The upfront fees are patterned after water and sewer tap fees levied by most municipalities as one-time connection charges for services. With new construction, the network tap fee ideally is paid up front by the developer or builder and is passed on as part of the lot price or final home price. The last-mile service provider then connects each home as it is built, typically when other utility trenches are open to the home from the street.
Cost recovery and mitigating the FTTH deployment debt load
Cost recovery for the network build is essential, because even though fiber to the home networks can deliver substantially more value to the consumer, competitive pressure often precludes providers from charging more for their voice, data, video or other enhanced services. Even in new "greenfield" master-plan communities, which are ideal places for FTTH deployment, developers are often reluctant to include some or all of the cost of the network in the price of their lots or homes.
The major challenge is that a full network tap fee can range from around $1,200 to more than $4,000 per home, depending on the size and scope of the fiber to the home network, the technology used, what and how services are deployed and subscriber take-rates. Competition has a big impact on the size of the network tap fee. With competitive overbuilds, subscriber take rates can stay in the 20% to 40% range even with a superior service offering, which effectively spreads the total network cost over many fewer homes.
There are ways to mitigate at least some of these costs and possibly bolster network ROI, however. Here are some examples:
Having an exclusivity agreement or guaranteed services contract in place, for example, can raise take rates to 100%;
- Sharing trenches with other utilities can cut outside plant costs;
- Utilizing passive optical network (PON) technology can lower the total cost of fiber and equipment;
- Similarly, deploying an all IP-based service strategy can simplify the network and further lower costs.
- Nevertheless, the fact remains that the debt load for a Fiber to the Home network build is often too great for many last-mile service providers to take on and still remain viable.
So what is the answer? The most likely scenario to build out FTTH on a bigger scale than currently available is some kind of public/private partnership where public investment or other incentives spur the creation of additional private or open access public Fiber to the Home networks, especially in unserved or underserved areas. The federal government, for example, is hoping to stimulate these types of investments in local infrastructure by focusing a good portion of the $7.2 billion for new broadband initiatives contained in the American Recovery and Reinvestment Act of 2009 on middle mile aggregation projects. Depending on the specific project, the money could come in the form of grants or subsidized loans.