Justification of FTTH Builds at Tens of Thousands of Dollars Per Mile Served?

Implications: 1.      A lot of people at the independent telcosare apprehensive that the USF and RUS funds could go away. 2.      It has resulted in some surprises in terms of FTTH equipment purchases. 3.      Suppliers such as Calix and Alcatel-Lucent might benefit if these seemingly irrational fears remain.

Analysis:  Some telephone companies get panic-stricken because they are no longer monopolies. And smaller telcos in particular are highly dependent on money from the USF and the RUS.  However, worries about the elimination of these funds appear unwarranted.  If anything, the way the politics in the U.S. is going, they will probably have access to even more cash in the next several years.  

Nevertheless, there are examples of carriers coming to the conclusion – why don’t we just fiberize everything while we can.  And in some cases, they do not care whether it is one farm for every five miles – they are deploying fiber.  Some of the justification for what appears to be an impetuous action is that they are probably not in the video business today.  So, they can get at least a little revenue (with apparently a pretty low hurdle rate).  Moreover, they will be potentially future proof for at least the next 100 years.  In addition, their cost to operating the network will be relatively low.  In short, they can only go so wrong in rushing to install fiber.  

These telcos tend to be part of non-profit cooperatives that really view FTTH as a benefit to all of the members of the community.  So, if it takes 20 or more years to pay it off, it is no big deal.  A couple of companies that were part of co-ops in west Texas installed fiber despite it costing them $30,000 a home served.