EarthLink focuses dark fiber sales on enterprise customers, will de-emphasize TDM-based products

EarthLink is a dark fiber advocate, but the service provider sticking to its strategy of selling the service to enterprise customers versus carriers.

Speaking to investors during the fourth quarter earnings call, CFO Louis Alterman said that the focus on enterprise customers is strategically designed so a competitor won't be able to sell lit services to those customers.

"We don't want to put it in the hands of competitors and don't feel like we need to so we're focused on selling dark fiber to enterprises unless there's a completely commoditized route, but that's rare," Alterman said during the earnings call. "These are unique routes we want to sell to people that are going to consume it and not sell it."

Alterman added that it will continue to look for opportunities to sell more lit services like Ethernet and wavelengths. 

"We light fiber as there's demand for lit services," Alterman said. "When the sales team wins a deal we light it up and when we get a deal for dark we get a different revenue stream and the customer lights it up."

At the same time, the service provider plans to de-emphasize parts of its Carrier/Transport business, particularly TDM-based services where revenues continue to decline.

"There are parts of the wholesale business we'll de-emphasize, which are low margin basic wholesale minutes," said Joe Eazor, CEO of EarthLink. "As we have cleaned up that portfolio over the last year and into this year, we expect the transport revenue and the wholesale work we are focused on to overtake and that business will grow."

In the fourth quarter, EarthLink's Carrier/Transport revenues were $34.3 million, a slight sequential increase over the third quarter. One of the highlights of the quarter was that the provider secured a $10 million dark fiber lease. Those revenues will be earned over a 20-year lease period.  

Besides winning that long-term dark fiber customer, the service provider set another path for dark and lit fiber growth in the Chicago area by building a ring located in a central business district around Canal, Cermak, LaSalle and South Federal Streets.

Set on providing services to a mix of business and wholesale carrier customers, EarthLink is deploying a four-node DWDM system which can support wavelength services from 1 Gbps to 100G combined with an OC-192 SONET node to meet smaller bandwidth requirements. The ring interconnects to EarthLink's long haul network to provide diverse connectivity to other key sites across the U.S.

Business revenues were not exactly rosy as the segment declined 8.3 percent year-over-year to $206.9 million. For the full year, total business services revenue was $877.9 million during the full year 2015, a decline of 5.7 percent from the full year 2014.

Total Business Services and company revenue during the fourth quarter of 2015 included $0.9 million of favorable settlements and adjustments compared to $3.9 million during the fourth quarter of 2014 and $1.2 million during the third quarter of 2015.

Within the business segment, results were varied.

Although the Enterprise and Mid-Market segment saw growth in network services and EarthLink streamlined go-to-market motion, the churn in legacy products continued to be a factor as revenues declined 3.5 percent sequentially to $106.2 million.

In the small business segment, price increases on services drove up revenue in the first and second quarter, but these changes did not have an effect in the third and fourth quarter. And despite seeing churn and renewal rates improve, it wasn't enough to prevent revenue from declining to $66.5 million.

From an overall financial perspective, EarthLink's results were a bit disappointing. The company reported $260.2 in fourth quarter revenue and $1.1 billion for the full year 2015, down 8.5 percent and 6.8 percent, respectively.

Shares of EarthLink were listed at $5.37, down 23 cents, or 4.29 percent in Thursday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special Report: From Adtran to Zayo: Tracking wireline earnings in Q4 2015

Related articles:
EarthLink sells IT unit to Synoptek for $29M, sharpening focus on carrier, enterprise
EarthLink's Eazor: Wholesale transport revenue turnaround is driven by refocusing business
EarthLink's Alterman: It's important to protect our lit fiber business
EarthLink introduces software defined WAN-based network visibility services
EarthLink to aggressively sell dark fiber to carriers, content companies

Suggested Articles

Microsoft announced on Monday it has bought privately-held Mover to make it easier for its customers to migrated files to Microsoft 365.

Massive IoT use cases are complex and no single technology can cover them all, opening the door for a broader 5G ecosystem of “best fit” technologies.

T-Systems, the IT and digital services division of Deutsche Telekom, is letting customers kick the tires on private cloud usage via a free trial.