How much impact will an additional 20 million U.S. fiber to the home lines deployed by telcos have on broadband market share? If past is prologue, telcos will find they get between 37 percent and 40 percent take rates for those FTTH facilities.
But that is almost certainly not going to mean a net gain of 37 percent to 40 percent. The reason is customer demand and displacement of existing copper-fed connections.
Assume take rates for copper DSL services are no higher than 20 percent to 30 percent, and primarily are purchased by cost-sensitive customers. What percentage of those value-conscious customers are likely to upgrade? Some, but not all, assuming speeds ranging from 100 Mbps on the bottom to 1 Gbps on the top end.
Instead, a good portion of the incremental new customers are likely to be former cable customers. All other things being equal, the value is likely to be greater upstream bandwidth on the new FTTH facilities, compared to cable offers.
All that noted, if new FTTH facilities are unlikely to exceed 40 percent take rates, and existing take rates are 20 percent to 30 percent, incremental market share is likely to grow by 10 percent to 20 percent.
That implies a net gain of no more than two to four million accounts, in those areas. True, the total take rates for FTTH might ultimately reach 40 percent, or eight million locations.
But not all that is an incremental gain, as the telcos already serve four million to six million locations in the areas where the new FTTH goes.
The growth will be quite welcome, to be sure, since telcos have been losing installed base for two decades. Growth of 10 percent to 20 percent will be important, but probably not a business model revolution, for AT&T and Verizon. Fixed networks overall contribute relatively light amounts of revenue, and even less profit.
Some other providers who possess only fixed assets might find the financial upside more important, since fixed networks generate 100 percent of revenue.
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