FairPoint Communications (Nasdaq: FRP) has set an aggressive fiber to the tower (FTTT) buildout strategy to reach over 1,000 towers with fiber by the end of the year.
Sunu (Image source: FairPoint)
But the telco is not an advocate of the build-it-and-they-will-come approach.
Paul Sunu, CEO of FairPoint, said during the telco's second quarter earnings call that they don't extend their fiber to any tower, particularly in their Northern New England region "without a contract in hand."
Although FairPoint only entered into the FTTT market in 2010, a bit later than other area providers, it has been aggressively making upgrades.
"Based upon the contracts that we had in hand and our plans, we've already made significant progress in adding fiber-to-the-tower connections," said Sunu. "We're up to 950 towers and have over 1,100 Ethernet connections for wireless carriers. Our plan is to get that to over 1,000 towers this year and 1,300 Ethernet connections."
Ethernet has become a big part of FairPoint's wholesale and retail business service revenue engine. In the second quarter, Ethernet circuits grew 49.2 percent and revenue rose 40 percent year-over-year.
Sunu said Ethernet "growth is expected to continue based on demand from customers like regional banks, health care institutions and wireless carriers."
Being an incumbent telco, however, will pose the ongoing revenue challenge as more of its wireless carrier customers migrate from copper-based T1 circuits to Ethernet.
Sunu said that depending on when customers convert TDM circuits to IP-based Ethernet, they expect to see some quarters where they will experience "modest gains" and others with "modest declines."
"Converging from TDM to IP-based Ethernet-based or fiber-based revenues is good for us in the long term," he said. "But as they initially come and lower ARPU, we will see some revenue churn. For instance, we could see IP-based services connect in one quarter and then have TDM service disconnect in the subsequent quarter for the same customer, creating an unfavorable variance."
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