Fiber broadband – it’s duh marketing!

Meanwhile, across the Atlantic, BT announces that it is stepping up its fiber deployment program, targeting 10 million homes-passed by 2010 for an investment of US$3 billion. BT will use a little FTTP and a lot of FTTC - fiber-to-the-cabinet, same as FTTN. BT plans to deliver up to 24 Mb/s using VDSL2 or ADLS2+ on its FTTC system, and eventually up to 100 Mb/s on the FTTP platform. The company still needs Ofcom, its regulator, to bless the plan, but expects to move forward nonetheless.

Then the questions started popping: Is BT late in the fiber game? Can they ever realize a profit? Will Ofcom go along? Will its investors be patient?

Wait a minute! Hold the phone!

If any such questions are being asked, they should be asked of AT&T and Verizon. Do the math and you find, on a straight line basis, that AT&T is investing $317 per home-passed with FTTN and Verizon is coming in at around $1,100 per home-passed with FTTP. The additional capital costs to connect each customer are about $550 for AT&T and a similar number for Verizon. By the same method, BT will invest $300 per home passed, and, likely, around $500 to 600 per connected customer.

Now these capex estimates are based on 100% of the homes-passed being connected. If the number of connected customers comes in any less than 100%, then by rights, the telco has to allocate its entire capex for the project across just the number of paying customers to properly determine the return on investment. Let’s say AT&T is successful in signing up 50% of the homes passed. This means that the actual investment per connected customer is now in the $1,100 to $1,200 range.