Now that it has firmly established a focused business services division, Frontier says it has the necessary fiber assets in place and that it does not have to go out and purchase additional fiber to reach its business service revenue goals.
Questions about Frontier enhancing its fiber network by purchasing other assets come at a time when there’s been a flurry of acquisitions. Verizon signed a deal to acquire WideOpenWest’s Chicago fiber network on late Tuesday afternoon as a way to enhance its wireless backhaul network as well as increase business fiber penetration.
Dan McCarthy, CEO of Frontier, told investors during the telco’s second quarter call that it has the network facilities to carry out its business service goals.
“We feel good about the fact that we have 4.5 million households that we can serve with fiber and all the fiber that is in the network that enables a lot of the commercial opportunities that Ken Arndt’s team are going after,” McCarthy said, according to a Seeking Alpha transcript. “We're not really looking to do anything at this point.”
On the business side, the service provider can leverage its existing wide-ranging network of about 39,000 lit fiber buildings.
The service provider will use the fiber network and its established set of fiber metro and on-net building fiber assets to deliver an array of Ethernet and VoIP capabilities for carriers and business customers. The company plans to focus its network capital spending on expanding Ethernet and VoIP capacity to support commercial and wholesale carrier opportunities.
Having a large base of on-net fiber-based buildings, something Frontier bolstered through its acquisition of Verizon’s properties in California, Texas and Florida, (which it refers to as its CTF markets) enabled the provider to enhance its profile with a spot on Vertical Systems Group’s new on-net fiber Leaderboard.
Frontier, which took the 11th spot on the Leaderboard, is part of a group of retail and wholesale fiber providers that have 10,000 or more on-net fiber-lit commercial buildings in the U.S.
Customer acquisition focus
Leveraging a mix of its direct and indirect sales channels, Frontier’s commercial sales team is focused on pursuing new carrier sales and market share growth opportunities.
Perhaps not surprisingly, the service provider has begun to put more emphasis on delivering Ethernet and other high speed services over the existing on-net fiber assets.
“Our ability to stabilize the business in Q2 was driven by growing wallet share with enterprise customers via large bandwidth services,” McCarthy said.
McCarthy added that by rationalizing its customer interaction process and a focus on next-generation cloud and IP services positions the business segment for new growth in 2017.
“We are focused on enhancing our customer acquisition strategy, simplifying the process of doing business with Frontier, improving billing and product pricing evolution, and driving growth with cloud-based VoIP and data networking solutions,” McCarthy said. “As a result, we expect to see continued improvement during the second half of 2017 compared to the first half of the year.”
However, in the near-term, Frontier saw some business revenue challenges during the second quarter.
Frontier’s commercial business revenue was $982 million, down sequentially from $997 million in the first quarter. Excluding the partnerships business, which was sold on May 31, commercial revenue remained flat at $967 million with the first quarter of 2017.
As of the end of the quarter, Frontier had a total of 473,000 commercial customers, down from 484,000 during the first quarter of 2017. The company said this reflects improved sequential churn within its small business customer base.
Seeking CTF opportunities
By completing its acquisition of Verizon’s CTF wireline assets, Frontier can penetrate three business markets that were widely underserved by Verizon. The service provider could now use the existing facilities in these markets to challenge local cable operators and CLECs for business services.
When Verizon owned the CTF assets, the focus was on selling businesses basic copper-based DSL and traditional voice services.
"On the commercial side, one of the things that we highlighted as one of the growth levers for the opportunity of bringing in the CTF properties into Frontier was that the commercial sales that we inherited were really very low-end services: DSL and some POTS, and there certainly was carrier business that came with it,” McCarthy said. “But we built the sales team from scratch and we did it in a very purposeful way with the idea of having that as one of the growth levers.”
During the last two months, Frontier has begun to track its monthly recurring charge (MRC) growth plans as it built up its commercial sales team.
“We’ve got to the point where the sales funnels are at a point where we would start to hit our model for commercial MRC production, and you're starting to see some of that flow in now and drive the stability that you saw on this quarter,” McCarthy said. “I feel very good about the continued trends of Ken Arndt and his team on the direct side is also turning up additional indirect channels and a direct channel for small business customers."
McCarthy emphasized that Frontier will actually be able to act like a competitive provider versus an incumbent operator since its business share in the CTF markets is still very low.
“We're really coming in as a challenger versus the incumbent because Verizon had really led the market share attrition in these areas, and it hadn't been a focus area,” McCarthy said.