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Broadband left out of infrastructure goals, and how the FCC wants to fix it

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Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#21

Post by amazon_not »

rayiner wrote: post #16
AnthonyMouse wrote: post #15

Earlier quoted context omitted.

> Munipalities don't do it because they have no money. Why isn't it self-funding? Issue a bond, pay for the network, lease it wholesale to competing ISPs, use the lease money to pay back the bond over time. Zero tax dollars.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

> The economics, politics, and logistics are brutal.

No on the economics, yes on the politics and again no on the logistics.

> Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1]

How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either.

> Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.

60% is far in excess of what maintenance and customer service costs. A brand new fiber network does not require significant maintenance and customer service is a small fraction of the monthly cost.

> 30-year bonds may be practical for a school building, but not so much for a telecom network where you'll need to make ongoing capital expenditures to upgrade the network.

30 year bonds work just fine for fiber networks. Upgrading active equipment is a minor effort, covered by your operating budget, unlike building the network which is CAPEX heavy.

> It's a political non-starter to issue city bonds to build a network you lease out to private ISPs to sell $70/month internet service that poor people and the elderly can't afford.

Yes, politics is a problem, but the above isn't what's stopping builds.

> And then there is logistics. Who do you pay to maintain said fiber network?

You outsource it like everybody else, unless it becomes cheaper to do it in-house. This is a solved problem.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#22

Post by jandrese »

crazyjustin wrote: post #6
theandrewbailey wrote: post #5

I'm cynical that this will bring meaningful improvement. Government has given money to telecoms before, and it's only brought us mediocre service, and brought executives huge paydays. Where's the fiber, Verizon? We (NJ and PA[0]) gave you huge tax cuts 20 years ago for universal fiber service. You and NYC agreed to provide everyone with fiber.[1] Meanwhile, AT&T keeps merging with promises that are meaningless or eve…

I was looking for references like these, thank you. > Pai is proposing an ambitious program whereby the FCC could expand corporate subsidies for building networks while scaling back regulations... Doesn't inspire a lot of confidence.

We already tried subsidizing corporations to convince them to build more infrastructure. They pocketed the money and never laid the wires.

If you want to do something like this it needs conditions, and the conditions have to have teeth. There needs to be a regulator in charge of making sure the money is actually used to build infrastructure and not to give even larger bonuses to the top management. But that's the antithesis of Pai's agenda, so it is highly unlikely to happen.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#23

Post by amazon_not »

rayiner wrote: post #11
theandrewbailey wrote: post #5

I'm cynical that this will bring meaningful improvement. Government has given money to telecoms before, and it's only brought us mediocre service, and brought executives huge paydays. Where's the fiber, Verizon? We (NJ and PA[0]) gave you huge tax cuts 20 years ago for universal fiber service. You and NYC agreed to provide everyone with fiber.[1] Meanwhile, AT&T keeps merging with promises that are meaningless or eve…

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2] That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rate…

> [2] And if the government does build it, we should ditch the emotional appeals for FTTH and rely heavily on sensible, cost-effect point-to-point wireless.

How about we ditch the emotional appeals to deploy whatever technology is the flavor of the month, and instead deploy whatever meets the needs and has the lowest TCO over the lifetime of the asset?

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#24

Post by rayiner »

amazon_not wrote: post #21
rayiner wrote: post #16

Earlier quoted context omitted.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

> The economics, politics, and logistics are brutal. No on the economics, yes on the politics and again no on the logistics. > Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either. > Say you charge $70 for service, and 60% of…

> How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either.

The network cost $330 million,[1] and has 71,000 subscribers.[2]

> 60% is far in excess of what maintenance and customer service costs.

http://static.epb.com/annual-reports/2016/media/EPB_2016_Fin... ($122.6 million in fiber optic revenues, $78.5 million in fiber optic operating expenses). That is 64% of revenues going to operating expenses.

[1] https://www.washingtonpost.com/news/the-switch/wp/2013/09/17...

[2] http://www.timesfreepress.com/news/business/aroundregion/sto...

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#25

Post by rayiner »

AnthonyMouse wrote: post #19
rayiner wrote: post #11

Earlier quoted context omitted.

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2] That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rate…

> If the market doesn't want to build it, we should think hard about whether we should build it There are good reasons to expect market failure here. New players very rarely enter infrastructure markets with existing incumbents because having to compete with the incumbent in a natural monopoly market is not expected to be profitable. And the "accidental duopoly" markets aren't going to do it. Both players try as hard…

> FTTH is a one-time expense. The maintenance cost of underground fiber shouldn't be any higher than wireless, and then you don't need to worry about spectrum or wireless line of sight obstructions or interference or any of the other problems with wireless.

Most of the country doesn't bury utilities.[1] Point to point wireless is a lot cheaper than burying fiber, and also a lot cheaper than maintaining aerial fiber that can be torn down by storms/tree branches.

[1] My fiber line hangs free from a telephone pole and is secured in the middle with a bent nail. But hey, that's one of the reasons my neighborhood in nowhere Maryland has fiber, while most of Silicon Valley does not.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#26

Post by ensignavenger »

rayiner wrote: post #16
AnthonyMouse wrote: post #15

Earlier quoted context omitted.

> Munipalities don't do it because they have no money. Why isn't it self-funding? Issue a bond, pay for the network, lease it wholesale to competing ISPs, use the lease money to pay back the bond over time. Zero tax dollars.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

Do you have a link for sources 1 and 2, perchance? Also, I don't think you amortized the interest? As you pay down th bond, the interest cost goes down, so you have more to pay towards the principal...

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#27

Post by rayiner »

ensignavenger wrote: post #26
rayiner wrote: post #16

Earlier quoted context omitted.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

Do you have a link for sources 1 and 2, perchance? Also, I don't think you amortized the interest? As you pay down th bond, the interest cost goes down, so you have more to pay towards the principal...

I cite the sources further down in response to a sibling comment. You're right, I didn't amortize the interest: fixing that brings the pay-off period to a bit under 25 years, not 37.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#28

Post by amazon_not »

rayiner wrote: post #24
amazon_not wrote: post #21

Earlier quoted context omitted.

> The economics, politics, and logistics are brutal. No on the economics, yes on the politics and again no on the logistics. > Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either. > Say you charge $70 for service, and 60% of…

> How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either. The network cost $330 million,[1] and has 71,000 subscribers.[2] > 60% is far in excess of what maintenance and customer service costs. http://static.epb.com/annual-reports/2016/media/EPB_2016_Fin... ($122.6 million in fiber optic revenues, $78.5 million in fiber optic operating expe…

> The network cost $330 million,[1] and has 71,000 subscribers.[2]

Both figures are inaccurate. The $330M includes $111.5M in federal grants which was used for EPB's smart grid. Thus only $220M can be attributed to the fiber network.

EPB fiber also had 83,000 subscribers at the end of FY2016, as per their annual report. 87,000 projected by end of FY2017.

Taken together this gives us $2650 per connected subscriber, almost half of what you claimed. Even with the smart grid grant, it would be less than $4000. Obviously this figure goes down with the number of subscribers.

> $122.6 million in fiber optic revenues, $78.5 million in fiber optic operating expenses). That is 64% of revenues going to operating expenses.

That's not correct. The annual report clearly states on page 11 that operating expenses were $41M, which is equal to 31% of revenues. Furthermore, it should be noted that operating expenses do not equal maintenance and customer service only.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#29

Post by amazon_not »

rayiner wrote: post #25
AnthonyMouse wrote: post #19

Earlier quoted context omitted.

> If the market doesn't want to build it, we should think hard about whether we should build it There are good reasons to expect market failure here. New players very rarely enter infrastructure markets with existing incumbents because having to compete with the incumbent in a natural monopoly market is not expected to be profitable. And the "accidental duopoly" markets aren't going to do it. Both players try as hard…

> FTTH is a one-time expense. The maintenance cost of underground fiber shouldn't be any higher than wireless, and then you don't need to worry about spectrum or wireless line of sight obstructions or interference or any of the other problems with wireless. Most of the country doesn't bury utilities.[1] Point to point wireless is a lot cheaper than burying fiber, and also a lot cheaper than maintaining aerial fiber t…

> Point to point wireless is a lot cheaper than burying fiber, and also a lot cheaper than maintaining aerial fiber that can be torn down by storms/tree branches.

Wireless is not always cheaper than fiber. The cost depends on geography and spectrum availability. Wireless is also more expensive per bit. Wireless also has a shorter lifespan than fiber. All these are things that have to be taken into consideration when determining which has the lower total cost of ownership over the lifespan of the asset.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#30

Post by rayiner »

amazon_not wrote: post #28
rayiner wrote: post #24

Earlier quoted context omitted.

> How did you get that $5,000 number? It's far more than Verizon paid for FiOS and I can't get it to line up with EPB's numbers either. The network cost $330 million,[1] and has 71,000 subscribers.[2] > 60% is far in excess of what maintenance and customer service costs. http://static.epb.com/annual-reports/2016/media/EPB_2016_Fin... ($122.6 million in fiber optic revenues, $78.5 million in fiber optic operating expe…

> The network cost $330 million,[1] and has 71,000 subscribers.[2] Both figures are inaccurate. The $330M includes $111.5M in federal grants which was used for EPB's smart grid. Thus only $220M can be attributed to the fiber network. EPB fiber also had 83,000 subscribers at the end of FY2016, as per their annual report. 87,000 projected by end of FY2017. Taken together this gives us $2650 per connected subscriber, al…

$330 million is the widely reported figure for the cost of the fiber network, which is also used as the basis for EBP's smart grid. I don't think it includes the expenditures on the other smart grid components.

Page 11 shows $41 million in "operation expenses" but there is also other line items for "cost of services" and administrative overhead. Those are "operating expenses" in the accounting sense. The cash flow statement on Page 19 shows that the total "operating expenses" is $78 million.

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