FTTH Deployment Might Cause Potential RBOC Copper Line Prices to Tank

Implications: 1.      The attitude by smaller independent telcos tends to be they are not going to mess around with old copper plant that is up for sale from the RBOCs. 2.      They will just overbuild these areas with fiber at a lower cost. 3.      In doing so, they avoid the integration expenses as well as the higher operational costs.

Analysis:  There are properties in the Midwest in which Qwest or AT&T has offered to sell their lines to independent telephone companies.  Their inclination has been to hold out on price at about $3,000 a line.  With the ability to do FTTH at $2,500 to $3,000 per home served, they can just overbuild with fiber (non-greenfield) for less than the asking price – with aerial plant in a rural area or a small town.  In fact, the independents are doing a good amount of overbuilding in the Qwest and AT&T territories.  

The bigger independents, such as FairPoint and Century Tel have obviously been acquiring copper properties.  With the ARPU per line significantly less than other carriers because there is no video terrestrial strategy in place, there is still probably a justification in purchasing copper loops.   

Measuring the cost of copper lines can be a complicated task because they depend on what services are either already to be, or planned to be, rolled out.  Obviously, the value of a DSL line goes up if it is designed to do triple play relative to a situation in which there is a DLC with maybe a DSL barnacle.   

CLEC FTTP deployments are also having an impact.  In West Virginia, One Communications’ FiberNet, claims that with its fiber to the premises overbuilds for business and MDU customers, that it will generate more revenue than Verizon within West Virginia this year.  This situation will make it that much harder for the RBOC to get anything resembling a decent price for its wireline assets that are all up for sale in this state.