Frontier expects wireless backhaul revenue headwinds to continue into 2017

Frontier Communications

Frontier Communications continues to see challenges in its wireless backhaul business as operators in its legacy markets migrate off copper-based T-1 circuits to Ethernet. Those revenue headwinds could mount to around $3 million in the third quarter.

Dan McCarthy, CEO of Frontier, told investors during the second quarter earnings call that it will also have to wait until it sees what one of its unnamed wireless operator customers decides to do with the next stage of fiber-to-the-tower (FTTT) deployment.

“We still probably will have the impact of at least one of the carriers who are still executing on their tower strategy, that's going to take a little bit longer than probably they had originally thought,” McCarthy said during the second quarter earnings call, according to a Seeking Alpha transcript. “So the offset is, we may have some additional revenue for a period of time, but the headwinds could extend over several more quarters.”

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As a result of the declines in wholesale wireless backhaul, business services revenue fell sequentially. 

Excluding the business and wholesale additional revenues Frontier gained from the latest Verizon (NYSE: VZ) asset acquisition, business revenues in the carrier's legacy markets cratered to $460 million, down from $1.24 billion in the same period a year ago. Total business revenues, including the assets it purchased from Verizon were $1.65 billion.

Another challenge Frontier could face in its overall wholesale service unit is the outcome of the FCC’s review of special access. Frontier sells wholesale TDM and increasingly Ethernet-based services to wireless operators. Joining fellow telcos AT&T (NYSE: T), CenturyLink (NYSE: CTL), Cincinnati Bell, Consolidated and FairPoint, Frontier helped form the "Invest in Broadband for America" coalition as the latest effort to encourage FCC to reconsider its business data services (BDS) proposal.

However, the telco maintains that it is unclear how the special access proceeding will affect its future wholesale revenue mix.

“The comment period was just extended [by an] additional two weeks based on the need to maybe modify some parts of the record around Ethernet and some other data,” McCarthy said. “So, I think it's a little too early to tell. We haven't baked any impact in until we get a better feel for if and when there might be some productivity factor changes that get implemented, and we should have a better feel for that as we get into reporting our next quarter.”

Even with these challenges at hand, Frontier continues to innovate on its wholesale strategy.

Previously, the service provider told FierceTelecom that it was extending its interLATA and intraLATA E-Path service offerings for into a number of Western and Eastern states in its territory. During the second quarter the service provider started extending these services into Washington, Oregon and the Northern California area, allowing it to address an array of wireless, content and other traditional carriers.

For more:
- see the earnings release
- listen to the earnings call (reg. req.)
- read the Seeking Alpha earnings transcript (sub. req.)

Special report: Tracking wireline telecom earnings in Q2 2016

Related articles:
Frontier sides against special access, says the 'Ethernet market is competitive'
Frontier wraps $10.5B, 3-state acquisition of Verizon wireline properties, plans to expand workforce
Frontier unveils Vantage brand, plays up broadband, TV and VoIP product lines
Frontier hopes to steal business market share from cable in biz sector

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