Verizon Communications said it agreed to acquire Frontier Communications in an all-cash deal valued at $20 billion.

Frontier is a pure-play fiber internet provider. It has spent $4.1 billion over the past four years to upgrade and expand its fiber network. 

The acquisition expands Verizon’s fiber footprint by adding Frontier’s 2.2 million fiber subscribers in 25 states to Verizon’s 7.4 million Fios connections in nine states and Washington, D.C. 

“Connectivity is essential in nearly every part of our lives and work, and no one delivers better than Verizon,” Verizon chairman and CEO Hans Vestberg said. 

“Verizon offers more choice, flexibility and value, and we continuously look for ways to provide the best product and network experience to our customers as we bolster our position as the provider of choice.” Vestberg said. “The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network.”

Verizon will pay $38.50 per share in cash for each Frontier share. Frontier shares rose 38% to close at $38.68 on Wednesday, when media reports about the deal started to circulate.

The Verizon and Frontier boards unanimously approved the transaction, which is expected to close in about 18 months.

“Less than four years ago, we set out an ambitious plan to Build Gigabit America, the digital infrastructure this country needs to thrive for generations to come,” Frontier president and CEO Nick Jeffery said. “Today’s announcement is recognition of our progress building a best-in-class fiber network and delivering reliable, high-speed broadband to millions of customers across the country. It’s also a vote of confidence for the future of fiber. I am confident that this delivers a significant and certain cash premium to Frontier’s shareholders, while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans.” 

A notorious hacker group says it has sensitive data for up to 2 million Frontier Communications customers and it’s about to put around 5 gigabytes of stolen digital info on the Dark Web for auction. 

Dallas-based Frontier has been quiet about all of this, but the theft by RansomHub reportedly took place back on April 14. 

The telecom reported the incident to the Maine Attorney General, and messaged its customers, saying that sensitive data for around 750,000 customers was “accessed by a third party during a recent cyber incident.” (Light Reading was the first to report on this.)

Frontier offered its customers free credit monitoring and identity-theft resolution services.

However, hacker group RansomeWare separately reached out to Bleeping Computer, declaring that the actual base of affected customers is closer to 2 million. The group also said it’s giving Frontier until Friday (June 14) to respond to its threats with a payment. 

“Data is more than 2 million customer with address name email ssn credit score date of birth and phone number. We gave frontier 2 months to contact us but they don’t care about clients data,” the group told Bleeping Computer.

Frontier Communications has partnered with YouTube on a limited-time “NFL Sunday Ticket” promo that will give users access to every out-of-market Sunday afternoon game and over 100 live TV channels at a discounted rate.

Frontier internet customers who are subscribed to YouTube TV and sign up for NFL Sunday Ticket can save $100 through Aug. 21. New subscribers to both Frontier and YouTube TV can save up to $500 their first year vs. cable plus, get $100 off NFL Sunday Ticket through Aug. 21.

Earlier this year, Frontier partnered with YouTube TV to offer integrated billing for internet and YouTube’s live TV vMVPD.

Frontier Communications has become the latest pay TV operator to drop/lose carriage of far-right channel Newsmax TV. 

"Our contract with Newsmax TV expired and we made the business decision not to renew our agreement," Frontier said in a statement on its website. 

The telecom, which reported 306,000 remaining TV/video customers at the end of 2022, also said that it has stopped carrying Fuse Media channels Fuse and FM. 

Also read: The Future of the Internet-TV Bundle? Frontier Integrates YouTube TV Into a Single Unified Bill

“Since we began renewals last year, 99% of our operators have renewed, representing about 98% of our subscribers,” reads a Newsmax statement. “Frontier’s decision was clearly political, because they will lose far more money in cancellations and lost business without Newsmax.“ 

The channel’s comments jibe with rhetoric used in a much higher-profile two-month carriage dispute with DirecTV, which was just resolved two weeks ago. 

Just as DirecTV did last year, Norwalk, Connecticut-based Frontier, a publicly traded company listed on the Nasdaq, also recently dropped carriage of another far-right channel, One America News. 

In its dispute with DirecTV, Newsmax was able to tap into the outrage of House Republicans, many of whom called for investigations of the satellite TV company over alleged political bias and the “silencing of conservative voices.” 

Newsmax also flooded its on-air and digital news channels with negative DirecTV press.

Newsmax returned to DirecTV’s program guide, but without securing its core demand, sources familiar with the negotiation told Next TV. Newsmax, which had previously been carried by DirecTV under advertising revenue share terms, had been seeking a license fee of $1 per DirecTV subscriber per year.

Newsmax disputes this assertion, telling Next TV that its DirecTV deal is “consistent in terms of licensing fees with all other agreements we have secured over the past 15 months.”

In any event, given that Frontier's pay TV heft doesn’t come close to DirecTV's 13.1 million subscribers, don't expect this latest garden-variety carriage dispute to rise to a similar level of prominence and acrimony. 

Frontier Communications, which has bundled third-party virtual pay TV services with its fiber-based high-speed internet service tiers for several years, will now integrate its customers’ monthly fees for YouTube TV with their main broadband bill. 

Call it one small step for a telecom, but one giant step in the evolution of bundled telecom services, with operators aggressively moving out of the business of licensing their own channels and showing no sign of looking back. 

Spiraling content licensing costs and cord-cutting may have splintered the ties between broadband and TV/video, but here they are, once again, bundled together in one oversized bill. 

"This is an exciting rollout for both Frontier and YouTube TV, and highlights the continued move away from traditional pay TV," said entrepreneur Jason Cohen, whose startup, MyBundle TV, is pitching a similar bundled third-party video scheme to smaller telecom companies. 

"Broadband providers have the opportunity to play a major role in helping existing and prospective customers simplify the streaming TV world, from live TV/cable replacements to on-demand services. Bundling streaming with internet is where we see the world going and represents a big part of MyBundle’s focus."

Frontier, which ended 2022 with 1.7 million FTTH subscribers, still has deals to market DirecTV Stream and Dish Network satellite TV as third-party TV/video replacement options. 

But Google’s YouTube TV seems to get most of Frontier’s promotional water, with the operator offering $10 off the vMVPD’s just-hiked $72.99-a-month bill for one year. 

Cable operators are very much part of trend of pulling back from licensing their own content. But insomuch as Comcast and Charter are still in that business, Frontier is using its YouTube TV billing integration move as counter-marketing. 

“Our partnership with YouTube TV makes it easier for customers to ditch cable,” John Harrobin, Frontier’s executive VP of consumer, said in a statement. “We take our position as the un-cable provider seriously and are constantly listening to consumers. Many want one source for internet and TV, and that’s what this partnership is all about. With Frontier and YouTube TV, there’s no settling for anything but the best.”

Added Tony Archibong, managing director of global product partnerships at YouTube: “Frontier is a natural partner for YouTube TV, due to our shared dedication to customer choice and flexibility. With this next stage of our partnership, Frontier customers will be able to sign up and enjoy all the perks of YouTube TV such as unlimited DVR, the ability to watch on any screen, innovative features such as key plays and multiview, special pricing offers for NFL Sunday Ticket and the option to cancel the service at any time, all on the same bill as their Frontier internet.” ▪️

About 2,000 Frontier Communications employees that walked off last Friday in several California communities over a dispute involving the use of non-union subcontractors were back on the job August 25, according to the Communications Workers of America. 

The CWA members went on strike on August 19, objecting to Frontier’s use of subcontractors for buildout work they said was in violation of the collective bargaining agreement between the union and the telecom company. Under that agreement, no more than 5% of Frontier’s workforce could be subcontracted.

As part of the new agreement, the union said Frontier has committed to follow the limits of subcontracting as put forth in the collective bargaining agreement, including posting job requisitions for at least a hundred Term Cable Splicer positions; meeting regularly with CWA on the status of the postings; offering union jobs in lieu of contract workers; and utilizing the existing referral program for union members to assist the company in finding qualified applicants. According to the union, the strike ended at  11:59 p.m. PT on August 24, and all employees returned to work on or before August 25. 

“This is a huge victory for CWA members at Frontier who stayed one day longer, one day stronger on the picket line and refused to settle for the company’s excuses and empty promises. It’s proof that we can successfully fight back when we come together, mobilize and build solidarity,” said CWA Local 9510 Executive Vice President Kenny Williams in a press release. 

Frontier officials did not respond immediately to a request for comment, but in earlier press reports said that the dispute had been mainly a misunderstanding. 

“Like most companies, we’re using contractors to fill a gap as we actively recruit new talent in a tight labor market,” Frontier said in a statement to the San Gabriel Valley Tribune. “Other factors have also pushed us to engage more contractors than normal, like weather-related repair issues, meeting PUC service requirements and employees not willing to meet overtime requirements.”

Telecom companies across the country have been experiencing a worker shortage as fiber build projects grow and the labor pool of skilled workers dwindles. 

Also: Equipment, Worker Shortage Could Delay Fiber Buildout

And though the CWA claimed victory in this dispute, it still is waiting for a new contract with Frontier. According to the Tribune, its previous collective bargaining agreement expired in September 2021, but workers have been without a contract since its last extension expired in April. 

“I am grateful for all of the members of the community who have been persistently supporting CWA members at Frontier and fighting alongside us to protect good jobs and the quality of service our customers receive. Although the issues relating to this grievance are resolved, we are still fighting for a new contract. I have no doubt in my mind that our members are ready, able and willing to do whatever it takes to ensure that Frontier provides quality service and good jobs for Californians,” said CWA District 9 Vice President Frank Arce in a press release.

The Federal Communications Commission’s Enforcement Bureau has launched an investigation into June 10 broadband and telecom outages in Arizona in areas serviced by Frontier Communications.

That came in a letter from FCC chair Jessica Rosenworcel to Rep. Tom O’Halleran (D-Ariz.), who had called for the investigation, saying the outage was “part of a persistent pattern of what can only be described as negligent behavior by Frontier toward communities in northern and eastern Arizona.”

In his letter to Rosenworcel, O’Halleran asked Rosenworcel to “consider initiating audits, a review of all outage filings and other disciplinary actions against Frontier.”

Rosenworcel told O'Halleran that she would conduct a “full and thorough” investigation. She would not comment on just how that would be conducted or what the result might be, but did add, “If our Enforcement Bureau determines that there was a violation of agency rules and law, I intend to take swift action.”

Frontier had not yet returned a request for comment. ▪️

Frontier Communications chief financial officer Scott Beasley said the mid-sized  carrier does not expect to introduce a mobile product in the near future, mainly because returns on its fiber-based broadband service are so high.

Frontier emerged from bankruptcy protection about a year ago with a goal to upgrade its network and vastly improve its customer experience. The company built out about 640,000 homes to fiber in 2020, and expects to pass another 1.1 million to 1.2 million homes with fiber this year -- up 20% from the original forecast. The plan is to pass 10 million households by the end of 2025.

At the Credit Suisse Communications conference Tuesday, Beasley said the build has been progressing well, adding that the company also is exceeding expectations for its goal of removing about $250 million in costs annually out of the business. 

“We’re about a year ahead of that plan. We expect to meet the $250 [million] a year ahead of schedule, plus add to it,” Beasley said.  

But one thing the company will not be focusing on is launching a mobile product, something overbuilder WideOpenWest  did earlier last month. 

At the Credit Suisse conference, Beasley said mobile has had no impact on Frontier’s fiber success, adding that at this point, the returns on the fiber product are so high, it doesn’t make sense to shift resources at the moment toward a mobile product.

“The demand for fiber is clear, we’ve had three successive quarters of record net adds without a wireless product,” Beasley said. “Consumers are choosing the best connectivity product separately from the potential to bundle it with wireless. Secondly, we haven’t done it yet because the returns on capital from building fiber are so strong for us that we’ve chosen to stay focused, we’re going to allocate capital to our fiber build. The unlevered IRs are in the mid-to-high teens there.” 

Also: Cable Wireless Grows Up 

But the CFO added that if consumer behavior does change, Frontier has the resources and the leadership -- Frontier chairman John Stratton and CEO Nick Jeffery have extensive experience in the wireless business -- to quickly launch a mobile product. 

“If we decided to do that we could do it quickly, we could do it well,” Beasley added. “But it hasn’t been a part of the core strategy this far.”

Also: It’s Time to Take Frontier Communications’ Fiber Plans Seriously 

In April, Frontier made 2 Gigabit per second data speeds available across its entire footprint -- making it the first carrier to do so, according to Beasley -- and the CFO said the company has been “very pleasantly surprised with the uptake.” While he conceded that not everyone needs that level of bandwidth -- “power users” like gamers and those who need to download and upload massive files are the main customers -- that may change sooner than you think. 

Beasley estimated that data consumption has risen between 30% and 40% annually over the past few years, with the average Frontier fiber customer consuming almost 1 Terabyte per month of data, up 30% from pre-pandemic levels. Also, as the number of devices connected to the network rises -- he estimated that the average household in Frontier’s footprint has 22 devices -- so will the need for bandwidth.

“We think demand is there now for a portion of our customer base, and we think it’s going to  continue to rise as data consumption rises,” Beasley said. ■ 

Total global revenue for the broadband access equipment market was $4.4 billion in the first quarter, up 14% and fueled by fiber and fixed wireless access projects, according to a study by the Dell’Oro Group.    

“Despite all the challenges with supply chains, logistics, and labor, service providers continue to invest heavily to expand their fiber broadband networks, particularly in North America,” Dell’Oro Group Vice President, Broadband Access and Home Networking Jeff Heynen said in a press release. “Many of these deployments are to deliver multi-gig services, as operators look to stay one step ahead of their competitors.”

Also: Equipment, Worker Shortage Could Delay Fiber Buildout 

In its 1Q 2022 Broadband Access and Home Networking quarterly report, Dell’Oro found that total cable access concentrator revenue increased 5% year-over-year to about $257 million as solid growth in Distributed Access Architecture (DAA) deployments help offset declines in traditional CCAP licenses. Total fixed wireless CPE unit shipments reached 3.8 million units in the quarter, with 5G Sub-6GHz units showing the fastest growth.

Also: It’s Time to Take Frontier Communications’ Fiber Plans Seriously 

Telco and cable operators across the country have stepped up fiber and fixed wireless deployments, especially as federal funding has emerged to help finance buildouts in rural areas. In addition, Altice USA said earlier this year it would accelerate its fiber-to-the-home build, expanding the technology to 6.5 million homes by 2025. AT&T has plans to pass 30 million additional homes with fiber by 2025 and Frontier Communications said it would extend its fiber network to 10 million homes by 2025,  while other smaller operators like TDS Telecommunications -- which plans to nearly double its total service addresses from 1.4 million to 2.2 million over the next five years, mainly through fiber expansion -- Shentel and MetroNet have all expressed plans to step up buildouts to bring faster speeds and greater capacity to broadband customers.  ■ 

About one year after emerging from Chapter 11 bankruptcy protection, Frontier Communications has been a surprising success story, moving full-speed ahead with building out its fiber footprint, doing it at a cost lower than even the company expected and watching its stock, driven by changing investor sentiment, rise more than 20% in the past three weeks. 

Frontier’s outlook wasn’t always so bright. In 2020, saddled with huge debt, a dwindling subscriber base and an outdated network, the company cleaned house under bankruptcy protection, refinanced its debt and refocused on delivering broadband via a state-of-the-art fiber network. About 14 months later — Frontier emerged from Chapter 11 protection in April 2021 — the company has a clear vision and a mission to beef up broadband speeds and reliability in its predominantly rural markets. Topping it all off is a new logo launched in April to reflect the company’s new direction and commitment to “relentlessly pursue betterness in our business and for our customers,” CEO Nick Jeffery said in a press release at the time. 

That Frontier decided to merely change its logo rather than scrap its name and conduct a total rebrand was telling to MoffettNathanson telecom analyst Nick Del Deo. In a May research report, Del Deo wrote that the decision to refresh the brand was “indicative of the positive effects the changes being made throughout the organization are already having on customer perceptions and marketplace traction.” 

Also: Equipment, Worker Shortage Could Delay Fiber Buildout

Del Deo added that management’s data-driven approach to the business has improved customer perceptions — its American Consumer Satisfaction Index scores are steadily moving up and its Net Promoter scores have surged in markets where it has fiber. 

“Put simply, the choice to refresh the company’s font and logo rather than totally rebrand is further evidence that changes to the business are working,” Del Deo wrote.

That change in sentiment also is evident in Frontier’s stock price. Frontier shares have risen about 21% between May 12 ($22.21) and June 3 ($27.03). While the stock is still down about 8% from the beginning of the year, Del Deo’s $33 target price for the stock seems to signify some decent upside.

Wells Fargo Securities telecom analyst Eric Luebchow was even more optimistic, calling Frontier the “best risk/reward opportunity that has meaningful exposure to fiber overbuilds” in a recent research note. Luebchow estimates Frontier will see an internal rate of return (IRR) of 20% or more at 40% penetration on its fiber build, well outpacing its cost of capital. 

“[Frontier] also has proven metrics that its fiber deployment is gaining traction, with its 2020 cohort of homes already exceeding 40% penetration just 24 months after completion (vs. its 25-30% initial expectations),” Luebchow wrote. “We believe this early success can continue, in part because FYBR on average is undercutting its cable peers on price by ~20% on average over a 3-year period for symmetrical broadband.”

Luebchow added that although year-over-year EBITDA and revenue growth was negative in Q1 — at $1.4 billion, revenue was down 10.7% in the period and  EBITDA of $509 million fell 22%, but both were in line with consensus estimates — he expects them to turn positive in late 2022 and 2023, respectively.

”We strongly view [Frontier] as a mispriced asset and presents a unique opportunity for the longer-term investor,” he wrote.

In a May research note, J.P. Morgan telecom analyst Phil Cusick wrote that Frontier’s fiber buildout was beating expectations, with the third phase of construction -- targeting the last 5 million households of its 15-million home footprint, costing less than the $900-to-$1,000 per passing earmarked for Phase 2. In addition, sell-through was higher and faster than earlier expectations. 

Cusick added that the company was optimistic concerning federal support of the network buildout, and that Frontier has already staffed up to pursue those funds, with the greatest impact expected in 2023. Nevertheless, Frontier believes Phase 2 of the buildout is funded through 2024.

Cusick noted that Frontier plans to build the network out to another 6 million homes in Phase 2, bringing the total number of homes where fiber is available to 10 million. So far, he wrote, Frontier is tracking ahead of schedule, building 640,000 fiber passings in 2021 (ahead of a 500,000-home target) and plans to finish 1.1 million to 1.2 million passings this year, up to 20% ahead of its earlier goal of 1 million additional passings.

In the first quarter, Frontier added 52,000 residential fiber broadband customers, its biggest quarterly addition in that metric ever, and beat analysts’ consensus expectations of 48,000 additions. 

In his report, Luebchow estimated that Frontier would more than triple its residential broadband subscribers over the next five years, from 1.5 million in 2022 to 4.8 million in 2027. Most of those additions will be fiber customers, as the analyst predicts that its legacy copper broadband customers will fall from 1.1 million in 2022 to 650,000 by 2027.

“[Frontier], in our view, remains the best ‘pure-play’ operator given its relative exposure to residential fiber, with a pathway toward revenue growth in early 2023 and a current valuation that makes for an attractive entry point,” Luebchow wrote. ■

Using unusually harsh language, the Federal Trade Commission and two California law enforcement agencies said they’ve stepped in to stop Frontier Communications from “lying” about internet speeds and “ripping off" customers, including by requiring Frontier to build out fiber and pay millions of dollars in reparations.

Specifically, the FTC said the broadband provider had been charging for high-speed internet speeds it failed to deliver under several digital subscriber line (DSL) service plans per an FTC complaint filed in May 2021 it had now settled with the agency. Frontier will pay $8.5 million in civil penalties and costs, as well as $250,000 to go to the “ripped off" California Frontier customers and future discounts for DSL service.

Frontier will also have to deploy its fiber plant in California more quickly over the next four years.

Also: Frontier to Expand Connecticut Fiber Network to 280,000 Additional Consumers in 2021

The settlement announcement came a day before Frontier reported its earnings, which it said represented three consecutive quarters of record operations growth, including building out fiber to a “record” 211,000 locations.

The proposed settlement — which must be approved by a U.S. District Court judge — would:

• “Require Frontier to substantiate its internet speed claims at a customer-by-customer level for new and complaining customers and notify customers when it is unable to do so;

• “Require Frontier to ensure it can provide the internet service speeds it advertises before signing up, upgrading, or billing new customers;

• “Prohibit Frontier from signing up new customers for its DSL internet service in areas where the high number of users sharing the same networking equipment causes congestion resulting in slower internet service; and

• “Require the company to notify existing customers who are receiving DSL internet service at speeds lower than was advertised and allow those customers to change or cancel their service at no charge.”

The language in the press release on the settlement differed markedly in tone from the May 2021 announcement of the complaint, which alleged the company had “misrepresented” internet speeds and “failed to deliver” on its promises. ▪️

With the start of the first-quarter earnings season about 10 days away, J.P. Morgan media and telecom analyst Phil Cusick expects total broadband customer additions to continue to slow, but said a boost from some fixed wireless access providers will make what could have been a really bad quarter a little better.

Comcast is expected to kick off the 2022 earnings season on April 28,  when it reports Q1 results, followed by Charter Communications on April 29.  

In a research note, Cusick estimated total broadband additions of about 674,000 in Q1, a 32% decline from the prior year. But the analyst noted it could have been worse -- his Q1 estimates include 274,000 fixed wireless access (FWA) additions from T-Mobile. Without those FWA customers, total broadband additions would be down 56% in the period. 

Cusick blamed the overall broadband slowdown on sluggish cable growth, weak housing growth (moves are down 17% for the year, according to U.S. Postal Service data), and the loss of about 5 million consumers with access via the Keep Americans Connected COVID-19 program since 2020.  

Cable operators will continue to see sluggish broadband growth in Q1. Cusick estimates that total cable broadband additions will fall 51% to 445,000 in the period from 910,000 in Q1 2021. For the full year, he expects cable operators to add about 1.78 million broadband customers, down from 2.64 million additions in 2021.

Overall, Cusick expects total broadband additions of 2.94 million, a 4% decrease from 3.07 million additions in 2021. Fixed wireless is expected to add about 1.77 million new customers in 2022, down from 2.55 million in the prior year.

But Cusick still expects cable to attract about 66% of new broadband additions -- FWA is in second place with 39% -- mainly because in many areas, cable is the best choice for reliable high-speed connection.

Comcast and Charter are expected to add about 180,000 residential broadband subscribers each, compared to the 448,000 and 334,000 broadband customers, respectively, they added in Q1 2021. 

Analyst: No Sign of a Cable Slump

In his research note, Cusick explained that he hasn’t taken down his overall cable broadband estimates -- unlike some of his colleagues -- not because he believes cable MSOs will do better, but because he hasn’t seen any evidence they will do much worse. 

“Typical seasonality would be for 1Q to be stronger, and most cable commentary in 4Q was that the business improved through 4Q until omicron hit,” Cusick wrote “[W]ith no useful commentary from the companies, aside from consistently denying that FWA is impacting, we prefer to leave our estimates unchanged than reflexively lower the bar due to bullish FWA commentary from [T-Mobile and Verizon].”

Low housing moves and increased pricing will also most likely help boost cable margins, the analyst continued, adding that Charter repurchased about $3.7 billion of its shares during Q1, usually an indication of strong cash-flow growth despite slower subscriber additions. 

For other operators, Cusick sees flat broadband subscriber adds at Altice USA in Q1, and about 11,000 additions at Cable One.

On the telco side, Cusick predicted AT&T would lose about 10,000 broadband customers (15,000 IP additions offset by 25,000 digital subscriber line losses). Verizon Communications should add about 45,000 consumer wireline broadband subscribers (65,000 Fios Internet additions offset by 20,000 DSL losses), he said. Frontier Communications, which emerged from bankruptcy last year and has an aggressive fiber buildout strategy underway, should be well-positioned for growth, according to Cusick. The analyst predicted that Frontier will add 15,000 broadband customers in Q1 (46,000 fiber adds offset by 32,000 DSL losses).

Legacy video losses are expected to be about 1.5 million in Q1, down from 1.67 million in the prior year, but the improvement is more due to waning satellite TV losses. Cusick expects DirecTV/Dish to shed a collective 575,000 customers in Q1 (compared to losses of 750,000 in Q1 2021), while he predicts cable operators to lose 872,000 video subscribers, 5% worse than the prior year. 

Comcast’s video losses are expected to rise to 435,000 from 404,000 in the prior year, mainly because of a price increase that took effect in January. Charter’s video losses are expected to be slightly better in the quarter -- 150,000 compared to 156,000 in Q1 2021 -- reflecting slowing move activity. For the full year, legacy video losses are expected to be 5.3 million, better than the 5.8 million shed in 2021. 

Virtual multichannel video programming distributors (vMVPDs) such as Hulu Plus Live TV, YouTube TV and Sling TV are expected to add about 23,000 customers in Q1 (better than a loss of 92,000 subscribers in Q1 2021). For the year, vMVPDs should add about 1.4 million video customers, about even with the prior year. ▪️

The spike in fiber construction projects — Altice USA, Comcast, Charter Communications, Frontier Communications and a handful of smaller operators all have plans to build out and expand their plant across the country over the next five years — has created a bit of a dilemma for providers. While there is money (federal grants totaling more than $65 billion have been earmarked for broadband expansion, especially in rural areas), desire (expanding footprints mean more chances to grow customers) and need (about 43% of U.S. homes have access to fiber broadband), shortages of equipment and skilled workers could throw a wrench in what many expect to be the biggest fiber buildout in the past 20 years.

For AmeriCrew, a company founded in August by former U.S. Army officer and long-time telecom executive Kelley Dunne to help fellow veterans train and establish careers in the telecommunications, clean energy and managed services industries, the worker shortage is real, and not just for people who know how to splice fiber.

“Everyone is building at once,” Dunne said. “In the process, the skill sets are converging as well. You need skilled labor out in the workforce, not to mention electricians and higher skilled laborers. I think we’re heading into the largest workforce shortage our nation has ever seen.”

He's not alone in that fear.

A ‘Huge Issue’

“Labor is a huge issue right now,” Jeff Heyner, Dell’Oro Group VP, broadband access and home networking, said. “It’s a big concern, especially for those projects that are subsidized through RDOF [Rural Digital Opportunity Fund] and the other U.S. government or state government grants. The concern there is, can they finish these projects within the time frame allotted before they have to go back and say they need an extension?”

Federal and state broadband funding programs usually have milestones and deadlines that awardees must meet in order for them to continue receiving money. For those that can’t meet those deadlines, they usually have to file for extensions to the respective government agencies, which at best means a ton of additional paperwork and at worst means giving the money back. 

Heyner said that the deficits aren’t only in the employee ranks. Supply chain issues are delaying projects as well. 

“There is still a lot of backlog of projects and it’s not like they’re slowing down any strategic initiatives they have,” Heyner said. “The projects just keep coming and they’re gated by supplies. It’s really difficult to get ahold of fiber itself, conduit, and once everything is installed, the CPE necessary to connect the subscriber. There are certainly labor shortages as well, all across the board when it comes to any technicians or outside plant folks.”

Fiber Broadband Association VP, research and workforce development Deborah Kish said her organization began hearing from its service-provider members about two years ago that they had to turn down jobs and couldn’t get installs done because they didn’t have the skilled workforce. 

“That’s kind of indicative of the telecom industry,” Kish said. “We have a lot of people who have been in the industry for 30 or 40 years, so there are a lot of people aging out. It’s a matter of how do you attract fresh, new people to do these jobs.” 

FBA, she said, launched a 144-hour fiber optic technician training course on March 29 teaching fiber theory, types of fiber, splicing , outside plant installation, FTTH installation, testing and troubleshooting. The course is about half in the classroom, half in the field, and students will emerge from the course as an advanced entry-level fiber-optic technician.

Kish said there are other training programs, from independent associations, community colleges and other educational institutions across the country, but it still might not fill the need.  

She added that the industry expects to build 1.6 million miles of fiber over the next five years. She estimated that potential job creation is in the tens of thousands to hundreds of thousands over the next several years.  

“Yes, it [the worker shortage] will delay projects,” Kish said. “That’s why it’s the right time to do this.”

Eleven of the top telecom trade associations, including the Competitive Carriers Association, the Fiber Broadband Association, INCOMPAS,  NTCA–The Rural Broadband Association, the Wireless Infrastructure Association (WIA) and CTIA, wrote Congress in February 2021 claiming that the industry will need an additional 850,000 man-years of trained fiber technician labor over a five year period to keep up with demand. In comparison, the group said the industry employed about 672,000 technicians, and to meet the short-term labor requirements will have to find and quickly train at least 250,000 new technicians.  

That same year South Dakota Republican Sen. John Thune reintroduced his Telecommunications Skilled Workforce Act bill, U.S.  which would establish a Federal Communications Commission-led interagency working group to develop recommendations for workforce needs and to empower the GAO to conduct a study to determine the specific number of workers required to fill the gap.

The bill was first introduced in February 2020 but appears to have little traction at the moment. 

“When you look at the industry as a whole, there’s simply not enough people,” CCG Consulting president Doug Dawson said, adding that the number of installations is already at record levels and continues to grow. “Somebody is going to get shorted somewhere along the line. It could be that everybody gets shorted.”

At the same time, there are groups who say there is no worker shortage at all. The Communications Workers of America, the union representing more than 150,000 wireless and wireline telecom workers, has said repeatedly that there is no shortage of workers. What has been lacking, according to the union, are decent wages as companies lay off telecom workers. 

In his February testimony before Congress, Communications Workers of America president Christopher Shelton said companies claiming a shortage of skilled workers are really lamenting a lack of non-union employees. 

“AT&T and other telecom companies have laid off tens of thousands of workers in the past few years, including thousands of well-trained construction technicians, while non-union contractor companies claim they can’t find qualified workers,” Shelton said, adding that if there truly was a deficit, wages would increase. Instead, he cited an Economic Policy Institute study that showed that wage growth has slowed over the past 40 years.

“The lowest-paid 10% of workers in telecom actually saw their wages decline by 12% in real terms since the 1970s, driven by outsourcing and the loss of union representation,”  Shelton continued. “When wireless infrastructure companies and their lobbyists start talking about workforce shortages, ask them for proof.”

Size Matters

But as big players like AT&T have the size and the muscle to bring in fiber workers, the pool is still small, meaning if one company attracts a crew, another company is left without.

Dawson, a 45-year veteran of the telecom industry, said the labor shortage depends on who and where you are. For mega-companies like AT&T and Verizon, which have nearly unlimited resources and can attract workers from around the country or train workers on their own, the ability to build a workforce isn’t as hard as it is for a small telco in a rural area.

So AT&T, Verizon and other mega-players may have a leg up on the rest of the industry in attracting work crews, “but that means 20 other smaller companies just got really screwed,” Dawson said.

The road for smaller operators is much rougher, adding that skilled workers can jump from company to company on fiber builds, landing where the pay is best. For many that means bigger companies. 

He used a small fiber project in Oregon, in a town with about 20,000 residents, that he has consulted for about two years as an example.

“During the construction process, every Monday they would make bets about how many construction crews wouldn’t show up,” Dawson said. “Because at that same time Verizon was building a tremendous amount of fiber throughout Washington and Oregon, and they would simply steal away the crews by offering them a higher rate. They weren’t at the bottom of the chain — they were building a $20 million project — but they still had a tremendous struggle trying to keep work crews. If you’re a little city with a $1 million grant, good luck.”

A Loss of Institutional Knowledge 

Dawson agreed that layoffs after the last fiber bubble burst 20 years ago have added to the paucity of fiber technicians. Between 2001 and 2005, AT&T alone reduced its workforce from 215,088 to 162,000 employees, according to the company’s 10-K annual reports. What resulted is that today, many fiber line workers are either baby boomers or Generation Z, meaning they are either about to retire or they’re too young to have much experience. And when those baby boomers retire, they take a lot of the provider’s institutional knowledge with them.

And the projects aren’t last-mile fiber builds alone, Dawson added. Independent companies like Zayo are building massive long-haul networks, cable companies continue to build fiber as they cut their nodes down, wireless service providers are all building 5G networks — which have a huge fiber component — as well as Dish Network, which as part of federal requirements for its spectrum purchases needs to build its 5G to 70% of the country by next June.  

While the available pool of workers is likely to migrate to those bigger projects, smaller companies are having to decide whether roll the dice and hope they can attract enough workers, or build projects with existing staff. Dawson pointed to one client — a municipality in Arkansas — which is doing the latter, but added it will quadruple the time it takes to build the network from one year to four years. 

“Everyone can’t build what they’re announcing, it’s impossible,” Dawson said. “Between materials, engineers, fiber splicers, there are places that are going to run into bottlenecks.” 

It’s Not Just a Job… 

While there are staffing agencies, contractors and subcontractors galore to provide skilled workers for fiber builds, training a fiber tech from scratch can take anywhere from several months to several years. And Dawson said it can take two-to-three years of being on the job before a fiber technician is up to snuff, Dawson said. 

"It's a true apprenticeship program, they're fairly worthless in the beginning," Dawson said. "Just knowing how to safely climb poles and all that, you don't learn in a day."

Workers are well-compensated for their efforts. Fiber-optic technicians make an average of $65,000 per year, according to Glassdoor.com, but depending on the location and the employer, can earn $80,000 or more annually. 

While that is enough to attract a wide range of workers from all walks of life, AmeriCrew's Dunne said he believes veterans are especially geared toward fiber work because of their focus on teamwork and getting the job done.  

For the veterans — Dunne said there are about 100 people in AmeriCrew's fiber program — the attraction is the ability to work wherever they want, to not to be tied to a desk and to build a career. 

“Sitting in a cubicle all day staring at a screen is not a job they are going to resonate towards,” he said.

If You Build It

Even the big guys have had to deal with periodic labor shortages. Almost every major telecom company has announced plans to boost its fiber diet, with AT&T predicting to extend its fiber network to 3.5 million additional homes this year, 4 million in 2023 and 30 million by 2025. Altice USA said earlier this year that it will accelerate its fiber buildout plans, extending its network to 6.5 million homes by 2025. Verizon has completed the core fiber buildout for more than 50% of its markets, so any further construction will be success-based 

Frontier Communications, which emerged from bankruptcy in April 2020, has put forth an aggressive buildout strategy, planning to pass 10 million homes with state-of-the-art technology by 2025.

Frontier chief network officer Veronica Bloodworth said at a recent industry conference that her biggest challenges in building out that network are twofold — labor and equipment.

“We have a much more diverse supply chain of labor partners than we even had nine months ago,” Bloodworth said at the conference. “I have a lot of confidence in our suppliers to meet their commitments. I feel very confident in our ability to meet our commitments. But the supply chain is much tighter than it was before.”

AT&T ran into some supply chain and staffing issues in 2021 around the fiber build — it finished the year adding about 2.6 million homes instead of the 3 million it had earlier predicted — but said that it believes it has solved any problems associated with network construction. 

At the Deutsche Bank Media, Internet & Telecom conference on March 14, AT&T chief financial officer Pascal Desroches said AT&T is in a good spot in its buildout plans. 

“Look, we’re not immune to supply chain issues, but we have first priority on supplies, we are in great position on access to labor relative to others, and what we’re seeing is while there were issues in the summer of last year those issues have been largely resolved and we exited 2021 with good momentum,” Desroches said at the conference. “That continues in 2022, so we feel really good about our ability to deliver 3.5 to 4 million new locations this year.”

But even though big players like AT&T have the size and the muscle to bring in fiber workers, the pool is still small. That means if one company attracts a crew, another is left without.

Smaller Providers Lead the Charge

Other smaller, more rural telecom companies also have aggressive buildout plans, like Shenandoah Telecommunications, which expects to pass 300,000 homes with fiber this year, and TDS Telecom, which plans to nearly double its total service addresses from 1.4 million to 2.2 million over the next five years, mainly through fiber expansion.

At the New Street Research virtual Fiber to the Future conference on March 29, TDS Telecom CEO Jim Butman said that currently, his company passes about 400,000 homes and businesses with fiber. He pledged to grow that to 1.3 million addresses in five years, adding that most of that growth will occur within TDS Telecom’s existing footprint.

“We want to protect what we’ve got in the ILEC first,” Butman said at the conference, adding that those plans don’t include efforts that could be funded through federal programs. With federal funding help, TDS could add another 100,000 to 150,000 homes to its fiber network.

Shentel had about 300,000 broadband passings at the end of 2021 — 200,000 through incumbent cable, 75,000 via its Glo Fiber offering in overbuilder markets and 30,000 through the federal Broadband Equity, Access and Deployment (BEAD) program. At the New Street Research conference, Shentel chief operating officer Edward McKay said the telecom company plans to double its Glo Fiber passings this year, growing to more than 450,000 passings by the end of 2026. 

“In total, we will grow broadband passings from 300,000 to 700,000-plus over the next five years, driven almost entirely by fiber-to-the-home expansion,” McKay said. 

And while competitors have opted to expand into more rural markets using fixed wireless technology, fueled by federal money, McKay said Shentel scrapped its fixed wireless program after it saw the amount of federal money that was pouring into its markets.

“We believe with the funding that is out there today, that will justify building fiber to the vast majority of the homes that we previously targeted for our BEAD fixed wireless,” McKay said. “We’re actually going after some of that funding ourselves.”

In the meantime, the number of wireline projects keeps growing. Earlier this month, Shentel’s Glo Fiber announced plans to expand its fiber network in Lancaster, Pennsylvania;  MetroNet announced plans to build a $130 million fiber network in Colorado Springs, Colorado; and Consolidated Communications said it will build a fiber network in Maine reaching 150,000 homes by the end of the year. 

In addition to building fiber networks for wireline high-speed Internet service, 5G wireless networks have a huge fiber component. 5G service requires a lot more towers than its predecessor technology: 5G cells have a range of about 1,000 feet, compared to 10 miles for 4G cells. 5G cells must also be connected to each other via fiber, which means a lot more fiber needs to be built. 

Dawson added that once the construction is completed, the work shortage could shift again. He said that companies will have to hire permanent fiber technicians for every 2,000 to 3,000 passings to maintain the network. 

“People will tell you there’s no shortage of them [permanent techs] right now,“ he said. ”There will be when there are 10 million more fiber passings.” ■ 

Frontier Communications stock got a lift Monday after J.P. Morgan media and telecom analyst Phil Cusick initiated coverage on the company with an “overweight” rating and a $40 per share year-end price target, pointing to his belief that its fiber network push could lead to big upside.

Frontier emerged from bankruptcy in April 2021 and since then has begun an aggressive push to build its fiber network out to more than 10 million homes by the end of 2025. In his report, Cusick wrote that the company had already built fiber to about 3.8 million homes in its footprint. 

Cusick estimated that Frontier could grow its broadband subscribers by 32% to about 3.6 million by 2025, but also noted it won’t be easy. 

“We are encouraged by Frontier’s reinvigorated focus to rapidly deploy fiber and improved capital structure post-bankruptcy, but acknowledge building and selling fiber in an increasingly competitive broadband ecosystem remains a key risk,” he wrote.

As a result, Frontier stock was up as much as 10% on Monday ($2.57 each) to $28.61 per share, before closing at $28.17, up 8.8%. The stock was down slightly (0.5% in early trading February 8 to $28.03 each.

But Cusick sees huge potential in Frontier’s predominantly rural market, which has been severely underserved by fiber and is the focus of federal programs to boost broadband availability. While Frontier has offered fiber in the past to some of its customers, most of its high-speed subscribers have received service via copper-wire based digital subscriber line (DSL) offerings. It is Frontier’s intention to replace DSL with fiber throughout its footprint.

That replacement strategy should lead to deeper penetration of service and lower cost over time. Historically, Frontier’s penetration rates for DSL were low because of slower speeds. With fiber, those take rates are expected to climb, Cusick wrote, adding that the pandemic has accelerated consumer need for broadband at reliable speeds. 

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable’s Broadband Lead 

In his note, Cusick wrote that Frontier’s main competition is cable, but believes over time the telco could achieve broadband penetration rates in the mid-to-high teens percentages in the first two years, and more than 40% over time. 

But Frontier’s ultimate broadband penetration could be even higher, given that other telcos that have expanded their fiber networks have reported rates as high as 30%.

“At the same time, we could see improved trends within Frontier’s base fiber cohort as Frontier improves go-to-market and promotional strategies,” Cusick wrote.

The big question is what will Frontier do with its markets outside of the 10-million base after 2025. Cusick estimates that there are about 5 million homes outside of the initial buildout, many in remote areas where it is cost-prohibitive to extend fiber. The analyst said the company could either build out those areas with the help of federal funding, or sell them to a third party. 

“Both are possible, as the prospect of Federal support could increase the value of the properties,” Cusick wrote, adding that Frontier management is likely to outline its plans for those areas by mid-year. He estimated those markets would be worth about $2 billion if the company decides to sell. ■

The theory that the recent spike in fiber builds by telcos, coupled with lower prices for 5G and broadband products will pull cable companies into an ever-descending vortex of spending and price-cutting — the so-called Convergence Apocalypse theory — could be one of the reasons for the rapid decline of both telco and cable stocks in the past few months. But in a research note Thursday, MoffettNathanson principal and senior analyst Craig Moffett said that despite the threat of telco fiber overbuilds, cable still has a clear advantage.

Cable stocks have been hit hard as investors have been thrown into a tizzy after two top companies warned of slower than expected broadband subscriber growth in the third quarter. The first tremor was  caused by Comcast chief financial officer Mike Cavanagh on Sept. 14, when he told a virtual audience at the Bank of America Media, Communications & Entertainment conference that the cable operator was seeing a “little bit” of a slowdown in broadband subscriber adds in late August. Comcast stock fell more than 7% that day and the rest of the sector — Charter Communications, Altice USA and Cable One — saw their shares dip between 3% and 4%. 

The real impact came a few weeks later, when Altice USA CEO Dexter Goei said at the virtual Goldman Sachs Communacopia conference on Sept. 23 that broadband additions would  be negative in Q3 — to the tune of 15,000 to 20,000 in subscriber losses — blamed in part on what he said was a sluggish back-to-school period. 

Also Read: How Slow Will The Broadband Slowdown Be? 

Altice USA stock fell 13% to $22.06 per share on that day, and has had a steady decline ever since, closing at $17.62 each on Oct. 13. Other stocks like Charter Comcast and Cable One also felt the pain, as analysts began to rethink their models to account for what they saw as an accelerated slowdown in growth. At the same time, some analysts were rejiggering their outlooks on telco stocks, especially those that have made commitments to expand their fiber networks like AT&T, Verizon Communications and Frontier Communications. 

Also Read: Analyst Says Telcos Better Positioned to Chip Away at Cable’s Broadband Lead

In a research note Thursday, Moffett wrote that both the cable and telecom sectors are getting crushed in the market. Cable distribution stocks are down 16.8% since Sept. 1 and telco stocks like AT&T, T-Mobile, Verizon, Frontier and Lumen Technologies have fallen a collective 10.5%, mainly due to the belief that as telcos build out more fiber and lower prices for broadband, cable subscriber additions will suffer. Conversely, as cable companies drop prices for wireless service, as Comcast did it in August and Charter did earlier this week, that will lead to a long-term slide in telco wireless customers. 

“In this dystopian converged future, there are no winners,” Moffett wrote. “There is only mutually assured destruction.”

But like any other good conspiracy theory, there is some truth to the thesis — telcos are expanding fiber builds and cable operators are dropping wireless prices — and some not so truthful assumptions. For example, Moffett believes that “Convergence Apocalypse” adherents are forgetting a few key components of the thesis, particularly timing and coverage. 

According to Moffett, telcos have targeted an incremental 5 million homes with fiber overbuilds this year, or about 4% of the country. Next year that effort will expand to an additional seven million homes, or 5% of the U.S. By Moffett’s estimates, the percentage of cable plant overbuilt by fiber will grow from 30% currently to about 55% in the next decade. 

“The delays in passing a home, subsequently making the broadband service available for sale, and then actually connecting it, make clear that the competitive impact of this year’s tranche of homes newly passed will only begin to be felt next year, and even then only modestly (we’ve heard arguments that Comcast’s warning of “a little bit of a slowdown” in their Q3 numbers is an early sign of the new fiber overbuilds, but that is not remotely plausible),” Moffett wrote. “And recall that new homes passed in 2020 were the lowest in a decade; it will be at least a few more years before the rolling average of homes passed over the trailing four years or so is meaningfully above average.”

Moffett believes the immediate impact will be on wireless, as cable’s ability to bundle mobile and broadband service at lower prices has the potential to take significant share from the telcos. 

Cable can offer broadband throughout its footprint and wireless on a national scale. Telcos are limited in terms of bundling on which parts of the country they offer fiber broadband. For Verizon, that’s about two-thirds of its footprint or 11% of the country and for AT&T, about one-third of its footprint or 13% of the U.S. T-Mobile, Moffett wrote, has no fiber at all. 

What has been holding  cable wireless back in the past has been pricing, but that changed six months ago when Comcast dropped its family wireless plans to $30 per line per month for four lines or more of unlimited service. Charter introduced its new pricing -- $29.99 per month per line for two or more lines of unlimited service -- and it could be a game changer for the company.

Also Read: Analyst Says It’s Time to Take Cable Wireless Seriously 

According to Moffett, both the Comcast and Charter wireless plans are cheaper than those of AT&T, Verizon or T-Mobile, although the traditional telcos offer steep handset discounts the cable companies do not. But that is likely to change.

And then there is the cost.

According to Moffett, telcos are spending up-front, at-risk incremental dollars for their fiber builds, so in order to get return on that investment, they will have to achieve high penetration rates and high average revenue per customer. And while payback periods are typically between six and 10 years, if they fail to hit those targets or costs rise, the periods extend or become unattainable. In contrast, cable wireless is a variable cost business — operators only pay their mobile virtual network operator (MVNO) contract when their customers are using the service. As long as they price the service above that variable cost, they make a profit. 

Moffett pointed to a report he did years ago that argued that cable companies had the advantage in the coming convergence climate, a tenet he says holds true today. 

Why Wired Nets Hold an Advantage

“The argument was simple: it costs vastly more to put wires under a wireless network than it does to put a wireless network on top of wires,” Moffett wrote. “He who has the best (most ubiquitous) wired network will win. That cable doesn’t even have to bother building out facilities in low-value places — they can let Verizon spend that money on their behalf — only makes their advantage all the more dramatic.”

The analyst added that as the cable industry sees the mobile product as the best way to protect its broadband offerings, they will respond to increasingly aggressive telco fiber buildouts with equally aggressive wireless pricing. That strategy already appears to be working. Moffett estimated that cable is capturing as much as half of all wireless net additions within their broadband customer base even at the old pricing. 

Moffett added that the pressure on wireless could force telcos to make a decision — cut their dividend or reduce capital spending. That’s what AT&T was faced with in 2019. It cut capital spending and halted its fiber build in favor of the dividend, then reversed course in 2021, slashing its dividend and recommitting to improving the network.

But in the end, success in the wireless and broadband business is going to come down to price.

“[O]perators will have to pay customers, in the form of a discount, for the disadvantage of forced choice,” Moffett wrote. “Cable’s cost structure and infrastructure advantage allows for them to do that. Verizon’s and AT&T’s do not.”

Frontier Communications said it will expand its fiber-optic network to an additional 280,000 consumers in Connecticut  in 2021, the initial phase in what it says is a multi-year expansion effort.

The moves come about three months after Frontier successfully emerged from Chapter 11 bankruptcy with a cleaner balance sheet and plans to capitalize on broadband demand in its service territories. In its reorganization plan, Frontier recognized the lack of fiber-based broadband in many of its markets, pledging to bridge that gap by investing as much as $1.4 billion in its network. 

As part of the state approval process of that restructuring plan, in February Frontier agreed to expand its Connecticut fiber network to about 100,000 homes over four years. The most recent expansion plans appear to build on that pledge substantially. 

Frontier said it will offer 1 Gigabit per second speeds in the state, as well as offer more simplified service offerings. The company said that means no annual commitments or data caps, waived activation fees (an $85 savings), and a three-year price guarantee on monthly charges for Gig service. Frontier also offers a free $100 Visa Card or Ring Video Doorbell with Gig service and contract buyouts are available.   

“This infrastructure investment stems from Frontier’s belief that access to high-speed broadband is critical to building a digital society, enhancing community inclusion, and helping the environment,” Frontier Connecticut senior vice president Julie Murtagh said in a press release. “I am confident communities will see Frontier in a new way once they experience the power of fiber-optic technology.”

Frontier said the communities where the fiber expansion is currently underway include: Andover, Ansonia, Bethel, Bloomfield, Bolton, Branford, Bridgeport, Bristol, Cheshire, Coventry, Danbury, Derby, East Haven, Enfield, Farmington, Hamden, Hartford, Hebron, Manchester, Marion, Meriden, Middletown, Middletown , Milford, New Britain, New Haven, New London, Newington, North Haven, Norwalk, Norwich, Plainville, Plantsville, Quaker Hill, Rockfall, Shelton, Southington, Stamford, Trumbull, Uncasville, Vernon, Rockville, Wallingford, Waterford, West Hartford, West Haven, Wethersfield, and Woodbridge.

Frontier Communications said it has named former Arcosa Inc. executive Scott Beasley as its new chief financial officer, replacing Sheldon Bruha who will leave the company to pursue other opportunities. 

Beasley previously served as CFO of Arcosa, a Dallas-based maker of infrastructure products. He will join Frontier effective June 14 and will report to president and CEO Nick Jeffery.

“The addition of Scott Beasley as our new CFO is an important step in building a world-class leadership team as we transform our business into a modern technology company,” Jeffery said in a press release. “Frontier has a newly strengthened balance sheet and Scott brings considerable experience in corporate finance that will be critical as we invest in building our high-speed Fiber network. Scott is the ideal executive to lead our finance organization as we build Gigabit America."

Frontier named Bruha, who had been serving as interim CFO, as permanent CFO in June 2019. He joined Frontier in 2018 as SVP and Treasurer. Frontier emerged from Chapter 11 bankruptcy protection in April and began trading under a new NASDAQ symbol (FBYR) on May 4. 

“We thank Sheldon Bruha for his significant contributions over the past three years,” Jeffery added in the press release. “Sheldon played a key role in Frontier’s successful emergence from bankruptcy, including leading the Company’s critical balance sheet restructuring. We wish him well in his future endeavors.”

The Federal Trade Commission has joined six states in suing Frontier Communications for allegedly not delivering the DSL internet speeds it promised its customers and charging for higher speeds than it delivered. Frontier counters that it will vigorously defend what it said is a baseless complaint.

Also Read: Frontier Sets April 30 for Chapter 11 Emergence

The FTC, along with Arizona, Indiana, Michigan, North Carolina, Wisconsin, and California filed the suit n the U.S. District court for the Central District of California.

Frontier, which recently emerged from bankruptcy proceedings, has more than three million internet customers, including 1.3 million residential broadband users in 25 states.

"In numerous instances, Frontier has sent consumers advertisements for DSL Internet service at speed tiers that Frontier could not provide to them," the complaint alleges, saying that at the point of sale--at the point of sending geo-targeted mailers or on the phone with potential customers--Frontier has information that it is unable to provide certain DSL speed tiers to consumers based on their addresses, but offered those ties anyway, and charged consumers for them.

"Since at least Jan. 1, 2015, Frontier has in numerous instances advertised, marketed, offered, or sold DSL Internet service at tiers corresponding to speeds that Frontier did not, and often could not, provide to consumers," the complaint alleged.

Responding to the complaint, Frontier said that it believed it was "without merit," and "includes baseless allegations, overstates any possible monetary harm to Frontier’s customers and disregards important facts." Those include, said the company, that "1) Frontier offers Internet service in some of the country’s most rural areas that often have challenging terrain, are more sparsely populated and are the most difficult to serve and 2) Frontier’s rural DSL Internet service was enthusiastically welcomed when it was launched and has retained many satisfied customers over the years."

Also Read: Hill Seeks ISP Help in Promoting Broadband Subsidy

As to the claim it misrepresented its service in marketing it to customers, the company said: "Frontier’s DSL Internet speeds have been clearly and accurately articulated, defined and described in the Company’s marketing materials and disclosures."  

After a year winding through the bankruptcy courts, Frontier Communications said it expects to emerge from Chapter 11 protection on April 30.

Frontier filed for bankruptcy protection on April 15, 2020. Earlier this month it said it had received all the necessary approvals for its reorganization plan,  which includes swapping about $10.2 billion in debt for equity, and investing about $1.4 billion to build out its fiber network. 

Frontier added that its new common stock will begin trading on the NASDAQ exchange on May 4, under the symbol “FYBR.” 

“Frontier is ready to set a new course as a revitalized public company. Through the restructuring process, the company has stabilized its business and recapitalized its balance sheet, while making significant progress on the early stages of implementing our initial fiber expansion plan,” said John Stratton, incoming Executive Chairman of the Board. “Frontier’s success with the Fiber-to-the-Home pilot program, which upgraded more than 60,000 locations from copper to fiber optic service in 2020, is just one example of the important work already underway. Frontier’s future is bright. I’m eager to work closely with our new Board, our CEO Nick Jeffery, and the rest of the leadership team to build the new Frontier.” 

The company said it will hold a conference call, which will be webcast, on April 30 (Friday) at 10 a.m. ET to discuss the path forward and Q1 results.

The new eight-member board of directors will be led by Stratton and Jeffery, who joined Frontier in December after serving as CEO of British wireless company Vodafone UK.  The remaining six independent board members are: Astra Capital founding partner and 2B Partners CEO Kevin Beebe; Coca Cola SVP and chief people officer Lisa Chang; former Liberty Media SVP, deputy general counsel and corporate secretary Pamela Coe; former Vodafone chief technology officer and current senior advisor to Bridge Growth Partners Stephen Pusey; former NFL chief operating officer and current senior advisor to the infrastructure division of Brookfield Asset Management Maryann Turcke; and Kaiser Foundation (Kaiser Permanente) SVP and chief digital officer Pratabkumar “Prat” Vemana.

“The future of Frontier is an innovative, modern technology company, poised to deliver next-generation fiber-rich infrastructure for our customers and communities,” Jeffery said in a press release. “Upon emergence, we will have the capital structure and resources to establish Frontier as a digital leader with top-tier talent and an entrepreneurial, high-performance culture. I want to express my appreciation to all our stakeholders who have enabled this process. Our team looks forward to beginning our next phase of long-term growth and value creation across the business.”

The FCC has denied Gray Television's retransmission consent complaint against Frontier Communications, saying Frontier did not violate the agency’s good-faith standards, its totality of circumstances test or its notice requirements.

Gray had alleged that Frontier had failed to negotiate a new contract in good faith, as FCC rules require, and had also violated customer notice requirements about a potential blackout.

According to the FCC good-faith standard, “broadcasters and MVPDs must actively participate in retransmission consent negotiations, with the intent of reaching agreement, though failure to reach agreement is not itself a violation of the rules or statute.“

Also Read: Frontier Could Emerge from Chapter 11 in Weeks

As to the notice requirements, “cable operators [must] notify subscribers of any changes in rates or services at least 30 days in advance of the change, unless the change results from circumstances outside of the cable operator’s control (including failed retransmission consent or program carriage negotiations during the last 30 days of a contract).”

The FCC's Media Bureau concluded Frontier had done both of those things. "We agree with Frontier that it complied with the obligation to negotiate retransmission consent in good faith, including its per se obligation to negotiate retransmission consent, its per se obligation to designate a representative with authority to make binding representations on retransmission consent, and compliance with the totality of the circumstances test," the bureau said in denying the complaint. "We also find that Frontier fulfilled its customer notice obligations."

Frontier had said it had a business reason for not accepting Gray offers, which was that the carriage was not as valuable as it had been. The FCC agreed that was legitimate. "We find that a party is permitted to adjust its bargaining position as negotiations proceed and doing so is not bad faith. In this case, Frontier ascertained information causing it to conclude that a station was less valuable to it than previously thought," the bureau said.

Also Read: Frontier Says Gray TV Impasse Is About Value of Signal

The FCC also concluded that it was not misleading for Frontier to assert that over-the-top access to Gray TV's programming continued to be available over the station's own web site and mobile applications.

Gray had formally complained to the FCC that Frontier was not negotiating in good faith and did not give its customers "as soon as possible" notice of a potential blackout, both of which are required under FCC rules.

The complaint asserted that Frontier appeared never to have intended to carry the stations after the contract expired Dec. 18. "Instead, it just strung Gray along for weeks making us believe progress was being made until informing Gray with less than an hour to go that Frontier’s negotiator actually had no authority to enter into an agreement on the terms she had most recently offered to us and in fact she could not agree to terms along the lines of any of the proposals she had made over the last several weeks."

If the lead negotiator had no power to negotiate, Frontier could hardly be negotiating in good faith, which would violate FCC rules.

Frontier begged to differ.

“The simple fact is that Frontier and Gray disagree over the value of Gray’s stations,” the cable company said in its reply to the FCC complaint. “After 25 days of negotiation and three offers put forth by Frontier, any of which Gray could have accepted, Gray now cries foul because Frontier did not agree with the financial terms that Gray wanted to force on Frontier and its customers.”

While Gray asserted that Frontier “removed Gray’s stations from its online channel guides several weeks before the agreement was due to expire,” and possibly even before negotiations on a new carriage deal began, Frontier said that was not the case and that it did not update its “customer-facing” channel guides until after the agreement had expired."

Frontier Communications, about a year after filing for Chapter 11 protection, received the final state approval of its reorganization plan, which the company said sets it on a path toward emerging from bankruptcy in “the coming weeks.”

Frontier filed for Chapter 11 protection on April 15, 2020. The company had worked out a restructuring plan that would exchange about $10.2 billion in debt for equity, and funnel about $1.4 billion toward building out fiber networks throughout its service territory.  On April 15, 2021, the company received the final approval of its plan from the California Public Utilities Commission, which it said was the last hurdle in the bankruptcy process. 

“Having already received all other required state and federal approvals, the Company expects to successfully emerge from Chapter 11 in the coming weeks,” Frontier said in a press release. 

Frontier stock, currently trading on the over-the-counter “pink sheets,” was priced at about 29 cents per share in early trading April 19, down about 5%. Once the company emerges from bankruptcy, it plans to return to trading on the full Nasdaq Exchange under the new trading symbol FYBR, which MoffettNathanson telecom analyst Nick Del Deo said in a note to clients “may be a bit corny, but it leaves no uncertainty regarding management’s focus.” 

According to the California PUC’s proposed decision to approve the reorganization in March,  Frontier would have to invest about $1.75 billion in its fiber network in the state over the next four years, including expanding broadband availability in unserved or underserved communities. As part of that condition, Frontier would build out fiber to 350,000 customer locations by Dec. 31, 2026, of which 150,000 locations must be in areas where Frontier has lower rates of return. 

As it nears the bankruptcy exit, Del Deo, who initiated coverage of the stock on April 19, added that he believes with new management, more manageable leverage and funds earmarked for an aggressive fiber buildout, Frontier could overcome the hurdles of the past. Frontier named former Vodafone UK CEO Nick Jeffery as its CEO in December. 

The analyst added that the company has identified millions of homes in its footprint that could be upgraded to fiber at attractive returns, “which would put the business on a sustainable path and potentially create billions of dollars in value.”

But he cautioned that although Frontier will emerge with substantially lower debt -- about $7 billion -- only about one-third of its total revenue comes from fiber services, with more than half coming from its struggling commercial unit. 

“A successful transformation would likely bring Frontier to revenue stability or modest growth, but not make it a star,” Del Deo wrote.

Addressable advertising is coming to linear TV slowly because it’s hard to do, especially within the cable environment.

Putting relevant commercials in front of the right viewers requires getting legacy insertion equipment and set-top boxes to communicate with newfangled ad-management platforms. And if you want to do it programmatically — the way an increasing amount of ad dollars are coming into the market — a lot has to happen fast. That’s not easy to do, either.

That’s where Beachfront Media is staking its claim. The industry is clamoring for more inventory to be addressable and for that inventory to be available however buyers and clients want to transact.

While lots of companies jump into connected TV because it is growing fast and the digital architecture lends itself to addressability, Beachfront sees opportunity in the still-large number of cable subscribers and the fact that linear continues to draw the majority of ad spending.

Even if cord-cutting continues, “there’s going to be 20 to 30 million set-top boxes in homes for the foreseeable future,” Beachfront CEO Chris Maccaro said. “Building that interactivity is going to be important for at least the next decade.”

Spotted Need for Enablement

Beachfront started out in the supply-side platform business but has been pivoting from competing against larger ad networks into providing enablement technology. 

“We’re a technology company, not a sales company,” Maccaro said, noting that Beachfront employs engineers rather than salespeople. 

“Getting those systems to speak the same language is hard, and getting those systems to transact in anything close to real time is super-difficult, because it’s not how those systems were made to transact,” he said.

Beachfront works with multichannel video programming distributors in the U.S., including Frontier Communications, and abroad.

For its enablement work, Beachfront gets paid every time its system delivers an ad. To get to scale quickly, Beachfront also found opportunities to work with outfits with technology used by large portions of the industry, Canoe Ventures and SeaChange International.

SeaChange servers are used by cable operators around the world to insert addressable ads down to the ZIP code level. When Beachfront figured out how to get those SeaChange servers to respond to requests from programmatic buyers, MVPDs saw increased demand and revenue for their local ads.

Similarly, Beachfront developed a programmatic module to connect buyers to Canoe’s video-on-demand inventory from networks using Google Ad Manager or Canoe’s own ad management platform.

“We like them because they are real and they actually do real work,” Canoe Ventures senior VP of global sales and marketing Chris Pizzurro said of working with Beachfront. “And their stuff works.”

What makes Beachfront unique is its familiarity with cable plants. Canoe saw what Beachfront had done for Frontier and felt reasonably sure that something similar would work for Canoe. “They had already built something for this purpose,” Pizzurro said. “It was really about how they make their peanut butter talk to our jelly.”

Canoe is working with Beachfront to integrate systems as it moves into international markets including Latin America and India, Pizzurro said.

Pizzurro said the communication that goes on to collect programmatic bids and insert the right ad into the right program must happen in milliseconds. If it’s just a bit slow, the program will run without the ad and revenue is lost. 

But when it works, “the national guys are happy and the local guys are happy because everyone has more ad impressions to sell,” Pizzuro said.

Amobee, which starts its cross-platform campaigns for clients with linear, likes working with Beachfront. 

“What was appealing to us is they are in the linear space through video-on-demand and addressable set-top box inventory,” Amobee chief commercial officer Jack Bamberger said. “This was a perfect marriage between what they do and what we do as a technology provider, meeting our clients’ unmet needs.” 

Competition Is Gearing Up

Beachfront certainly has competitors. First of all, there’s Comcast owned FreeWheel, which so far has largely focused on inserting ads based on direct sales, as opposed to programmatically. 

Roku last month agreed to buy dynamic ad-insertion technology and the patents it is based on from Nielsen, which had been in testing mode.

And the large media companies — NBCUniversal, The Walt Disney Co, WarnerMedia — might all at some point decide to either build technology or bring it in-house as they build their advanced advertising and direct-to-consumer functions.

Despite the challenges, Maccaro said he thinks the Beachfront strategy is sound because building this technology is hard. “If you try to do it in a siloed approach, you miss the scale opportunity,” he said.

Maccaro said Beachfront is working on ways to address measurement and attribution. One key to its approach will be speed. 

Traditionally, the turnaround on letting buyers know when ads ran and what impact they had was measured in months. Beachfront already has it down to a week and is aiming to do it within an hour. 

“What we’re trying to do on linear is get our ducks in a row to make sure we give the demand side everything that they get today in a time that’s exponentially faster than they get it through a manual process,” Maccaro said. “The goal is to get them the data in real time so they can make optimization decisions in real time.”

The Connecticut Public Utilities Regulatory Authority approved Frontier Communications' Chapter 11 bankruptcy reorganization plan Wednesday, agreeing to expand its fiber network and pledging not to reduce its workforce in the state for at least two years.

Frontier filed for Chapter 11 bankruptcy in April. The company received Federal Communications Commission approval for the plan earlier this month.  With Connecticut’s approval, 12 of the 25 states in which Frontier operates have approved the plan.

The Communications Workers of America, which represents about 1,600 Frontier technicians and call center workers in Connecticut, had pressed for the approval to include conditions to improve service quality and preserve jobs in the state. The CWA had pointed out that Frontier has jettisoned about 740 employees in the state, about 30% of its workforce, since 2016. The union also wanted the PURA to use the oversight process to ensure the company stayed accountable to its workers and customers and not Wall Street hedge funds.     

As part of the reorganization, Frontier said it would reduce debt by about $11 billion and build out its fiber network across its footprint. It expects to emerge from bankruptcy early this year. In December, the company named former Vodafone executive Nick Jeffery as CEO.  Jeffery, who is expected to take the helm on March 1, replaces Bernie Han, who will remain on the board of directors and assist in the transition.  

Among the conditions for approval in Connecticut, Frontier agreed to add at least an additional 100,000 locations in the state in a four-year period ended Dec. 31, 2024, pledged not to reduce its technicians and call center workforce through involuntary attrition for two years and promised to maintain its corporate headquarters in Connecticut.

In a statement, CWA Local 1298 president Dave Weidlich said the PURA approval commits Frontier to expanding its fiber network and offers some protections for employees, but fell short of the mark.

“However, we believe this was a missed opportunity to follow the lead of other states who have put stronger conditions on Frontier related to capital investment, broadband deployment and workforce retention,” Weidlich added. “CWA remains committed to working with Frontier to provide the best possible service to Connecticut customers and to ensure that Frontier lives up to both the letter and spirit of this decision. We hope that this decision will serve as a starting point for Frontier’s continued investment and that Frontier makes a strong, ongoing commitment to Connecticut homes and businesses to provide Connecticut with the connectivity we deserve.”

The FCC has approved Frontier's plan for restructuring out of bankruptcy, which includes allowing it to complete what amounts to a transfer of control from the old company to the restructured one before the FCC authorizes its Rural Digital Opportunity Fund (RDOF) Phase I support. It was one of the winning bidders in the recent auction for rural broadband buildout subsidies.

That is part of a $1.4 billion investment the company has said it planned to make in building out its network.

Also Read: Frontier Maps Out Restructuring Plan

"We have thoroughly reviewed the record, including the supplemental information submitted by the Applicants, and we conclude that the transaction serves the public interest, convenience, and necessity and meets the requirements of the Act," the FCC said.

A bankruptcy court approved the plan Aug. 21.

The Communications Workers of America had asked the FCC to hold off on the decision until it collected more data on the restructuring's impact on workers and until it had reviewed the results of state regulatory reviews, but the FCC declined to do both.

"Based on the record, we find no merit to CWA’s and TURN’s concerns regarding service quality, competitiveness, workforce, including CWA’s members, and operations," it said. "Indeed, we expect that Frontier is more likely to improve service quality and invest in infrastructure than it would be absent its prompt emergence from bankruptcy."

It pointed out Frontier had promised that “all employee wages, compensation, benefit programs, and collective bargaining agreements in effect as of the Plan’s effective date will remain in place.”

CWA said it would continue to monitor the deal.

"In the absence of an investigation of these issues by the FCC, some states like California are pursuing thorough oversight that is resulting in strong commitments to ensure the bankruptcy reorganization will benefit the public," CWA said in a statement. "Frontier’s recent proposed settlement to the California Public Utility Commission to gain approval of the bankruptcy restructuring plan included a commitment of $1.75bn in new capital investment, 350,000 new fiber to the premise connections, and a commitment to maintain technician staffing levels and California call center locations required to perform this work. CWA will continue its advocacy for other states to follow suit and for Frontier to use its enhanced financial flexibility to invest equitably across all the communities it serves."

Frontier Communications said it has named Vodafone UK CEO Nick Jeffery as its new CEO. Jeffery will replace Bernie Han, who will step down March 1.

Frontier filed for Chapter 11 protection in April  and has been winding through a restructuring process for months. Its reorganization plan was approved by the U.S. Bankruptcy Court in August and the company said that it has received regulatory approval in 12 states for its restructuring plan. It expects to emerge from Chapter 11 in early 2021.

After Jeffery takes the helm, Han, who joined Frontier in December 2019 from Dish Network, will step down, but will remain a member of the company’s board of directors and will assist in the CEO transition. Jeffery will join the board of directors after the company emerges from Chapter 11.  

“There is still important work to do in unlocking Frontier’s full potential, and I am excited to facilitate the transition and pass the CEO baton to someone with Nick’s outstanding track record,” Han said in a press release. “I want to again thank the entire Frontier team for their support as we see the chapter 11 process through to completion.”

Jeffery was selected after an extensive internal and external search for a new CEO. He has about 30 years of experience, most recently at Vodafone UK, where he helped engineer a turnaround at the British wireless and wireline operator. According to Frontier, during Jeffery’s tenure at Vodafone UK, the unit of Vodafone PLC grew revenue and market share, improved customer service, reduced churn and increased customer and employee satisfaction. Prior to his tenure at Vodafone UK, where he spent eight years, the last four as CEO, Jeffery spent more than a decade at Cable & Wireless, where he led the UK and international markets business units.

In a press release, Robert Schriesheim, chairman of the finance committee of Frontier’s board of directors, said that in addition to Jeffery becoming CEO, John Stratton will become Frontier’s executive chairman after it emerges from Chapter 11. 

“We are now at a point of natural evolution in our transformation and, following a rigorous process, the search committee concluded that Nick is the right CEO to lead Frontier through its next phase of investment and profitable growth,” Schriesheim said in the release. “On behalf of the Finance Committee and Board, I want to thank Bernie for his leadership in executing Frontier’s operational turnaround while managing the unprecedented challenges of the COVID-19 pandemic. Bernie has demonstrated his world-class skills as a CEO operator, managing large-scale complexity with a relentless focus on driving performance and emphasizing accountability. His contributions have helped to reposition Frontier as a stronger, more resilient business, and we appreciate his willingness to guide the CEO transition and remain on the Board through transition.”

Frontier said it is making progress in executing its reorganization plan, including recapitalizing the balance sheet, which upon emergence, will include reducing its debt by about $11 billion and its annual interest expense by about $1 billion. The company also plans to re-focus its efforts to become a fiber-based broadband service provider, and has had five straight quarters of consumer broadband subscriber growth.

“Frontier owns a unique set of assets and maintains a competitive market position,” Jeffery said in the release. “My immediate focus will be on serving our customers as we enhance the network through investments in our existing footprint and in adjacent markets while building operational excellence across the organization. I am committed to delivering world-class customer service. I look forward to speaking and meeting with our employees while working with Bernie, the Board and leadership team to ensure a seamless transition.”

Regional sports channel the YES Network went dark to Frontier Communications customers on Sept. 1, around the same time as customers of the troubled telco lost access to several Fox Sports regional sports networks.

YES Network, which carries games from Major League Baseball’s New York Yankees, the National Basketball Association Brooklyn Nets, the Women’s NBA New York Liberty and Major League Soccer’s New York City FC, confirmed it went dark to Frontier customers on Sept 1. According to a website for YES customers, the RSN is encouraging Frontier customers to seek out other pay TV distributors to access its programming.

“We negotiated with Frontier in good faith and were eager to get a deal done, but unfortunately were unable to come to an agreement,” YES said on the website. “Frontier subscribers should switch today to one of the many providers that carry YES and its Yankees, Nets, NYCFC and Liberty games.”

While the battle with YES rages on, several Fox Sports RSNs also appear to have gone dark to Frontier customers. Fox Sports RSNs were purchased by Sinclair Broadcast Group last year (it also purchased minority interest in YES last August) and have battled with distributors in the past. 

"While we had tremendous success in renewing carriage deals that expired recently, we are disappointed that Frontier has dropped a number of our regional sports networks, leaving subscribers without access to their favorite local teams and programs," Fox Sports said in a statement. "We worked with Frontier in good faith and really wanted to get a deal done, but unfortunately they were unwilling to agree to fair terms consistent with the terms on which many other subscribers carry the RSNs. Frontier subscribers should switch today to one of the many providers that carry their favorite teams."

According to sources familiar with the sports programmer, the Frontier blackout involves all Sinclair-owned RSNs with the exception of Marquee Sports Network, the joint venture Sinclair struck with the Chicago Cubs last year. Frontier was one of the first distributors to sign up with Marquee Sports. 

In a statement, Frontier acknowledged the YES and Fox Sports blackouts, which were effective Sept. 1, adding that they too tried to reach a deal.

"Frontier worked hard to negotiate a fair deal, however, we were unable to reach an agreement," Frontier said in a statement. "Our customers are very important to us and we’ll continue to strive to provide them with the best content experience, including access to their favorite shows and content including other networks that carry sports programming on -Frontier TV. These include ABC, CBS, CBS Sports Network, ESPN/ESPN2 /ESPN Classic/ ESPNews /ESPNU, FOX, FS1/FS2, Longhorn Network, NFL Network/NFL Red Zone, NBA TV, NBC Sports Network, NBC, NHL Network, SEC Network, TBS/Turner, and TNT. No provider is immune from network negotiations and programming removals. It was economically unsustainable for Frontier to continue carrying these regional sports networks, and ultimately it was the Network’s decision to remove their programming from our lineup." 

Frontier subscribers have taken to Twitter to voice their displeasure, including former Dallas Morning News TV critic Ed Bark, who called the impasse a deal breaker.

“Our cable provider, Frontier, has now cut Fox Sports Southwest from its lineup due to contract impasse,” Bark wrote on his Twitter feed. “This follows their removal of MLB network & Mark Cuban’s AXS TV & movie net for same reason. But haven’t cut consumer prices. Unless this is remedied soon, that’s it for me.” 

Other Frontier customers of Fox Sports RSNs, including Fox Sports Florida and Fox Sports Sun -- which carry games from MLB American League East Division leader the Tampa Bay Rays -- Fox Sports West expressed similar feelings.

Frontier filed for Chapter 11 bankruptcy protection on April 15, and has had its reorganization plan approved by the federal court. Earlier this month it said it named former Verizon Communications executive John Stratton to be its executive chairman once the company emerges from bankruptcy protection. That is expected early in 2021. 

Frontier has had a spotty relationship with RSNs. Last year it dropped SNY, the home of MLB’s New York Mets.

Frontier Communications said former Verizon executive John Stratton will become executive chairman of the board of the company once it emerges from Chapter 11 bankruptcy protection, expected in early 2021. 

Frontier filed for Chapter 11 protection in April. In August, its reorganization plan, which would retire about $10 billion in debt, was approved by the U.S. Bankruptcy Court. The plan is awaiting federal approvals. 

“We are excited that John Stratton, an executive with a proven track record leading telecom businesses through all phases of the investment life cycle, will oversee Frontier’s strategic direction following the Company’s emergence from bankruptcy,” said Frontier board member and chairman if its finance committee Rob Schriesheim said in a press release, adding that Stratton’s acceptance of the new position is “a powerful endorsement of the company’s ability to deliver value to customers and shareholders. 

Stratton became a Board Observer at Frontier in May of 2020 after he was selected by creditors in connection with Frontier’s restructuring. As a Board Observer, he has supported Frontier’s Finance Committee as it developed a strategic plan.

“Since becoming a Board Observer of Frontier in May, I’ve had the opportunity to engage with the Finance Committee to review and evaluate the company’s broad portfolio of assets and have developed strong confidence that Frontier can emerge as one of the nation’s leading broadband providers in the markets it serves,” Stratton said in a press release. “There is significant opportunity to drive operational efficiency, deliver an exceptional customer experience, expand Frontier’s fiber footprint and achieve profitable growth. I’m looking forward to working with the management team, helping drive execution of the Company’s strategic plan and achieving sustainable, long-term success.”

Stratton retired from Verizon in 2018 after 25 years with the company, most recently as EVP and president of Global Operations. Prior to that role, he had served as Chief Operating Officer of Verizon Wireless and separately, President of its Global Enterprise Solutions Group. He also was Head of Wireline Divisions at Verizon, where he had full responsibility for all of Verizon’s wireline operations for seven years. 

Ducera Partners LLC and Houlihan Lokey Inc. are serving as financial advisors and Akin Gump Strauss Hauer & Feld LLP and Milbank LLP are serving as legal advisors to representatives of noteholders of Frontier.

About four years after a major purchase that many believe was the source of most of its problems, Frontier Communications is attempting to solve them through a prepackaged Chapter 11 bankruptcy filing and a debt-for-equity swap that will erase about $10 billion in balance sheet obligations. Frontier had been expected to file for bankruptcy protection for months. The company, which has about 3.8 million residential customers in 29 states, many in rural areas, has been struggling to make payments on its $17.5 billion debt load, the majority of which is tied to its 2016 purchase of Verizon Communications Fios assets in California, Florida and Texas.

That $10.5 billion deal doubled the size of the small-market carrier, but brought with it a world of operational problems. For weeks after the deal was closed in April 2016, the switchover from Verizon’s network to Frontier’s was riddled with outages and increasingly poor service. Frontier later blamed the spotty transition partly on insufficient customer data supplied by Verizon.

“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” Frontier CEO Bernie Han said in a press release about the bankruptcy filing. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keep them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment.”

Frontier had been expected to file for bankruptcy for months. The company said late on April 14 that it had reached an agreement with bondholders representing more than 75% of its $11 billion in unsecured bonds on the deal, which is expected to reduce its debt by more than $10 billion. In addition, the company said it has secured about $460 million in debtor-inpossession (DIP) financing, which coupled with its $700 million of cash on hand give it about $1.1 billion in liquidity. Frontier said it filed for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of New York on April 14 and will continue to operate normally as it goes through the process.

Frontier expects to emerge from Chapter 11 with about $7.5 billion in debt, considerably less than the $17.5 billion in leverage it had carried previously. The company has admitted it has underinvested in fiber over the years, and in the 10-K it said it would need to invest only about $1.4 billion to build out its network — part of that possibly coming from federal programs — through 2024.

In a presentation to bondholders that was made public last month, Frontier admitted its broadband speeds are lacking compared to competitors, and that only 3 million of the 14 million residences able to access its internet service are passed with fiber. Most of Frontier’s broadband customers have slower speed digital subscriber line service. About 30% of its customers have service with download speeds of 0-12 megabits per second; 35% have download speeds of 13-24 Mbps and only 6% have download speeds of 24 Mbps or higher. The company has managed to survive mainly because in many of its markets it is the only provider.

Fueled for a Rebuild

With the DIP financing and the planned sale of its systems in Washington, Oregon, Idaho and Montana for $1.352 billion to Northwest Fiber — a deal it agreed to earlier last year — Frontier should have more than enough capital to go through with the rebuild. The Northwest Fiber transaction is slated to close on April 30.

The FCC said it would make sure Frontier continued to fulfill its obligations to keep its customers connected, which has become especially important during the pandemic. “As the company undertakes this process, we expect it to comply with all Commission regulatory obligations,” Kris Monteith, chief of the FCC’s Wireline Competition Bureau, said. “We will be vigilant in ensuring both that Frontier’s customers stay connected to vital 911, voice and broadband services and that Frontier continues to put the federal funds it receives through the Connect America Fund and other universal service programs to work for the American people.”

In a statement, the Communications Workers of America, which represents some Frontier employees, hoped that workers would have a voice in the reorganization. “Frontier’s front-line employees have a unique insight into the challenges — and opportunities — that the company faces. Unfortunately, Frontier’s management did not engage with CWA members or leadership as part of their negotiations with creditors, denying their workforce a much-needed voice in the future of the company,” it said. “CWA members expect to have input in the direction of the company as the bankruptcy process goes forward.”

Frontier Communications has reached an agreement with bondholders to restructure via a Chapter 11 bankruptcy, reducing its debt by about $10 billion and pumping another $1.1 billion into the telecom company in the form of new financing.

Frontier had been expected to file for bankruptcy for months. The company said late Tuesday that it had reached an agreement with bondholders representing more than 75% of its $11 billion in unsecured bonds on the deal, which is expected to reduce its debt by more than $10 billion. In addition, the company said it has secured about $460 million in debtor-in-possession (DIP) financing, which coupled with its $700 million of cash on hand give it about $1.1 billion in liquidity. Frontier said it filed for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of New York on April 14 and will continue to operate normally as it goes through the process.

Frontier had mapped out plans for the restructuring in its amended 10-K filed earlier this month. The company had said it was seeking to reach a prepackaged bankruptcy agreement with bondholders, swapping about $11.7 billion in debt for equity in the company. 

When the dust clears, Frontier expects to emerge from Chapter 11 with about $7.5 billion in debt, considerably smaller than the $17.5 billion in leverage it had carried previously. The company has admitted that it has underinvested in fiber over the years, and in the 10-K said it would need to invest only about $1.4 billion to build out its network -- part of that possibly coming from federal programs -- through 2024.

“We are pleased that constructive engagement with our Bondholders over many months has resulted in a comprehensive recapitalization and restructuring,” chairman of the finance committee of Frontier’s Board of Directors Robert Schriesheim, in a press release. “We do not expect to experience any interruption in providing services to our customers. With a recapitalized balance sheet, we will have the financial flexibility to reposition the company and accelerate its transformation by allocating capital resources and adding talent to enhance our service offerings to our customers while optimizing value for our stakeholders. Under the RSA, our trade vendors will be paid for goods and services provided both before and after the filing date.”

Frontier said it also will continue to pursue the closing of the sale of its system in Washington, Oregon, Idaho, and Montana to Northwest Fiber for $1.352 billion in cash. That deal is expected to close by April 30.

“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” Frontier CEO Bernie Han said in the press release. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment.”

The FCC said it would make sure Frontier continued to fulfill its obligations to keep its customers connected.

“Staying connected to reliable telephone and Internet services is essential in today’s America—perhaps never more so than during this unprecedented time as we confront the coronavirus pandemic," said Kelly Montieth, chief of the FCC's Wireline Competition Bureau. "As such, I am pleased that Frontier has made clear that consumers will remain connected despite Frontier’s filing of a bankruptcy reorganization plan. As the company undertakes this process, we expect it to comply with all Commission regulatory obligations. We will be vigilant in ensuring both that Frontier’s customers stay connected to vital 911, voice, and broadband services and that Frontier continues to put the federal funds it receives through the Connect America Fund and other universal service programs to work for the American people.”

In a statement, the Communications Workers of America, which represents some Frontier employees, hoped that workers would have a voice in the reorganization.

"Frontier’s front-line employees have a unique insight into the challenges - and opportunities - that the company faces. Unfortunately, Frontier’s management did not engage with CWA members or leadership as part of their negotiations with creditors, denying their workforce a much-needed voice in the future of the company," The CWA said in its statement. "CWA members expect to have input in the direction of the company as the bankruptcy process goes forward."

"Frontier’s front-line employees have a unique insight into the challenges - and opportunities - that the company faces," said the Communications Workers of America. "Unfortunately, Frontier’s management did not engage with CWA members or leadership as part of their negotiations with creditors, denying their workforce a much-needed voice in the future of the company. CWA members expect to have input in the direction of the company as the bankruptcy process goes forward." 

But CWA still supports a way forward for the company. 

"The need for high-speed, reliable communications services is more evident now than ever before. Our position has been clear - Frontier needs the debt relief and financial flexibility to invest in its network and its employees, so that it can provide the service that its customers want and deserve. 

"We call on Frontier and its creditors to work quickly to put Frontier on a strong financial footing and prioritize the long-term gains that will come from investment in Frontier’s network over extracting cash from the company for short-term profit." 

Frontier Communications is expected to file for Chapter 11 bankruptcy protection within the next two weeks, part of a sweeping restructuring plan that would include swapping about $11.7 billion in debt for equity, as well as possibly selling off some assets.

According to a 10-K annual report filing with the Securities and Exchange Commission on March 31, Frontier said it has been in discussions with its bondholders since January. Frontier had been expected to file for Chapter 11 protection for months. Last month it said it would exercise its right to defer about $322 million in interest payment on its debt for 60 days, a move that many saw as a precursor to a prepackaged Chapter 11 filing. In its 10-K, the company said it would defer a $6.8 million interest payment due on April 1 as it continues to negotiate with bondholders over the restructuring.

Frontier still needs its bondholders to sign off on the plan, so there is no guarantee that the proposal will be approved. But the company did say in the documents that a Chapter 11 filing could commence "no later than April 14." 

Frontier outlined a presentation it gave to bondholders in SEC filings regarding that restructuring, blaming its past problems on a serious under investment in fiber infrastructure and an inability to capitalize on the fiber assets it had.

According to the filings, Frontier’s broadband service is available to about 14 million homes, but only 3 million of those residences are passed with fiber. According to the filing, most of Frontier's broadband customers have low-speed digital subscriber line service (DSL). About 30% of its customers have service with download speeds of 0-12 megabits per second; 35% have download speeds of 13-24 Mbps and only 6% have download speeds of 24 Mbps or higher. The company has managed to survive mainly because in many of its markets it is the only provider.

Frontier admits that it has not invested in fiber over the years. And it believes that if its restructuring plan is approved, it would have the necessary capital to build out its network. But even then it said it would only invest about $1.4 billion -- part of that possibly coming from the FCC’s Rural Digital Opportunity Fund -- through 2024.

Frontier’s biggest problem is its debt, currently at about $17.5 billion, accumulated through a series of now questionable acquisitions over the past few years, mainly its $10.5 billion purchase of Fios assets in California, Florida and Texas in 2016. Those obligations have prevented the company from investing adequately in its network and as subscribers continue to defect from its broadband services, its financials have faltered.

Revenue has been on a steady decline over the past few years -- $9.1 billions in 2017 to $8.1 billion in 2019 -- and is expected to fall further in 2020. Net losses have tripled in the same time frame, from $1.8 billion in 2017 to $5.9 billion in 2019.

By increasing its emphasis on fiber, Han and the rest of the Frontier team believe they can begin to reverse the company's history of declines, but it will take time. According to the SEC filings, Frontier doesn’t expected to turn a profit

Current Frontier stockholders would likely be left in the lurch in a Chapter 11 filing -- in most of those cases, current equity is valued at 0 and retired and replaced with shares in a new entity.

Frontier hired former Dish Network chief operating officer Bernie Han as its CEO in December, and he has been working hard to hammer out a deal with bondholders. According to the SEC filings, Frontier believes with its debt problems out of the way and a new focus on fiber, it can grow revenue and cash flow over time.

But it wouldn’t be immediate. According to the restructuring plan, Frontier revenue would decline over the next four years -- from about $7 billion in 2020 to about $5 billion in 2024 -- as it shifts from a legacy copper-based business to a fiber-centric operation. But by 2024, when fiber accounts for 47% of revenue (it’s at about 34% now), it will have a customer base that is more profitable. By Frontier’s estimates, fiber cash flow will grow at a 6.1% clip from 2019 to 2024, and at a 10.2% rate between 2024 and 2031. Cash flow at the legacy copper business is expected to decline from about $2.2 billion in 2019 to $900 million by 2031.

Frontier Communications said Monday that it would invoke a 60-day grace period to pay its bond debt due March 16, a move that many believe could be the first steps in restructuring its debt, including a bankruptcy filing.

Frontier was scheduled to make a $320 million interest payment on its bond debt on March 15, a payment that many have speculated it cannot make. The company has been trying to restructure about $17.5 billion in outstanding debt, much of that incurred after it agreed to buy Verizon Communications’ Fios business in three states in 2015. That deal closed in 2016. 

In a statement on March 16, Frontier said it would take advantage of the 60-day grace period on its interest payment, adding that it continues to hold talks with bondholders as it works to “reach a comprehensive resolution.”

“We remain actively engaged in constructive discussions with our bondholders as the Company continues to evaluate its capital structure with an eye to reducing debt and interest expense,” Frontier continued in its statement. “...Importantly, we continue to provide quality service to our customers without interruption and work with our business partners as usual.”

In the meantime, Frontier stock continued to fall, dipping 20% (7 cents per share) to $27 cents each on March 16. The stock has been trading under $1 per share since Oct. 31.

In December Frontier hired former Dish Network executive Bernie Han as CEO. According to reports, Han has been working hard to restructure Frontier’s debt. Bloomberg reported that Frontier is negotiating terms of a debtor in possession loan that would allow it to continue operating through a bankruptcy filing. 

But just when that filing would come is up in the air. Frontier had been expected to file for Chapter 11 restructuring in March, possibly before the interest payment came due, but that hasn’t happened. According to Bloomberg, the company has another interest payment due April 1 (with a 30-day grace period) and one due April 15 (without a grace period). That could mean that the telecom company would file for protection around the middle of next month.

Frontier Communications has become the latest telecom to retrench from the traditional pay TV business and simply offer a third-party virtual MVPD service to its subscribers to what is now its core service offering, broadband. 

Philo, which offers a bundle of 59 entertainment-themed channels—no broadcast networks, or sports or news—for an industry-low $20 a month—announced this week that both Frontier and cable company WideOpenWest will offer its service to its broadband-only customers. 

Also read: Cable Operator WOW! to Market vMVPDs Sling TV, YouTube TV, fuboTV and Philo in Charleston

Frontier paid Verizon $10.54 billion in 2016 for Fios assets in California, Texas and Florida. But less than four years after that deal closed, Frontier seems to be content with rendering its Fios service a single-play offering. 

Also read: YouTube TV Gains Distribution Into Windstream Kinetic Broadband Homes

Frontier’s pay TV subscriber base shrunk to below 700,000 at the end of the third quarter. And like virtually all other North American pay TV operators, the company faces a virtuous cycle—the more its customer base for TV shrinks, the less bargaining power it has to push back against programmers in licensing negotiations. 

This downward trajectory has most small and mid-sized telecoms looking to third-party OTT services. Providing a video solution is crucial to packaging what is now their core business, broadband. And bundling ready-made live-streaming services like Philo has become a hot trend. 

Competitive local-exchange carriers (CLECs), one of the main purveyors of broadband service in rural America, are learning the hard way that, in the cutthroat business that is high-speed internet, speed rules.

The CLEC industry is anxiously awaiting the pending bankruptcy filing by Frontier Communications, expected sometime next month. And Sanford Bernstein telco analyst Nick Del Deo has slapped a “sell” rating on one of the larger CLECs in the business, CenturyLink Communications. In a research note, Del Deo said as much as half of the CLEC business is tied to old technology — voice and copper-based digital subscriber line high-speed data service — that customers in secondary markets are increasingly shunning.

In downgrading CenturyLink to “sell” from “neutral,” Del Deo said the change was more a trading play than a fundamentals play. But there are still potential pitfalls ahead, he said.

CenturyLink lost about 36,000 broadband customers in Q4, and its 2020 outlook called for overall adjusted EBITDA to increase slightly, from $9.07 billion in 2019 to between $9 billion and $9.2 billion in 2020. On the plus side, the company has built out fiber to about 2 million homes and expects that to grow.

“The downside isn’t as juicy as it was, but it’s still quite meaningful and the risk-reward remains favorable,” Del Deo wrote, adding that Q4 2019 results and 2020 guidance didn’t play out as he had hoped. “There was nothing terrible in the report, but neither was there any reason to alter our negative longer-term forecasts.”

To bring home that point, Del Deo kept his 12-month price target on CenturyLink stock at $10, a 25% discount to its closing price of $13.34 on Feb. 18, the day he issued his downgrade.

CenturyLink stock closed at $13.33 on Feb. 19. CenturyLink’s broadband challenges are similar to those of its peers. In markets where it has fiber and is offering speeds of 100 Megabits per second or faster, growth is strong. In markets where its top speeds are 20 Mbps or slower, losses mount.

Nowhere was that more evident than in the fourth quarter. CenturyLink, which ended Q4 with 4.7 million broadband subscribers, lost about 36,000 high-speed internet customers in the period. Breaking out those losses, CenturyLink reported that it shed 73,000 customers that had speeds of 20 Mbps or less, and added 37,000 subs with service at 20 Mbps or higher. Of those additions, CenturyLink added 53,000 customers with service speeds of 100 Mbps or greater, and lost 16,000 customers with speeds between 20 Mbps and 99 Mbps.

Frontier’s Fios Hangover

At Frontier, the declines can mostly be traced back to its 2015 purchase of Fios properties from Verizon Communications for about $10.5 billion. That deal was supposed to be a game-changer for Frontier by doubling its footprint. Instead, it has proved to be an albatross, marred by system outages after a difficult transition period.

Those troubles, along with mounting debt and poor customer service, in part led to last year’s departure of Frontier CEO Daniel McCarthy. He was replaced by former Dish Network chief operating officer Bernie Han, who has reportedly been in talks with Frontier’s creditors to restructure $17.5 billion in debt. Hence the expectation of a prepackaged bankruptcy filing before the next $365 million payment comes due on March 15.

Frontier would be the second major CLEC to file for bankruptcy protection in the past year. In February 2019, satellite TV and broadband service reseller Windstream filed for Chapter 11 protection after it lost a $312 million legal judgment brought by a capital management firm that claimed the spinoff of network assets to a real estate investment trust violated bondholder agreements.

In the meantime, Frontier’s stock has cratered to about 60 cents per share from $3.50 about a year ago.

Telco broadband subscribers as a whole were down about 2% last year, Leichtman Research Group president Bruce Leichtman said, while cable grew by about 5%.

“They [CLECs] are not growing, while cable is growing,” Leichtman said.

He said cable’s growth has been helped by two factors: a superior, faster broadband product and bundling high-speed internet with a competitive video product.

“That has been a significant advantage for cable,” Leichtman said. Cable has dominated the broadband market for a decade.

Cable operators have accounted for 26.8 million of the 27.8 million broadband customer additions between Q1 2010 and Q3 2019, Leichtman estimated.

Leichtman doesn’t count the CLECs out, though. He said that besides debt-burdened Frontier and CenturyLink, the sector has performed well.

There is still opportunity in rural markets, Leichtman said, and broadband service is still a good business, especially from providers like Cincinnati Bell and Consolidated Communications that have invested in fiber.

“Broadband is a fairly profitable business,” Leichtman said. “If you can stay whole, there’s profitability in that.”

Frontier Communications, on the verge of one of the biggest debt restructurings in recent telecom memory, said it has named former Dish executive Bernie Han as its new CEO, replacing Daniel McCarthy.

Frontier has been in talks with bondholders to restructure about $17.5 billion in debt since November. The telecom company has struggled as consumers have abandoned landlines for wireless, and bondholders have pressured Frontier management to come up with a plan, which some reports speculated could include a bankruptcy filing.

Han has more than 30 years experience in the telecom industry, serving more than 11 years in various roles at Dish, including chief financial officer, chief operating officer and EVP of strategic planning. In announcing the appointment, Frontier said Han had been retained as a strategic adviser to the company since Oct. 16, and has been actively supporting efforts to strengthen its financial position.

“Bernie is a proven industry leader who has a broad-based background with a long track record of developing organizational talent and enhancing financial and operational performance while driving and navigating strategic shifts in the industry,” Frontier chairman Pamela Reeve said in a press release. “In addition, he has a passion for serving customers with new and innovative solutions that meet their evolving needs with a focus on increasing value for all stakeholders. He brings a disciplined approach to operations management, having led turnaround initiatives at Dish Network that increased profitability, enhanced customer experiences and reduced churn rate. The Finance Committee and entire Board are confident that, as CEO, Bernie will further Frontier’s efforts to drive operational improvements in our business while continuing to evaluate the company’s capital structure.”

Reeve also thanked McCarthy for his nearly 30 years at the company, adding that as Frontier moves to improve its financial position, “now is the right time to transition leadership. We thank Dan for his nearly three decades of service to Frontier and tireless commitment to customers and employees and wish him the best in the future.”

McCarthy was named CEO of Frontier in 2015, after then-chairman and CEO Maggie Wilderotter passed the CEO baton in March of that year. Wilderotter stepped down as chairman of the company in April 2016, and was replaced by Reeve. 

In a press release, McCarthy said he is leaving Frontier in “great hands.”

“I remain a firm believer in Frontier’s future,” McCarthy continued. “I look forward to cheering the team on, and I want to thank everyone I have had the pleasure to work with and learn from during my time with Frontier.”

Frontier’s problems seemed to mount shortly after it spent about $10.5 billion on former Verizon Communications Fios wireline properties in California, Texas and Florida in 2015, which doubled the carrier’s size. But the transition was rife with problems, causing many customers to cancel service. According to Frontier’s financial statements, Frontier’s total video subscribers have declined from 1.526 million in Q3 2016 to 698,000 in Q3 2019.

In a press release, Han acknowledged that he takes the helm “at a time where we have both challenges to overcome and substantial opportunities ahead. I look forward to working with the Board of Directors and leadership team as we continue to execute on our initiatives to drive operational performance, invest in our business and become a stronger partner to our residential and enterprise customers.”

Frontier Communications stock soared by more than 39% in early trading Wednesday, a day after it reported improved fourth quarter results.

Frontier reported its Q4 results on Feb, 26, after the market close. Revenue was down 4% to $2.1 billion and cash flow was down 2.6% to $895 million year over year, but up almost 2% sequentially. After 11 straight quarters of poor performance, analysts and the investment community appeared encouraged that the results showed some positive momentum for the troubled telecom company.

Frontier stock, down 65% in 2018, rose as much as 39.4% (99 cents each) to $3.50 per share early on Wednesday. The stock closed at $2.96 per share on Feb. 27, up 45 cents each or 18%.

Net losses improved to $219 million in Q4, a massive change from the $1.2 billion it lost in the prior year. For the full year, Frontier pared its net losses to $750 million from a loss of $2 billion in 2017.

Related: Frontier's Formula

The telco shed 67,000 broadband customers in the quarter, higher than the 63,000 it lost in the prior year but indicative of what the company said is its new “disciplined approach.” Video losses for the period were also up -- to 35,000 from 20,000 in the prior year. Overall, the new approach has had an impact on churn, which was 1.94% in the period an improvement over the 1.98% reported in Q4 2017 and the 2.03% reported in Q3 2018.

“Our view is that focusing on acquiring customers who are less likely to churn will over time result in further churn improvements while reducing the costs associated with adding customers that have higher propensity to churn,” Frontier CEO Daniel McCarthy said on a conference call with analysts to discuss results. “This selectivity is a factor in the stronger fourth quarter EBITDA result and you should expect to see further progress on all of these metrics in coming quarters.”

Frontier said it expects Adjusted EBITDA to be in the $3.45 billion to $3.55 billion in 2019 (in line with 2018), capital expenditures to fall to about $1.15 billion from $1.2 billion in 2017 and operating free cash flow to rise to between $575 million and $675 million. 

Univision Communications said it renewed a distribution agreement with Frontier Communications covering Univision's full portfolio of local stations in the telco's Fios and Vantage markets and UCI cable networks.

The pact includes Univision Network, UniMás and Galavisión; Univision Deportes Network; El Rey Network and cable networks FOROtv, TLNovelas, Telehit, Bandamax, De Pelicula and De Pelicula Clasico. 

UCI EVP of content distribution Eric Ratchman said in a release: “We greatly appreciate the opportunity to extend our partnership with Frontier Communications. The company has long understood the value of the Hispanic viewer and the importance of providing content that attracts and retains customers in the key markets they serve in states ranging from California and Texas to Florida.”

Steve Ward, Frontier senior vice president, video technology and content, added: “We are pleased to have reached an agreement with Univision Communications to continue to include their portfolio of programming in the wide variety of Spanish-language entertainment options we offer our customers.” 

If broadband, as Comcast CEO and chairman Brian Roberts puts it, is becoming the “epicenter” of his company’s relationship with the subscriber, then that epicenter continues to shrink at Frontier Communications.

Frontier announced Tuesday (Oct. 31) that it lost 63,000 broadband subs in Q3, lowering its total to about 4 million, and its stock took a hit during the week as a result.

Its video business also felt some pain, as Frontier lost 26,000 video subs (not including the reselling of Dish Network’s satellite TV service), for a total of 981,000. Frontier also lost 10,000 subs through its partnership with Dish, falling to 244,000.

Speaking on the company’s Q3 call, Frontier president and CEO Dan McCarthy said the pressure in the company’s legacy footprint has been a “gross add issue for us.” The company believes that will improve in Q4 as it refines and enhances its retention tactics and beefs up marketing efforts in its CAF (Connect America Fund) territories.

McCarthy also expects Frontier to see improvements in the former Fios territories the company acquired, noting that Tampa is a “very vibrant growth market” with lower service penetrations to attack. Texas, he said, is a “little bit more mature, but we still have an opportunity to go back to some of the customers we lost there.”

On the video side, he said Frontier sees opportunities for OTT to be integrated into its ecosystem. That, he said, could come way of a partnership or something that Frontier does on its own.

McCarthy believes Frontier has the capability to “put together a pretty compelling, over-the-top product that we could use in our legacy markets or as an alternative for customers that just want a standalone product.”

Frontier, he added, is “not quite agnostic, because we're very heavily invested in the linear side, but we are looking at all sorts of different options to provide customers with choice.”

On the financial end, Frontier pulled down consolidated revenues in Q3 of $2.25 billion ($1.1 billion from consumer revenue, down by $22 million) versus $2.52 billion a year earlier, and a Q3 net loss of $38 million. Customer churn improved to 2.08%.

Hurricanes during Q3 resulted in an impact of $12 million -- operating expenses of $9 million and capital expenditures of $3 million.

Jeremy Pederson has joined USTelecom as vice president of government affairs.

Pederson comes from Frontier Communications, where he was senior manager of federal legislative affairs.

Before that he was counsel to House Energy & Commerce Committee chairman Rep. Gus Bilirakis (R-Fla.). He also has a connection with a good man to know these days, having been a summer clerk to then FCC commissioner Ajit Pai, now chairman.

"He brings a trifecta of policy experience to our work," USTelecom CEO Jonathan Spalter said of Pederson.

Frontier Communications is joining the small but building G.fast wave by deploying the technology to some apartments and multi-dwelling units across Connecticut.

G.fast is a new standard that can help ISPs extend the life of DSL networks and position them to deliver 1-Gig speeds without FTTP upgrades while also giving them access to technology that can compete more directly with the performance of cable’s widespread DOCSIS networks.

RELATED: ITU Stamps G.fast

Frontier and Nokia said they’ll deliver “fiber-like speeds” to buildings targeted by the G.fast platform.

"Nokia's field-proven G.fast solution will help Frontier quickly bring ultra-broadband access to customers by using the existing copper twisted-pair wiring that is often found in apartment buildings,” Steve Gable, Frontier’s EVP and CTO said in a statement.” Without it, we'd have to drill holes and pull fiber into each apartment unit we serve, a time-consuming and challenging process that can be frustrating for customers. Nokia's solution allows us to deliver new enhanced services without ever having to enter the place of residence."

RELATED: Windstream Brings G.fast to MDUs

Nokia said it has completed G.fast trials with more than 40 customers and is involved in commercial deployments with 10 partners, including Openreach, Chunghwa Telecom, A1 Telekom Austria and Energia Communications.

Of recent note, Windstream teamed up with Calix to deploy G.fast to MDUs in Lincoln, Neb. Last year, U.K. telecom BT said it wasdelivering up to 330 Mbps in a G.fast trial.

WideOpenWest is inching closer to a planned initial public offering, setting a price range for the stock that potentially could raise nearly $500 million to help pare down debt.

While the overbuilder has stressed it is focused on organic growth, it also points to a string of successful purchases over the past 15 years and is keeping its deal options open while moving deeper into a strategy that favors broadband over video.

Related: WOW Sporting New Logo

WideOpenWest was formed in 2001 and made its mark that same year when it bought SBC Communications’s Ameritech New Media, a state-of-the-art overbuild in Illinois and Michigan and Ohio that gave the upstart company instant credibility. WOW paid between $200 million and $300 million for the assets, which added about 300,000 subscribers. Using a popular metric from the period, the Ameritech deal was valued at about $1,000 per subscriber, or about one-quarter of SBC’s original asking price for the assets, according to reports.

From there, WOW set off on a string of acquisitions that beefed up subscriber rolls. Buying Sigecom in 2006 gave the company an inroad in the Indiana market, followed by five other deals that added 330,000 customers for a combined $1.6 billion.

New Organic Approach
WOW has focused on organic growth lately. Chairman Jeffrey Marcus, who joined the company after private-equity player Crestview Partners purchased a 35% interest in WOW in 2015, has said it will emphasize broadband rather than video going forward. But it also wants to take advantage of smaller tuck-in acquisitions.

Related: Marcus Helps Set WOW's Winning Strategy [subscription required]

Tuck-ins may be the only deals left to pursue. Altice USA, the domestic cable arm of European telecom company Altice N.V., is expected to unveil its IPO later this year and could be an aggressive buyer in the future. While Altice has said it is focused on integrating its past purchases of Cablevision Systems (2016) and Suddenlink Communications (2015), many expect it to at least kick the tires on midsized operators such as Cox Communications (which says it isn’t for sale) and others once it has a public deal currency.

Related: Testing Cable's Value Proposition

In the meantime, WOW will focus on growing the high-speed data business. That’s a tack many small operators have taken over the years in the wake of rising programming costs, most notably Cable One, the Phoenix-based cable operator that was the top-performing stock in the sector in 2016.

But that approach has pitfalls. While Cable One stock rose more than 40% in 2016, due largely to takeover speculation, its metrics have declined. Video subscribers have plunged from 436,370 to 293,726 between 2014 and March 2017. Broadband revenue increases have largely been the result of steep price hikes for service.

According to MoffettNathanson principal and senior analyst Craig Moffett, Cable One broadband subscribers increased by about 2.9% in the first quarter, above the 2.5% growth of the previous quarter, but still about half the growth rate for its peers. Video customers declined at about a 12.4% clip.

The big difference is that Cable One has little competition in its markets: customers who want high-speed internet either have to pay the increases or opt for inferior digital subscriber line service. According to its prospectus, 53% and 39% of WOW’s footprint is overlapped by Comcast and Charter, respectively.

The competitive dynamic with phone companies is a bit better. AT&T’s U-verse (a mixture of fiber and DSL) is available in about 63% of WOW’s footprint based on homes passed. Verizon Fios is in about 3.5% of the footprint and Frontier Communications operates in about 2.7% of WOW’s territory, according to the prospectus.

Allure of High Margins
The allure of high broadband margins — in excess of 95%, according to the prospectus — is strong, though, and led to a steep rise in net income ($26 million in 2016, a $53.6 million improvement over 2014) while revenue increased about 1% to $1.2 billion.

At the same time, video customers have declined steadily while broadband increases have been relatively minimal. Video revenue-generating units (RGUs) fell from about 635,000 in 2014 to 474,000 by this March, according to the prospectus. High-speed internet customers increased from 728,000 to 729,000 in the same time period. During that time, WOW sold its Lawrence, Kan., system with about 31,000 customers, to Midco.

WOW apparently sees greater upside in broadband, driven by increased data consumption from social media applications, OTT video and cloud-based computing. Customers who crave video are just going to have to pay more.

Chris Levendos, the former head of the network deployment and operations organization at Google Fiber, is joining Frontier Communications as EVP, field operations.

Levendos is succeeding John Lass, who is retiring. Levendos will report to Dan McCarthy, and Frontier’s president and CEO, and become a member of the company’s senior leadership team.

Frontier said Levendos’s work at Google Fiber, which spanned network planning, expansion and design, and his time at Verizon as region president and VP in the wireline transformation group, fit in well with Frontier’s plans for operations that cover 29 states.

Levendos is also making the move following a recent string of shifts and changes at Alphabet’s Access unit, which runs Google Fiber. In addition to the recent hiring of a new CEO of Alphabet’s Access division, Google Fiber has put expansion plans on pause as it explores wireless-focused broadband alternatives.

RELATED: Google Fiber Taps New Leader Amid Restructuring

Levendos is also coming aboard the year after Frontier closed its acquisition of Verizon’s wireline operations in California, Texas and Florida. Before joining Google, Levendos spent 26 years at Verizon, last serving as region president for its New York City wireline operations.

Frontier lost 107,000 broadband subs in Q1 2017, ending the period with about 4.16 million.

"I am confident Chris will further enhance the robust resources of our field operations teams and our network assets, allowing Frontier to continue to provide the bandwidth options that support advanced technology and connectivity,” McCarthy said in a statement. “We remain focused on providing homes and small, medium and commercial businesses with technologies that will help us lead in our markets, scale wisely, and create seamless network experiences."

Levendos is a graduate of the State University of New York at Plattsburgh and earned a Master's degree in Urban Planning from New York University and a Master's degree in Telecommunications Management from Stevens Institute of Technology.

SES S.A. said Frontier Communications has joined a growing mix of MVPDs that have begun to test 4K/Ultra HD video services on the company’s managed distribution platform.

For the tests, SES is delivering UHD content to its partners via dedicated satellite bandwidth, holding that the approach delivers 4K fare at higher quality than content delivered in the pixel-packed format via Internet connections.

"We are optimistic that SES’s innovative, pre-packaged Ultra HD solution will allow for a smooth transition of Ultra HD delivery to Frontier subscriber homes nationwide," Steve Ward, SVP of video technology & content for Frontier, said in a statement.

Other MVPDs working with SES on 4K trials include Marquette-Adams, Buckeye Broadband, Service Electric Cable TV, enTouch Systems, Cable America, Golden West Telecommunications, MTC Cable and Sjoberg’s Cable TV. Those operators are delivering 4K into homes using either managed IP multicast DOCSIS 3.0 streams (not over-the-top/public Internet) or on traditional digital QAM transport streams.  

RELATED: SES Expands 4K Cable Trials

SES’s managed platform currently offers nine linear Ultra HD channels, with 4K Universe joining the mix late last year.

Outside of SES’s partners, a growing group of other MVPDs have launched or are testing 4K services and apps, including DirecTV/AT&T, Dish Network and Comcast.

RELATED: Dish to Offer Live Broadcast of ‘Planet Earth II’ in 4K

Mediamorph, a provider of cloud-based rights management systems for programmers and video distributors, said Fronter Communications will use its platform to help it “streamline content handling and confirm content obligations.”

“Frontier has significantly grown its customer footprint and increased its TV content offerings. We view Mediamorph’s solution as a way to integrate contract details, content information, and financial processing.” Steve Ward, Frontier’s SVP of video technology and content, said in a statement.

“As Frontier continues to create new consumer experiences, Mediamorph’s platform will enable it to leverage licensed content and automate key financial use cases to improve revenue and operational productivity,” added Mediamorph CEO Rob Gardos.

Frontier joins other Mediamorph partners that include Hulu, TDC Group and Millicom.

Last August, Mediamorph closed a $21 million “C” round of funding led by Advance Vixeid Partners and by senior advisors to Lee Equity Partners that include former NBCU chairman and CEO Bob Wright and former USA Networks president and COO Barry Baker.

According to Frontier Communications' latest SEC filing, EVP for external affairs Kathleen Abernathy stepped down from that post Nov. 18.

Abernathy, a former Republican FCC commissioner, is planning to retire in April 2017, but will remain a senior advisor to Frontier until then.

It was listed in the SEC document because given that change in status, she is no longer considered an executive officer.

READ MORE:Frontier's Formula: Telco, rising up the TV ranks, is taking its Connecticut experiment on the road

Assuming Abernathy's duties will be Mark Nielsen, Frontier EVP and general counsel.

Abernathy will continue to oversee the company's America’s Best Communities Prize Campaign until her April exit.

Abernathy helped lead Frontier's pushback on the FCC's proposed business data services reforms, one of the "controversial" items pulled from the FCC's public meeting agenda by chairman Tom Wheeler after Republicans cautioned against such decisions in the transition to Republican leadership.

Abernathy was on the FCC under then-chairman Michael Powell, now head of NCTA: The Internet & Television Association, and after leaving the FCC was on the short list to head the National Association of Broadcasters, a job that ultimately went to Sen. Gordon Smith.

Pushing ahead with a video strategy that hinges on IP-powered services, Frontier Communications said it has expanded the reach of its new “Vantage TV” offering to nearly 75,000 homes in the Raleigh-Durham area.

The expansion means more video competition for incumbent providers Charter Communications (via its acquisition of Time Warner Cable) and AT&T, as well as Google Fiber, which started the service sign-up phase in the Triangle area in September.

RELATED: Google Fiber Starts Connecting in North Carolina

The News & Observer noted that the expansion covers about a third of Frontier’s North Carolina footprint.

Vantage TV is powered by the latest release of Ericsson Mediaroom, the IP video platform that Ericsson acquired from Microsoft in 2013.

RELATED: Frontier Fires Up ‘Vantage’ Brand

In Raleigh-Durham, Frontier will be delivering the service over its FTTP and fiber-to-copper networks.

Frontier, which entered the market after acquiring systems supporting about 4.8 million access lines from Verizon in 2010, said the new video service offers more than 400 channels, support for TV Everywhere (via the Frontier TV app), a multi-view feature (up to four channels at once), a whole-home DVR with 1 TB of storage, with integration of Netflix on the set-top “coming soon.”

Triple-play bundles start $64.99, and double-play packages start at $54.99, with no contract and a 24-month price lock. Frontier is also tossing in Amazon gift cards, free installation and a free DVR (for 12 months).

Frontier, which has a reorg underway in the wake of its acquisition of Verizon’s wireline operations in California, Texas and Florida in April, is moving ahead on a plan to roll Vantage TV to three markets and 150,000 homes this year.

As previously announced, Frontier has a plan to  launch IP-based video service to more than 40 markets, representing about 3 million homes, over the next three to four years.

Frontier Communications is cutting about 1,000 jobs across its 29-state footprint amid a reorganization that follows the company’s acquisition of Verizon’s wireline operations in California, Texas and Florida in April.

The workforce reduction, which includes cost savings, is also coming alongside a reorg in which Frontier is creating commercial and consumer business units.

“On Tuesday we announced a restructuring that is a meaningful and necessary next step toward realizing the full potential of our increased scale following the recent Verizon transaction,” Frontier said in a statement. “We are focusing our field staff on operational excellence and centralizing other support functions.  These changes will unfortunately impact approximately 1,000 valued Frontier employees across our 29 state footprint—employees who have made significant contributions to the organization.   Impacted employees will be notified over the next several weeks.”

Daniel McCarthy, Frontier’s president and CEO, noted on the company’s Q3 call on Tuesday (Nov. 1) that Frontier, prior to the Verizon wireline asset acquisition, had been organized around a regional structure, with each having its own resources for areas such as marketing, finance, engineering and human resources.

According to a memo from McCarthy posted by DSL Reports (a Frontier official validated its contents),  the new structure, which will include seven geographic operating areas each led by an SVP of operations, becomes effective December 1.

Per the memo, those SVPs will report to Ken Arndt, EVP of customer operations, succeeding John Lass, who intends to retire in 2017 and will lead a centralized Commercial Sales team on an interim basis. Cecilia McKenney, meanwhile, will head up Frontier’s centralized sales team focusing on consumer and small business.

“Our focus in the consumer market has not changed,” McCarthy said. “We will pursue opportunities aggressively in all of our Fios markets,” he added, noting that Frontier is expanding its Vantage product footprint and working toward a relaunch in legacy Fios areas.

RELATED: Frontier Fires Up ‘Vantage’ Brand

On the video side, Frontier expects to roll its Vantage TV product to three markets and 150,000 homes this year.  Frontier has initiated a plan tolaunch IP-based video service to more than 40 markets, representing about 3 million homes, over the next three to four years.

Frontier lost 92,000 video subs in Q2, giving it a total of about 5.07 million. It also shed 99,000 broadband subs, for a total of 4.4 million.

Frontier posted Q3 revenues of $2.52 billion, down $84 million versus the previous quarter.

Its revised annualized cost synergy target is $1.4 billion, up from the $1.25 billion outlined in its Q2 report. 

Frontier Communications tonight adds a local sports channel to its Vantage TV lineup in Connecticut. Vantage Sports Network (channels 600 and 1600, in HD) will lead off at 10:30 p.m. with a 30-minute highlights show (Connecticut Sports Now) followed by a replay of a recent high-school football game between teams from Trumbull and Ridgefield, according to HAN Network, a content supplier to the new channel.

Programming will be overseen by Noah Finz, a former sports director at New Haven TV station WTNH, Frontier said. Statewide sports at the college and youth levels also will be on tap, aired live and on tape delay, the telco said. (For more colorm see this Westfaironline.com article.)

Frontier, based in Norwalk, bought the former AT&T telephone and U-verse video assets in Connecticut in 2014 and, this past March, rebranded the system as Vantage TV and is looking to take its Connecticut model to other markets, including via recent cable franchise applications in New York state. This will be the telco's first local sports network, it said.

Last month, Frontier held a casting call for student athletes to appear in promotional messages touting the new channel. Frontier has partnered with Sacred Heart University in Fairfield, which will host the network's studio and draw in students to participate and learn about sports broadcasting, according to HAN Network.

Local channels -- of the news and sports varieties -- are a staple of cable and telco-TV providers providing exclusive programming as a competitive differentiator. Charter Communications, for example, has more than a dozen local news channels around the country, acquired from Time Warner Cable and Bright House Networks (and overseen by former MSG Networks executive Michael Bair). In the New York area, Cablevision Systems for several years carried the MSG Varsity local-sports network, now an online video hub branded News 12 Varsity with exclusive content for Optimum broadband customers.   

Looking to provide better, more consistent in-home WiFi, Frontier Communications is hawking AirTies Wireless Networks’ Smart Mesh WiFi” platform via Frontier Secure, a site that sells a mix of smart home products and services.

Per the site, Frontier is selling the AirTies Smart Mesh WiFi product individually for $72 and in pairs for $144. Customers link those devices to the main router/gateway to expand and improve WiFi access in the home. Frontier sells products and services via Frontier Secure to residential and small business customers on a national basis, and offers products wholesale through strategic partnerships.

Frontier is the second (and largest) North American operator to deploy AirTies’s WiFi Mesh product; the first was Midco, which is selling a whole-home WiFi service starting at $7.95 per month. Frontier said it also has trials underway with mid-sized and large service providers in the U.S. AirTies is working with several providers outside the U.S., including Sky, Vodafone, Singtel, and Swisscom.

“At Frontier, we’re committed to continually improving the Connected Home experience to meet the needs of our customers across the country,” Kelly Morgan, SVP and GM of Frontier Secure, said in a statement. “AirTies has a proven track record of enhancing the performance of in-home Wi-Fi for leading operators around the globe, and we are pleased to bring its next-generation technology to our customers.” 

“Delivering quality broadband is no longer just about reaching the home, but about the experience throughout the entire home – a vision we share with Frontier,” added AirTies CEO Philippe Alcaras.