Consolidated makes 100 Mbps, greater speeds available to 42% of customer base

Consolidated Communications is staying on pace with cable in the broadband race as it extends higher speed broadband tiers to more of its customer base.

Speaking to investors during its fourth quarter earnings call, Bob Udell, president and CEO of Consolidated, said that 89 percent of its customers have access to 20 Mbps, while another 42 percent can get 100 Mbps or higher.

"Our broadband speeds continue to increase, and consumers are choosing higher bandwidth offers," said Udell on the company's earnings call. "We have just under 800,000 consumer marketable homes, with 89 percent of those able to receive 20-meg speed or more, and 42 percent have access to 100-meg or greater."

These figures are an improvement over the 31 percent Consolidated had in 2014.

Udell said this uptick in speed available reflects the fact that Consolidated "continued to expand our capability and backbone network ability to support those capacity adds."

Another question is how Consolidated's broadband growth ties into its IPTV business. Consolidated will still offer IPTV as part of a double or triple bundle for customers who want it, but it is pushing customers to consider an OTT video offering to illustrate it has the speeds to handle the growing video streaming trend.

"The video product is going to be part of our bundle," Udell said. "We're de-emphasizing our broadcast video product while emphasizing an over the top [video service] to capitalize on making bandwidth more valuable to our end users. That's demonstrated by the positive response to our 100-meg and 1-gig launches. So I think you'll see more of that strategy play out in our results this year."

Part of Consolidated's broadband plan also includes expanding and deepening its 1 Gbps service presence into more markets like Kansas City, Mo., where it faces competition from Google Fiber (NASDAQ: GOOG).

Consolidated also offers its 1 Gbps FTTH service in three Houston-area communities, including Conroe, Katy, and Lufkin, Texas. Eligible customers in those communities can get the service for $69.95 per month.

Similar to its larger ILEC peers like CenturyLink (NYSE: CTL), Consolidated continues to see the presence of the 1 Gbps FTTH service driving interest in other higher speed broadband tiers.

Within the Kansas City market where it currently competes with Google Fiber, Consolidated's investments in its last mile infrastructure enable the telco to offer a competitively-priced 1 Gbps product to over 50 percent of its customer base. Consolidated currently overlaps with 2,500 customers, but the telco expects that to change as Google Fiber enters other markets.

Udell said that what sets Consolidated apart from Google Fiber is that they work with customers to understand what tier best meets their individual needs. The service provider can also address business customers' needs with its fiber-based metro Ethernet product with associated QoS and SLAs that Google Fiber does not offer today.

"We differentiate ourselves by providing a consultative approach to marketing our product, so we help our customers use bandwidth versus some of the lower touch models that they can get other places, and we're seeing a growth in the gig product, although I would also tell you we offer other options that allow customers to spend less per month if they want on Internet," Udell said. "And the one final thing I'd add there is that while the consumer market gets a lot of attention in Kansas City, because of Google, we have a very strong track record of growth there with our commercial metro Ethernet service."

Jennifer Fritzsche, managing director of the equity research group at Wells Fargo Securities / Wachovia Securities, said in a research note that Consolidated's ongoing investments will enable to fend off cable competition in the markets it serves.

"We expect the company's continued investment and focus on network speed and quality to continue to push the mix of available speed higher," Fritzsche said. "We believe CNSL is ahead of the cable competition it faces in the markets in this regard."

For more:
- see the earnings transcript

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