Hacker News Reader

Comment by rayiner | Hacker News Reader

Running five miles of cable would cost hundreds of thousands of dollars: https://www.reddit.com/r/networking/comments/7mp9gz/comment/....

Then, if you’ve got 50 houses, how many will subscribe? Hint: not many, since folks who buy houses in places without broadband probably don’t prioritize broadband. Say you get 20 houses though, with $200,000 invested. That’s $10,000 per house. That’s an optimistic figure. Will you ever make that money back? No. Charter has a market cap of $5,000 per subscriber. If you blow double that on capital costs alone per subscriber, you’ll never come close to making it back. (Especially in a scenario like the above with high maintenance costs.)

View on HN

In rural areas at least it is not going to cost 40k a mile to run coax. Those kinds of areas are almost always serviced by overhead utility lines that already exist, and just running a new line on those poles just requires township permit. It would be probably an order of magnitude cheaper than the buried lines or new lines building required in other circumstances.

Typical MBA-type way of calculating costs.

Let's take an average over country then apply it in my back-on-the-envelope. Doesn't matter if areas alike Manhattan would probably have 100x the cost of running coax in the rural area (which obviously drives the average).

Then justify the existence of monopolies when in fact purely local providers are actually better able to reduce the costs associated with broadband installation. Those monopolies subsidise central areas by providing way worse service for rural.

I've actually got this issue in London (I didn't check before moving, that our house is literally in the middle of about 5 exchanges). Went as far as reaching providers relating to Gigabit Voucher Scheme or even thinking of asking a friend living about a mile away to provide a wireless link from his house.

Your going to have to run fibre to the Cab and probably Upgrade the Cab as well

Local cable company wanted $10,000 to run a half mile of cable to my brother-in-law's house. Their other option is some local wireless provider that gives about 1.5mb/s, or cell phones which come in with 1-2 bars of signal.

They offered to split the cost with the other neighbors on the street. One are elderly who aren't interested in cable, the other are very religous and don't own a television or use the internet. IMO it'd be worth it for just the resale value of the houses.

While I don’t know what providers have to do to actually access it, the Universal Access Fee is supposed to be there for exactly this kind of reason: providing internet to rural areas that wouldn’t otherwise get it, due to low population levels.

Oh, I am well aware of the costs involved. Hence why I stated they likely only ran the cable to fulfill a regulatory check box and appeared to have done it as cheap as possible where you could see dozens of yards of cable exposed in a ditch, or even exposed to vehicles driving over it. But that's also why Congress has passed acts to compel providers to provide service.

Hell, I currently live in an affluent Chicago suburb, and I have exposed wires from both Comcast and AT&T just inches from the sidewalk out my back door. My dog literally takes dumps on the internet/TV cables to the townhouses I live in.

Haven't had AT&T service since they sold AT&T BI to comcast, but Comcast has the balls to tell me when I complain about an outage I should upgrade to business class if I want fewer outages (lower speeds, more money, supposedly service guarantees).

> But that's also why Congress has passed acts to compel providers to provide service.

There are no federal level universal service mandates for broadband. In any event, mandates aren’t free money. Consumers end up paying for it, the cost is just hidden and unaccountable. The mandate obscures the political question of: should we give a $5,000+ subsidy to people out of other peoples’ pockets, or are there are needier people who are more deserving?

Thee whole purpose of monopolies an the actual subsidies that they take with glee is to cover these costs. I completely disagree, Congress should compel these people to provide what they stated. If Romania can provide fiber for their rural populations for cheaper than we have there's no excuse for not being able to provide internet in the United States for all but the most remote locations.

Congress banned monopoly cable franchises in 1992. These companies have no legal protection from competition that would justify a mandate. They also don’t generally receive subsidies. The universal service fund only recently started offering subsidies for broadband. (Obviously, if a company elects to take those subsidies, it should build the infrastructure they say they will build.) And at least for larger providers, the “subsidy” really isn’t a subsidy. The money just comes from a special tax on the industry, so for say AT&T, the “subsidy” is really coming out of their own pocket.

As to Romania—that country has vastly lower broadband penetration in rural areas (where more than half the population lives) than the US: https://www.broadbandtvnews.com/2018/05/22/romanian-broadban.... Also, costs are not easily comparable across countries. The vast bulk of costs of building fiber in the US is labor costs, both for initial build and for ongoing maintenance. Building infrastructure in a blank slate with developing country labor costs is a very different proposition than doing the same thing in the US. (It’s also why China can build tons of high speed rail while the California HSR project ran out of money before getting out of Fresno.)

You’re totally right that it’s much harder to run fiber across the US vs a much smaller country. However I don’t think you’re accurate on a few other points:

> the “subsidy” is really coming out of their own pocket

ISPs lobbied really hard during the 1996 rewrite of the USF so they could add the “Universal Access Fund” line item on your bill separately. So, by and large, it’s not coming out of their pocket.

> The universal service fund only recently started offering subsidies for broadband

Not sure what you’re referencing when you talk about subsidies, but the USAC website says that they offered $200m in 2000, and the number quickly goes into the billions from there.

https://www.usac.org/about/tools/publications/annual-reports...

The USF is charged to providers. Providers can seek to recover some of that through a USF line item on the bill, but that's just optical cover. The actual burden of the tax is split between the provider and customer according to the relative elasticity of supply versus demand: https://www.investopedia.com/terms/t/tax_incidence.asp. (While I'm not aware of a specific study on the issue, telecom service subject to the USF has low elasticity both on the supply side and demand side, so it's probably a reasonable assumption that AT&T is bearing a big chunk of the tax incidence.)

As to broadband subsidies: prior to 2011, the universal service fund only covered subsidies for broadband to schools and libraries, through the e-rate program. It wasn't until 2011 that the USF started subsidizing broadband generally through the Connect America Fund.

You could charge $60/month and assuming there are no marginal costs to providing service and everybody subscribes (two big assumptions) that would be >7% yearly yield. Not bad at all, actually, in ideal circumstances.

Those two assumptions are wrong. Charter’s (who I use as an example because they’re a most pure cable company) shows an EBITDA margin of about 36%. That means that just under two thirds of revenues get eaten up by operating costs. And that’s on average—maintenance costs will be higher in some respects in rural areas where you have to roll a truck every time a tree takes out a power line. You have to charge a lot more than $60 even if everyone subscribes.

Which brings us to assumption 2. At > $100 per month, most people won’t subscribe. (Especially given that, as a matter of local law, in many places you’re required to offer a basic cable tier for $20-$30.) Atlantic Broadband, which covers rural areas around PA and MD primarily, has about 250,000 subscribers, but is available to almost 2 million people. (At least on a census-block basis.) My 40% assumption was quite generous.

> Running five miles of cable would cost hundreds of thousands of dollars

There are more modern laying techniques for rural areas that don't require you to dig up that much. A five person team can lay 3 kilometers of fiber a day in rural areas with modern microtrenching solutions. (looks like this for instance: https://www.youtube.com/watch?v=4bfbh3ILLD0)

The investment on 50 loss making houses can be subsidized by the investment on 50 profit making houses.

Estimates aside (I imagine these vary a lot by area anyway.. city vs rural, etc.), aren't these the same considerations as phone lines?

> Will you ever make that money back? No.

They almost certainly would make it back over a long enough time period. Broadband is going to get more important over time. Even if just a few people sign up now, future residents may prioritize it higher.

Isn't this the EXACT scenario government grants and subsidies are supposed to resolve?

Reply on news.ycombinator.com