With many service providers looking to scale their fiber-based broadband networks, the open access model, which allows multiple providers to run on a fiber network, has become attractive.
While open access networks have been prevalent in other countries like Sweden, the concept has been gaining more attention lately as T-Mobile, through a venture with EQT, announced a deal to acquire regional fiber provider Lumos Networks for $1 billion. The goal is to bring services to 2 million homes in underserved markets by 2026 through an open access fiber model.
AT&T is also engaged in an open access fiber model via its Gigapower venture.
But Frontier appears to have no immediate interest in the concept.
Speaking to investors at the TD Cowen Annual Technology, Media & Telecom Conference, Scott Beasley, EVP and CFO for Frontier Communications, said that while the interest in open access fiber networks shows the viability of fiber-based broadband, the telco has no open access fiber network plans.
The service provider focuses on rolling out fiber to 1.3 million locations annually.
"The number of announcements around JVs and open access shows the attractiveness of fiber-to-the-home (FTTH),” he said. “One of the reasons you are seeing capital funding flow into the U.S. is because there’s so much white space to build fiber.”
He added that its market structure does not support an open access model.
“In 86 percent of our footprint, we have either one or no competitors,” Beasley said. “It won’t make economic sense for there to be any more than two high-speed options.”
Focus on cost savings
Frontier continually focuses on reducing costs. In 2021, the service provider set a goal of cutting $250 million from its cost structure.
Although Frontier is in this process's early innings, Beasley said it has exceeded its goals.
“We have more than doubled our initial target by the end of 2023,” he said. “After Q1, we’re north of $500 million in cost savings.”
Frontier sees three areas to reduce costs: automation, broadband self-installation, and decommissioning copper plant.
By implementing automation into its operations, Frontier can reduce the need to conduct processes manually in the back office and the field.
Beasley said Frontier is just starting this process. “We’re in the early innings with automation,” he said. “We started some more basic automation and extending that into the generative AI category, but like others in the industry, we’re still early in the game.”
As Frontier continues to scale its fiber broadband network, it aims to enable customers to install equipment themselves. In the first wave of the fiber build, Frontier estimates that connecting a customer in an area costs between $600 and $800.
“As we build fiber, we have to do a truck roll to connect a customer to install an ONT and a drop on the side of the house,” Beasley said. “When a customer moves, the ONT and the fiber drop stays, and you can get 60-70 percent of the self-installation cost, where the only cost to connect is the CPE inside the house.”
Finally, like other traditional telcos, Frontier wants to replace aging copper wiring with fiber.
Other traditional telcos, such as Verizon and AT&T, have reported that this process enables customers to access the service at faster speeds and reduces maintenance costs.
“We decommissioned a handful of wire centers,” Beasley said. “We’re learning how to do that and scale the program over time.”
Growing ARPU
As Frontier brings fiber to more customer locations, the provider is extending service beyond just being another fast pipe.
Frontier's fiber ARPU grew 6% during the first quarter to $65.18 due to solid fiber broadband sales.
Like other telcos, Frontier’s pricing structure is predicated on three levers: cost-of-living adjustments, migrating customers to higher speeds, and value-added services.
Frontier has added various new services to its broadband suite, such as Device Security, VPN Privacy, and Password Manager. It also offers My Premium Tech Pro, which is Live, U.S.-based tech expert support for all installation, troubleshooting, and general tech questions for connected devices for an additional $10 a month.
Beasley said that while “we are one of the leaders in the US developing value-added services, we are far behind other places in the world.”
Frontier’s CEO Nick Jeffery has led the charge to have the telco offer value-added services. “One of the skills Nick encouraged us to improve our suite of value-added services and sell them not only to new customers but also existing customers,” Beasley said. “That’s a small portion of our ARPU today, but we see it increasing over time.”
Increasingly, Frontier has found that gigabit speed adoption is rising from new customers. “A few years ago, fewer than 10% of our customers were taking 1 Gbps or above, but now that’s north of 50% and approaching 60% of our new customers,” Beasley said.
The next challenge for Frontier is to drive its existing base to migrate to higher speeds. “Our existing customer base has a much lower percentage of our gigabit-plus plans, which shows that there’s demand in the market, and we have to figure out a way to move our base to higher speeds that improve customer service and drive up our MPS scores.”
