Verizon "Spot Deploys" Fiber to Home to Drive Maintenance Savings

Sometimes, doing what is more expensive winds up being financially beneficial for an access provider. 

If you ask a network designed what costs more--installing new customer drops one by one or all at one time--the answer generally is that the "all at one time" approach is cheaper, per line.

Sometimes the more-costly approach actually winds up saving an access provider money, however.

In 2013, Verizon Communications eliminated 600,000 repair dispatches (truck rolls)  as a direct result of migrating customers served by copper access loops over to fiber access, saving more than $100 million for Verizon.

The idea is that Verizon replaces drops that experience repeated trouble calls, as needed. 

That raises an interesting point about fiber-to-home economics in rebuild areas where copper access dominates. 

The original justification for installing fiber to home networks was a combination of revenue upside and cost savings. So some areas were completely rebuilt, allowing Verizon to sell FiOS video services, for example, while reaping the benefits of lower maintenance costs.

But Verizon at some point concluded that the business case, given other alternatives for capital investment, was not so high as one expected. 

To be sure, the economics of a "whole network" rebuild arguably are better than a "rebuild individual lines if customers complain" model. When a whole network is upgraded at once, Verizon gains the ability to share costs, such as trenching, pole attachments and dispatch of crews to install drops.

Compared to that approach, the overhead costs for replacing single drips, as needed, are higher.

But the overall economics probably are better for the spot deployment business case, nevertheless. The reason is that there is no "video services" revenue upside in an area where copper replacements are done as needed, and strictly to reduce maintenance costs.

Oddly enough, the more-expensive spot deploy method is more financially efficient, since it avoids the cost of building facilities that would be stranded (no customer revenue from particular drops). 

So Verizon saves by avoiding stranded investment. It doesn't build facilities that will not generate a return. Those savings allow Verizon to come out ahead, financially, even when it has to spend more on each discrete new fiber to home drop.




1 comment

Popular posts from this blog

Voice Usage and Texting Trends Headed in Opposite Directions

Spectrum Fees, High Incremental Capex, Lower Value in Ecosystem Mean Historic Changes Might be Necessary

For Ting, Operating Costs are Key to Business Model