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> 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

> 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.

rayiner 10y ago
$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.
- amazon_not 10y ago
  Just because something is widely reported does not mean it's true. You can just as easily find reports which details the cost of the network at $220M, which is how much the city bonded for to build it. Furthermore the sources you cite yourself clearly states that of the $330M, $111.5M was a federal grant for the smart grid. As to the smart grid project, that was a separate $232M project. https://www.smartgrid.gov/project/epb_smart_grid_project.html https://www.smartgrid.gov/project/epb_smart_grid_project.htm... Of those smart grid investments, only the Backhaul Communications part could conceivably (in part) be attributed to the fiber network buildout costs. In no way can 100% of the federal smart grid grant be seen as a subsidy to the fiber network. Even if you subscribe to conspiracy theories about the power side secretly subsidizing the fiber side, that 100% subsidy theory just does not survive the collision with reality. Given how litigated this issue has been, there's no way the opponents would let a hundred million dollar misuse of federal grant money slide. Either way, no matter what dollar cost you peg the fiber network buildout costs at, your $5,000 cost per subscriber is plain wrong. The correct figure is closer to $2650, but it's still not even close to $5,000, even if you slap on an additional hundred million dollars in costs. This obviously also makes your payback times wrong. To give some context to EPB fiber's costs, ten years ago Verizon paid $850 per premise passed and an additional $880 per premise connected. These are in line with EPB's costs if you assume a 50% take rate for FiOS. Just to rub it in on how wrong your estimate of $5,000 per subscriber is, the very source your cite yourself states that the average cost to connect a new subscriber to EPB fiber is $1,200. But, wait, there's more! Your analysis on the economics of fiber networks just crumble when you look at the annual report of EPB. Here's the punchline: - operating expenses include debt service! EPB fiber pays EPB $10M per year for the use of the fiber network. This is enough to cover the costs of the $220M bond. In fact it covers half of EPB's whole debt service. Incidentally EPB fiber's operating income would more than covers the remaining debt service with change to spare. In other words your assumption of 60% in operating expenses excluding debt service is just plain wrong and all your calculations are wrong. And that's even before factoring in the fact that service at $70 per month usually does not include cable tv. This in turn means that a large chunk of operating expenses for that service can be excluded, as cable tv rights are a major cost item. All in all, even assuming debt service is included, 60% operating expenses for a fiber network is not a given.
  - rayiner 10y ago
    > Just because something is widely reported does not mean it's true. You can just as easily find reports which details the cost of the network at $220M, which is how much the city bonded for to build it. Furthermore the sources you cite yourself clearly states that of the $330M, $111.5M was a federal grant for the smart grid. Right, but sources say the $111.5M was used to build the fiber network that was a part of both the Smart Grid and broadband projects: "In 2009, a $111 million federal stimulus grant offered the opportunity to expedite construction of a long-planned fiber-optic network, said David Wade, chief operating officer for the power company. (EPB also had to borrow $219 million of the network’s $330 million cost.) Mr. Wade said it quickly became apparent that customers would be willing to pay for the one-gigabit connection offered over the network." (https://www.nytimes.com/2014/02/04/technology/fast-internet-service-speeds-business-development-in-chattanooga.html?_r=0 https://www.nytimes.com/2014/02/04/technology/fast-internet-...) > Of those smart grid investments, only the Backhaul Communications part could conceivably (in part) be attributed to the fiber network buildout costs. Yes, but that's the fiber backbone underlying the residential internet service. > Either way, no matter what dollar cost you peg the fiber network buildout costs at, your $5,000 cost per subscriber is plain wrong. Sure, with the newer 83,000 subscribers figue, it's more like $4,000 rather than $5,000. > To give some context to EPB fiber's costs, ten years ago Verizon paid $850 per premise passed and an additional $880 per premise connected. These are in line with EPB's costs if you assume a 50% take rate for FiOS. The FiOS uptake rate is under 40% (and during the first decade was under 1/3). Even with your numbers that's $850 / 0.4 + $880 = $3,000 per customer. And those numbers are 2006 projections at the onset of the project: https://www.sec.gov/Archives/edgar/data/732712/000119312506198669/dex992.htm https://www.sec.gov/Archives/edgar/data/732712/0001193125061.... Through 2010, Verizon spent $23 billion on FiOS, and since then spent at least another $3 billion wiring up New York. It has about 7 million subscribers, or about $3,700 per subscriber. See also https://techcrunch.com/2013/04/08/google-fiber-cost-estimate https://techcrunch.com/2013/04/08/google-fiber-cost-estimate ("As a point of comparison, it was estimated that it cost Verizon, before it halted FiOS buildout, about $4,000 per home to connect it to its fiber network."). > Just to rub it in on how wrong your estimate of $5,000 per subscriber is, the very source your cite yourself states that the average cost to connect a new subscriber to EPB fiber is $1,200. It says that's the "Average cost of hooking up new fiber optic customer for EPB." I don't take that to be the cost including construction of the network in the first place. > - operating expenses include debt service! Does it? "Fiber optics revenues are recognized on the accrual basis at the time services are provided. Operating revenues include service sales net of bad debt expense and miscellaneous revenue related to ber optics operations. This miscellaneous revenue includes ad revenue, late payment fees, and rental income. Operating expenses include those expenses that result from the ongoing operation of the ber optics systems. Non-operating expenses consist of interest expense on indebtedness and various miscellaneous expenses." > EPB fiber pays EPB $10M per year for the use of the fiber network. Is that for debt service? That could be for shared O&M too. > And that's even before factoring in the fact that service at $70 per month usually does not include cable tv. This in turn means that a large chunk of operating expenses for that service can be excluded, as cable tv rights are a major cost item. Television packages are also a major revenue source. In computing the operating margin, if you exclude TV from costs you also need to exclude TV from revenues.

rayiner 10y ago

$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.

amazon_not 10y ago
Just because something is widely reported does not mean it's true. You can just as easily find reports which details the cost of the network at $220M, which is how much the city bonded for to build it. Furthermore the sources you cite yourself clearly states that of the $330M, $111.5M was a federal grant for the smart grid. As to the smart grid project, that was a separate $232M project. https://www.smartgrid.gov/project/epb_smart_grid_project.html https://www.smartgrid.gov/project/epb_smart_grid_project.htm... Of those smart grid investments, only the Backhaul Communications part could conceivably (in part) be attributed to the fiber network buildout costs. In no way can 100% of the federal smart grid grant be seen as a subsidy to the fiber network. Even if you subscribe to conspiracy theories about the power side secretly subsidizing the fiber side, that 100% subsidy theory just does not survive the collision with reality. Given how litigated this issue has been, there's no way the opponents would let a hundred million dollar misuse of federal grant money slide. Either way, no matter what dollar cost you peg the fiber network buildout costs at, your $5,000 cost per subscriber is plain wrong. The correct figure is closer to $2650, but it's still not even close to $5,000, even if you slap on an additional hundred million dollars in costs. This obviously also makes your payback times wrong. To give some context to EPB fiber's costs, ten years ago Verizon paid $850 per premise passed and an additional $880 per premise connected. These are in line with EPB's costs if you assume a 50% take rate for FiOS. Just to rub it in on how wrong your estimate of $5,000 per subscriber is, the very source your cite yourself states that the average cost to connect a new subscriber to EPB fiber is $1,200. But, wait, there's more! Your analysis on the economics of fiber networks just crumble when you look at the annual report of EPB. Here's the punchline: - operating expenses include debt service! EPB fiber pays EPB $10M per year for the use of the fiber network. This is enough to cover the costs of the $220M bond. In fact it covers half of EPB's whole debt service. Incidentally EPB fiber's operating income would more than covers the remaining debt service with change to spare. In other words your assumption of 60% in operating expenses excluding debt service is just plain wrong and all your calculations are wrong. And that's even before factoring in the fact that service at $70 per month usually does not include cable tv. This in turn means that a large chunk of operating expenses for that service can be excluded, as cable tv rights are a major cost item. All in all, even assuming debt service is included, 60% operating expenses for a fiber network is not a given.
- rayiner 10y ago
  > Just because something is widely reported does not mean it's true. You can just as easily find reports which details the cost of the network at $220M, which is how much the city bonded for to build it. Furthermore the sources you cite yourself clearly states that of the $330M, $111.5M was a federal grant for the smart grid. Right, but sources say the $111.5M was used to build the fiber network that was a part of both the Smart Grid and broadband projects: "In 2009, a $111 million federal stimulus grant offered the opportunity to expedite construction of a long-planned fiber-optic network, said David Wade, chief operating officer for the power company. (EPB also had to borrow $219 million of the network’s $330 million cost.) Mr. Wade said it quickly became apparent that customers would be willing to pay for the one-gigabit connection offered over the network." (https://www.nytimes.com/2014/02/04/technology/fast-internet-service-speeds-business-development-in-chattanooga.html?_r=0 https://www.nytimes.com/2014/02/04/technology/fast-internet-...) > Of those smart grid investments, only the Backhaul Communications part could conceivably (in part) be attributed to the fiber network buildout costs. Yes, but that's the fiber backbone underlying the residential internet service. > Either way, no matter what dollar cost you peg the fiber network buildout costs at, your $5,000 cost per subscriber is plain wrong. Sure, with the newer 83,000 subscribers figue, it's more like $4,000 rather than $5,000. > To give some context to EPB fiber's costs, ten years ago Verizon paid $850 per premise passed and an additional $880 per premise connected. These are in line with EPB's costs if you assume a 50% take rate for FiOS. The FiOS uptake rate is under 40% (and during the first decade was under 1/3). Even with your numbers that's $850 / 0.4 + $880 = $3,000 per customer. And those numbers are 2006 projections at the onset of the project: https://www.sec.gov/Archives/edgar/data/732712/000119312506198669/dex992.htm https://www.sec.gov/Archives/edgar/data/732712/0001193125061.... Through 2010, Verizon spent $23 billion on FiOS, and since then spent at least another $3 billion wiring up New York. It has about 7 million subscribers, or about $3,700 per subscriber. See also https://techcrunch.com/2013/04/08/google-fiber-cost-estimate https://techcrunch.com/2013/04/08/google-fiber-cost-estimate ("As a point of comparison, it was estimated that it cost Verizon, before it halted FiOS buildout, about $4,000 per home to connect it to its fiber network."). > Just to rub it in on how wrong your estimate of $5,000 per subscriber is, the very source your cite yourself states that the average cost to connect a new subscriber to EPB fiber is $1,200. It says that's the "Average cost of hooking up new fiber optic customer for EPB." I don't take that to be the cost including construction of the network in the first place. > - operating expenses include debt service! Does it? "Fiber optics revenues are recognized on the accrual basis at the time services are provided. Operating revenues include service sales net of bad debt expense and miscellaneous revenue related to ber optics operations. This miscellaneous revenue includes ad revenue, late payment fees, and rental income. Operating expenses include those expenses that result from the ongoing operation of the ber optics systems. Non-operating expenses consist of interest expense on indebtedness and various miscellaneous expenses." > EPB fiber pays EPB $10M per year for the use of the fiber network. Is that for debt service? That could be for shared O&M too. > And that's even before factoring in the fact that service at $70 per month usually does not include cable tv. This in turn means that a large chunk of operating expenses for that service can be excluded, as cable tv rights are a major cost item. Television packages are also a major revenue source. In computing the operating margin, if you exclude TV from costs you also need to exclude TV from revenues.