McCarthy: Frontier will expand FiOS in markets it purchased from Verizon

McCarthy

A top Frontier executive sees an opportunity to increase its fiber and copper-based broadband share when it completes its purchase of Verizon's wireline properties in three states (NYSE: VZ) later this year.

Speaking to investors during the JP Morgan Global Technology, Media and Telecom Conference event, Frontier's CEO Daniel McCarthy said the telco will look for ways to expand the existing fiber-to-the-home (FTTH) FiOS footprint.

In the three markets Frontier will enter into--California, Florida and Texas--there is a higher penetration of FiOS users.

"The FiOS penetration is much higher, specifically in Texas, but we think there's a lot of opportunity to drive FiOS penetration in Florida and California," McCarthy said. "We see that as a big opportunity."

But fiber is just one part of the overall broadband integration story.

Frontier also plans to leverage new advancements with ADSL2+, bonding and VDSL2+ technologies to advance the copper-based infrastructure in these three markets.

"On the copper side, we actually have a playbook that describes in detail how to upgrade the Verizon architecture to what I would say is next-generation broadband capabilities," McCarthy said. "It starts with some building blocks and that is one of the things we'll focus on out of the gate."

McCarthy added that "it's one of those things that although we didn't build it into our synergy, per se, it's an opportunity for us as we bring a Frontier approach towards network architecture and operating rural systems specifically in Texas and California."

While Verizon had not been aggressively upgrading its copper-based assets in these states, Frontier won't have to make a large investment outside of installing new DSLAMs in remote terminals (RT) or local Central Offices (CO) to deliver higher speeds over copper. Given the physical distance limitations of copper overall, the telco will likely use VDSL2+ on short copper loop lengths and ADSL2+ on longer lengths that exist in each region.

"I think in this case it might be replacing some electronics, but it's not a heavy lift from a construction perspective," McCarthy said. "By putting in a shelf and next-generation capabilities, whether it's VDSL, ADSL2+, or all the different flavors you can use to serve the different loop lengths in a market you achieve the ability to bring a fresh product set into an area at a fairly low cost."  

What's also making Frontier confident about achieving broadband growth in the California, Florida and Texas markets is that there's a spate of new housing developments being built in each state. This means that Frontier can potentially extend a mix of higher speed copper-based VDSL2+ or even a fiber-based broadband product to these new homes.

"The new states will clearly have new growth opportunities," McCarthy said. "In Florida there has been a revival of housing in certain areas and subdivision growth in Texas and California."

Besides the three new states it will enter later this year, Frontier sees new growth potential in the Connecticut market, one that it strengthened through its $2 billion acquisition of AT&T's (NYSE: T) wireline operations in Connecticut and its related statewide fiber network and U-verse operations.

By making that acquisition, Frontier immediately gained 415,000 data, 875,000 voice and 215,000 video connections in Connecticut, including AT&T's local business connections and existing carrier wholesale relationships.

"We actually see growth opportunity in Connecticut," McCarthy said. "As we go through and look at the Connecticut property, one of the things that have been a recent development from a technology perspective allows us to serve lower density parts of the state of Connecticut with U-verse product that was limited by densities and loop lengths in the past."

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