In my last Cool Stuff post, I wrote about FFTH (or fiber from the house). In the past week, I have had the chance to refine my idea, and I even had a chance to read the very good paper by Slater and Wu, Homes with Tails. The more I think about the subject, the more I come to the conclusion that main issue is syndication of the risk of stranded investment. The strategies which deal directly with spreading this risk have the greatest chance of succeeding.
Just to review FFTH, is where the homeowner buys his own Internet connection. Under the simple scenario, Joe the Fiber Layer comes to Joe the Homeowner and offers to build him his own fiber optic Internet connection. The cost of this construction is highly sensitive to the number of homes which take the offer in a given area. Using Slater and Wu’s numbers regarding the Verzion FiOS roll out, the capital cost for a fiber to the home connection is about $7,000 if 20% of homes passed take the service and on the order of $3,000 to $4,000 at a 40% take-up rate.
Insight: There is a marketing strategy which plays perfectly to this problem. Suppose Joe the Fiber Layer comes to Joe the homeowner and makes the following offer, “I will build you your own fiber Internet connection for $5,500. However, if 5 other homes on your line buy FFTH, I will send you a check for $500; if 10 more take it, I will send you a check for $800; 20, $1,500; etc.” I can imagine that in everywhere in America there would be neighbors leaning across the hedges saying, “Dude, we just got our FFTH connection. It is AAAAAWSOME! You totally have to get one of these!” Word-of-mouth is the best marketing, but peer pressure is better.
