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Comment by forrestthewoods | Hacker News Reader

Fiber has operating margins of 99%. Yes there's a big upfront cost. But it recoups quickly and becomes pure profit. Goldman Sachs estimated the cost to wire the whole country at a mere $140 billion [1].

Apple has $230 billion cash on hand. Microsoft has $100 billion. Alphabet has $73 billion. There's no shortage of capital to start with metropolitan areas.

The issue isn't up front costs or capital. The issue is politics and rent seeking incumbents.

Hopefully the more competitive mobile marketplace and 5G will free us from the tyranny of Comcast.

[1] http://www.businessinsider.com/how-much-it-would-cost-google...

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That article appears to be misinterpreting the quote from the Goldman report. It says it would take 70B to wire up 50 million homes, which is less than half. The article then just doubles that figure and assumes that is what a nationwide deployment would cost.

That is flawed for two reasons:

1) First, 50 million homes is more like 40%. "less than half" isn't half.

2) Not all homes are equal. Presumably Goldman meant the easiest/most profitable 50 million homes. It costs much much much much more to wire up rural and exurban homes.

Verizon spent 15bn wiring 17 million houses, but it only did rich areas. And they only got 4 million of those houses to actually sign up. Nearly 4k capital outlay per subscriber is a lot for a service that only costs 75 bucks a month.

>Apple has $230 billion cash on hand. Microsoft has $100 billion. Alphabet has $73 billion. There's no shortage of capital to start with metropolitan areas.

Yea but those companies won't use that capital on a relatively low margin industry like telecom. There is a reason Verizon is selling off as much wireline as it can. It's really not a great investment.

> Fiber has operating margins of 99%.

Instead of believing fake news, you could actually look at financial statements. Here's the financials on Chattanooga's gigabit network: https://static.epb.com/annual-reports/2016. Operating revenues from fiber was $122m. Operating cost was $78m.

So if you're paying $70 for gigabit, $45 are immediately eaten up by operating expenses (customer service, maintenance, etc.). Out of the $25 you have left, you gotta pay for the thousands of dollars you spent hooking up that customer, continuing equipment upgrades, etc.

Oh, Christ, not you too with "fake news". Fight semantic drift!

Do realize Apple also has over $100b of debt and Google about $4b.

"would raise the company’s adjusted debt to more than $100bn."

https://www.ft.com/content/d0293136-e98b-11e6-893c-082c54a7f...

I wouldn't propose any single company pay that cost out of pocket up front. The point is that $140 in private infrastructure isn't as big of a number as people think. What's holding it back is NOT raising capital.

Verizon spends upwards of 10 billion a year on infrastructure. They might spend over a 100 billion in the next 10 years all by themselves. Verizon, T-Mobile, AT&T, and Sprint combined will spend god knows how much.

There are many roadblocks to widespread fiber. Capital and profit are not among them.

One such roadblock apparently being that VZ is getting good return on its wireless spend, but putting that money into fiber would not generate the returns.

The private market is working as it should: not plowing money into things that don't have the ROI. The roadblock to fiber is that it is a boondoggle only government would like.

If it's so profitable, why don't the rent-seeking incumbents like Verizon and AT&T deploy more fiber?

Because it's even more profitable for them to not deploy fiber, so that their political allies can continue to use the need to "encourage additional investment in broadband" as an excuse for policies that mostly serve to give them more money without increasing service.

If there wasn't an access problem, you couldn't blame the access problem on policy limitations holding back the big providers.

Also some variation of "never attribute to malice/greed what can be attributed to sheer laziness/neglect" probably applies here too. The incumbents don't have to do anything to keep margins stable, and so laziness implies they won't bother to do anything but the bare minimum.

(See also: every other bit of crumbling infrastructure.)

Ok. So then why isn't Google doing it?

Because lobbying for more favorable regulation that makes your existing service more profitable under the premise that it will encourage you to add new service you have no intention of adding is only profitable for major existing incumbents, which Google isn't in the relevant space.

Time Warner publicly has a 97% margin on operating their high-speed internet. It's not an "if". http://www.huffingtonpost.com/bruce-kushnick/time-warner-cab...

It's heavily local politics. Often having to do with utility pole ownership and rights. Here's a classic article for Seattle's situation. Over 18 months just to survey and "make ready" an existing pole. http://crosscut.com/2014/12/google-fiber-never-come-seattle-...

If you're the incumbent is can often be best to freeze the system. Sure you don't get to profit or benefit from progress. But no one else does either. Not a bad place to be if you're the presently entrenched winner.

Debunking that 97% number: http://www.dailycaller.com/2013/02/15/does-cable-really-have...

Yes, broadband has a 97% profit margin if you attribute all of the costs of maintaining and operating the network to the TV service, and ignore the costs of building the network in the first place.

they do seem very willing to give rather long (12-24 month) massive discounts to new customers and people who threaten to leave. would seem to be in line with huge margins that they would behave that way.

How do? Lots of low margin businesses try to use new customer discounts. Think Groupon.

That is in line with how low marginal cost businesses work. Each new customer is essentially free to them. But the first one is massively expensive. It makes sense to give massive discounts to keep people or to get them to sign up.

Try replacing your comment with something like this instead:

2007 January: I'm not so sure about our announcement. I mean, if the iPhone is going to be such a winner, wouldn't it already have been done?

It's not a sound argument. The infinite regress will kill you.

It was called BlackBerry, it was hugely popular.

BlackBerry/RIM was to the iPhone was the telecoms incumbents are to Google Fiber.

If you're trying to make it out like there's a contradiction here, I'm not seeing how there is one.

ATT is deploying lots of fiber lately, take a look at their map[1]. It takes a lot of time and labor to deploy though, so it may show a city on their map when they haven't covered very much of it. In terms of organization, they have huge advantages over google: they have a local labor force, including big equipment for running new street level cable -- because they need it occasionally; they have existing customers they can sell to and project use for; they already know how to get access to poles and navigate local government processes, because they've been building street level boxes forever.

Also, I don't know if Google was doing it, but ATT is running fiber on streets with factory spliced connectors custom sized to run to the poles that are already present, so the street team doesn't have to do any splicing.

[1]https://www.att.com/shop/internet/gigapower/coverage-map.htm...

Quickly lol your looking at decades of payback time

Decades plural? You're off by an order of magnitude.

Upfront Investment: $140 billion

Yearly revenue per Subscriber: $70 month * 12 months/year * .97 operating margin = $815

Households in US: 110 million. Households in US w/ broadband: 102 million. So let's say 50 million fiber subscribers

140 billion / 50 million subscribers / $815 revenue per subscriber per year = 3.4 years

Three and a half years to recoup? Not bad! Installing fiber in dense neighborhoods with a high subscriber rate should recoup very quickly. It'd take a little longer in rural areas and poor areas. But there is absolutely no good reason for every metropolitan area in the US to not have gigabit fiber.

what's the average cost of connecting a sub in this model and what % will pay $70 a month

Let's look at actual numbers rather than fantasy.

> Upfront Investment: $140 billion

It cost Verizon at least $26 billion,[1] to wire up 7 million subscribers, or about $3,700 per subscriber. Verizon's network is in dense northeastern/midatlantic states, so in reality much more than that once you start wiring up the rest of the country. Chattanooga's network was about $5,500 per subscriber.

> Yearly revenue per Subscriber: $70 month * 12 months/year * .97 operating margin = $815

The gross operating margin for Chattanooga's gigabit system is under 40%.[2] So $336 per year.

> 140 billion / 50 million subscribers / $815 revenue per subscriber per year = 3.4 years

$3,700 per subscriber / $336 revenue per subscriber per year = 11 years. You've broken even just in time for the next around of upgrades!

> Installing fiber in dense neighborhoods with a high subscriber rate should recoup very quickly

Verizon only averages about 33% uptake rate, and that's by avoiding low-income inner cities or sparse rural areas.

[1] The reports are $23 billion through 2010. Don't have records after that, but e.g. it spent $3 billion in NYC alone since then. The subscriber count is 2016.

[2] Verizon's margin is quite a bit less than that (single digits), but let's assume in this hypothetical that you're not maintaining a legacy POTS network and don't have a unionized workforce.

I should point out that the above assumes you're content making no profit during that 10 years. If you want to eke out a 5% annual return on your $3,700 investment, your pay-off time is 24 years.

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