Cincinnati Bell (NYSE: CBB) is taking careful steps in building its Fioptics network, its president and CEO said, setting a modest goal of 15 percent penetration within six months of building into a new neighborhood.
Torbeck (Image source: Cincinnati Bell)
The carrier's moves are based on a model focused on getting the right returns for its investment.
"Our FTTx build out is success-based, so as we run into situations where we don't anticipate the appropriate returns we'll pull back on that investment. But the response we're getting from the public in the Cincinnati area is very positive," said Ted Torbeck, president and CEO of Cincinnati Bell, during 41st Annual J.P. Morgan Global Technology, Media and Telecom Conference.
In the initial six months of deploying Fioptics service in a new neighborhood, the telco can achieve about 15 percent penetration. In each market, penetration will then typically rise up to about 35 percent.
Torbeck said he thinks that "we will settle out around somewhere above 40 percent penetration, but we'd like to build out to the 60-70 percent range in the next three or four years."
Similar to other incumbent telcos, Cincinnati Bell is taking a two-part fiber strategy that includes fiber to the premises (FTTP) and a hybrid copper/fiber to the node (FTTN) architecture that delivers video and data over VDSL2 at the home.
To date, about 60-70 percent of the Fioptics FTTX network is FTTP and 30 percent is FTTN. In considering whether to deploy FTTN or FTTP, Torbek said they examine the condition of the existing plant in a neighborhood before they conduct a build.
"What we do is we assess the neighborhood before we build out, and where we have good copper that can deliver a quality product to the customer we use the copper," he said. "If it needs repair and it's going to cost any money at all, we replace it with the fiber and go from there."
While he does not see great demand for 100 Mbps service speeds and above today, Torbeck said that it needs to be prepared to deliver such speeds when consumers ask for it.
"Where we differentiate from cable is the higher speeds where customers need more than 50 Mbps because our fiber product can offer 100 Mbps so we differentiate in pricing there, but not everyone needs 100," he said. "We see the demand continuing to grow and over the years it will become more important to have the capability of the higher speed and we'll be able to differentiate in the pricing."
Thus far, Cincinnati Bell's buildout strategy is showing signs of success.
During the first quarter, Fioptics service revenues rose 52 percent year-over-year in Q1 2013 to $22 million.
From an overall broadband perspective, Cincinnati Bell had a total of 61,000 Fioptics customers and 58,000 entertainment subscribers, up 42 and 35 percent, respectively, from Q1 2012. It passed a total of 220,000 addresses with Fioptics.
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