Consolidated places emphasis on broadband to offset linear video declines, rising content costs

As it continues to face high video content costs, Consolidated Communications has been placing greater emphasis on driving up the speeds of its consumer broadband networks.

Speaking to investors during the third-quarter earnings call, Bob Udell, CEO of Consolidated, said that the service provider is enhancing its last mile network to deliver a mix of fiber and copper-based speeds that can accommodate more data-hungry over the top service sets.

"We continue to execute on our strategy on the consumer side with a focus on higher broadband speeds, higher ARPU and passing on content price increases to our video subscribers," Udell said.

Today, the service provider's last mile network can support 89 percent of its marketable homes with 20 Mbps, 41 percent can get 100 Mbps, and 8 percent can get 1 Gbps FTTH service.

Udell said Consolidated has "27,000 customers taking a 50 Mbps product or higher and has increased its 1 Gbps customer count to over 1,000."

Similar to other telcos like CenturyLink (NYSE: CTL) and AT&T (NYSE: T), Consolidated continues to be challenged by rising content costs, making it difficult to continue scaling its IPTV offering.

While Consolidated is not completely hanging up on its linear IPTV offering, the service provider says that having a more robust set of broadband network offerings plays into the viewing behaviors of its customer base. Customers have the option to get OTT video options with its unified log-on strategy through its online portal.

"We're deemphasizing the broadcast video product," Udell said. "The programming costs continue to make that a very low margin alternative so standalone video is not a priority for us to maintain so the emphasis on product promotion has been on broadband speeds and the penetration of homes with our broadband product."

Consumer broadband, which includes VoIP, data and video, was $52 million, down from $54 million in the same period a year ago. Overall, Consolidated added over 3,300 net data subscribers and a result commercial and carrier revenues rose 3 percent year-over-year.

It also saw gains on the commercial and wholesale side of its business. Driven by a 25 percent uptick in Metro Ethernet circuit sales, data network revenues were $46.2 million, up year-over-year from $43 million.

In tandem with its Ethernet growth, the service provider increased its fiber route network miles (long-haul and metro) and its on-net building reach. On a year-over-year basis it added 880 new fiber route network miles and 231 new on-net fiber enabled buildings. These new builds will enable Consolidated to further its Ethernet and overall data services reach.

On the wholesale side, Consolidated also continues to reap rewards from the wireless operators' ongoing expansion of their 4G LTE networks, with the telco winning a number of new fiber-to-the-tower contracts during the quarter.

"We completed the installation of 130 fiber to the tower sites that were primarily driven by the record sales in the first quarter where we added 200 sites under contract," Udell said. "In the third quarter we had another strong performance with 57 new sites sold for future installation."

Consolidated's total third-quarter revenue was $194 million, down from $203.4 million in the same period a year ago.

The service provider said that growth in strategic sales channels were offset by declines in legacy voice services and network access revenues. At the same time, Consolidated's third-quarter equipment sales and service revenues declined by $7.5 million.  

For more:
- see the earnings release

Special report: Tracking wireline telecom earnings in Q3 2015

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