Frontier's McCarthy: We don't have plans to implement usage-based broadband billing

Frontier Communications may still be still recovering from system glitches that caused losses of new broadband subscribers for its fiber-and copper-based broadband offerings following the completion of its Verizon (NYSE: VZ) assets deal, but the telco has no near-term intention to implement metered broadband billing.

CEO Dan McCarthy told investors attending the Bernstein 32nd Annual Strategic Decisions Conference that it would rather give users more flexibility in how they use their broadband pipes in the home.

"We have not really started or have any intent about initiatives on usage based pricing," McCarthy said. "We want to make sure our products meet the needs of customers for what they want to do and it does not inhibit them or force them to make decisions on how they want to use the product."

What's enabling Frontier to be flexible in how consumers use broadband services is that the telco has installed packet optical switching gear to serve as a backhaul transport foundation for all of its consumer and business traffic.

Frontier is leveraging BTI's (now part of Juniper) P-OTS platform and its Integrated Services Delivery Platform, which includes its WideCast caching solution, to cache popular content locally for their subscriber base. It saw two main benefits from this move: reduced network backhaul costs and improving the customer's Quality of Experience (QoE).

"The nice part of technology and what has happened is that transport costs continue to decline and by putting in the packet optical fabric it takes away a lot of those constraints," McCarthy said. "There may be a time when usage-based pricing is the right solution for the market, but I really don't see that as a path the market is taking at this point in time."

Frontier's stance is in contrast on usage based pricing is in contrast to other telcos like AT&T (NYSE: T) began implementing a usage-based pricing regime in May.

Under the new plans, AT&T is giving the majority of its U-verse Internet customers an automatic increase in their monthly data usage allowance. U-verse Internet data allowances will automatically increase -- 250 gigabytes will increase to 300 GB or 600 GB, and 500 GB will jump to 1 TB. AT&T said that the exact amount will be based on a customer's Internet speed tier.

AT&T's U-verse Internet users also have the option to purchase unlimited data for an additional $30 a month.

In terms of broadband pricing, Frontier continues to examine how it can offer speeds that enable it to stay competitive with cable operators in its region such as Charter Communications and Comcast.

"We don't necessarily look at a cost per megabit, which a lot of firms that help analyze pricing look at from that perspective," McCarthy said. "We look at what we think is relevant from a competitive perspective in the market and what we want to give customers as far as choice."

McCarthy added that in many cases having the choice of unmetered broadband "allows them to do standalone broadband and be the impetus for somebody to cut the cord with the cable company because we give them the right product to do that."

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