TDS Telecom is finding that as it enhances its broadband network speeds across its ILEC markets via fiber and copper, more customers are not surprisingly signing up for higher speed services.
Vicki Villacrez, VP of finance and CFO of TDS Telecom, told investors during its first-quarter earnings call that customers are choosing speeds of 15 Mbps or higher.
“We're offering a variety of speeds up to 1 gig service in all IPTV markets,” Villacrez said during the earnings call, according to a Seeking Alpha transcript. “Residential customers continue to choose the higher speeds in our ILEC markets, as approximately 20% of our customers are now taking 15 megabit services or greater.”
Interestingly, the presence of higher speed choices in its IPTV markets is enhancing average revenue per connection and reducing churn.
“[Higher speeds], along with price increases, contributed to a 4% increase in average revenue per connection in the quarter,” Villacrez said. “In addition, churn continues to remain very low.”
TDS has taken a two-pronged effort to enhance broadband speeds. The service provider plans to increase penetration in existing fiber markets and continue to modestly deploy fiber where it is economically feasible, while leveraging copper bonding to increase penetration of higher speed broadband customers.
“We continue to leverage our fiber and copper bonding deployments to drive penetration of higher broadband speeds and IPTV in certain ILEC markets,” Villacrez said. “Approximately 19% of our 56,000 total network route miles are fiber builds as a direct result of our fiber deployment strategy over the last several years.”
A-CAM to deepen fiber footprint
By leveraging the FCC’s Alternative Connect America Cost Model (A-CAM), TDS will continue to enhance its FTTH footprint and improve rural broadband availability.
“A-CAM along with the state broadband program will enable us to drive fiber even deeper into our network, and we will continue to evaluate future opportunities to bring fiber to more service addresses,” Villacrez said.
In January, TDS Telecom elected to accept about $75.1 million a year for the next 10 years from the FCC’s A-CAM program to expand rural broadband availability.
The telco, which participated in the Broadband Stimulus program developed by former FCC Chairman Julius Genachowski, will use the funds to expand and improve broadband services to nearly 160,000 homes in 25 states over that time frame.
TDS said most rural area customers eligible for Connect America Fund funding will receive guaranteed broadband speeds of 25/3 Mbps. Under the agreement, most of the remaining customers will receive speeds of 10/1 Mbps.
Villacrez noted that while capital spending declined during the quarter, “we do expect our capital spending to increase throughout the year to support our A-CAM build-out.”
Residential, business show mixed results
TDS reported that it saw growth across all three of the wireline segments: residential, commercial and wholesale.
Here’s a breakdown of TDS’ key first-quarter metrics:
Residential: Residential revenues were $79 million, up 4% year over year from the first quarter of 2016. Within the residential segment, IPTV was a strong performer. IPTV connections grew 18%, adding 6,900 subscribers compared to the prior year.
Commercial: Driven by lower CLEC sales, which are an expected trend as TDS shifts its focus to serving new customers who do not require leased facilities, Commercial revenues declined 6% to $51 million. The service provider said shifting its customers onto its own facilities will also translate into lower costs going forward.
Wholesale: Wholesale revenues rose 15% due to support received under the A-CAM program as expected. On a combined basis, total wireline service revenues increased 4% to $179 million.
Financials: TDS’ parent company, Telephone and Data Systems, reported total operating revenues of $1.24 billion for the first quarter of 2017, versus $1.25 billion for the same period one year ago.