Cincinnati Bell’s Kaiser: We’ll reduce opex, gain efficiencies by migrating copper to fiber

Cincinnati Bell
As it goes through this the copper to fiber transformation, Cincinnati Bell, like other telcos, will have to continue to run a copper and fiber network simultaneously.

Cincinnati Bell said that its ongoing Fioptics FTTH build is part of a broader initiative to transform itself from a sleepy copper-based telco into a fiber-based entertainment provider.

Andy Kaiser, CFO at Cincinnati Bell, told investors at the Morgan Stanley event that the migration from copper to fiber is part of a way to reduce expenses.

“As we shift more of our assets from copper to fiber, we’ll continue to look for opportunities to surgically pull out expenses that are related to our legacy network without impacting customer service levels,” Kaiser said.

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However, Kaiser said the longer-term opportunity of shedding assets like Central Offices (CO) and other real estate won’t happen for a long time.

As it goes through this copper to fiber transformation, Cincinnati Bell, like other telcos, will have to continue to run a copper and fiber network simultaneously.

“You hear a lot of folks talk about network transformation, but when you think of the full impact of network transformation where you’re decommissioning COs and selling off real estate assets that process is a long way off,” Kaiser said. “Unless you move into a forced migration model, but that approach comes with a whole lot of challenges.”

Improving productivity

By shifting more of its customer base from copper to fiber, Cincinnati Bell will ultimately be able to become more efficient in how it manages and delivers services to businesses and consumers.

The service provider said in the fourth quarter that it conducted a process of offering some of the employees that worked on its TDM network voluntary retirement.

After it implements this program, Cincinnati Bell said the impact is expected to “generate cost savings of $10 million annually.”

“This is absolutely a multiyear process,” Kaiser said. "We will continue to pull out legacy-related expenses where possible and become more efficient once we effectively make the shift from copper to fiber

But even with all of the efficiencies of the IP and fiber migration, there are still plenty of maintenance and truck rolls that need to be performed on the fiber network in provisioning services.

“When you’re delivering a product like video, you’re still going to have to roll trucks,” Kaiser said. “There are definitely efficiencies that we see in managing fiber versus copper, but there’s still a big asset in place that you have to support.”

Focus on the business case

Cincinnati Bell has set a plan to pass 35,000 new addresses in Cincinnati, Ohio, with Fioptics FTTH service this year.

The telco is confident about reaching this year’s build and future expansion goals because it is also seeing that the costs of passing homes and installing homes with fiber are declining. Cincinnati Bell said the cost per home passed was $850 and capex per installation was about $900 in 2016.

The service provider also saw the FTTH investment pay off in garnering new customer penetration. In addressing the 100,000 locations it passed in 2016, Cincinnati Bell saw about 26% penetration for video and 37% for internet services.

As it looks into 2018 and 2019, Cincinnati Bell is searching for opportunities to push the FTTH footprint further inside of its footprint. This could include reaching homes where it has only equipped with fiber to the node (FTTN) today.

“Given what we have seen on build-related cost efficiencies, we’re no longer constrained by thinking that our fiber build-out will be complete at 70%, 80% or beyond as we are experiencing a significant change in total cost per pass,” Kaiser said. “To the extent that we can continue to build-out economically, we will continue to consider further expanding our footprint.”

As long as it can make a business case to build, Kaiser said the telco will continue deepen the fiber reach within Cincinnati.

“Given that it is a long term investment and it’s about transformation and being able to provide services that consumers currently need and will need in the future, we will continue to build as long as it makes financial sense,” Kaiser said. “However, there are areas where cost per pass is prohibitive so at some point we do reach the theoretical limit in-territory.”

Once it reaches the limit in its Cincinnati territory, the service provider will also consider extending its fiber reach into other nearby cities like Dayton, Ohio.

However, Kaiser did not provide any specific plans or a timeline about when the telco would expand its fiber network.

“Out of territory, there exist opportunities where Cincinnati  meets Dayton,” Kaiser said. “It’s a big market and similar to Cincinnati, but that would be further downstream. Ultimately, we would have to  determine if the math hangs together before we would consider out-of-territory expansion.”

This article was updated on March 7. with additional information from Cincinnati Bell.