Windstream to increase on-net fiber footprint in 5 markets in 2015

Windstream may have a strong business service presence throughout the United States, but the telco is moving to take control of its service delivery destiny by increasing its on-net fiber building footprint in five markets by the end of the year.

Speaking at the Barclays High Yield Bond & Syndicated Loan Conference, Bob Gunderman, CFO of Windstream, told investors that the growth of on-net buildings will enable its sales team to close more business customer deals.

"We have given some level of enthusiasm to them in terms of bringing in more on-net services to their arsenal over the next year," Gunderman said. "They are excited about that and that will add to their success over the near and long-term."

Although Windstream has the fifth largest fiber network, the telco still has over $1 billion in interconnection costs it pays to other telcos like AT&T (NYSE: T) to connect multi-site businesses that reside outside of its traditional territory.

Gunderman said while Windstream sees the opportunity to bring more buildings on-net, the process will be an ongoing migration that will take place over multiple years.

"We do have $1 billion in interconnection expense annually so you can't change it overnight," Gunderman said. "We will start this year with five markets and we'll spend $25 million, but the opportunity to do this in many more markets is absolutely there for us."

Gunderman added that enhancing its on-net building count will be done incrementally as it looks to increase business service profitability.

"You'll see those opportunities be consistently applied in the next several years and so that's five markets this year and maybe we take that up higher than that next year," Gunderman said. "You don't turn all the interconnection costs off overnight, but you start to turn up more customers to get more profitable.  

Increasing its on-net fiber footprint will enable Windstream to gain a number of advantages, particularly as it rolls out more Ethernet and cloud-based services.

By building out on-net fiber to more buildings, the big opportunity for service providers like Windstream will lie in their ability to respond to new Ethernet access to IP VPNs service deals for large multi-site customers.

While Windstream did not break out how many buildings it reaches with fiber today, a recent Vertical Systems Group report found that in 2014, the amount of buildings that were connected to a fiber network rose to 42 percent.

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