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Summary:

Want fiber to the home? If you’re not in FiOS territory, it’s going to cost you. I’ve been following the various research projects over at Google and up in Canada debating the benefits and business models of building fiber to the home, and wondered how much […]

Want fiber to the home? If you’re not in FiOS territory, it’s going to cost you. I’ve been following the various research projects over at Google and up in Canada debating the benefits and business models of building fiber to the home, and wondered how much it would cost. Today I sat down with a table of Time Warner Cable Business Class salesmen to hear that it wasn’t possible. Finally, one told me it might happen, but I would have to pay the cost to build out the fiber to the home — about $5,000 to $10,000, depending on how far out from the core fiber line I lived.

Okay, that is some serious infrastrucutre cost right there, something many of these “homes with tails” studies gloss over.  I have no idea how accurate that price is since it’s not something people want to talk about, but Verizon FiOS estimates range from $850 per home to $4,000. So we’re not far off on the low end and perhaps, since it’s a one-time effort rather than a neighborhood-wide deployment, the high end might be reasonable.

Regardless, that’s about what I would pay to be hooked up to the city’s water system or sewer system. I am of the the belief that broadband is more like water or electricity in that everyone should have access to it, but as a homeowner looking at a $5,000 (or $10,000) cost for something that doesn’t even begin to approach that type of value, I think homes with tails will be a hard sell. Until there’s a killer application that requires that kind of infrastructure investment — and HD streaming for all content might count — I can’t justify the cost. So, the bandwidth gap between copper and fiber to the home seems insurmountable for now — but maybe, when LTE arrives in a few years, wireless networks can bridge that divide.

  1. Oh Contraire, LTE has a huge backhaul problem so expect a lot of femto deployments in the first iteration, all dependent upon that wireline broadband link.

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  2. I’ve never bought these kinds of arguments against FTTH deployments. And I don’t necessarily buy the cost, either, without hearing it broken down into its components. I think when we see more neighborhood deployments the cost will come down significantly for your users farther off the grid, as the infrastructure will already built out.

    The reliability of these connections tends to be higher than your average cable connection with the exception of the backhoe factor, so we can expect operational and support costs to be lower though probably not capital expenditures. This translates into more money for the operator, particularly if we really start seeing a service delivery ecosystem in the US, which I don’t think is as far away as we make it out to be.

    Your average DirecTV customer might pay $90/month for service – this is $5,000 over five years. Cable Internet right now around $15-$40/month – around $2,000 or so for five years. Seeing nationwide fiber deployments for the delivery of these services suddenly becomes pretty attractive. People throw out these numbers as if they’re really hugely expensive, but I think in your average suburban areas, particularly ones that have to have a lot of new infrastructure run anyway, it’s not that dramatic an increase as we’d expect.

    What it will really take for FTTH deployment in the US, and I think this is obvious to everyone, is municipalities and states making it a priority. A great number of them are doing the right thing, and demanding that the “utilities” (Verizon, for instance) provide the service to all residents rather than only a partial subset of “luxury” residents. Your utility doesn’t want to do that unless there’s some kind of agreement from the municipality which it doesn’t want to give. The municipality would find an easier time of this if the builders in the area shouldered part of the cost as part of the home price, or there were better tax initiatives in certain areas. But this isn’t likely to happen with the current state of economic affairs, where a lot of municipalities are going bankrupt.

    Anyway, the cost is not the problem. That problem is solvable. The problem is prioritization.

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  3. LTE also isn’t going to solve the problem. Todd’s right, backhaul for LTE is a real challenge, mostly because of the radio vendors making it an issue due to inflexible architecture and a refusal to innovate at rapid pace to maintain the revenue stream. Greenfield WiMAX deployments will bring us part of the way, and in five or ten years we may see a huge level of improvement in bandwidth and services available over the mobile network, but by that time I think FTTH will be a national priority. There are plenty of killer apps out now that will drive this for us – the question is who will capitalize on them and how the revenue gets distributed.

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  4. @Om

    The real problem is that fiber deployment costs tend to be highest where home prices tend to be lowest. For most places where the average single family is > $300k, even $5k for fiber is probably too high, but out where $100k buys you two bedrooms and more you could easily be looking at at least $10k for the fiber (not mention greater distances to the headend, making for more expensive PON equipment). So what is a home builder to think? In places where the cost of adding in the fiber is easy to hide in the bottom line, the carriers are probably going to build out themselves. In places where the fiber connection is a significant percentage of the overall price, no carriers are coming unless they are forced.

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  5. Sorry Stacey, for some reason I hallucinated Om in the byline.

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  6. How is this not the same 1985 argument about cable, i.e. we didn’t get cable til I was in 5th grade and survived on ONE channel until then. The people 4-5 miles up the road had to wait even longer. I wish I could show you the map/FIOS service in my area. Sometimes it’s just bureaucracy that keeps FIOS out. Or Comcast.

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  7. Tom Schwitzgebel Thursday, December 4, 2008

    Thus the beauty of AT&T’s U-Verse product. They bring fiber to a node near your neighborhood and then use the POTS twisted pairs to bring it into your house. I have the service and love it.

    Cheers!
    Tom

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  8. Did it occur to you that the TW guys were pulling your chain?? At least where I live in Texas, the biggest cost is in the permitting and labor with material being only a small fraction of the CPE connection cost. The actual cost of fiber isn’t drastically more than than that tired old Coax the TW guys want you to be happy with.

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  9. “$5,000 (or $10,000) cost for something that doesn’t even begin to approach that type of value”

    Interesting. That’s what the carriers are saying.

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  10. Stacey Higginbotham Thursday, December 4, 2008

    Tom, if I could get U-verse I would try it, but alas, I’m not in an area that’s close enough to the the CO, or populated enough depending on who I ask at AT&T. It’s not a great demographic for broadband is my guess.

    Garry, of course it occurred to me. I’m hoping someone can shed some more light on possible pricing beyond the Verizon numbers.

    Allen, I should say it doesn’t approach that type of value today. I have no doubt it will, but when contemplating my household budget it’s not something I can defend, even amortized out over a period of years. I hate to fall in with the telco thinking, but I can’t be a visionary AND pay my bills at this point even if it does make me sad.

    @Tim and Todd, I’m thinking some kind of fiber to the node deployment used as backhaul for LTE. But that may not end up being the panacea I hope for.

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