What is the Value of a Copper Access Line That Cannot be Upgraded to Optical Fiber?

Some of us used to wonder what many telcos were going to do as they phased out their copper access facilities, since many are still covered by older laws mandating they provide service to any customer who asks for it. The problem is that those telcos must still have the means to provide service, even if they cannot use copper or optical fiber facilities. 

Wireless, in some form, always has been the only realistic alternative. Whether that is satellite service, mobile phone service or fixed wireless, untethered platforms might always be the only way to provide universal service in areas where a fixed network using cables is impractical. 

The latest advances allow standard mobile phones to communicate with low earth orbit satellites without any extra gear or software. 

Which still leaves us with the problem of how to value stranded copper assets, which are declining in value, especially when they cannot be upgraded to optical fiber, and as consumers continue to migrate away from use of fixed networks for voice services. 

Many potential fixed network “home broadband” assets owned by smaller telcos must use a blended valuation approach, as such firms generally own a mix of copper access lines that cannot be profitably upgraded to fiber-to-home; copper lines that can be upgraded as well as existing fiber lines that are operational.

Each asset has distinct valuation characteristics, with built fiber lines being the most valuable, non-upgradable copper lines the lowest valuation. 

The big U.S. telcos arguably always have grown more from acquisitions than from organic growth. Verizon, AT&T, Charter, Comcast and T-Mobile, for example, have done so. In the FTTH business, which always is capital intensive, there also is a “time to market” advantage. 

Building lines takes time. And even when built, take rates might remain in the 40-percent range. In other words, up to 60 percent of the assets are essentially stranded, with no revenue produced. So buying lines that do produce revenue (have subscribers on them) has lots of value. 

If building FTTH lines costs between $800 and $1200 per location, and we assume 40-percent take rates, the cost per subscriber can range from $2000 to $3000. 

If we add in marketing and acquisition costs, the full cost of provisioning a line with a customer on it can range from $2350 to $3700, assuming sales and marketing cost between $200 and $400 per sub, plus installation costs between $150 and $300 per subscriber. 

Scenario	Cost per Passing	Take Rate	Cost per Subscriber
Low Cost	$800	40%	$2,000
High Cost	$1,200	40%	$3,000
Average	$1,000	40%	$2,500

If that is the case, then it often makes sense to pay a premium to acquire customers and facilities rather than build them, if “buying rather than building” accelerates cash flow and also allows some additional economies of scale. 

When copper access lines are upgradable, there is additional upside. And even dwindling copper access revenues provide some amount of revenue and cash flow, even if they are declining assets. For providers who own mobile network assets, there additionally is the potential to serve former copper customers with fixed wireless access as well, as a longer-term alternative to using copper access. 

Eventually, that also will change the valuation of access network assets.

U.S. Cable Operators Will Lose Home Broadband Share, But How Much, and to Whom?

Comcast says it will lose about 100,000 home broadband accounts in the fourth quarter of 2024, a troublesome statistic given that service’s past-decade role in fueling company revenue growth. 

By most estimates, the U.S. cable operators will lose market share to other contestants to 2030. The issue is “to whom” the losses will occur. By volume, the shift to telcos is likely to be the biggest. Satellite access might gain, but the magnitude remains unclear. Share held by third-party independents might not change. 

ISP Segment	2025 Market  Share	2030 Market Share	Key Drivers
Cable TV Providers	58%	45%	Increasing competition from 5G fixed wireless Legacy infrastructure becoming less competitive Price pressure from new entrants
Telcos (Combined)	30%	38%	5G fixed wireless growth in suburban areas Fiber deployment acceleration Mobile/fixed service bundling
Satellite	7%	12%	LEO constellation maturity (Starlink, Project Kuiper) Improved latency and speeds Rural market penetration
Independent ISPs	5%	5%	Municipal networks growth Local fiber deployments Consolidation pressure from larger players

The issue is growing competition for new fixed wireless services on one end of the demand spectrum, plus fiber-to-home services on the other end. Put simply, fixed wireless seems to be taking market share from cable services among customers content to buy services offering 100 Mbps to 200 Mbps of downstream bandwidth, while FTTH is taking share among customers who want 1 Gbps or faster, and sometimes more upstream bandwidth. 

In my own case, I can get around 1 Gbps from both my hybrid fiber coax provider and a FTTH provider. That isn’t the issue. The HFC upstream runs at about 17 Mbps. The FTTH connection is reliably operating at 940 Mbps. 

And the point is not that I “need” 940 Mbps upstream. I don’t. The point is that upstream performance is 55 times greater for the FTTH provider than the HFC provider, at zero cost premium. 

For that matter, I don’t “need” 1 Gbps in the downstream direction, either. The point is that I wouldn’t consider buying any service operating at speeds less than 1 Gbps. It is not a matter of “need” but of preference or “want.”

Somewhat ironically, U.S. cable TV operators face almost the same issues as do telcos when pondering upgrades of their legacy networks. Traditionally, telcos have had to fund a complete replacement of their copper access networks with fiber-to-home platforms to support broadband services. 

And telcos have generally tried to be rational about the capital expenditures, generally deploying FTTH in greenfield areas (new home construction, for example). But that might only represent about one percent to two percent of housing locations per year. At that rate, it will take quite some time to complete a full transition to FTTH. 

Cable operators face the same dilemma. 

Telcos also have justified FTTH upgrades in neighborhoods where demand is greater and willingness to pay is higher. Cable operators might make the same decisions. 

And much hinges on changes in customer demand for symmetrical bandwidth and faster speeds, as there is a point where HFC cannot compete with FTTH (perhaps at about 10 Gbps). That might give cable operators about a decade of running room before a network replacement is required. 

That might assume that “typical” U.S. home broadband speeds reach 1 Gbps by perhaps 2026, with upgrades beyond that to 3 Gbps to 10 Gbps over a decade. 

But that also assumes the key issue is downstream bandwidth, not “symmetrical” or “more nearly symmetrical” bandwidth. Though most observers arguably do not believe upstream bandwidth symmetry is a huge issue for the near future, its importance seems likely to grow. The issue is whether demand for symmetry grows slowly or faster. 

Market demand for products sometimes is not based on “need” but “want,” and some users might already make buying decisions as though symmetrical bandwidth is preferable, even if no application currently requires it, and even if multi-user demands do not require it. 

source: ITIF 

So bandwidth demand beyond the capabilities of the HFC network will force a platform upgrade that telcos already have been facing with the upgrade to FTTH from copper access, even if HFC has a more-evolutionary path remaining, before a full platform shift is necessary. 

Cable operators have been able to gradually and incrementally upgrade their once-copper networks to hybrid networks featuring fiber backbones and retaining copper distribution. But a disruption is coming. No matter how far cable operators extend fiber closer to end user locations, increasingly more-difficult adaptations are necessary. 

Traditionally, the simple remedy was to replace coaxial cable in the backbone with fiber, which was fairly simple, as the rest of the network remained untouched. But moving in the direction of more-symmetrical bandwidth is tougher, requiring revamping all active elements of the copper network. 

High-split hybrid fiber coax networks allocate up to 204 MHz for upstream traffic, compared to only 42 MHz (USA) or 65 MHz (Europe) in sub-split networks. That represents as much as five times more upstream capacity compared to 42-MHz sub-split upstreams.

But even a high-split network will not be able to support symmetrical bandwidth, as FTTH systems now do. So long as customers do not demand symmetrical bandwidth, perhaps that is not an existential issue. 

But if the market shifts to a preference for symmetrical bandwidth, cable operators will, at some point, have to invest quite a bit more than they presently do in network capital investment, as they will essentially have to replace HFC with FTTH access networks. 

There also is a new wrinkle, namely that some demand for lower-bandwidth connections apparently has grown for fixed wireless alternatives. 

We can see that demand shift in statistics on home broadband net gains and losses. 

Company	Q1 2024 Net Broadband Subscribers	Q2 2024 Net Broadband Subscribers	Total Net Additions (Losses) Q1, Q2
Charter	(81,000) losses	(72,000) losses	(153,000) losses
Comcast	(38,000) losses	(34,000) losses	(72,000) losses
AT&T	Slight gains	Slight gains	Approximately 50,000 gains
Verizon	Minor losses	Minor losses	Approximately (50,000) losses
T-Mobile	226,000 gains	246,000 gains	Approximately 472,000 gains

Company	Net Change (Q3 2024)
Charter	-113,000
Comcast	-87,000
AT&T	+50,000
Verizon	+28,000 (Fios) plus 363,000 fixed wireless
T-Mobile	+415,000 fixed wireless

Verizon's Home Broadband Scale Gambit

Though some might criticize the debt implications or the strategy, there is a reason Verizon is pursuing an acquisition of Frontier: it is one way to gain scale in the home broadband market.

Consider that although all telcos trail the two leading cable providers (Comcast and Charter) in national market share (those two firms have at least 63 percent national share, Verizon has just nine percent share compared to AT&T at 23 percent share. 

That is a result of the smaller geographic footprint Verizon has, relative to AT&T, Comcast and Charter. 

ISP	Subscribers (millions)	Market Share (%)
Comcast (Xfinity)	32.1	32.6
Charter (Spectrum)	30.4	30.9
AT&T (Fiber)	22.6	23
Verizon (Fios)	9.2	9.3
Lumen (CenturyLink)	4.8	4.9
Cox	7	7.1
Altice USA	4.7	4.8
Other (including smaller ISPs)	1.6	1.6
Total	98.5	100

U.S. internet service providers compete on a geographic basis and not all providers face all other providers. Comcast and Charter, both cable companies, generally do not compete head to head. Neither do AT&T, Verizon and Lumen Technologies. 

But sheer numbers of homes and other locations passed vary as well, with Comcast and Charter passing the most U.S. homes. 

ISP	Estimated Homes Passed (Millions)
Comcast	60
Charter	55
AT&T	30–35
Verizon	15–20
Lumen	10–15
Frontier	10–15
Altice USA	8–10
Windstream	6–8

ISPs also generally count small business broadband accounts within their “home broadband” totals, as well. 

ISP	Estimated Homes & Small Businesses Passed (Millions)
Comcast	65–70
Charter	60–65
AT&T	40–45
Verizon	20–25
Lumen	15–20
Frontier	12–15
Altice USA	10–12
Windstream	7–9

Also, differences in “homes and businesses” passed by any single ISP’s network long have mattered for assessments of the degree of competition. For example, when looking at telco fiber-to-home competition for cable hybrid fiber coax networks, the actual degree of competition has been shaped by the huge cost of upgrading telco copper access networks to fiber. 

That has limited the actual degree of competition between telcos and cable companies for decades, as it rarely is the case that a given telco has FTTH deployed ubiquitously in all its geographies. 

ISP	FTTH Homes & Small Businesses Passed (Millions)	Total Homes & Small Businesses Passed (Millions)	FTTH as % of Total Passings
AT&T	25–30	40–45	60–67%
Verizon	17–20	20–25	80–90%
Lumen	5–7	15–20	25–35%
Frontier	6–8	12–15	50–53%
Windstream	3–4	7–9	35–45%
Consolidated	1.5–2	4–5	30–40%

Traditionally, the “best” data we have had on the market share positions of cable and telco competitors has come from Verizon areas, as that is were FTTH facilities are most-ubiquitously deployed. And in those areas, Verizon has been able to gain a bit more than 40 percent market share, while the local cable operator has been able to hold on to 45 percent to 55 percent of the market, with other independent providers holding generally single-digit shares but growing. 

In a growing number of markets third-party providers have targeted areas where telco FTTH is not available, and in such areas have generally been able to garner up to 20 percent share. 

In some instances, where a cable company mostly competes with a municipal fiber network, and the local telco has no appreciable residential and small business fiber coverage, the municipal provider tends to get 20 percent to 30 percent market share. 

Provider Type	Estimated Market Share (%)
Cable Company	60–70%
Independent ISP	20–30%
Telco (non-FTTH)	5–15%
Other ISPs	2–5%

The degree of “other ISP” market share is shaped by the coverage area selected by the attacking independent ISP. Generally speaking, such ISPs will choose portions of an incumbent’s territory to operate in, rather than overbuilding an entire city or town, for example. 

As in the case of telco-cable competition, that necessarily restricts the degree of head-to-head competition across an entire market area, and is reflected in the lower take rates we generally see when a cable company competes against any fiber provider that does not cover the whole local market.