One of the significant challenges facing network operators today is the high capital cost of deploying next generation broadband network to individual homes or schools. Fiber to the home only makes economic sense for a relatively small percentage of homes or schools. One solution is a novel new approach under development in several jurisdictions around the world is to bundle the cost of next generation broadband Internet with the deployment of solar panels on the owners roof or through the sale of renewable energy to the homeowner. Rather than charging customers directly for the costs of deployment of the high speed broadband network theses costs instead are amortized over several years as a small discount on the customer’s Feed in Tariff (FIT) or renewable energy bill. There are many companies such as Solar City that will fund the entire capital cost of deploying solar panels on the roofs of homes or schools, who in turn make their money from the long term sale of the power from the panels to the electrical grid. In addition there are no Energy Service Companies (ESCOs) and Green Bond Funds that will underwrite the cost of larger installations.
Tuesday, November 6, 2012
Googles next steps after Kansas City
[The hubbub and buzz around Google’s Kansas City fiver to the home (FTTH) project has died down as Google over the next year focuses on building out its network.
As far as I know, Google has yet to announce any follow on plans to Kansas City. Which begs the question as to what it plans to do next. Some theorize that Google will not undertake any more fiber deployments and instead use Kansas City as showcase to demonstrate to policy makers that building out fiber to the home is not as expensive as the telccos and cabelcos claim, and that there is no need for usage based billing (UBB) or data caps.
I suspect that Google has also learned some painful lessons. Deploying FFTH networks is a grunt business. There is no glamour or pizzazz in stringing fiber and you definitely don’t need a degree from Stanford to build and operate a FTTh network. It is very capital expensive with long paybacks. It is also painfully slow as anything to do with city owned infrastructure takes twice as long as three times your worst estimate to complete. It is a business that is diametrically opposite to the instant billion businesses and atmospheric valuations of Silicon Valley.
It would be shame if Google did not expand beyond Kansas City. But it is clearly not a undertaking suited to their business culture.
I hope that Google is exploring other alternatives such as a “franchise model” for their FTTh networks. With a franchise model Google’s brand name and technology would be a major asset to any budding FTTH project. A franchise arrangement would also help many smaller community FTTH projects get financing. For example in Europe the European Investment Bank is financing a number of FTTH projects with Reggefiber in the Netherlands.
Google has undertaken franchise models and underwriting costs of infrastructure in some of its other business ventures. For example Google has invested $75 million with Clean Power Finance which will help homeowners install solar panels funded by Google, generating solar-generated electricity for a monthly fee. Like FTTH the upfront cost is the largest obstacle to installing residential solar panels. Google, provides the capital funding while the maintenance and upkeep responsibility of the solar panels stays with Clean Power Finance and its local franchise installer. The homeowners, who are essentially giving roof space in exchange for a chance to buy solar-generated electricity, will pay a monthly fee. Google's return on investment comes via the electricity that is generated by the solar panels and sold to customers.
Google staff have also proposed a similar business model for FTTH called “Homes with Tails” where the last mile is owned by the homeowner, but where the capital cost is underwritten by the FTTH developer paid for by fees for Internet service. It would seem obvious to bring these two ideas together in one product offering – solar panels plus FTTH, as part of one product offering.
Google clearly has the expertise and brand recognition to a major FFTH franchiser. And I suspect that in addition to many community deployments, the RBOCs might be a potential target franchisee. The RBOCs have pretty well stopped all their FTTH deployments and yet are still losing out to the cablecos in terms of broadband adoption. They desperately need a new business model. But whether they would swallow their pride and hubris and embrace a new business model with their arch enemy Google is another matter. – BSA]
Homes with Tails
Google finances solar panels for homeowners
Reggefiber gets EIB funding for FTTH roll out
R&E Network and Green Internet Consultant.