Frontier Communications may have seen a $5 million decline in Connecticut revenues, a factor it anticipated due to broadband pricing migrations, but it is fighting that trend by introducing a new 100 Mbps residential DSL speed tier.
To deliver the 100 Mbps speeds to residential customers, Frontier is using a mixture of vectoring and bonding technologies on its existing copper network facilities. Being a copper-based technology, how many subscribers can get the service will depend on the condition of the copper plant and their distance from the nearest remote terminal (RT) or central office (CO).
"We're rolling out 100-meg over copper product in Connecticut, and we feel very good that we'll be able to change the trends in the parts of Connecticut that AT&T had not upgraded historically," McCarthy said during the earnings call, according to a Seeking Alpha transcript. "And we should have a nice opportunity going forward."
Delivering 100 Mbps DSL service is part of the telco's broader strategy to enhance broadband availability throughout Connecticut. Upon completing its acquisition of AT&T's (NYSE: T) wireline assets, Frontier launched a plan to invest $63 million to expand the reach of the U-verse video and broadband network to offer speeds of 10 Mbps and higher for over 100,000 households. The service provider has also built a fiber-based middle mile network that will connect all of its central offices across the state and dedicate about $3 million to expand broadband to areas it says are currently "unserved or underserved."
"We're in the process of upgrading the areas that are non U-verse today in many parts of the state," McCarthy said. "As you may recall from the approval docket, we had promised to upgrade 100,000 homes in Connecticut so we are moving forward with that right now."
Frontier's strategy of enhancing its legacy copper assets is getting positive attention from the financial analyst community.
"Unlike its peers, many of whom are attempting to offset the secular decline in copper voice revenues with ventures into the enterprise space (some with limited success), Frontier is sticking with what it does best, operating legacy wireline properties," wrote Phil Cusick, managing director at J.P. Morgan in a research note. "It has shown over the last 2.5 years that it is able to offset some of the secular and industry-wide decline in voice revenues by driving consumer and small business broadband adoption, while consistently defending itself from the cable competition."
But residential services are just one part of its network enhancement strategy in the state. It is also seeing continued momentum in Connecticut's business services, particularly Ethernet, which McCarthy said was one of its "best performing markets."
"The predominant services that we're selling are Ethernet," McCarthy said. "In fact, it's been an incredibly complementary addition to the entire workflow around that. It's probably our most successful Ethernet market to date. And we continue to see that each and every month so we are very, very bullish on Connecticut, and continue to see good performance there."
John Jureller, CFO of Frontier said that the actions that it took in Connecticut in the latter part of the first quarter of 2015 have the intended positive impact, something it said it foresees continuing in the second half of this year. As of the end of the first quarter, the telco has achieved annualized cost synergies in the Connecticut acquisition of $230 million, exceeding its $200 million target for synergies and far earlier than its original timing of three years.
Jureller added that "we continue to believe there are additional synergies we will realize in both Connecticut and centralized support areas."
- see the earnings transcript (sub. req.)
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