Thursday, September 28, 2006

The true cost of residential fiber deployment

Fios Spending: $9,650 for Each Home?

Light Reading editor Phil Harvey e-mailed BroadbandReports to let them know he's crunched some numbers based on Verizon's Fios statements (discussed in full this morning), and has come to some interesting conclusions. According to Harvey, it's costing Verizon over $9,000 to wire each home (at least at first), with his math worked out as such:

"Verizon also says it will cost only about $650 to connect a "passed" home to its network by 2010. So what does it cost to hook up a neighborhood? These aren't absolute figures, mind you, but let's assume that Verizon passes each home in a 400-home neighborhood, then nabs 10 percent of the homes (40 homes) as customers. Take $950 and multiply it by 400 homes. That's $360,000.

Now let's hook up those 40 homes. That's 40 multiplied by $650. That's $26,000 added back to the cost to pass the homes, which was $360,000. So now we have a figure of $386,000 spent in just one neighborhood. But what has Verizon spent per customer? Take $386,000 and divide it by the 40 homes and you get $9,650."

He notes that Millennium Marketing analyst Kermit Ross came to some similar figures last week. Despite this, Verizon this morning stated they should see profitability by sometime in 2009.