FTTH is Important, But Only So Important

One might be forgiven for overestimating the value of fiber-to-home networks; fixed network revenues in general or profit margins from fixed network business services. After all, the fixed network once drove 100 percent of revenue and all profit. 

Nobody seems to contest the notion that fiber-to-premises networks are the future. And an awful lot of investment activity now goes into building and acquiring access networks that are largely copper-based but could be transformed into fiber access facilities. 

It is undoubtedly the case that optical fiber, deployed quite deep into access networks, is the intermediate requirement for fixed network survival and relevance. Just as arguably, all that has to be kept in perspective.

For all the investment, and for all the value, fixed networks just do not generate all that much revenue in the connectivity business. It might seem that is the case to practitioners, but it is largely an illusion, in the context of the global business. 

The global connectivity business now is driven by mobile operations. 

Consider AT&T. Mobility generated most of the revenue and even more of the actual profits. At AT&T, about 11 percent of total revenues are generated by all consumer fixed network operations. 

Revenue generated from business customers on the fixed network represent about 19 percent of total revenues. So the fixed network contributes about 30 percent of total revenue. 

Mobility accounts for 70 percent of total revenue. 

source: AT&T data, Daniel Jones formatting 

source: AT&T data, Daniel Jones formatting 

Just as significantly, of the roughly $25.8 billion in profit, only about five percent of total profit was generated by all fixed network operations. 

Fully 95 percent of profits are generated by the mobile operations.

source: AT&T data, Daniel Jones formatting 

At Verizon and T-Mobile, mobility plays an even-bigger role. T-Mobile has virtually nil fixed network revenue, while Verizon in 2019 stopped reporting fixed network revenue altogether.

Perhaps that will help put FTTH into perspective. In a real sense, FTTH now is a niche within the global connectivity industry, because fixed network access operations are a niche within the industry. 

That is not to deny that, in any given segment, that segment is close to 100-percent of the importance of the connectivity business for those who are in that part of the business. 

Still, as important as the FTTH investment thesis remains, it might affect less than five percent of consumer service profits. The fixed network represents about 15.5 percent of total profits, with business customers contributing about 11 percent of the profit total. 

The point is that, despite all the important decisions service providers and investors have to make around FTTH, the whole fixed network supplies a smallish portion of total revenue. The fixed network remains important, but pales in comparison to the mobility business as a driver of revenue and profit.