Sprint (NYSE: S) and Windstream may be ramping up their presence in the Ethernet services race, but to get the necessary scale these service providers can't justify building out fiber to every business location they serve.
Fiber is a major part of Sprint's wireline DNA. The service provider was an early advocate of fiber for its soon to be shut down long-distance voice service. However, Sprint sold off its wireline division which was renamed Embarq and later was acquired by CenturyLink (NYSE: CTL).
Today, the service provider delivers Ethernet to businesses over a mix of fiber and copper facilities that it rents from a host of ILECs and CLECs in its U.S. and international serving territories.
While wireless has become the main focus of Sprint over the last decade, the service provider recently launched a separate wireline division dedicated to its business customer base.
Sprint is motivated to build out fiber directly to a business customer that requires high gigabit speeds for their locations and data centers, Mike Fitz, VP and general manager of Sprint's Global Wireline Business Unit, told FierceInstaller.
"We own obviously a lot of fiber for backhaul, and we have on occasion for big customer deals done fiber-to-the-premises ourselves so if the economics makes sense we do it," Fitz said. "There are plenty of customers that have GigE connections or 10 GigE and the economics are such that it makes sense to do it."
Sprint found if a customer only wants a sub 10 Mbps connection, there's no business case for building out fiber to that location.
"If I have a circuit into a mall and AT&T and Verizon does and my customer wants 10 Mbps of service, it does not make sense to trench fiber in there five times for the five different carriers," Fitz said.
This is where Ethernet over Copper (EoC) and Ethernet over DOCSIS come into play. With these facilities, Sprint, CLECs, and even traditional ILECs like CenturyLink have been able to deliver a host of speeds from 10 Mbps up to 100 Mbps.
This summer Sprint plans to further extend its Ethernet reach to more customers by using a mix of EoC and EoDOCSIS. The service provider is currently working out the E-NNI arrangements with various service providers in its wireline region while putting in place necessary provisioning and billing systems.
Likewise, Windstream is enhancing its on-net fiber footprint in its traditional ILEC and CLEC territories using EoC.
Over the past year, the service provider has continued to expand its on net fiber footprint, announcing in February that it expanded its fiber network in Charlotte, North Carolina, and is planning additional network builds in Tennessee and Virginia.
During the first quarter, Windstream reported that it increased its on-net fiber sales.
"We are selling more on-net in first quarter of 2016 versus the first quarter of 2015,"said Tony Thomas, CEO of Windstream.
But like Sprint, Windstream can't prove a business case to build out fiber to every one of its customers' locations, particularly those that may only need a 10-100 Mbps connection.
"Although Windstream has invested in building its network, for many business locations there simply is no viable business case for Windstream to overbuild the incumbent," Windstream said in an FCC filing.
By leveraging EoC from other competitive carriers like XO, Windstream can continue to expand its Ethernet footprint while satisfying a greater array of business customer needs.
A chief concern for Windstream is having a competitive choice for EoC in the markets where providers like XO reside. At issue is Verizon's (NYSE: VZ) pending acquisition of XO Communications, a major EoC provider.
Windstream said that about 50 percent of the Ethernet circuits it buys from XO, or about 32 percent of its Ethernet expense with XO, is provisioned as EoC. By using XO's EoC services, Windstream can provide symmetrical bandwidth of up to 100 Mbps to business customers.
The service provider said that if the FCC does not put conditions on Verizon's purchase of XO, the telco could compromise competition in the areas where it operates as a CLEC.
"If this transaction is permitted to go through without conditions, Verizon would have an increased incentive and ability to choke off enterprise business solution competition in its ILEC service area, including shutting down EoC and eliminating the price competition XO brings, and Verizon would have an increased ability to cooperate with AT&T to raise rivals' costs to choke off enterprise business solution competition nationwide," Windstream said.
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