Frontier Sets Video Service Expansion

Frontier Communications used its fourth quarter earnings call Tuesday to outline its video strategy, announcing that it plans to launch video service to more than 40 markets, representing about 3 million homes, over the next three to four years.

That offering, delivered via IP, will lean fairly hard on Frontier’s fiber-to-the-node platform, though it will also be using FTTP networks it has obtained, and will soon obtain, from Verizon Communications.

“Once complete, video service will be available to about 50% of the 8.5 million households in Frontier’s existing footprint, not counting the pending Verizon acquisition,” Daniel McCarthy, Frontier’s president and CEO, said on the call.

With the expected Verizon properties in California, Texas and Florida factored in, Frontier will be in position to provide video service to more than 7 million homes.

“We anticipate additional opportunities as we upgrade select copper markets in the acquired states,” McCarthy said.

He said the video plan was made to be “extremely capital-efficient” because it will ride on the investments Frontier has been making in its broadband plant in recent years, and because it will use new compression technology that will allow it to deliver an HD signal in about 2.5 Mbps of capacity.

That means “a household with four HDTVs active at once will only require 10 megabits of capacity into the home, leaving the remainder available for data usage,” the exec said, estimating that it will require less than $150 million spread over several years to enable 1.3 million homes to receive video over its existing broadband infrastructure.

“We think a good video product would be about a 15-meg video product,” he said, noting that what it’s doing today in Connecticut  requires about 80 Mbps of capacity to deliver four HD streams.

McCarthy said Frontier is in the final phases of preparing to close its pending acquisitions of Verizon wireline operations in parts of California, Texas and Florida, noting that it’s scheduled to wrap up those deals on April 1.

Frontier, he said, believes the new video offering “opens the door to attracting new customers to our broadband service while introducing new tools to improve retaining existing customers.”

Frontier started the process when it launched a video service trial in Durham, N.C., in the fourth quarter of 2015 that has since reached the commercial stage.

McCarthy said Frontier is in the process of booting up video services in an additional two markets.

Frontier ended 2015 with 3.12 million residential customers, down 0.7% on a year-over-year basis.  Frontier added 28,500 net broadband subs in the period, for a total of 2.46 million, and lost 5,800 video subs, including a reduction of 5,400 satellite video subs, giving it a total in that category of 553,700.

On the financial front,  Frontier posted Q4 revenues of $1.41 billion, and a net loss of $103 million, or 9 cents per share.