Cincinnati Bell's new broadband and energy ventures are all about survival
Cincinnati Bell's (NYSE: CBB) plans to expand its Fiber to the Home (FTTH) reach along with a move to deliver IPTV over copper and energy services is a thesis that states: innovate quickly and adapt to changes in the industry or die.
The telco may not be the size of AT&T (NYSE: T) or Verizon (NYSE: VZ), but its challenges are no different.
As one of the early purveyors of PSTN voice service in the late 20th century--one that sustained Cincinnati Bell and the rest of the Bell System for nearly a century--the telco has also seen its traditional landline voice market continually erode to wireless substation and cable competition.
Ongoing landline losses, not surprisingly, have forced Cincinnati Bell to cut jobs from its traditional consumer wireline voice workforce in recent years. Following a warning in late 2009 that it would have to make cuts companywide as part of an expense reduction program for 2010, it slashed an additional 50 jobs last November on top of the 200 it cut in May 2009.
And while it's never a good sign when service providers cut jobs, Cincinnati Bell CEO Jack Cassidy put a plan in motion to grow the consumer and business wireline businesses by establishing two units: communications and technology solutions.
Led by former Freedom Group executive Ted Torbeck, Cincinnati Bell has been slowly building up its Fioptics Fiber to the Home (FTTH) initiative with plans to pass an additional 70,000 homes by bringing fiber into specific neighborhoods this year.
FTTH service growth has been modest. In Q1 2011, Cincinnati Bell added about 2,500 new subscribers, bringing its total broadband service subscriber count to 31,000.
Given the expense to lay cable and install FTTH equipment, Cincinnati Bell is being realistic about its FTTH drive. To augment the FTTH-based Fioptics video effort, the service provider revealed this week that it would start rolling out IPTV over its traditional copper-based lines similar to AT&T's U-verse Fiber to the Node (FTTN) drive.
One of Cincinnati Bell's most interesting bets in the communications segment is its recent entrance into the power industry through a partnership with Viridian Energy. Already serving 1,400 customers since launching the energy service in June, Cincinnati Bell plans to extend the service to businesses and offering natural gas service.
The thought process with getting into the energy business is that Cincinnati Bell can become a one-stop shop that consumers can use to get both telecom (wireless and wireline) and energy services.
Outside of the residential services market, Cincinnati Bell's technology solutions unit has been also upping its business service power by tapping into the burgeoning cloud services and data center market. Like CenturyLink (NYSE: CTL), TDS Telecom (NYSE: TDS), Verizon (NYSE: VZ), and Windstream (Nasdaq: WIN), Cincinnati Bell has augmented its data center capabilities by purchasing Texas-based CyrusOne.
Data center services have been a saving grace for Cincinnati Bell. In Q1 2011, data center colocation adjusted EBITDA increased by 122 percent, or $13 million.
So, will all of these efforts pay off in the long run for Cincinnati Bell?
While there's no definite answer to that question, the reality is that Cincinnati Bell's moves reflect the ongoing notion that telcos have to think outside the PSTN box if they want to survive.--Sean