5 ms·

Yet broadband providers continue to do it.

by dsl 10y ago

walrus01 10y ago
Usually because a customer can't properly articulate on the phone what's wrong with their connection. Last mile broadband providers want to do as much as possible to avoid a site visit to a home. Unless they're charging $95 per visit one technician visit for 30 minutes can eat up all the profit from that customer for an entire year.
- dsl 10y ago
  Again, you seem to be confusing what they should be doing with what they are actually doing.
  - walrus01 10y ago
    sadly, I am... I work for an ISP that generally doesn't make these mistakes, our network engineering/operations/construction team enjoys observing all the stupid things Centurylink and Comcast do in our local market.
- ryao 10y ago
  How much does your ISP charge you? Verizon managed to get $71.48 a month out of me on a connection that had been set up by a technician nearly 10 years prior before I got fed up. A technician visit at that rate would probably eat just 1 month of profit on a connection whose initial installation cost had been paid many times over. The reason that I got fed up was that they kept trying to get more. Nearly all of those years had involved a triple play, for which they had raised rates until they charged ~$162 a month. Sadly, I was not the one who negotiated with them. Had I been, I would have been fed up well before things became that bad. The $71.48 came after breaking the bundle I favor of an OTA antenna and VoIP. I managed to talk my way out of the ETF by telling a supervisor that the ETF was the same whether I cancelled all services or just 2 and that I was giving Verizon the chance to keep some business, provided that they reduced services to just the Internet connection and waived the ETF. The supervisor waived it. After breaking the bundle, I took over responsibility for such bills. I am paying Cablevision ~$45 a month now. Bandwidth is lower, but I reason that as long as bandwidth is high enough to deliver traffic with acceptable latencies, being able to burst higher does not matter that much. So far, things have been okay on both pricing and having a usable connection, despite a few initial goofs by Cablevision.
  - rayiner 10y ago
    How much profit do you think Verizon actually makes from your $70/month connection? FiOS revenues make up 70% of Verizon wireline's revenue, and the average monthly bill is like $110. But the division's profit margin is 2-5% most years. Let's say generously they're making $7 a month on you (10%). A Verizon tech makes $35/hour+ not including benefits. So a one-hour field call wipes out 5 months of profit.
    - ryao 10y ago
      They make nothing off it because I cancelled service. Google searches show that they have had a special $29.99 reactivation rate for years. Several months ago they made it $39.99 in the second year. A couple years prior, they had also added a $1.99 municipal construction fee. That works out to be $37 a month. I assume that the amortized cost of keeping the fiber lit is below that because I doubt that they would make such an offer at a loss. Charging a long time customer higher pricing would provide them with money that they can spend on things like Fios network expansion and network upgrades, which are expensive.
      - rayiner 10y ago
        Your analysis is wrong. When Verizon spends a bunch of money to wire up a neighborhood, that doesn't come out of profits. Instead, it books a capital asset that is depreciated over time. Verizon wireline's EBITDA margin these days--five or six years after the end of significant network expansion--is about 22%. That's what's left after paying for ongoing maintenance, support, and bandwidth, but before accounting for recouping the cost of the original build. After accounting for depreciation, interest, and taxes, it's under 5%. That means the up-front cost of your connection is being recouped at $10-20 per month at most. Verizon spent about $20 billion on FiOS, and has about 7-8 million customers. So the average customer cost about $2,500 to wire-up. That means it'll take 10-15 years to recoup the initial cost of the build-out. The special-offer pricing is not meaningful. Most of the cost of building and maintaining fiber is getting to the neighborhood. FIOS penetration is only about 1/3 in the places where service is offered. Which means that Verizon has a lot of incentive to make offers to those 2/3 at a rate below what it could sustain charging everyone. Again, even though the average FIOS subscriber pays $100+ per month (triple play, etc), the division's net profit margin is under 5%. It would be losing enormous amounts of money if people were paying $30-40/month.

Yet broadband providers continue to do it.

by dsl 10y ago

Yet broadband providers continue to do it.

Usually because a customer can't properly articulate on the phone what's wrong with their connection. Last mile broadband providers want to do as much as possible to avoid a site visit to a home. Unless they're charging $95 per visit one technician visit for 30 minutes can eat up all the profit from that customer for an entire year.

dsl 10y ago
Again, you seem to be confusing what they should be doing with what they are actually doing.
- walrus01 10y ago
  sadly, I am... I work for an ISP that generally doesn't make these mistakes, our network engineering/operations/construction team enjoys observing all the stupid things Centurylink and Comcast do in our local market.
ryao 10y ago
How much does your ISP charge you? Verizon managed to get $71.48 a month out of me on a connection that had been set up by a technician nearly 10 years prior before I got fed up. A technician visit at that rate would probably eat just 1 month of profit on a connection whose initial installation cost had been paid many times over. The reason that I got fed up was that they kept trying to get more. Nearly all of those years had involved a triple play, for which they had raised rates until they charged ~$162 a month. Sadly, I was not the one who negotiated with them. Had I been, I would have been fed up well before things became that bad. The $71.48 came after breaking the bundle I favor of an OTA antenna and VoIP. I managed to talk my way out of the ETF by telling a supervisor that the ETF was the same whether I cancelled all services or just 2 and that I was giving Verizon the chance to keep some business, provided that they reduced services to just the Internet connection and waived the ETF. The supervisor waived it. After breaking the bundle, I took over responsibility for such bills. I am paying Cablevision ~$45 a month now. Bandwidth is lower, but I reason that as long as bandwidth is high enough to deliver traffic with acceptable latencies, being able to burst higher does not matter that much. So far, things have been okay on both pricing and having a usable connection, despite a few initial goofs by Cablevision.
- rayiner 10y ago
  How much profit do you think Verizon actually makes from your $70/month connection? FiOS revenues make up 70% of Verizon wireline's revenue, and the average monthly bill is like $110. But the division's profit margin is 2-5% most years. Let's say generously they're making $7 a month on you (10%). A Verizon tech makes $35/hour+ not including benefits. So a one-hour field call wipes out 5 months of profit.
  - ryao 10y ago
    They make nothing off it because I cancelled service. Google searches show that they have had a special $29.99 reactivation rate for years. Several months ago they made it $39.99 in the second year. A couple years prior, they had also added a $1.99 municipal construction fee. That works out to be $37 a month. I assume that the amortized cost of keeping the fiber lit is below that because I doubt that they would make such an offer at a loss. Charging a long time customer higher pricing would provide them with money that they can spend on things like Fios network expansion and network upgrades, which are expensive.
    - rayiner 10y ago
      Your analysis is wrong. When Verizon spends a bunch of money to wire up a neighborhood, that doesn't come out of profits. Instead, it books a capital asset that is depreciated over time. Verizon wireline's EBITDA margin these days--five or six years after the end of significant network expansion--is about 22%. That's what's left after paying for ongoing maintenance, support, and bandwidth, but before accounting for recouping the cost of the original build. After accounting for depreciation, interest, and taxes, it's under 5%. That means the up-front cost of your connection is being recouped at $10-20 per month at most. Verizon spent about $20 billion on FiOS, and has about 7-8 million customers. So the average customer cost about $2,500 to wire-up. That means it'll take 10-15 years to recoup the initial cost of the build-out. The special-offer pricing is not meaningful. Most of the cost of building and maintaining fiber is getting to the neighborhood. FIOS penetration is only about 1/3 in the places where service is offered. Which means that Verizon has a lot of incentive to make offers to those 2/3 at a rate below what it could sustain charging everyone. Again, even though the average FIOS subscriber pays $100+ per month (triple play, etc), the division's net profit margin is under 5%. It would be losing enormous amounts of money if people were paying $30-40/month.