It often is hard to determine when it is worthwhile to upgrade copper access facilities to fiber-to-home platforms, in large part because competitive dynamics, customer density and total investment (own copper and upgrade to fiber; buy copper and upgrade to fiber) costs vary so much.
In many cases, the financial upside comes not so much from operating revenue results but from equity value increase.
Fiber networks generally command higher valuations compared to copper networks. For example, while copper access lines from Lumen were acquired by Apollo Global in 2022 for about $1,154 per passing, the estimated value post-fiber upgrade ranged from $2,154 to $2,654 per passing.
The value of fiber assets can increase dramatically with higher customer take rates. A network with a 40% take rate may be worth roughly twice as much as one with a 20% take rate.
As a rule, the “average” cost of upgrading a telco copper access line to fiber is roughly $1,000 to $1,500 per passing (location), assuming 50-80 homes per mile, a suburban density.
Costs arguably are lower for urban densities and higher for rural passings. Financial return often hinges on population density and competitive dynamics, however. Assuming the presence of at least two competent internet access providers, the fiber upgrade of owned assets might assume revenue from half to less than half of passed locations, since the other competent competitor will roughly take half the market share.
For such reasons, many independent ISPs choose to build only in parts of any metro area, while many incumbent asset owners will tend to follow suit. In other words, it might generally make sense to upgrade in urban and suburban areas (often focusing on single-family residences) while delaying or finding different platforms for rural and ex-urban areas (fixed wireless, mobile substitution, satellite).
But the key point is that the financial opportunity is to rebuild networks for fiber access and boost take rates for those assets.
The cost per passing is one figure, but even after spending the money to upgrade to fiber, if take rates climb, the value of the assets still exceed the cost of acquisition and upgrade.
For Apollo Global, for example, the acquisition of “mostly” copper access lines from Lumen in 2022 was about $1154 per passing. Once upgrade for fiber access (boosting per location investment to between $2154 and $2654), and assuming take rates can be boosted to 40 percent, the financial value of the assets still grows.
Beyond those considerations, incumbent owners of copper access assets have other values to consider. Any telco that does not upgrade from copper to fiber likely cannot survive long term in the market when competitors do so.
So irrespective of the actual business case, any access provider that wants to remain in business must consider fiber upgrades. “You get to keep your business” is the strategic rationale, not “higher revenues, lower costs and higher profits.”
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