The telco hopes its ongoing fiber expansion efforts will be the growth engine.
Frontier may be focused on enhancing its fiber growth for business and wholesale customers, but it faces the joint growing pain of declining copper-based revenues.
Third-quarter business and wholesale revenue decreased 1.1% year-over-year to $634 million as growth in fiber was offset by declines in copper.
Nevertheless, the telco’s bet on fiber is showing signs of progress. Frontier’s business and wholesale fiber revenue increased 5.2% year-over-year to $281 million as growth in data and voice was partly offset by declines in other segments. Business fiber broadband customer net additions of 4,000 resulted in business fiber broadband customer growth of 12.5% year-over-year.
Nick Jeffery, CEO of Frontier, told investors during its third-quarter call that Business and Wholesale is “slightly lumpy quarter-to-quarter.”
“We have a little bit more copper kind of headwinds in that business than in other parts,” he said. “We’ve got an excellent team that's continuing to refine and improve that business, and we’re on track to achieve stable total Business and Wholesale revenues for the full year in 2023.”
Driving fiber penetration
Being an incumbent telco, Frontier will continue to be exposed to legacy copper service declines every quarter, but it is continually expanding its fiber footprint into more business buildings and for large wholesale customers.
Jeffery said that Frontier’s 5% growth in its Business and Wholesale fiber revenues “shows the potential of that segment as we continue to expand our fiber footprint and continue to refine our go-to-market strategies kind of there.”
Frontier moved up to ninth position from tenth on Vertical Systems Group’s year-end 2022 U.S. Fiber Lit Buildings LEADERBOARD. A fiber-lit building is defined as a commercial site or data center that has on-net optical fiber connectivity to a network provider’s infrastructure, plus active service termination equipment onsite.
VSG noted that commercial fiber installations increased in 2022, driven by escalating requirements for gigabit-speed connectivity to support cloud-based services, data centers, 5G rollouts, and other applications.
As Frontier continues to bring fiber and extend services like Ethernet and SD-WAN to more businesses, it expects to surpass copper-based service losses. “As our new fiber growth continues to accelerate, at some point in time, that will outweigh the legacy,” Jefferey said. “When exactly that is, we'll have to talk about in subsequent quarters.”
SMB focus
For Frontier, the definition of the business customer it serves vastly differs from other ILECs like AT&T and Verizon, where the focus has been on large multinational companies.
The company’s Enterprise business is different than others in terms of customer size and market size. The typical length of a Frontier business customer is medium.
Despite the smaller size, Jefferey said that when it extends new services into a market, it can provide symmetrical fiber services to those business customers.
“We've got a tiny kind of enterprise base compared to others,” he said. “That means those customers have a much higher propensity to buy the core product that we are building and selling, which is high-speed symmetrical fiber.”
But the fiber build is only one part of the equation. Jeffery pointed out that the team it has built to run business and wholesale is more responsive to customer needs.
“The overall market dynamics don't affect us so much, which is particularly true when you realize that the business and wholesale segment in the past was perhaps not as well run as it could have been,” he said. “I am pleased with the work the new leadership teams have put in place there. You can see that flowing through in the customer bookings.”