Consolidated pivots business fiber focus on enhancing DIA, Ethernet connectivity

As Consolidated Communications pursues its commercial fiber network build, the service provider said it would be better positioned to drive its dedicated internet access (DIA) and Ethernet services as a foundation to sell cloud-based voice security and SD-WAN.

In its second-quarter earnings call, the service provider noted that DIA grew 16% while SD-WAN was up 36%.

“Within commercial data services, we're focused on driving growth for our core fiber product offerings of dedicated internet access and Ethernet connectivity,” said Bob Udell, CEO of Consolidated Communications. “With success in the fiber connectivity business, we expect to expand and grow our cloud voice security and SD-WAN offerings in our enterprise markets.”

A key focus for Consolidated’s business services group is to extend services to more customers while making its product set easier to access. “During the first half of the year, we've been executing our strategy to simplify product offerings, enhance our go-to-market coverage and improve our speed to market to capture more businesses, both on-net and near-net,” Udell said.

Ramping SMB reach

Enterprises are only one part of Consolidated’s business services growth plan. The service provider is keen to take a more significant piece of the small to medium business (SMB) market through its Fidium@Work initiative.

Fidium@Work offers new SMB customers multi-gigabit symmetrical broadband and Wi-Fi 6 in its fiber markets. Available with no contracts or data caps, Fidium@Work includes VoIP business phone lines, the choice of a dynamic or static IP address, and what the company calls enterprise-grade security managed through the Attune@Work WiFi app. The service is available on more than 180 Fidium systems in California, Illinois, Maine, Minnesota, New Hampshire, Pennsylvania, Texas and Vermont.

“We are also ramping sales of our fiber Internet connectivity products, leveraging our symmetrical fiber network for small and medium businesses, including Fidium@Work, which we introduced last quarter for small businesses and FiberConnect, which serves larger SMBs,” Udell said. “Within SMB, installs of our fiber Internet connectivity products were up nearly twice yearly.”

Leverage and extend fiber

Consolidated’s ongoing effort to equip more consumers with fiber-based broadband enables the service provider to deliver services for its business and wholesale customer base.   

The company is taking leverage and extending the approach for its fiber network.

“We will continue to leverage new fiber passings within our consumer routes, which provide us with opportunities to use the same fiber to grow both carrier and commercial data and transport services,” Udell said. “And we are focused on enhancing the visibility of our network in commonly used industry tools and databases, which allow nationwide carriers, channel partners, and customers to more easily identify the robust services consolidated and provide as well as the span of our lit buildings and fiber footprint.”

During the second quarter, Consolidated raised its on-net fiber building count to 14,700 buildings. Consolidated also increased its route miles of fiber to 59,000.

“We increased our on-net buildings by 4% in the second quarter after normalizing for Kansas, which correlates to higher margins, increased opportunity to upsell, a greater ability to ensure the best customer experience, and more opportunities for additional connections,” Udell said.  

Access line, wholesale headwinds

While Consolidated made progress in the commercial segment, various headwinds affected its overall revenue mix. For the quarter, commercial revenue was $95.8 million, down $2.6 million or 2.6%. Data Services revenue was $53.2 million, up 0.5% year-over-year.

Voice services revenue was $32.2 million, down $2.2 million or 6.4% in the recent quarter, primarily due to a decline in access lines as commercial customers increasingly choose alternative technologies. A decrease in sales of business systems equipment drove other revenue in the retail segment down by $600,000 to $10.4 million.

Carrier revenue was $35.8 million, down $1.2 million or 3.2% from the same quarter last year Carrier Data and Transport services revenue was $31.2 million, down $1.7 million or 5.1% from last year. Consolidated’s tower connections under contract totaled 3,864, down 4% versus last year. Network access revenues totaled $22.7 million, down $1.7 million or 6.8%, primarily due to declines in special access circuit revenue as carriers move from TDM to Ethernet-based transport solutions.

“In the second quarter, our carrier transport revenue declines reflect the impact of churn and pricing step-downs in the fiber-to-the-tower business,” said Fred Gaffam, CFO of Consolidated.

For the full year 2023, including the timing of churn and pricing step-downs, Gaffam said Consolidated expects revenue to decline by $5 million and $10 million for the year but emphasized that there are opportunities to increase revenue. “Once we are beyond the large fiber-to-the-tower renewals, we will have an opportunity to grow our carrier business through capacity upgrades for our wireless and wholesale customers, adding new tower connections and expanding sales focus to include a broader set of wholesale customer targets,” he said.

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