Cincinnati Bell may be planning to wind down capital spending on its fiber build starting in 2017, but in the meantime the provider has built an aggressive foundation from which it can deliver a series of high-speed services in Cincinnati to residential and business customers.
As of the end of the fourth quarter, the service provider passed 97,000 new addresses in 2015. Cincinnati Bell is showing no plans of slowing down its buildout in the near term, with plans to pass over 70,000 homes by the end of this year.
"CBB continues to be extremely fiber focused, said Jennifer Fritzsche, senior analyst for Wells Fargo in a research note. "80% of its current Fioptics footprint is fiber to the home, whereas the remaining 20% is fiber to the curb. CBB's fiber depth is clear."
While the initial buildout of fiber is capital intensive, the fiber network gives the telco a degree of upgrade freedom it could not achieve with existing copper facilities.
Tom Simpson, CTO of Cincinnati Bell, told investors during the recent 2016 Morgan Stanley Technology, Media And Telecom Conference that by building out the fiber network to more homes, "we're able to scale that customer base from 30 Mbps to 50 Mbps or 100 Mbps with little to no incremental cost."
The ongoing fiber rollout is helping to tip the scales of the legacy and strategic revenue mix in its residential and business segments, a trend that was clearly seen in the telco's fourth quarter 2015 results.
In the residential segment, Fioptics continued to be a large part of Cincinnati Bell's revenue base, rising 34 percent year-over-year to $54 million for the fourth quarter and $191 million for the year. Likewise, Cincinnati Bell's Entertainment and Communications revenue totaled $188 million for the quarter and $744 million for the full year, up $3 million and $14 million, respectively.
"CBB's legacy revenue continues to be a lower part of the mix," Fritzsche said. "In the consumer side, legacy revenue was 42% - down from 52% in 2014 and 64% in 2013."
A similar trend is taking place on the business side where legacy revenue was 51 percent, down from 56 percent in 2014 and 60 percent in 2013.
Having built out fiber to more parts of its territory, particularly where businesses reside, the service provider can be on a more competitive footing with local cable operator that has been able to poach copper-based customers.
To complement its fiber build, the service provider created a new unit that will focus on small to medium sized businesses that have unique needs which differ from the larger enterprise customers served by its CBTS division. Additionally, the telco has begun using ETI Software Solutions' circuit management module to migrate existing T1 copper based business customers to fiber, a process it uses to migrate residential customers from DSL to its FTTH-based Fioptics products.
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