Big Test for Ting in Denver Suburban Markets
If Google Fiber so far has proven to be the biggest single disappointment among the ranks of overbuilders and proponents of greater local loop competition, it is hardly alone. There are some other “for-profit” overbuilders and perhaps a couple hundred not-for-profit municipal networks.
Among the more interesting is Ting, owned by Tucows, a provider of internet domain name registration services.
And though would-be municipal overbuilds seem to be gathering momentum, most such networks have worked in rural areas and small towns.
Also, so far, it appears that most such efforts peak at between 20 percent and 25 percent market share. Overbuilder Ting says it intends to get 50-percent market share in five years in it markets, an aggressive target that likely never has been reached.
Ting says it has been able to get about 20 percent share initially, in a number of its internet access markets.
“We expect to see 20 percent adoption amongst serviceable addresses in a year and 50 percent in five years,” Ting CEO Elliot Noss always says. That latter forecast likely is quite important.
Noss talks about “network cost per customer” in somewhat oblique ways. There is cost per passing and cost per customer. The former figure does not change with adoption. The latter figure is highly dependent on take rates.
“At these take rates we will be paying about $2,500 to $3,000 per customer and those customers will be worth about $1,000 a year in margin,” says Noss (Noss probably meant “revenue,” not “margin.”). That makes sense at about 20 percent penetration and network costs per home passed of about $500.
Getting 50-percent market share really changes the “cost per customer” of the network. At 50 percent (every other home is a customer), the per-customer cost of the network drops to about $1,000.
“So we think about $1,000 to $1,400, plus the install to build a home,” he said. That seems to imply the cost per customer at 50-percent penetration, with about $1,000 in network costs and then about $400 for activating a drop and supplying customer premises equipment.
You're not going to get that $1,000 down to $500,” he says.
All that implies a network cost between $500 and $600 per passing. That would be in line with network construction costs to build the municipal network in Chattanooga, Tenn.
So the basic math for any overbuilder doing a fiber to home network involves network capex of about $500 to $600 per location, and about $400 per activated customer location.
Against that are a couple major assumptions, including take rates and average monthly recurring revenue. At 50-percent take rates, an overbuilder should have a terrific business, even with average revenue per account as low as $70 a month to $90 a month.
At 20 percent longevity could be a key issue. So, all other things being equal, the keys for overbuilder success are capex control, ARPU and take rate.
Significantly, Ting also is entering new suburban markets in Denver, Colo. that are bigger than what Ting has attempted in the past.
Ting Internet continues to gradually add locations in Charlottesville, a town of 46,000.
Ting also is offering commercial internet access service in Holly Springs, N.C. a community of about 30,000.
Early in 2017 Ting saw commercial activations in Westminster, Colo., a town of about 102,000 people. And Ting also will be building in Centennial, Colo., a suburb of about 120,000 people.