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How much of that infrastructure cost is purely cellular or data centre purpose fibre optics, or to support the existing copper infrastructure though? And does i

How much of that infrastructure cost is purely cellular or data centre purpose fibre optics, or to support the existing copper infrastructure though? And does it include routine operations and routine maintenance, components that needed to be replaced because of end-of-life? Service contracts? If there was a national effort to roll out fibre optic, I can easily imagine it costing fractions of a trillion in startup costs, but these would be recouped easily if everyone switches over from alternative services. Bell Canada rolled out fibre optic connections to many houses and buildings in big Canadian cities and easily started gaining customers for fibre, though still others stick with incumbent cable companies because they got a deal thanks to the competition (finally!). Sadly, like in the US, the farther you travel from a big city, the harder it is to get any form of connectivity without manually arranging for your own fibre rollout at your own dime. But Bell Canada did say that regardless of how much it cost them to roll out fibre optic, they would make lots of money thanks to reduced maintenance costs and cheaper activation over the next 25 years+. Basically, telcos math tends to be "roll out fibre once, make money for the next 100+ years off the new cables just by replacing infrastructure at each end of the fibre line every X years..." Found a quote from Glen LeBlanc, BCE’s Executive Vice-President and Chief Financial Officer: > Now the benefits that we’re seeing 6 or 7 years down the road. Lower customer churn, higher ARPU per household, we’re seeing significant cost reductions in the network, lower truck rolls, lower calls to the contact centre. Ultimately, when you fast forward through the next decade, we’re going to end up with a very different cost structured telco in the future. There’s no electronics in the field. That’s one thing that I can’t overstate of how important that is. Whether that be a copper network that quite frankly over time in Canada does not age well in humidity and rain in Canadian weather. Or even fibre to the node or networks that have electronics in the field – DSLAMS or nodes. Those nodes ultimately lead to trouble, which leads to service troubles with customers and truck rolls and calls to the call centre. > Fibre is all about elimination of all of that. It’s a glass strand from our office to your home. There are no active electronics in the field. It’s a passive network. The cost savings for that in the long term are very substantial. Payback is 7 to 10 years we would say on average. > ... The numbers we’re seeing from Verizon are absolutely achievable [30% cost expenditure reduction once a city has fibre] and we’re seeing that. But I want to separate the cost savings you see today with the cost savings you ultimately see in the long run. The first cost savings I’ve already alluded to: that’s the lower truck rolls and better customer experience. The network performance savings, lower calls to the call centre. We’re absolutely enjoying that right out of the gate. We see about 40-50% lower truck rolls on a fibre network than our historic fibre to the node network. The great savings – the ultimate euphoria – is when you can shut down your copper network. That’s where I think you see the telco of tomorrow. From https://www.michaelgeist.ca/2016/06/ignorescaretacticsbell/ https://www.michaelgeist.ca/2016/06/ignorescaretacticsbell/

rsj_hn 6y ago
> I can easily imagine it costing fractions of a trillion in startup costs, but these would be recouped easily if everyone switches over Hmm. Let's think about that. Let's say a "fraction" of a trillion is $240 Billion. There are ~100 million households who are potential broadband customers. If they pay $100/month, that's an income stream of $10 Billion/month or $120 billion per year. So you'd be repaid in 2 years! Well, unfortunately that's not all profit, so let's say 10 years. Still decent. But wait! There are already 100 million (actually 114 million) households with broadband in the U.S., and their average broadband speed is 124 Mbs. Yes, that's behind the world-leading Singapore at 200 Mbs (I wonder why that is..) but better than Sweden and about the same as France -- two other nations with population density closer to the US than to Singapore. So pretty much everyone who wants broadband has broadband with the exception of a small number of households in rural areas - you are talking about say, 20 million households. But there it's really expensive to lay fiber. Now those rural households will pay their $100 but that's an income stream of 24 Billion/month which will not justify spending fractions of a trillion. And for the other 120 million households, you are going to have a hard time getting them to pay more for faster broadband, as there are rapidly diminishing returns. Not many would be willing to pay $30/month more to go from 120 Mbs (US) to 200 Mbs (singapore). That convexity (diminishing returns) means when you begin your rollout, the incumbents can reduce their price by $20/month and you have to massively increase speeds to compete. Then they reduce their price by $10/month and you have to massively increase speeds even more. So you are really screwed now, with a trillion in debt, and at the complete mercy of competition that can steal your customers by spending a lot less money, in terms of reduced fees, than you have to spend in terms of increased infrastructure costs. That is why beyond a certain point, it doesn't make sense to compete on faster broadband. So I think the mistake you are making is thinking in terms of average revenue and average costs. But actually you need to think in marginal terms. Say it costs an extra $X to deliver a network that is 1 MB faster than the current network. But customers would be willing to pay $Y more for 1 MB of speed, or equivalently, would give up 1 MB in speed for savings of $Y. If X < Y, you have a winning proposition, but if X > Y, you have a losing proposition, and this is true regardless of whether the average costs and average revenue work out in your favor. And the problem is that Y is kinda small in a market that is close to broadband saturation, even if everyone always wants more speed and even if there are rural households that are left out.

rsj_hn 6y ago

> I can easily imagine it costing fractions of a trillion in startup costs, but these would be recouped easily if everyone switches over Hmm. Let's think about that. Let's say a "fraction" of a trillion is $240 Billion. There are ~100 million households who are potential broadband customers. If they pay $100/month, that's an income stream of $10 Billion/month or $120 billion per year. So you'd be repaid in 2 years! Well, unfortunately that's not all profit, so let's say 10 years. Still decent. But wait! There are already 100 million (actually 114 million) households with broadband in the U.S., and their average broadband speed is 124 Mbs. Yes, that's behind the world-leading Singapore at 200 Mbs (I wonder why that is..) but better than Sweden and about the same as France -- two other nations with population density closer to the US than to Singapore. So pretty much everyone who wants broadband has broadband with the exception of a small number of households in rural areas - you are talking about say, 20 million households. But there it's really expensive to lay fiber. Now those rural households will pay their $100 but that's an income stream of 24 Billion/month which will not justify spending fractions of a trillion. And for the other 120 million households, you are going to have a hard time getting them to pay more for faster broadband, as there are rapidly diminishing returns. Not many would be willing to pay $30/month more to go from 120 Mbs (US) to 200 Mbs (singapore). That convexity (diminishing returns) means when you begin your rollout, the incumbents can reduce their price by $20/month and you have to massively increase speeds to compete. Then they reduce their price by $10/month and you have to massively increase speeds even more. So you are really screwed now, with a trillion in debt, and at the complete mercy of competition that can steal your customers by spending a lot less money, in terms of reduced fees, than you have to spend in terms of increased infrastructure costs. That is why beyond a certain point, it doesn't make sense to compete on faster broadband. So I think the mistake you are making is thinking in terms of average revenue and average costs. But actually you need to think in marginal terms. Say it costs an extra $X to deliver a network that is 1 MB faster than the current network. But customers would be willing to pay $Y more for 1 MB of speed, or equivalently, would give up 1 MB in speed for savings of $Y. If X < Y, you have a winning proposition, but if X > Y, you have a losing proposition, and this is true regardless of whether the average costs and average revenue work out in your favor. And the problem is that Y is kinda small in a market that is close to broadband saturation, even if everyone always wants more speed and even if there are rural households that are left out.