Build Versus Buy is the Issue for Verizon Acquisition of Frontier

Verizon’s rationale for acquiring Frontier Communications, at a cost of  $20 billion, is partly strategic, partly tactical. Verizon and most other telcos face growth issues, and Frontier adds fixed network footprint, existing fiber access and other revenues, plant and equipment. 

Consider how Verizon’s fixed network compares with major competitors. 

ISP	Total Fixed Network Homes, Small Businesses Passed
AT&T	~70 million
Comcast	~60 million
Charter	~50 million
Verizon	~36 million

Verizon has the smallest fixed network footprint, so all other things being equal, the smallest share of the total home broadband market nationwide. If home broadband becomes the next big battleground for AT&T and Verizon revenue growth (on the assumption mobility market share is being taken by cable companies and T-Mobile from Verizon and At&T), then Verizon has to do something about its footprint, as it simply does not have enough ability to compete for customers across most of the Untied States for home broadband using fixed network platforms. 

And though Frontier’s customer base and geographies are heavily rural and suburban, compared to Verizon, that is characteristic of most “at scale” telco assets that might be acquisition targets for Verizon. 

Oddly enough, Verizon sold many of the assets it now plans to reacquire. In 2010, for example, Frontier Communications purchased rural operations in 27 states from Verizon, including more than seven million local access lines and 4.8 million customer lines. 

Those assets were located in Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, Wisconsin and West Virginia, shown in the map below as brown areas. 

Then in 2015, Verizon sold additional assets in three states (California, Texas, Florida) to Frontier. Those assets included 3.7 million voice connections; 2.2 million broadband internet access customers, including about 1.6 million fiber optic access accounts and approximately 1.2 million video entertainment customers.

source: Verizon, Tampa Bay Business Journal 

Now Verizon is buying back the bulk of those assets. There are a couple of notable angles. First, Verizon back in the first decade of the 21st century was raising cash and shedding rural assets that did not fit well with its FiOS fiber-to-home strategy. In the intervening years, Frontier has rebuilt millions of those lines with FTTH platforms.

Also, with fixed network growth stagnant, acquiring Frontier now provides a way to boost Verizon’s own revenue growth.

For example, the acquisition adds around 7.2 million additional and already-in-place fiber passings. Verizon already has 18 million fiber passings,increasing  the fiber footprint to reach nearly 25 million homes and small businesses​. In other words, the acquisition increases current fiber passings by about 29 percent. 

There also are some millions of additional copper passings that might never be upgraded to fiber, but can generate revenue (copper internet access or voice or alarm services, for example). Today, Frontier generates about 44 percent of its total revenue from copper access facilities, some of which will eventually be upgraded to fiber, but perhaps not all. 

Frontier already has plans to add some three million more fiber passes by about 2026, for example, bringing its total fiber passings up to about 10 million. 

That suggests Frontier’s total network might pass 16 million to 17 million homes and small businesses. But assume Verizon’s primary interest is about 10 million new fiber passings. 

Frontier has estimated its cost per passing for those locations as between $1000 and $1100. Assume Verizon can also achieve that. Assume the full value of the Frontier acquisition ($20 billion) was instead spent on building new fiber plant outside of region, at a blended cost of #1050 per passing. 

That implies Verizon might be able to build perhaps 20 million new FTTH passings as an alternative, assuming all other costs (permits, pole leases or conduit access) were not material. But those costs exist, and might represent about 25 percent higher costs. 

So adjust the cost per passing for outside-of-region builds to a range of $1300 to $1400. Use a blended average of $1350. Under those circumstances, Verizon might hope to build less than 15 million locations. 

And in that scenario Verizon would not acquire the existing cash flow or other property. So one might broadly say the alternative is spending $20 billion to build up to 15 million new fiber passings over time, versus acquiring 10 million fiber passings in about a year, plus the revenue from seven million passings (with take rates around 40 percent of passings). 

Critics will say Verizon could do something else with $20 billion, to be sure, including not spending the money and not increasing its debt. But some of those same critics will decry Verizon’s lack of revenue growth as well. 

But Verizon also sees economies of scale, creating projected cost synergies of around $500 million annually by the third year. The acquisition is expected to be accretive to Verizon’s revenue, EBITDA and cash flow shortly after closing, if adding to Verizon’s debt load. 

Even if the majority of Verizon revenue is generated by mobility services, fixed network services still contribute a quarter or so of total revenues, and also are part of the cost structure for mobility services. To garner a higher share of moderate- to high-speed home broadband (perhaps in the 300 Mbps to 500 Mbps range for “moderate speed” and gigabit and multi-gigabit services as “high speed”), Verizon has to increase its footprint nationwide or regionally, outside its current fixed network footprint. 

One might make the argument that Verizon should not bother expanding its fixed network footprint, but home broadband is a relative growth area (at least in terms of growing market share). The ability to take market share from the leading cable TV firms (using fixed wireless for lower speed and fiber for higher speed accounts) clearly exists, but only if Verizon can acquire or build additional footprint outside its present core region.

And while it is possible for Verizon to cherry pick its “do it yourself” home broadband footprint outside of region, that approach does not offer immediate scale. Assuming all else works out, it might take Verizon five years to add an additional seven million or so FTTH passings outside of the current region. 

There is a value to revenue Verizon can add from day one, rather than building gradually over five years.

Verizon Flips Assets: Selling then Buying Frontier Communications

Asset flipping in any business is not unheard of, but Verizon’s history with Frontier still seems instructive. In 2010, for example, Frontier Communications purchased rural operations in 27 states from Verizon, including more than seven million local access lines and 4.8 million customer lines. 

Those assets were located in Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, Wisconsin and West Virginia, shown in the map below as brown areas. 

Then in 2015, Verizon sold additional assets in three states (California, Texas, Florida) to Frontier. Those assets included 3.7 million voice connections; 2.2 million broadband internet access customers, including about 1.6 million fiber optic access accounts and approximately 1.2 million video entertainment customers.

source: Verizon, Tampa Bay Business Journal 

Now Verizon is buying back the bulk of those assets. There are a couple of notable angles. First, Verizon back in the first decade of the 21st century was raising cash and shedding rural assets that did not fit well with its FiOS fiber-to-home strategy. In the intervening years, Frontier has rebuilt millions of those lines with FTTH platforms.

Also, with fixed network growth stagnant, acquiring Frontier now provides a way to boost Verizon’s own revenue growth. The acquisition means Verizon’s FTTH  connections will jump from approximately 7.4 million to 9.6 million, a gain of about 23 percent in one fell swoop. And since home broadband is the primary revenue growth driver for fixed networks these days, that matters. 

source: Verizon 

There are other takeaways. As in the mobile communications business, where Verizon and AT&T, for example, had been focusing on urban footprints and customers, market saturation has forced both firms to plumb rural areas and customers as well as the mobile virtual network operator business and prepaid accounts, where the main focus had been postpaid branded accounts, market saturation has forced the major providers to search in new areas for growth. 

As a byproduct, Verizon might, in some cases, be able to leverage its new fixed network assets to support its mobile network as well (fiber backhaul, for example). 

It is possible there are other strategic considerations as well. T-Mobile, which started out with zero share of the fixed network home broadband market, now is growing based on its use of fixed wireless services provided by its mobile platform.

But T-Mobile is making its first steps towards adding some amount of fixed network access provided by cabled networks as well. For example, T-Mobile has partnered with EQT, a global investment firm, to acquire Lumos, a fiber-to-the-home platform.

T-Mobile also formed a joint venture with KKR, another global investment firm, to acquire Metronet, a leading fiber-to-the-home provider. That acquisition also will expand T-Mobile’s fixed network home broadband market share.

And while it has seemed unlikely that T-Mobile would contemplate moves such as acquiring Frontier Communications or other firms such as Brightspeed itself, that outcome--at least regarding Frontier--is closed. 

On the other hand, the pressure to grow footprint to grow market share remains intact. Brightspeed does appear to have substantial overlap with Verizon’s new fixed network footprint, but duplicated assets might be sold. 

And Verizon appears to face little danger of antitrust action were it to acquire additional fixed network assets, given its modest coverage of U.S. homes. By some estimates, prior to the Frontier acquisition,   

Verizon homes might have numbered less than 25 million, possibly as low as 20 million. 

That is far fewer than top Verizon competitors might claim. 

Comcast has (can actually sell service to ) about 57 million homes passed. AT&T’s fixed network represents perhaps 62 million U.S. homes passed. 

Charter already passes more than 32 million locations, including homes and businesses. 

CenturyLink never reports its homes passed figures, but likely has 20-million or so consumer locations it can market services to.

The point is that additional Verizon acquisitions of fixed network assets, to reach more U.S. homes, might not pose antitrust issues. The Frontier acquisition adds between five million to 10 million potential new fixed network locations (not all upgraded for FTTH, yet, and including business locations). That potentially increases Verizon’s “locations passed” footprint by as much as a third. 

Using Verizon’s recent assertion that, after the Frontier acquisition, Verizon will reach 25 million homes, Verizon would still have some ways to go before it passes as many homes as AT&T, Comcast or Charter, its larger fixed network competitors. 

Frontier is said to have a network reaching 15 million locations, including homes and businesses. A reasonable guess is that at least 10 million of those locations are homes. 

Most of those locations are arguably not good candidates for FTTH investment, which is why firms such as Verizon and Lumen sold off rural footprints in the past. 

If Verizon’s “homes passed” footprint, after the acquisition, is only 25 million, there remains room to add more homes by acquisition.

Brightspeed’s network seems to pass about 6.5 million locations. Most are homes, but not all. Assuming 90 percent are residential, that implies less than six million locations are homes. So even adding Brightspeed assets would only bring Verizon up to perhaps 31 million or so homes, still far less than reached by AT&T, Comcast and Charter. 

The point is that the strategy of selling off rural assets and re-acquiring them later, once a critical mass of FTTH passings and accounts have been created, seems a logical strategy. Verizon’s cost to acquire the Frontier footprint (not customers, but network passings) is north of $1,000 per location, and possibly in the $1500 per passing range. 

Many observers expect that the former Frontier FTTH passings will double within a couple of  years. At current take rates, that also implies a potential additional two million or more FTTH accounts being added. 

Asset flipping remains part of the connectivity business. But it is rare to see a seller reacquire its sold assets.

"Doom Loops" and Legacy Product Declines

It is not always easy to explain why some ideas and terms emerge at specific times in history. But some terms, including the “doom loop,” have emerged before. A doom loop is a self-reinforcing cycle of negative events that can lead to a catastrophic outcome. 

For long-time observers of the cable TV business, perhaps that phrase is current because a major cable operator now believes “the video product is no longer a key driver of financial performance.” 

source: Charter Communications 

That is a profound change for an industry known as “cable TV.” 

The “doom loop” is fundamentally caused by what Charter Communications considers an unsustainable video model.

We are familiar with the notion of the “vicious cycle,”  a situation in which one bad event leads to another bad event, which then leads to even more bad events. Then there is the phrase “death spiral,” referring to  a situation in which a company or organization is caught in a negative feedback loop, itself another phrase expressing a similar idea. 

In the environmental area, the 18th century Malthusian trap argued that population growth will eventually outstrip the carrying capacity of the environment, leading to widespread poverty and starvation. 

In recent decades we have heard about “the tragedy of the commons,” where individuals acting in their own self-interest deplete a shared resource. 

These days, we are apt to hear the term applied to the declining linear video subscription business. But we also have seen similar ideas expressed form time to time about specific companies in the telecom or connectivity business. 

source: NextTV, MoffatNathanson

One example of a doom loop is the Greek debt crisis. In 2010, Greece's government debt was too high and the country was unable to pay its debts. This led to a loss of confidence in the Greek economy, which caused the value of the Greek currency to plummet. This, in turn, made it even more difficult for Greece to pay its debts, and the cycle continued.

Another example of a doom loop is the 2008 financial crisis. The crisis began when the housing market in the United States collapsed. This led to a loss of confidence in the financial system, which caused banks to become more cautious about lending money. This, in turn, made it more difficult for businesses to get loans, which led to a decline in economic activity.

In the telecom industry, a doom loop can occur when a company's financial problems lead to service cuts, which in turn lead to customer losses, which further worsen the company's financial problems. This can create a vicious cycle that is difficult to break.

One example of a doom loop in the telecom industry is the case of Sprint. In the early 2000s, Sprint was one of the leading wireless carriers in the United States. However, the company began to struggle financially. 

In an attempt to save money, Sprint began to cut back on its network investment and service offerings. This led to customer losses, which further worsened the company's financial problems. Sprint eventually filed for bankruptcy in 2012.

Other leading firms also have experienced doom loops. MCI once was a leading provider of long distance services in the U.S. market, second only to AT&T. But MCI began to suffer as its shrinking long distance business was not offset by growth in local access services. MCI eventually was absorbed by Worldcom, which itself collapsed. 

AT&T faced the same problem, more than once. Its declining long distance business could not be countered by new revenues in local services. Eventually, after spinning off mobile, equipment manufacturing and Bell Labs assets, AT&T was acquired by SBC, which then rebranded itself as AT&T. 

Of course, a doom loop is not necessarily fatal for the company or industry in the loop. 

AT&T has a history of getting caught in doom loops. In the early 2000s, for example, the company acquired several large cable companies in an attempt to become a one-stop shop for telecommunications services and solving its local access business problem. 

However, the acquisitions were expensive and led to a significant increase in AT&T's debt. As a result, the company was forced to cut costs and lay off employees, which further damaged its reputation. In 2005, AT&T spun off its cable business.

Then AT&T decided to reimagine itself along the lines of Comcast, and acquired DirecTV and Time Warner assets. That required taking on so much debt that eventually AT&T had to sell off those assets to pay down debt. 

It perhaps goes without saying that such terms as “doom loop” only arise in connection with legacy businesses that are declining. 

By definition, growing businesses are in positive feedback loops; virtuous cycles or experiencing scale or network benefits. So you will not hear anyone applying such terms as “doom loops” to artificial intelligence.

How Much FTTH Investment Will Prove Excessive?

Some observers might note that there have been periods of overinvestment in various connectivity sectors since 1995, and in data center capacity to a lesser extent. 

Subsea capacity and competitive local exchange carrier segments in the 1995 to 2001 period come to mind, as well as low earth orbit satellite systems in the early 2000s as well. 

Global Crossing, Level 3 Communications, 360Networks, NorthPoint Communications, and Winstar Communications were a few of the subsea or CLEC firms that went bankrupt. 

In 1998 Teledesic raised $9 billion in funding to launch a constellation of 288 satellites, but filed for bankruptcy in 2002. In 1999, Iridium launched a constellation of 66 satellites to provide global mobile satellite services and was bought out  by Globalstar in 2007.

In 2000, Orbcomm launched a constellation of 28 satellites to provide two-way data messaging services. The company survived as a small participant in the LEO business.

In the mobile segment, Metropcs, Nextel and VoiceStream declared bankruptcy about the same time. 

And though data center capacity has in the past briefly been overbuilt, demand has relatively quickly absorbed the supply. 

Data Center Market	Years	Degree of oversupply
Northern Virginia	2015-2017	20%-30%
Silicon Valley	2016-2018	15%-25%
Frankfurt	2017-2019	10%-20%
Singapore	2018-2020	5%-15%

Some might ask questions about the sustainability of many fiber-to-home business plans now underway in the U.S. market. In the past, firms have come to grief when they borrowed too much money, were overly optimistic about their sales and revenues and faced too much competition. 

Consider one scenario where overinvestment in FTTH proves troublesome. Keep in mind that investment to create facilities does not mean customer acceptance. Lumen, for example, sells FTTH to about 26 percent of locations passed. Verizon has peaked at just a bit over 40 percent, as have most other telcos with FTTH footprints. The typical pattern is lower take rates when service is launched, with higher terminal rates after three years of marketing in any single market.  

While revenue sources for some ISPs with extensive FTTH networks will include revenue from business customers and wholesale operations, many ISPs are looking at payback models anchored by home broadband services with monthly revenues between $50 to $80 a month. 

Whether you believe that is sustainable for an ISP with 80 percent or greater market share and other revenue sources, questions begin to grow as the terminal market share forecasts in competitive markets dip towards 20 percent or 30 percent. 

Though there is certain to be huge disagreement about such forecasts, one might argue that the home broadband market is moving towards a much-reduced role for fiber-to-home platforms and a heightened role for mobile and other wireless access technologies, as the number and types of connected devices grows, with greater reliance on mobile or untethered access, and increasing ability to leverage mobile network assets to support both mobile and fixed use cases. 

Some rival platform executives might be more optimistic about their chances of competing with FTTH. Most customers, for example, do not buy the fastest-available services but rather “good enough” services that cost less. Also, we should expect every platform to continue to increase provided speeds over time. 

Some observers might expect satellite access to remain at no more than 10 percent. And though FTTH should gain, so will mobile-only and fixed wireless. Perhaps most in the “things will change, but not drastically” camp believe that HFC share (cable operator) will decline as more customers buy FTTH instead. 

Platform	2023 Market Share	2030 Market Share
Fiber to Home	15%	20%
Hybrid Fiber Coax (HFC)	60%	50%
Fixed Wireless	5%	10%
Mobile-Only	15%	20%

Fiber supporters will argue that FTTH will do far better, eventually perhaps representing 40 percent share of market by 2030, as all fixed network ISPs shift to FTTH platforms, including cable operators. In such scenarios, perhaps FTTH holds 40 percent share (including share of telcos, cable and independent ISPs). HFC could drop to 30 percent while shares of the other platforms share the rest of the market. 

The real sensitivity in the model is how fast new FTTH lines can be added by 2030, compared to how fast cable operators can continue to upgrade HFC service, or themselves switch to FTTH. 

The argument for FTTH is that it is the only futureproof platform for internet access. And while that might prove correct. But it might be a longer transition than many now expect.

NextLight Grabs 60-Percent Market Share Competing Against Lumen and Comcast

NextLight, the electrical utility owned internet service provider in Longmont, Colo. says it has gotten 60 percent take rates for its fiber-to-home service, with similar take rates among business customers, after gaining about 54 percent take rates after five years of operation. 

Should many other competitive ISPs achieve such success, incumbent telco and cable operator ISPs could face serious challenges. 

It has been conventional wisdom in U.S. fixed network markets that two competitors are a sustainable market structure, typically featuring one cable operator and the legacy telco, with market shares ranging between a 70-30 pattern (where the telco only has copper access)  to something closer to 60-40 as a rule (where the telco is upgrading to fiber access). 

Telcos hope for market shares approaching 50-50 as FTTH becomes the dominant access platform over time. 

The new issue is additional providers, ranging from municipal or utility-owned ISPs to independent ISPs, including independent ISP operations that cover only parts of a metro area. In a sense, that is the mass market or consumer version of the competitive local exchange carrier strategy adopted decades ago, where suppliers target business customers in major office parks or downtown core areas. 

The American Association of Public Broadband cites 750 municipal internet service provider networks in operation in the United States, mostly serving smaller communities. Not all have full retail operations, though. 

Chattanooga Electric Power claims 175,000 customers in the Chattanooga, Tennessee area. The next-largest 10 such ISPs have fewer customers, often because they are smaller population centers. 

• City of Salem Electric Department (Oregon): 50,000

• City of Longmont Power & Communications (Colorado): 40,000

• Plum Creek Electric Cooperative (North Dakota): 35,000

• Jackson Energy Authority (Tennessee): 25,000

• City of Holyoke Municipal Light Department (Massachusetts): 20,000

• City of Boulder Municipal Electric Utility (Colorado): 18,000

• City of Dubuque Utilities (Iowa): 17,000

• City of Lawrence Public Utilities (Kansas): 15,000

• City of Lexington Utilities (Kentucky): 15,000

 

And other networks are launching in larger population centers. As with any set of contestants in any other industry, not all suppliers will succeed and not all will likely survive. Managerial skill still seems to matter, as do the other prosaic concerns such as managing debt burdens and picking the right areas to serve. 

Many for-profit ISPs now believe they have better opportunities in rural areas, for example, where a new fiber network can be “first” to serve the market. Up to this point few have attempted to compete in a major big city market. ISPs targeting operations in mid-size cities have generally only chosen to serve portions of their cities. 

The obvious broader issues are the roles and strategies traditional retail service providers can envision as their markets are reshaped by competition, new investors and virtualized or other roles beyond the traditional vertically-integrated model. 

The question naturally arises: how many of these new competitors will succeed, and what are the implications for sustainable market shares over time?

In a market with two significant suppliers, each serving the whole market, an ISP might require  market share of at least 30 percent to be sustainable. That has often been the pattern where a cable operator competes against a telco with copper-only access, where the available telco speeds are quite limited in comparison to a cable operator hybrid fiber coax network. In such cases, there is an order or magnitude or two orders of magnitude difference in top speeds. 

In a market with three significant suppliers, an ISP typically needs to have a market share of at least 20 percent to be sustainable, if competition across the full geography is envisioned. Such ISPs also tend to require more efficient operations. 

In a market with four significant suppliers, where we can assume as many as two of the four compete only in a portion of the metro market, an ISP typically needs to have a market share of at least 10 percent (of the full area potential market) to be sustainable, though ISPs serving only a portion of a metro area also probably need take rates higher than 10 percent in the areas they do choose to serve. 

If an independent ISP cannot get 20 percent to 30 percent take rates in its chosen geographical areas of coverage, it probably is not doing well. 

The best suppliers can take so much share from the incumbents (telco and cable) that severe damage to the incumbent business model is possible, turning those competitive areas into loss-making operations. 

A fixed network operator with sufficiently offsetting performance might survive actual losses in a few geographies. In fact, traditional monopoly fixed network suppliers expected permanent losses in rural areas, breakeven or slightly better performance in suburbs and most of the profits from operations in city cores. 

NextLight seemingly has avoided issues of cross-subsidization of internet access service by the electrical utility ratepayers, separating its financial operations from those of Longmont Power Company.

NextLight has its own board of directors, management team, and accounting system.

NextLight seemingly provides service “at cost,” plus a small margin to cover its operating expenses. The objective is to break even, rather than “making a profit.”

NextLight's network is physically separate from LPC's network, though critics might argue NextLight uses power company rights of way and other benefits of having a sponsor with an on-going business, which could translate to financial advantages. 

Others might argue there is some cross subsidy. There is a no-recourse surcharge on LPC's electric bills, used to fund the construction and operation of NextLight, and it is applied to all LPC customers, regardless of whether they subscribe to NextLight service.

That said, NextLight has gotten a legal opinion from the Colorado Attorney General's Office stating that NextLight is not engaging in cross-subsidization, and that the non-bypassable surcharge is a fair and reasonable way to fund the network. 

In fairness, what revenue-generating entity would not look to leverage its current assets to create new lines of business? Cable operators used their video subscription networks to create fully-functional telecom networks; use their fixed network to support their mobile service provider operations; extended their consumer networks to provide business-specific services; used their linear video customer base to leverage a move into content ownership. 

Telcos do the same, when trying to extend their core operations to new services. In the more-regulated era, they had to establish separate subsidiaries to enter non-regulated lines of business. That is less an issue in today’s largely-deregulated markets. 

The city of about 100,000 is about 30 miles north of Denver, so might be considered a suburb by some, a neighboring city by others. Using either characterization, population density varies quite substantially. 

The population density of Longmont, Colorado in its city core is 11,999 people per square mile while the population density of the outlying areas is 1,369 people per square mile  

 

Housing density and population density obviously are key indicators of potential access network cost and revenue possibility. Housing density enables and constrains home broadband market size, while population density is correlated with business revenue potential. 

To a large extent, housing and population density also affect network cost: the lowest-cost-per-passing networks can be built in dense areas while the most costly networks are in rural areas. 

Among U.S. internet service providers, the “average housing density is 400 locations per square mile, with Comcast sitting squarely on that level of density. Smaller telcos tend to serve more-rural areas and have housing densities an order of magnitude or two orders of magnitude less than the largest ISPs. 

Company	Housing Units	Average Housing Density (dwellings per square mile)
Verizon	58.2 million	1,500
AT&T	51.8 million	1,300
Lumen (formerly CenturyLink)	25.7 million	600
Charter	22.9 million	500
Comcast	19.5 million	400
Windstream	14.8 million	300
Brightspeed	1.9 million	40

At least historically, that explains why Verizon was early to invest in fiber to home facilities. It has the most-dense serving areas, so has the best economics. Only recently have many smaller and independent ISPs been able to make a business case for investing in FTTH in rural and exurban areas, though lots of small rural telcos have been doing so for years. 

Housing density	Cost per home passed
40 homes per square mile	$2,000
40 homes per square mile	$800
1,300 homes per square mile	$500

Figures of merit for FTTH construction might range from $1,000 to $1,250 per household at 400 homes per square mile but $1,500 to $2,000 per household at 40 homes per square mile, for example. 

At higher densities of 1,300 homes per square mile, costs might range from $500 to $750 per household. 

The business case also includes less revenue per account potential at lower densities as well. 

All that matters as attacking ISPs and infrastructure investors weigh their odds of success when competing with legacy service providers. To be sure,  FTTH payback models seem to have changed greatly since 2000. 

The economics of connectivity provider fiber to the home have always been daunting, but they are, in some ways, more daunting in 2022 than they were a decade ago. The biggest new hurdle is that expected revenue per account metrics have been cut in half or two thirds. That would be daunting for any supplier in any industry. 

These days, the expected revenue contribution from a home broadband account hovers around $50 per month to $70 per month. Some providers might add linear video, voice or text messaging components to a lesser degree. 

But that is a huge change from revenue expectations in the 1990 to 2015 period, when $150 per customer was the possible revenue target.  

You might well question the payback model for new fiber-to-home networks which assume recurring revenue between $50 and $70 per account, per month, with little voice revenue and close to zero video revenue; take rates in the 40-percent range; and network capital investment between $800 and $1000 per passing and connection costs of perhaps $300 per customer. 

In the face of difficult average revenue per account metrics, co-investment and ancillary revenue contributions have become key. Additional subsidies for home broadband also will reduce FTTH deployment costs. 

The point is that FTTH revenue models, and the ability to sustain a competitive ISP operation, either as an incumbent or attacker, now seem to make possible more competition than was previously thought possible. 

NextLight is a good example.