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

(arstechnica.com)
1135 points carride | 3 comments | 10 Aug 22 13:23 UTC | HN request time: 0s | source
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boplicity ◴[10 Aug 22 16:59 UTC] No.32415153[source]▶
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.

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capableweb ◴[10 Aug 22 17:10 UTC] No.32415347[source]▶
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.

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the_watcher ◴[10 Aug 22 17:33 UTC] No.32415680[source]▶
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!

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boplicity ◴[10 Aug 22 18:05 UTC] No.32416113[source]▶
You're also assuming a 100% conversion rate, in terms of homes being wired for access. That's a pretty big assumption!
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1. pessimizer ◴[10 Aug 22 20:41 UTC] No.32418124[source]▶
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.
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2. boplicity ◴[10 Aug 22 22:34 UTC] No.32419285[source]▶
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.

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3. the_watcher ◴[11 Aug 22 18:41 UTC] No.32430002[source]▶
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.