Frontier Communications' (Nasdaq: FTR) CEO told investors on Tuesday that since most of its customers are in rural areas where there's less population density, a 6 Mbps DSL connection is sufficient.
Wilderotter (Image source: Frontier)
"In a lot of the big urban markets there a lot more power users, but a lot of our rural customers are not power users so 80 percent in our footprint use 80 Mbps or less," said Maggie Wilderotter, chairman and CEO of Frontier, during the J.P. Morgan 41st Annual Technology, Media and Telecom Conference in Boston.
It is now offering an up to 6 Mbps DSL connection bundled with local and long-distance phone service for $19.99 a month for those customers that are willing to sign a three-year contract.
The telco recently launched an ad campaign to present the $19.99 a month service via an ad campaign that features a talking buffalo named Frank. In addition to TV ads, Frank will market the broadband products through social media and through wraps placed on its fleet of service trucks.
There have been two benefits of the promotion: increased revenue and customer APRU.
"Every new customer we put on is incremental revenue for us so it's bringing on more revenue based on fixed asset we already have in place," Wilderotter said. "We have also seen the attach rates, even for customers coming onto those bundles, for ancillary products like identity theft protection and computer security bringing up the revenue per customer even on those aggressive packages."
When it comes to attracting new broadband subscribers, the telco said it tries to understand what kind of user they are: a casual user, basic user, and power users.
Today, Frontier's typical 6 Mbps user is using streaming video a few times a week in addition to e-mail and basic surfing.
"We don't focus on megabits, we don't focus on gigabits, we focus on activities," Wilderotter said. "We go to the activity set to get a sense of what customers are actually doing and the majority of our customers fit into that 6 Mbps or less category."
Today, Frontier can deliver up to 12 Mbps speeds to 54 percent of its footprint and up to 20 Mbps to 42 percent of its footprint.
For those customers that want something above the 6 Mbps package, they can opt to purchase an Ultra and Ultimate package of 12 and 20 Mbps, respectively, by paying a higher price each month.
During the first quarter, Wilderotter added that the $19.99 a month offering drove more of its telephone-only customers to purchase broadband.
"One of the things we did see in the first quarter is that our single phone line customers shift to broadband packages with this new offer we have in the marketplace," she said. "We're now starting to upgrade again, which we call left to right where you start with a single product and you move them to double, triple and quadruple play."
The next question is what about inorganic growth via acquisitions? While acknowledging that there is going to be more inevitable consolidation of the Tier 2 ILEC market, Frontier is going to focus on organic growth in the near-term.
The telco plans to continue expanding its broadband service reach in the legacy Verizon markets, which at the time it purchased them in 2010, had not been fully penetrated.
"We bought markets that were very low penetration from a broadband perspective because there wasn't even the build out in 60 percent of those markets," Wilderotter said. "We had to put the networks in first and now we see the opportunity to scale on the organic side to grow that market share."
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