OK, call me a cynic, but I think that we tend to obsess about singular solutions to complex problems. Maybe it’s just a human need, or maybe it’s easier these days to present a single story instead of an exploration of some complex set of requirements and even-more-complex set of possible solutions. In any event, one place we see this is in the broadband space in general, and in particular how subsidies to support underserved and unserved users might best be applied. The most popular answer seems to be “fiber”, but is it the right one?
Light Reading cites a study by a wireless broadband supplier that calls a pure-fiber approach into question. Is this just self-serving and opportunistic, or is there a real question of how far you can take fiber, even given government willingness to kick in subsidies? A systemic approach is needed, and I think that has to recognize that there is no single answer to how to promote quality broadband for most markets.
What is the best technology for broadband? The one with unlimited (essentially) potential capacity? Why, given that the average household cannot really justify more than roughly 100Mbps broadband? Why, when operators are already under considerable financial pressure delivering even the current broadband services to the current users? The best solution to any tech problem is the one that delivers the best return on investment, because without good ROI there isn’t any deployment. So what does that say about fiber broadband?
The ROI of broadband depends on the cost of serving a population and the revenue the served population could generate. Generally speaking, as I’ve said for decades, those things depend on demand density, which is roughly the dollar GDP a mile of infrastructure could pass in a positioning deployment. Demand density is largely a function of population density and household income, and it varies considerably depending on both these metrics.
Could you trench a mile of fiber to serve one user? Hardly. Even half a mile per user would be an unbearable cost. The baseline strategy for fiber deployment is to “pass” households with baseline infrastructure than can then be connected to households that elect to purchase your service. If households are dense enough that works, which means that fiber is really a community strategy, and probably a strategy that requires some population density within the target communities.
If you look at the US market, the top ten metro areas in population each have 5 million or more inhabitants. Dip down to areas with a population greater than 1 million and there are roughly 56. At the half-million or more level and you have 113, and there are roughly 360 metro areas with a hundred thousand or more people. Only about 1,600 communities have a population greater than ten thousand, of which over a thousand have populations less than 25 thousand. The number of households in any community tends to be roughly 40% of the population.
Population density and household income correlate fairly well with willingness to pay for broadband services, and the household numbers of course correlate well with the cost of providing those services. When we have a concentrated population, a large number of people per square mile, the total revenue potential is higher per unit area than when population density is lower. When we have a large number of residential units per unit area, we have more efficient infrastructure to deliver broadband.
The reason this is important is that most fiber experts I talk with tell me that it is difficult to justify fiber broadband in communities less than ten thousand in population (4000 households), because the cost of deployment can’t be recovered fast enough from broadband subscription revenues. Roughly twenty percent of the US population live in smaller communities or unincorporated rural areas that would be difficult or impossible to serve with fiber except through a level of subsidies unlikely to secure public and political support.
There are alternative strategies to fiber to the home, of course. Fiber could be deployed to a node or to the curb, with another media then used to haul into each home. That strategy isn’t particularly useful unless you can reduce the cost of the home-haul significantly versus taking fiber the whole distance, of course, and that’s why fixed wireless access (FWA) has gained a lot of traction recently. With FWA you run fiber to an antenna site where wireless, including millimeter wave, can be used to reach homes out to a distance of one or two miles, depending on how fast you want to be and how many obstructions exist. Most operators I talk with will admit that the optimum technology strategy for broadband deployment would be a combination of fiber and FWA.
A square mile is 640 acres. A typical single-family residential subdivision has between four and six households per acre. Condos and clusters roughly double that, and apartment buildings generate ten to twenty times that density. FWA coverage, presuming a one-mile radius, would be 3 square miles or roughly 1800 acres, which would equate to a population of between seventy-five hundred and ten thousand single-family houses. The broadband revenue from ten thousand subscribers assuming an average of $50 per month for broadband would be $500 thousand per month, from which we could allocate $120 thousand to access infrastructure. That’s between $1.1 and $1.45 million per year. The cost of fiber infrastructure to support the population is estimated at between $5.7 and $7.5 million, so the rough payback period is five years, which is reasonable.
However, the cost of FWA for the same community of users is far less, estimated at only a sixth that of fiber, so we could support the high end of our community density with only $1.25 million in deployment costs, and the payback at the same revenue per user is then less than a year. Or, looking at it another way, we could support a population of one sixth of ten thousand, or about 1,600, with the same payback as we’d have with FTTH in a community of ten thousand units. That means we could address an additional ten thousand communities using FWA.
When household densities rise to roughly twenty-five per acre we reach a point where multi-story structures are essential to achieve that density, and these reduce the fiber cost while at the same time raising issues with per-household FWA because of interference of structures. These could be mitigated by having a single FWA antenna per building, of course. However, the number of communities that would fit these parameters is limited. Overall, FWA could increase the percentage of population covered by “quality” broadband from roughly 80% of the population to roughly 94%, according to my model. The remainder are likely beyond reach of any broadband technology except mobile cellular 5G and satellite.
I think that the article and study are correct in saying that the cost of supporting the underserved and unserved households with quality fiber broadband would be excessive. I also think that it would be reasonable to believe that some additional households in areas below the target density that can justify fiber could be served via fiber from the node point where FWA towers were fed, so the actual number of households that could be served by fiber would be a bit over the 80% number. My model suggests that this could serve another 4 million households, leaving FWA to support perhaps ten to twelve million who couldn’t be economically served via fiber. I also believe that of the 80% of areas that could support fiber, a quarter would be better served by FWA because ROI would be better and service competition likely higher.
To return to my opening point, there’s surely a tendency to avoid complexity and complex topics, but that can hide important truths. Demand density has been an accurate predictor of broadband deployment economics for at least two decades, but using it would generate a lot of that apparently unwanted complexity. The problem is that it’s simply impossible to ignore economic reality on an issue like this, and there’s actually some good answers out there…not perfect ones, or always popular ones, but still better than we have now. I hope we can take the time to consider the questions in the right way, so we can find those answers.