month. A rural deployer can play in the same league even if it cannot aford the upfront cost of developing and marketing hundreds of customer services and even if its marketing staf can ft into a single room or even sit at a single desk. Fully loading the loan payments, overhead, and marketing and operating costs (not including video content) for fber to the home adds costs of $10 to $50 per month per subscriber. Potential deployers think of that in a negative way – it eats up most of the extra proft from ofering new, high-margin services. But of 80 | BROADBAND COMMUNITIES | www.broadbandcommunities.com course the reverse is true: Te margin on these services is what allows the investment in the frst place. Raising money still isn't easy, in large part because Wall Street sees a quicker return on money spent expanding wireless capacity. Tus, investors penalize investment in fber and in other landline broadband technologies such as DSL and DOCSIS not because they are particularly bad bets but because wireless appears to be a better bet in the short term. In reality, revenue opportunities abound, even for providers serving just a few thousand premises with fber. Te revenue potential is high enough that even municipal systems can keep their low-price promise on basic services – broadband, voice and linear video – while ofering proftable custom services, each of which is used by a small percentage of customers. Tese are services that larger national providers cannot or will not ofer in small markets. Tese are also services that spur local economic growth. RETHINKING REVENUE Let's look at some of the revenue opportunities. As Figure 2 shows, getting close to $200 a month ARPU, on average, with close to an $80 monthly proft is at least conceivable. Tat's far more than is needed. However, some of that income will soon disappear, and some of the revenue produces little for the bottom line. | July 2013