A top Frontier Communications executive revealed it is moving ahead with its trial of over-the-top video with its partner TiVo as a way to appeal to users who are not interested in traditional linear television services.
Speaking to investors during the Bernstein 31st Annual Strategic Decisions Conference, Dan McCarthy, CEO and president of Frontier, said the trial with TiVo is designed to look at both OTT and over-the-air options.
"We're looking at how to attack a segment of the market that's not interested in a pure linear play," McCarthy said. "We're in a trial right now with TiVo as our partner to bring a combination over-the-air and over-the-top content provisioning to a single user interface with time shifting and DVR."
Similar to its larger ILEC counterparts like Verizon (NYSE: VZ) that's considering its own OTT video play, the driver is a desire to appeal to the millennial segment.
"The OTT trial with TiVo is a way to see if we can appeal to the millennial segment that is really not interested in linear TV service from anybody, but are willing to go to the Internet and consume what they want when they want, and occasionally they'll want something over the air," McCarthy said.
Looking for new video growth opportunities, including OTT, makes sense for Frontier. During the first quarter, Frontier reported that it lost 7,700 customers, including 3,500 satellite video customers, to end the period with a total of 577,700 video customers.
Today, the service provider offers video across three other platforms: satellite TV through its partnership with Dish Network, FiOS TV and U-verse in the Connecticut market it purchased from AT&T (NYSE: T) last year.
When it completes its acquisition of Verizon's properties in California, Florida and Texas, Frontier will have a total of 1.8 million video subscribers.
By offering video across these platforms, McCarthy said it is gaining a wide experience in how to deliver video services over both copper, fiber and how to integrate satellite services as part of a bundle.
"We have a pretty good view on how you can provide video over fiber and over copper," McCarthy said.
Moving into online video and supporting online video streaming is also driving Frontier's investments in both its last mile broadband and backbone networks to give users enough capacity to access these services effectively.
On one hand, this will include a host of last mile upgrades, including offering 1 Gbps in select markets and shortening its copper loops to support ADSL2+ and VDSL2+, two technologies that can theoretically provide between 20-100 Mbps depending on the condition of the copper.
"When you look at the capex side on how we think about things, speed and capacity of broadband are right at the top," McCarthy said. "In the future, it may be loop shortening, which would dramatically change the speed profile for an individual household, but today the bigger investment is really making sure the ecosystem supports the increasing bandwidth requirements associated with video streaming."
In the near term, the key investment point for the service provider will be in adding 10G and higher optical backbone connections between markets it serves.
"We might add a 10-Gigabit link from one market to another and people start to use [it] and we're quickly adding other links," McCarthy said. "The investment is more around that than around loop shortening."
From a FiOS fiber-to-the-home (FTTH) expansion perspective, Frontier will look for organic growth opportunities that emerge in California, Florida and Texas as new housing developments emerge.
"As far as FiOS expansion, I think there's going to be natural organic growth that happens from subdivisions," McCarthy said. "In the markets we're acquiring from Verizon, Verizon has already met all their obligations from a franchising perspective, diversity of customer's homes passed and if we decided to expand further, it would be based on economics we see once we take over the property."
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