Cincinnati Bell (NYSE: CBB) may be much smaller than its larger ILEC brothers AT&T (NYSE: T) and Verizon (NYSE: VZ), but it has come to the same realization that having a fiber-based broadband strategy for consumers and business will be a new revenue driver.
Over the past four-plus years, the telco has been rolling out a fiber to the premises (FTTP) network to deliver its suite of broadband and entertainment services to consumers under the Fioptics brand name.
Although its fiber footprint is mainly relegated to Cincinnati and parts of Kentucky, Cincinnati Bell's CFO Leigh Fox said during the recent Raymond James investor conference that it plans to ultimately pass 60-70 percent of the city's homes with its fiber to the home (FTTH)-based Fioptics product.
Pulling off this feat won't be easy as the telco is not only building out into Greenfield housing developments but also into Brownfield areas where it has existing copper facilities. It will continue to have to weigh out what neighborhoods are the best to overlay fiber with by gauging customer interest in higher speed broadband and TV.
Fioptics today delivers speeds from 5 Mbps up to 100 Mbps. Being a FTTP-based network, Cincinnati Bell could follow the lead of Google Fiber and AT&T to deliver a 1 Gbps service, but Fox previously said that its most popular broadband speed is 20 Mbps.
Regardless of any challenges it will face in meeting its goals, the telco has found that fiber-based consumer broadband and business services are two new revenue sources that are helping to stem ongoing legacy voice business losses.
In the fourth quarter of 2013, Fioptics revenues rose 49 percent year-over-year to $29 million amidst flat wireline revenues of $182 million. It also increased the amount of homes passed by Fioptics to 71,000 units and achieved 29 percent penetration. Fioptics products are now available to 276,000 residential and business customers, or about 35 percent of greater Cincinnati.
Residential competitors like Time Warner Cable (NYSE: TWC), which made a larger splash in Ohio when it purchased Insight in 2011, have yet to respond with an ultra-high speed tier like its new 300 Mbps tier, which was in response to recent moves made by AT&T (NYSE: T) U-verse Internet and Google (Nasdaq: GOOG) Fiber. AT&T launched a 300 Mbps service in the city, while Google Fiber said last year that it will launch its 1-Gig product there.
But the residential market is only one part of the company's overall fiber strategy.
Being the incumbent telco in Cincinnati, the service provider has built a sizeable network that can serve a series of small-to-medium sized businesses (SMBs) and large enterprise customers.
Since the service provider is already passing by many businesses, it sees utility in extending the Fioptics network to SMBs as a foundation to provide enhanced services like cloud and VoIP. On the larger business side, the service provider has built a large on-net fiber footprint.
In 2013, the service provider lit 100 multi-tenant units with fiber, ending the year with 500 MTUs and 3,200 single-family units lit with fiber. It also built 900 fiber route miles in 2013, bringing its total fiber network 5,700 route miles.
However, its dominant fiber network position will be challenged by two viable competitors: tw telecom (Nasdaq: TWTC) and Fibertech Networks, which have been expanding their networks throughout Cincinnati and Ohio.
Fibertech, for one, recently completed a network expansion in Ohio by adding more than 1,000 miles of new fiber in Akron, Cleveland, Cincinnati, Columbus, Dayton and Toledo.
While no one can predict when its fiber-based service will completely surpass its legacy wireline core, Cincinnati Bell had to make bold moves to create a new growth revenue foundation to maintain its relevancy as a wireline service provider.--Sean