Financing FTTH deployment: Show us the ROI for FTTH

David Hashman, Knowledge Works LCC
02 Jun 2010
FTTH has always held the promise of delivering nearly unlimited bandwidth to the residential consumer.
Verizon has embraced FTTH deployment, as have a few other large telecommunications companies. It is also one of the technologies essential to meeting the US FCC's long-term broadband universal service goal of providing at least 100 million US homes with affordable access to 100 Mbps of download speed and at least 50 Mbps of upload speed.
But what if you don't have Verizon's deep pockets? How will you ever earn an ROI on your network investment? The cost for FTTH deployment continues to be a barrier for most "last mile" service providers and even some municipalities providing broadband service. Why? Insufficient demand has kept fiber and electronics costs from dropping as originally predicted, and labor costs -- which can account for as much as half of the total project -- are increasing.
FTTH deployment project costs tend to be heavily front-loaded because much of the infrastructure has to be put in place before the first customer can be connected. In a smaller, self-contained FTTH deployment, for example, the entire headend must be built and equipped as one of the first tasks. The bulk of the large-count backbone fiber often needs to be laid early in the project, running from the headend past all of the homes that will be initially served, at the very least.
In newer FTTH deployments, where all utilities may have to be placed underground, the expense of buying and installing equipment like conduit and handholes (the below-ground splicing enclosures for fiber that technicians can reach into but not enter) can increase the overall cost of the FTTH project by 25% or more. These costs are skewed, as well, to the early stages of the project since conduit in each open trench must be placed all at the same time, even if it is for future phases.
The most successful business model for FTTH deployment to date has been one that includes the assessment of an initial lot fee or "tap fee" per home to defray some or all of the construction costs of the network. It is easier to become profitable, remain so and earn network ROI under this scenario, since revenue streams need to support mainly the ongoing cost of goods sold without the additional burden of having to service large amounts of construction debt.


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