For Hawaiian Telcom, small cell backhaul is an emerging opportunity

Hawaiian Telcom's wireless operator customers see small cells as a way to expand coverage and capacity on the Hawaiian Islands, a trend that the telco can address with its growing fiber network.

CEO Scott Barber told investors during the recent Stephens 2016 Spring Investment Conference that Hawaiian Telcom is seeing early and growing interest to provide small cell backhaul services.

While he could not cite any names, Barber said that the provider is in discussions with two wireless operators for small cell backhaul.

"We're in dialogue with two of the largest four carriers to serve them with small cell wireless backhaul," Barber said. "We have enough fiber to make that happen."

Barber said that in a number of areas where the terrain makes the rollout of traditional towers prohibitive.

"There are concentrations in Waikiki, for example, (where) wireless operators are not installing traditional 300-foot towers on a mountain or top of a building," Barber said. "In order to get better concentration or coverage in Waikiki where there's a lot of people it's easier to do small cells there versus trying to do something with an additional tower."

But to provide small cell backhaul, Hawaiian Telcom won't have to look to hard for new fiber. Similar to larger operators like AT&T (NYSE: T), Hawaiian Telcom is taking a holistic approach to building out fiber by using the same facilities that run by its business and residential customers.

"Because the investment was already made and we placed it for consumers and businesses we might as well leverage that investment and hang more services on it," Barber said.

At the same time, the service provider continues to add fiber to more towers.

Like its investment in FTTH and IPTV, Hawaiian Telcom will complete its fiber-to-the-tower investment by next year.

"There are about 460 sites we have built to and we have about another 50-60 to go and then all of that wireless backhaul investment will be concluded and should start to wind down to its natural completion in 2017," Barber said.

Fiber-based backhaul overall continues to be a revenue driver for the telco's wholesale division.

In the first quarter, Hawaiian Telcom's wholesale revenue declined year-over-year to $13.8 million. However, the revenue decline was related to wireless operator customers disconnecting copper-based services and moving to fiber-based, higher bandwidth Ethernet circuits on multi-year contracts.

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