Lumen FTTH Revenue Assumptions Show FTTH Business Case has Changed

Lumen reports its fiber-to-home average revenue per user at about $58 per month. For those of you who have followed fiber-to-home payback models for any length of time, and especially for those of you who have followed FTTH for many decades, that level of ARPU might come as a shock. 

Though some honest--and typically off the record--evaluations by some telco executives 25 years ago would have predicated the FTTH business model as “you get to keep your business” rather than revenue increases. 

Few financial analysts would have been impressed. 

The theory was that upgrading to FTTH would allow incumbent telcos to essentially trade market share with cable companies: gaining video subscription market share from cable as cable took voice share. The assumption was that home broadband share would remain about where it was. 

The thinking was that per-home revenue could range as high as $130 to $200 per month, even as overall market share was gained by cable and lost by telco providers. 

So the $58 ARPU is a shock. Essentially, telcos are investing in FTTH to reclaim market share in home broadband, but largely harvesting video and voice revenues, both of which are dropping. 

Some telcos able to operate in both mobile and fixed network segments of the business have seen revenue growth shift decisively to mobile sources. 

Incumbents restricted to fixed network services only have faced huge challenges, which explains why many have been acquired by private equity and institutional investors with different financial motivations. 

Much investment in digital infrastructure is made to gain exposure to alternative assets that in past decades would have consisted of real estate holdings. The objective is asset diversification into a category that offers stable long-term cash flow with some presumed moats, but not necessarily revenue or asset value growth. 

If FTTH ARPU for home broadband remains in the $50 to $60 range, then payback models from FTTH will have to incorporate additional revenue sources, especially for publicly-traded firms. 

That is why one hears so much about FTTH value for supporting 5G small cells, edge computing, internet of things and private networks and network slicing. 

Monthly recurring FTTH revenue of $50 to $60 for home broadband might be strategically important for a telco’s sustainability, but unattractive if the argument is made that “FTTH will boost consumer revenues.” It might not.

On the other hand, without the upgrade to FTTH, most fixed network telcos face extinction. Investors will not like the idea that FTTH basically allows the business to remain viable, but does not necessarily lead to additional revenues. 

The same sort of worry also exists for 5G and coming mobile next-generation platforms. These days, the upgrades are necessary for business survival. Hopefully, new revenue sources develop, at scale.

But even if they do not, the capital investment is required. If not, the viability of the business is threatened.

Verizon Activates 2 Gbps Service; Comcast 3 Gbps: All Pointing to 10 Gbps

With the news that Verizon is introducing 2-Gbps symmetrical fixed network access in New York for about $120 (using autopay), along with Comcast’s similar moves to 3 Gbps, we see continued improvement in home broadband in the U.S. market, and a continual movement towards 10 Gbps service. 

Comcast prices its 3-Gbps service--available nationally--at about $300 a month, making it a service mostly appealing to business users. The service also has a $1,000 install fee. 

The Verizon 2-Gbps service clearly is aimed more squarely at the top end of the consumer market, while also having appeal for business users. 

At the same time, the increasing speeds also are accompanied by lower prices. 

According to a new study, U.S. home broadband prices have fallen since 2016, says Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

Verizon Introduces 2-Gbps Service In New York, at Prices as Low as $120 Per Month

With the news that Verizon is introducing 2-Gbps symmetrical fixed network access in New York for about $120 (using autopay), along with Comcast’s similar moves to 3 Gbps, we see continued improvement in home broadband in the U.S. market, and a continual movement towards 10 Gbps service. 

Comcast prices its 3-Gbps service--available nationally--at about $300 a month, making it a service mostly appealing to business users. The service also has a $1,000 install fee. 

The Verizon 2-Gbps service clearly is aimed more squarely at the top end of the consumer market, while also having appeal for business users. 

At the same time, the increasing speeds also are accompanied by lower prices. 

According to a new study, U.S. home broadband prices have fallen since 2016, says Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now

A Handful of Hyperscale App Providers--and Video--Drive Global Internet Traffic

There is a simple reason why hyperscale app providers  now drive global data traffic. The single greatest driver of WAN demand is movement of traffic between a handful of hyperscale app provider data centers.

In 2021 just six firms generated 57 percent of global traffic, and much of that WAN traffic supported data flowing between hyperscale data centers. In 2021, intra-data-center traffic was about at the same magnitude as data consumed by retail end users.  

moving between data center locations.  

source: Cisco 

About six firms are responsible for about 57 percent of 2021 WAN traffic, according to Sandvine. 

source: Sandvine, IN Forum

These days, voice demand is paltry in relation to content bandwidth--largely video--that flows between hyperscale application provider data centers and internet points of presence where local internet service provider traffic pours onto the backbones.

Digital Transformation is Safer When it is "Smaller"

There is a good argument to be made that digital transformation is so prone to failure that a safer strategy is avoid "big" goals and instead concentrate on numerous "smaller" goals, even when the outcomes from many smaller projects do not necessarily transform firm earnings or profits in any directly-measurable way.

By definition, failure on a small project does not jeopardize firm survival.

By some estimates digital transformation spending will top $6.8 trillion by 2023. But those investments are “often made without seeing clear benefits or ROI,” says Tomas Chamorro-Premuzic, chief innovation officer at ManpowerGroup, a professor of business psychology at University College London and at Columbia University, 

Some argue digital transformation failure rates are 70 percent to perhaps 80 percent or more. To be sure, that failure rate includes projects that fail to reach their objectives, but might arguably have some benefits. Still, some argue 73 percent of such projects fail to provide any business value at all.  

While that might seem outlandish, it is well within the parameters of failure rates for less-complex projects such as information technology initiatives, which also fail at about those rates. 

And digital transformation is nothing if not hugely more complex. In fact, it might be so complicated that no single technology change, in any one part of the business, actually captures the magnitude of necessary changes. 

While 85 percent of CEOs accelerated digital initiatives during the pandemic, most can’t articulate their overall strategy and progress beyond that they made a tech investment,” say consultants at Deloitte. 

“If CEOs can’t say their digital transformation resulted in new business advantages or adaptability, then they haven’t really transformed,” Deloitte consultants note. 

source: Deloitte  

Crypto at the Inflection Point?

With the caveat that important consumer technology products do not always succeed, the cryptocurrency adoption curve does presently seem to track use of the internet. Cryptocurrency adoption seems to be a classic S curve.  

source: Wells Fargo 

The important takeaway is that cryptocurrency might be at an inflection point. 

source: World Economic Forum

U.S. Home Broadband Prices Have Fallen in Every Speed Tier Since 2016

U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now