Hacker News Reader

Comment by rayiner | Hacker News Reader

Competition won't change economic reality. Verizon's average revenue per wire-line user is $125/month (mostly FiOS), and the operating income margin on that is 1-5% in any given quarter. Unless a competitor had fundamentally different economics than Verizon, there's no way it could profitably serve those low-income communities.

The city's approach, direct spending focused on deploying cheaper wireless technologies, is the least distortionary and most cost-efficient way to proceed. Better still would be just giving those poor neighborhoods cash and letting them decide whether to spend it on broadband, or food or clothing.

View on HN

I think you're missing the option that Verizon is just plain terrible. You can both have a monopoly, charge high and still get a low operating income. It tells us nothing about the underlying economics of the problem at hand.

I think it tells you a lot about the underlying economics that an organization that's so successful at making money on wireless can't even eke out a 5% operating margin on wireline.

Verizon has invested about $23 billion on its network, and has 6.6 million FiOS subscribers. That's about $3,500 per subscriber. Chattanooga spent $330 million on its network, to serve 65,000 subscribers, or over $5,000 per subscriber.

To ball-park Google's KC rollout. Estimates are $85 million to wire the neighborhoods, plus $500-600 per house. They've got about 32,000 subscribers,[1] so about $3,250 per subscriber.

[1] Based on the reported 27,000 video customers and using Verizon's 85% ratio of video to broadband customers.

The only thing that changes economic reality is competition.

Governments also change economic reality. Regulation, when well-applied, works wonders.

And in most cases, competition requires a (somewhat) level playing field - a job for government.

If you only rely on the Elon Musks of the world to disrupt entrenched interlocking cartels, you'll end up waiting decades to balance the inefficiencies of that market if you're lucky.

Reply on news.ycombinator.com