Monday, August 01, 2011


Chattanooga FTTH economics

I previously noted the rather high cost per premise of EPB's Chattanooga FTTH deployment. While this scheme is the poster child of the UK's "FTTH or bust" lobby it does look expensive in terms of cost of installation and the retail pricing would be a bit rich for our tastes too.

Obviously it's a sexy proposition to have a gigabit connection, even if only 12 residents take that service. One has to question the large debt involved in the current climate - a company with a turnover of $480m in 2008 taking on a fibre-optic bond debt of $220m doesn't look like something that would fly in the private sector. $220m divide by 169,000 residents is a debt of $1300 per head which if transferred to the UK population would be $78 billion or £47.8 billion which is 50% higher than the Analysys Mason estimate of under £30bn for point to point FTTH throughout the UK.

EPB's premise was of reducing the cost of operation of it's electric grid. The accounts show the following costs for 2008, 2009 and 2010 in $m :-

Other operation expenses :- 38.0, 38.9, 37.5
Maintenance :- 13.6, 15.6, 18.0

So it's early days but the tens of $millions of smart grid savings aren't showing up just yet.

The operating expenses and revenues of the fibre optic system are starting to take off :-

Fibre optic operating expenses :- 9.8, 11.0, 16.1
Fibre optics sales :- 15.5, 17.2, 20.9

It will be interesting to see the full picture as the system rolls out and full year accounts reflect a mature customer base. Adding $5.1m in operating expenses to gain $3.7m in revenues from 2009 to 2010 doesn't look great but the accounts of large companies don't provide a whole lot of detail.

In 2010 only 18% ($4m) of the fiber optic revenue was from residential services. When 30,000 customers paying $100 a month are fully reflected in the accounts we should see perhaps $36m of revenue making the total more like $58m with 62% from residential sales.

I look forward to the 2011 accounts, and would be happy to be corrected if I have misunderstood any of the above. It's a shame proponents of schemes like Chattanooga don't look beyond the willy waving gigabit speed into the detail in order to see if the thing is remotely affordable or sustainable.

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