Man who built ISP instead of paying Comcast $50K expands to hundreds of homes

He's getting $2.6 million to set up access to 417 homes. That works out to $6,235 per home. At $55 per month, it would take 113 months, or over 9 years just to get $2.6 million in revenue.

Horrible economics! What a crazy business to be in. No wonder grants like this are necessary.

This is how the ISPs work as well, typically 10 years is common ROI for any neighborhood and 5-10 years for multi-family housing (apartment) runs. This is also the reason AT&T/Comcast won't run new installations to small (less than 40 residents in my experience) or rural neighborhoods since the ROI time gets longer the fewer potential customers they have.

Has a road or water line ever paid for itself?

Not that bad. A lot of utility-type businesses expect to have much longer return on investment times, the electric business is usually wanting to get 50 years of life out of a new baseload generating unit, and it might be 30 or 40 to get your investment back.

So taxpayer dollars are necessary to make this business viable, and the product of that business is something that, realistically, everyone absolutely needs access to - certainly seems like this should not be a private business at all but a public utility. Have we ever asked this kind of question for interstate highways?

The actual price they are offering seems to be $55 or $79/month + ~$200 installation fee. Also missing in your calculation, is a $30/month subsidy from FCCs "Affordable Connectivity Program".

I didn't make the calculation myself, but a sub-10 year horizon for a project someone seems to do from the goodness of their heart, doesn't seem so bad.

given the state of the roads and streets in most places in the usa I have very little confidence that public internet will keep up with maintenance, upgrading the equipment to the lastest speeds and standards every 5 yrs.

Commercial ISPs have issues and they should not be given local monopolies but even shitty Comcast is better today than it was yesterday. The same is not true of most of the roads in my state.

It’s a utility. Utilities have very stable revenues and very long payback periods. Nine years is pretty short in this context

Including the installation fee and $30/mo subsidy (I am assuming this means the price he receives is $30 higher than the one customers pay), my quick math shows it would take a bit over 71 months (almost 6 years) to hit $2.6M in total revenue. However, that assumes literally every customer chooses the $55/month plan, if everyone chose the $79/mo plan, it would take almost 51 months, or a bit over 4 years (obviously the number will be somewhere in between that).

Also, this math assumes no growth whatsoever in homes served or other revenue lines. I assume adding another home will be far cheaper than building out the core network, and the article itself notes other lines of business. To be honest, this doesn't seem like a terrible investment to me. There are certainly better ones in a pure ROI point of view, but for government investments? More of these please!

Well the US economy has boomed for the last 250 years or so and depends pretty heavily on roads and thirsty humans. Those investments seem to have given more than they took, by a very wide margin.

My experience is a bit different. The roads where I live (San Francisco) are better than my AT&T options. Roads here seem to be repaved every 5-10 years and AT&T still doesn’t offer a plan that the FCC would classify as broadband to my house.

I disagree with you on the basis that I can get in my car right now and be confident that I'll be able to drive with speed and safety to any city on the map, and that when I get there I'll be able to drink the tap water and to plug my electronics into any wall socket without them getting fried. Maybe some local municipalities aren't that great at keeping up with their last-mile pothole maintenance, and maybe that should be an issue the locals prioritize more when choosing their representatives - but that doesn't represent the average experience.

But also, we're already talking about publicly funded infrastructure. We've subsidized broadband to every home multiple times by now, and we still continue to write those checks. Maybe if we want it to be private we should actually enforce that and then see how it goes.

I don't know what parts of sf you're referring to but my experience of sf is it's pothole hell. Market, Misson, anything between market and van Ness, and plenty of others

to add, I lived on the east coast in the 80s and I found some fellow Californians where we co commiserated about how shitty the roads were in Baltimore and how nice they were in southern Orange County but now I drive though southern Orange County and the roads are clearly in need of repair.

You're also assuming a 100% conversion rate, in terms of homes being wired for access. That's a pretty big assumption!

The Grant County Public Utility District in eastern Washington (and presumably PUDs elsewhere in the nation) did exactly that. They built a fiber network throughout the county (physically large but pretty sparsely-populated), although they don't provide service directly to customers--instead, a healthy number of local ISPs still exist in the area. If fiber isn't at your house yet, there are also a few WISPs, which were easy to stand up because of the fiber.

https://www.grantpud.org/getfiber

You are completely ignoring any operating costs. For all we know monthly profit could be negative, and not 100%.

He's serving 600 households afaik, not offering service to 600 households. So the assumption is that there's a 0% attrition rate. Pretty safe assumption for monopolies, or for local services with half the price and 5x the bandwidth of the other choices.

We're talking about the ROI on the 417 houses he's installing access for, not his total customer base. 2.6m / (417*(55+30)) = months to $2.6 million in revenue.

However, the assumption was that all 417 houses connected will become customers. That's a pretty big assumption. The actual percentage could be 50% or 90%. I don't know -- but surely the answer will have a big impact on the time it takes to reach that amount of revenue.

Going from 0 to 1 internet providers is likely to have an extremely high conversion rate assuming affordable pricing and quality. While it's anecdotal, I have personal experience with this. My family is from rural eastern WA and spends the summer in the mountains up there. Until 2020, the only internet service option was HughesNet, which was extremely expensive and very low quality, as it's a notoriously rugged region that's difficult to serve (it's still ineligible for Starlink). In 2020, a local was able to get a 5G tower installed (way cheaper and way higher quality). When I had him set us up, he told me he'd already installed it for 60% of the cabins on the chain of lakes our house is on. He expected it to be 100% by 2022.

All that said, my experience does remind me that many of the people up there turn it off for the winter, when they aren't there. My assumption is that there'd be some amount of desire to do that, which would also reduce returns.