Are Government Home Broadband Networks Facing Worse Business Cases?

Dr. George Ford, Phoenix Center for for Advanced Legal & Economic Public Policy Studies chief economist, notes in a recent study that three sales of municipal home broadband networks illustrates the financial issues such networks face. 

The Bardstown, Ky. network, for example, privatized in 2024, illustrates the revenue side of the problem. 

source: Phoenix Center 

Another study looked at the financial performance of every municipal fiber project (with published financial data) in the U.S. operating in 2010 through 2019. None of the 15 projects generated sufficient nominal cash flow in the short run to maintain solvency without infusions of additional cash from outside sources or debt relief. 

To be sure, 68 operating networks provide no public financial information, some observers note. 

Similarly, 87 percent have not actually generated sufficient nominal cash flow to put them on track to achieve long-run solvency. 

Some 73 percent generated negative nominal cash flow over the past three fiscal years, leaving them poorly positioned to make up their deficits and causing them to fall farther into debt, the authors note. 

Fully 53 percent of projects would not be on track to reach breakeven even assuming the theoretical best-case performance in terms of capital expenditures and debt service.

Business Model Issue	Impact	Sources
Short-Term Revenue Shortfalls	Most projects fail to cover operating costs with subscription fees, requiring taxpayer subsidies.	2,4,10
Long-Term Viability Concerns	Only 2/15 projects studied showed potential for self-sustaining cash flow over 20-25 years.	2,6,10
Network Upgrade Costs	Frequent tech advancements require reinvestment, straining budgets not designed for dynamic needs.	137
Cross-Subsidization Risks	Many rely on municipal utility funds or bonds, distorting competition and transparency.	7,10,11
Crowding Out Private Investment	Municipal entry reduces private sector incentives to build/upgrade networks in the same areas.	3,6,11
Project Management Complexity	Lack of expertise in broadband operations leads to cost overruns and service quality issues.	3,5,9
Political vs. Market Incentives	Prioritizing coverage over profitability results in unsustainable pricing and service models.	3,10,11
Financing Challenges	Securing loans/investment is harder due to incumbent opposition and uncertain ROI.	5,9,11

CoreWeave's Valuation in High-Performance Computing as a Service

Times of high volatility in equity markets tend to be even more volatile where it comes to assets in new or emerging fields where demand is hard to forecast. So it is with high-performance computing “as a service,” the business CoreWeave and others are in. 

So it might not come as a complete surprise that some observers are skeptical about CoreWeave’s valuation, at the very least. 

To evaluate, we would need to estimate the global market; the U.S. share of that market (CoreWeave will operate internationally as well as in the U.S. market); CoreWeave’s  enterprise value (debt plus equity) and then CoreWeave’s estimated revenue. 

So assume global 2023 HPCaaS revenues of about $36 billion; North America share is 40 percent and U.S. share of North America is 85 percent. That gives us a 2023 U.S. market of about $12.4 billion. 

U.S. High-Performance Computing "as a Service" Market
Year	Low Scenario (8% CAGR)	Baseline Scenario (13.4% CAGR)	High Scenario (18% CAGR)
2023	$12.42 billion	$12.42 billion	$12.42 billion
2024	$13.41 billion	$14.08 billion	$14.66 billion
2025	$14.49 billion	$15.97 billion	$17.30 billion
2026	$15.65 billion	$18.11 billion	$20.41 billion
2027	$16.90 billion	$20.54 billion	$24.09 billion
2028	$18.25 billion	$23.29 billion	$28.42 billion
2029	$19.71 billion	$26.41 billion	$33.54 billion
2030	$21.29 billion	$29.95 billion	$39.58 billion

So that establishes some expectations for the market opportunity CoreWeave and others are chasing. 

An immediate question is whether CoreWeave can hope to make a profit, given its debt and equity structure, both of which place claims on some of CoreWeave’s cash flow.

The company took on $7.5 billion in debt facility led by Blackstone and Magnetar in May 2024, with participation from Coatue, Carlyle, CDPQ, DigitalBridge Credit, BlackRock, Eldridge Industries, and Great Elm Capital Corp., following an earlier $2.3 billion debt facility led by Magnetar Capital and Blackstone in August 2023.

A $650 million credit facility was added in October 2024. So total debt is $10.45 billion.

Equity issued includes a $1.1 billion Series C round in May 2024, valuing CoreWeave at $19 billion.

A $642 million Series B round was completed in December 2023 with another $420 million Series B round in April 2023.

According to Crunchbase, CoreWeave raised $2.37 billion in equity across 13 rounds, including seed, Early-Stage, and Late-Stage rounds).

So assume $2.37 billion as the total equity raised. Add the $10.45 billion in debt and total investment  is $12.82 billion. 

Enterprise value includes the firm’s market capitalization plus debt plus cash. If CoreWeave’s market cap is about $18 billion, then enterprise value is about $28.55 billion. 

For the current EV of $28.55 billion and revenues of $1.92 billion, CoreWeave has an implied revenue multiple of 14.87 times. That might be considered conservative for a fast-growing technology firm.

At $1.9 billion in a U.S. market that might have generated $14 billion in annual revenues, CoreWeave might already have as much as 13,5 percent share in the high-performance computing as a service market. 

Can AI Replace Cloud Computing?

I saw an odd headline asking “when will AI replace cloud computing?” It’s a non-sequitur. Sort of like asking when a layer 7 function is replaced by a layer 1 function. In other words, AI exists at a different layer of the software stack.

OSI Model	AI/Cloud Layer
7. Application (user-facing apps)	AI Model Deployment & APIs4
6. Presentation (data formatting/encryption)	Data Preprocessing/Feature Engineering4
5. Session (connection management)	Cloud API Gateway Management2
4. Transport (data integrity)	Distributed Training Orchestration4
3. Network (routing)	Cloud Network Virtualization2
2. Data Link (node-to-node transfer)	GPU Cluster Interconnects2
1. Physical (hardware)	Cloud Infrastructure (GPUs/TPUs)

Saying AI replaces cloud computing is like saying "video games replace electricity." Cloud computing is infrastructure, supplying functions lower in the stack.

2 Customers Account for 77% of CoreWeave Revenue

Financial analysts typically express concern when any firm’s customer base is too concentrated. Consider that, In 2024, CoreWeave’s top two customers (Microsoft and “Customer C”) accounted for 77 percent of revenue. 

Based on available information, CoreWeave’s largest customers by revenue contribution are primarily Microsoft, with other notable customers including OpenAI, Meta, NVIDIA, IBM, and Cohere. 

Customer	Revenue Contribution (2024)	Importance
Microsoft	62%	Largest customer in 2023 (35%) and 2024. Significant reliance noted in S-1 filing.
Customer C	15%	Unnamed second-largest customer, contributing to 77% of 2024 revenue with Microsoft.
OpenAI	Not specified (future revenue)	Signed a $11.9B five-year contract in March 2025, expected to reduce Microsoft’s share to <50%.
Meta	<10%	Confirmed customer, but no individual revenue share above 10% in 2024.
NVIDIA	Not specified	Customer and investor; $250M order during IPO, but no specific revenue share.
IBM	Not specified	Using CoreWeave for Granite AI training; no specific revenue share.
Cohere	Not specified	AI startup customer; no specific revenue share reported.

Why Kuiper?

 Amazon has launched into orbit the first 27 of a planned Kuiper constellation of 3,236 low-earth-orbit satellites. Some will liken the effort to Google Fiber, in the sense of a major app provider getting into the access business. And obviously it is a challenge to Elon Musk’s SpaceX. 

But some might also wonder whether the initiative consumes capital that might be better spent elsewhere. 

Amazon itself, and others who think the plan has value, might point to the upside. For starters, 

Kuiper can help AWS offer low-latency services even in remote areas, as well as providing redundant or backup links for AWS data centers, especially in underserved regions.

Kuiper also can provide AWS clients space-based connectivity for internet of things apps, for example. 

Kuiper enhances Amazon’s logistics network by providing coverage in rural or hard-to-reach areas, improving route optimization, tracking, and communications.

As other app hyperscalers have found, without internet access, potential users cannot be served. So Amazon could reach new customers in remote or underserved areas using Kuiper, supporting content services (Amazon Prime Video), e-commerce and other services and apps. 

And once access is provided directly by Amazon, device and other bundles can be offered that might include Alexa, for example. 

Also, to some extent, Kuiper means Amazon can vertically integrate its stack, providing internet access and applications, reducing its value chain dependence on partners.