Frontier's Jureller: 'no change' in subscription pricing after Verizon deal complete

As Frontier Communications nears the completion of its acquisition of Verizon's (NYSE: VZ) wireline properties in California, Florida and Texas, the service provider has pledged to keep pricing consistent with what customers in those markets are currently paying.


Speaking to investors during the Wells Fargo Securities Technology, Media & Telecom Conference, John Jureller, CFO of Frontier, said it will avoid raising residential broadband and voice prices like it did after completing its acquisition of AT&T's (NYSE: T) Connecticut wireline operations.

During the first quarter of 2015, Frontier reported that its residential customer base declined slightly year-over-year by 0.4 percent. It ended the quarter with a total of 3.2 million residential customers.

Frontier reported a $5 million decline in Connecticut revenues, a factor it anticipated due to broadband pricing migrations. Since that time it has been scaling up its subscriber base while introducing a new 100 Mbps residential DSL speed tier.

"The biggest lesson learned from Connecticut in late Q4 and in Q1 was the pricing migration that we allowed to happen," Jureller said. "I'd say the month of March was our low month from a residential revenue perspective, but we have been stable ever since then."

To ensure that the pricing issue does not happen when it does complete the Verizon deal, it has already established a set of pricing and packaging in these markets.  

"What we're doing with our Verizon properties is we are instituting the pricing and packages today in our Verizon footprints that we'll bring in with the customers so that once we close there will be no change or no migration to which we will have an issue when we bring on new customers," Jureller said. "Dan [McCarthy] and his team, including our call center team and video team are completely aligned to make sure it's a similar experience."

Besides creating consistent pricing and packaging for its residential customer set, the service provider will expand broadband deeper into California, Florida and Texas.

One example of this will be in California. Frontier is currently awaiting the California Public Utility Commissions' approval of the deal.

Leveraging a mix of its own capital and funds from phase two of the FCC's Connect America Fund (CAF-II), the service provider plans to extend service to a number of unserved rural areas.

In California, the service provider plans to use $32 million in CAF-II funding annually over the next six years for broadband deployment in Verizon high-cost service areas. During this six-year period, Frontier forecasts that CAF-II funding could enable it to bring 10/1 Mbps broadband service to nearly 77,000 rural locations within this territory.

"There's a lot of space in California that's not served by broadband," Jureller said. "There were already plans underway we had to serve those markets, but we can leverage our capital with the CAF-II funding we're getting to further enhance those capabilities."

It will also work to further expand its FiOS footprint in Texas, a market that has seen FTTH penetration continue to ramp under Verizon.

"We're going to continue to enhance the FiOS market in Texas," Jureller said. "We still think there's opportunity to grow the FiOS share in Texas and we'll continue to drive that in California and Texas."

FiOS will also enhance DSL capabilities in markets where it has no FTTH network infrastructure in these three states. This could include a mix of traditional ADSL2+, VDSL2, and potentially depending on how much fiber it has in a particular area connected to local nodes and plant conditions.

"What we'll also do is enhance the non-FiOS properties in each of those states," Jureller said. "We see it as a great opportunity for us because today we operate in a lot of non-FiOS markets so we're really good at upgrading capabilities, electronics and competing against cable in non-FiOS markets."

Jureller pointed out how the company has had 11 quarters of broadband net additions against cable competitors in its markets. During the third quarter it added 27,000 new broadband customers amidst a rise in customer churn due to seasonal trends and customers dropping voice services and moving out of territory.

"We think we can drive better performance in the DSL territories in those three states," Jureller said.

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