Speed is Everything When it Comes to Successful RLEC FTTH Businesses

Implications: 1.      The RLECs can really get themselves into trouble by just doing a little bit here and a little bit there, when it comes to FTTH. 2.      It is not like in the CLEC business that is serving large cities in which careful consideration is a must. 3.      The folks that just do the whole thing at once very quickly gain the necessary efficiencies and can become profitable in no longer than 48 months.  

Analysis:  As the source article points out, being “a really small carrier” is advantageous in deploying FTTH.  The piece also indicates that the ability to be nimble is key.  Unless a critical mass of customers can be achieved speedily, then the RLEC is going to have trouble justifying the cost.  If the carrier runs the shop correctly, it should take no more than four years to get a payback.   

One advantage that an RLEC has over a larger independent is that it will by definition have a higher take rate because of the limited amount of competition that is available in these areas.  Frequently, these RLECs are part of a cooperative, which will have a mission statement to serve everybody.  And “funding from RUS or the…USF” can be essential in super-rural areas that have significantly fewer than a dozen homes per mile.   

The bigger independents, such as CenturyTel, FairPoint, and Windstream, are also “in a bad pinch” because they currently lack a terrestrial video strategy – while the smaller ILECs do tend to have such a game plan.  Part of it is that for the larger independents to offer a video service, they probably believe they would have to do it ubiquitously.  That gets tough because some of their plant is going to be able to do video and some is not.