Frontier has set a high bar for its IPTV service, with plans to leverage its existing fiber-to-the-node (FTTN) network to bring service ultimately to 7 million customers across the network territory it will have when it completes the acquisition of Verizon's (NYSE: VZ) wireline properties this year.
Speaking to investors during its fourth quarter 2015 earnings call, Dan McCarthy, CEO of Frontier, confirmed that the company sees great potential for IPTV.
When Frontier completes its acquisition of Verizon's wireline properties in California, Texas and Florida, it will also look for ways to extend the service to other homes as it upgrades copper facilities in these markets.
"Including California, Texas and Florida properties, we would be able to provide our video service to more than 7 million households, and we anticipate additional opportunities as we upgrade select copper markets in the acquired states," McCarthy said. "This initiative is a direct result of the experience in technology we have gained from Connecticut and the pending California, Texas and Florida acquisition."
Initially, the telco will deliver service to nearly 50 percent of its households even without the Verizon acquisition.
"Our plans are to introduce video service to more than 40 markets representing approximately 3 million households over a three- to four-year period," McCarthy said during the fourth quarter earnings call, according to a Seeking Alpha transcript. "Once complete, the video service will be available to about 50 percent of the 8.5 million households in Frontier's existing footprint, not counting the pending Verizon acquisition."
But the telco is not taking a reinvent-the-wheel approach to meet its IPTV goals. The move to leverage and extend its FTTN-based network infrastructure to deliver IPTV will require minimal capital to achieve.
In addition to leveraging the existing FTTN network, the new service will use Frontier's enhanced billing and support systems, IPTV delivery platform, content relationships and compression technology.
McCarthy said these elements will make the rollout of its IPTV service more capital-efficient, for two key reasons.
"First, we are leveraging the substantial broadband infrastructure investment we have made in our network over the last half-dozen years," McCarthy said. "And second, our IPTV applications employ the latest very advanced compression technology. Our HD television channel will require approximately 2.5 megabits of capacity, meaning a household with four HDTVs active at once will only require 10 megabits of capacity into the home, leaving the remainder available for data usage."
By offering IPTV services, McCarthy said Frontier can lure more new customers away from cable operators as well as retaining existing ones.
"We believe that offering video service opens the door to attracting new customers to our broadband service while introducing new tools to improve retaining existing customers," McCarthy said.
Frontier has gained plenty of experience in delivering video. Besides operating FiOS video in various markets it entered from the acquisition of Verizon's rural properties in 2010, it took over AT&T's (NYSE: T) U-verse network in Connecticut.
More recently, the service provider started offering FrontierTV IPTV service in Durham, N.C. in January over its existing copper and FTTH networks, challenging the growing threat from AT&T (NYSE: T) and Google Fiber (NASDAQ: GOOG).
The service provider will offer bundles over both copper and its new 1 Gbps-capable FTTH network: 18 Mbps DSL with voice and data for under $70 and $150 for 1 Gbps services.
The timing of the IPTV service could not be better as the telco continues to see declines in its FiOS and overall video service base, a trend that continued into the fourth quarter. Frontier reported that it lost a total of 5,800 video customers, including 5,400 satellite customers, which was lower than the loss of 9,600 video customers, including a reduction of 6,900 satellite video customers.
- see this Seeking Alpha transcript (reg. req.)
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This article was updated on Feb. 24 to correct information about Frontier's video losses.