Frontier Communications may be weathering revenue declines in its wireless backhaul business, but the service provider sees opportunities to leverage its FiOS footprint to provide fiber-based services for small cells and 5G wireless.
Dan McCarthy, CEO of Frontier, told investors during the J.P. Morgan Global Technology, Media And Telecom Conference 2016 that the nature of small cells and 5G are more amenable to shorter fiber runs.
In particular, the service provider will be able to leverage the fiber that was built out in the California, Florida and Texas markets that Frontier entered through its purchase of Verizon's (NYSE: VZ) assets.
"When wireless carriers were looking at LTE, these were generally large fiber builds that required extensive investments to very disparate locations in rural areas," McCarthy said. "Next generation wireless will be shorter fiber builds in areas that are bit more urban, and I think we're uniquely positioned to take advantage of that because of the FiOS deployment in these three markets, but also in other areas outside of Oregon and Washington."
McCarthy added that "we'll be active players in trying to look at those opportunities because we have so much fiber there already it makes us a natural choice potentially to provide short extensions to get to diverse antenna systems."
Unlike other wireline providers, which had to roll out fiber across large portions of their footprint to reach their towers, Frontier was more cautious.
John Jureller, CFO of Frontier, said the telco targeted towers that presented them with the best return on their fiber investments.
"We stepped back and said 'does this make sense from a return on capital perspective for the significant investment we would have to make to build fiber to the towers for our existing customers?'" Jureller said. "In many instances the answer was yes because we saw revenue ... was going to come off those towers, but in other incidences it did not."
Jureller said that "the consequence is we lost top line revenue, which is going to continue, but in the end we think it was the right cash decision and the right returns on investment decision."
Evidence of wireless backhaul's downward trend was seen in Frontier's first quarter results. During that period, Frontier reported that one-half of its quarterly declines in the business and wholesale segment were due to lower wireless backhaul revenue.
Jureller said that Frontier expects the segment to level off in 2017.
"From a sequential basis the [wireless backhaul decline] will probably abate sometime next year," Jureller said. "We see about a $2 to $3 million quarterly sequential decline in wireless backhaul revenue during the course of this year in our legacy footprint, but eventually we'll see a growing need for backhaul services."
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