The point isn't that Sonic is running gigabit networking to people's houses. The point is that it CAN BE DONE and on a reasonably profitable basis (I'm assuming that Sonic's management is fine with the cost outlays). Verizon was 80% of the way there and its management got cold feet.
Memo to Frontier Communications: THIS is how you do it. You can beat Verizon at their former game, get Sonic.net to show you how. (Or, even better, get Sonic.net to take over your FiOS operations in the Pacific Northwest...)
> Verizon was 80% of the way there and its management got cold feet.
I have a simple explanation for that: A regulatory and commercial environment that was clearly not going their way. Verizon spends something like $1,000 to install FiOS at your house, then a few hundred dollars a year in hardware, bandwidth, etc. To make that work for them economically, they need customers paying an average of $100+/month and preferably even more over time.
But how does Verizon get your $100+ when you watch all your TV on NetFlix, Hulu or iTunes? That's pretty obviously the way things are heading, though it may take another decade. Now all you want from Verizon is an IP pipe, and good luck convincing customers that "Internet only" should cost as much as "Internet + TV + Phone". And an Obama-appointed FCC is unlikely to allow Verizon to demand a cut of NetFlix or Apple's revenue for use of "full bandwidth": That's what the Net Neutrality fight was always about.
Without their own services to sell, the capital cost of laying and maintaining a "dumb pipe" didn't look so good.
I think Apple is going to have a go at solving this problem for the providers: "Let us take over the user experience (i.e., the hardware and software) and in return we'll give you a new way to package your services that guarantees a healthy revenue stream regardless of how consumers are getting their content." Just think how much more money AT&T makes from the average iPhone subscriber vs. the average dumb phone subscriber and you'll have the right idea.
Here's the thing I find most confusing, and it somewhat goes with what you wrote: Frontier took over Verizon's operations in Eastern Washington, Oregon, and Fort Wayne (Indiana). For a year or more, they were ambivalent or even hostile about the idea of selling FiOS TV. Now, all of a sudden, they've renewed or let stand existing TV franchise agreements and are full-out marketing it again.
I think Frontier realized what you just wrote: Being a "dumb pipe" provider--especially when your company took on a pile of debt to "buy" both aging copper and new-fangled fiber--is not a strategy for success. So now, they figure they've got the TV equipment, so why not go for it?
Personally, and this is apparently me having a minority opinion, I utterly despise Hulu, NetFlix, et al. Why? None of them has matched the ease of use of my TiVo connected to a linear cable lineup. Television is supposed to be an "idiot box" and for me and the other two people in my household, TiVo + FiOS TV = astoundingly easy.
My guess is that any full-fledged "Apple TV" will take your preferences into account. Here's my wild theory:
How many unique TV channels are there in America? OTA and cable. Maybe 2,000? With a ton of redundancy in the programming. What if Apple simply recorded all of them into that big fancy data center? No need for a DVR: Now you can stream anything your cable provider offers any time after it airs whether you have a "season pass" or not.
There will probably be a few annoying restrictions (Shows disappear after two weeks?) and you'll probably have to watch ads. But as far as I can guess, it's the only way Apple can give you time-shifted access to non-streaming programming (e.g., the NFL) without reinventing TiVo, which I'm pretty sure they don't want to do.
It all hinges on whether they can get the contracts ironed out. But the cable/fiber companies will see dollar signs from more expensive "Apple TV" plans (with two year contracts to make the set cheaper?) and the networks may be swayed by the promise that customers will have to watch ads, or pay them to make the ads go away.
Keep in mind one of the reasons it's profitable is because running above ground wires is much cheaper than in the ground or whatever has to be dealt with in big cities. The article even mentions expanding to other towns will mean going into debt.
When their break even point is well below 2 years going into debt is hardly a bad idea. In their situation debit is simply leverage and while it increases risk you can easily maintain profitability while borrowing significant amounts of money as long as your creating capital with that debt.
The article implies that laying cable in the ground is significantly more expensive than running it above ground. Hence the need to go into debt. The ROI timeframe will also likely change with the increased costs.
The point I was making is that one of the most expensive parts of getting fiber to the home is laying the cable. In this case they were able to do a 'test' run to a neighborhood where they could just relatively cheaply run the cable above ground. I hope that their cost structure still works when moving towards more expensive rollouts, but given how we have seen other fiber rollouts get scaled back or fail I'm not so sure.
Memo to Frontier Communications: THIS is how you do it. You can beat Verizon at their former game, get Sonic.net to show you how. (Or, even better, get Sonic.net to take over your FiOS operations in the Pacific Northwest...)