FTTH Business Case Changes

Fiber to the home seems to boost AT&T’s internet access market share by about 10 percent, AT&T has claimed. That is a big deal, as where telcos use digital subscriber line platforms, they tend to have about 30 percent installed base share, compared to cable with 70 percent. 

In an FTTH scenario, AT&T might get 40 percent of the installed base, reducing cable’s share almost immediately to 60 percent. 

Longer term, AT&T expects to reach installed base share closer to 50 percent, in areas where it uses FTTH and has been marketing for three full years. 

But that will require prodigious deployment of FTTH facilities. Traditionally, FTTH deployment by telcos has been limited enough that most cable companies still competed against DSL facilities. 

Some smaller telcos estimate it costs about $500 to $600 to pass a home with FTTH, in areas with the most-favorable economics. Costs to reach less-desirable areas might rise to as much as $1,000 per location. 

By most estimates, it costs up to $725 to connect to a subscribing customer’s location. 

So it might cost $1,325 per customer location to activate an FTTH account. The net cost could well be lower, in the future, for a number of reasons. As AT&T creates a denser optical fiber backhaul capability for its 5G network, that is likely to reduce backhaul costs for other use cases, such as business internet access and FTTH. 

Then there will be some impact from government subsidies for serving low-income customers or providing service in high-cost areas, beyond what traditionally has been available. On the demand side, internet service providers sometimes will see a $30 per month subsidy. On the supply side, there will be one-time subsidies for extending coverage, possibly in the $300 per location range. 

Also, the payback model for optical fiber access now is more complicated, with value being driven in part by non-consumer upside, such as 5G small cell transmission networks, edge computing and business broadband. 

The point is that payback for dense fiber networks is based on numerous value drivers, not just consumer broadband or commercial revenues. The subsidy regime has changed as well.