On August 5th, Frontier Communications announced an accelerated fiber optics buildout plan that will result in their fiber-to-the-premises (FTTP) network passing 10 million locations (homes/offices) by 2025.  Frontier says they will end 2021 with 4 million locations passed by fiber and will then add another 6 million in a revised, multi-year “Wave 2” plan.

Nick Jeffery, President and Chief Executive Officer of Frontier, said, “The acceleration of our fiber network expansion is clear evidence that Frontier’s transformation is taking hold. Over the past several months, we’ve made real progress in executing our strategy – by adding world-class leadership, introducing a purpose-driven culture, improving the customer experience, and making our operations more efficient and sustainable.

“Demand for high-speed broadband is growing rapidly, and fiber is the best product to meet the needs of consumers and businesses. Frontier is already doing what customers want and cable can’t – delivering symmetrical download and upload speeds with far lower latency than our competition. Early next year, we will start delivering 2 gigabit per second services, further stretching our performance lead to where only fiber can compete. We have hard work ahead of us, but momentum is increasing as we rally the Frontier team around our mission to Build Gigabit America.”

Jeffery added, “Our second-quarter results reflect continuing momentum in our fiber expansion strategy, with all key fiber metrics in line or above expectations. In particular, we accelerated our fiber build out, continued our customer momentum with another strong quarter of consumer fiber net adds, and reduced our consumer churn. Taken together, it was another strong quarter that positions Frontier well as we head into the second half of the year.”

At its virtual investor day, Frontier provided an update on the fiber buildout and other priorities resulting from its strategic review. These include:

• Frontier’s current ability to provide a best-in-class offering featuring symmetrical 1 gigabit per second download and upload speeds;
• Plans to launch a symmetrical 2 gigabit per second offering in the first quarter of 2022 that will unlock next-generation digital experiences for customers;
• Plans to deploy fiber to reach 10 million locations by 2025; and
• A new target of $250 million run rate savings by 2023 from simplifying the Company’s operations and improving the customer experience.

Image Credit: Frontier Communications

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Frontier also offered some revised predictions on service penetration, expecting them to be in the mid-teens to 20% at the end of year one, rise to 25% to 30% at the end of year two, and then on up to 45%.  Frontier introduced new pricing for residential fiber broadband service, with entry-level service at 500 Mbit/s.

MoffettNathanson analyst Nick Del Deo (a colleague) wrote in a note to clients:

The single most important data points from today’s analyst day relate to Frontier’s FTTH deployment plans (Exhibit 1). For 2021, the company increased its expectation for new passings from 495K to >600K, which will complete “wave one” of its fiber upgrade project and leave it with ~4M total FTTH passings. Between 2022 and 2025, the company plans to build to another 6M passings, bringing its total to 10M, or about two thirds of its broadband-enabled locations. The remaining 5M, part of wave three, are currently in a holding pattern, with the company working through the optimal approach: do nothing, upgrade, upgrade with government assistance, divest, swap, or do something more creative that we haven’t come up with.

Image Credit: Frontier Communications

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The company also announced it will start to introduce 2-Gig services over FTTP in early 2022, but didn’t disclose pricing.

Del Deo summarized his assessment of Frontier’s fiber buildout (emphasis added):

Frontier plans to build FTTH to 7M incremental homes through 2025, a rapid acceleration from its current pace. This will leave two thirds of its broadband-enabled footprint served by fiber, with the status of the remaining one third TBD. The deployment costs appear somewhat higher, and returns a bit lower, than what we would have expected, but we had haircut the value of its FTTH expansion in our prior work to account for such risks. The faster pace and certainty now reduce the need for such haircuts. The path to financing the build remains open, but the company will need at least a couple of billion dollars in fresh funding. It’s not clear to us that management’s optimism regarding the commercial unit is warranted, but time will tell whether it can engineer a turnaround.

Management has high hopes for the commercial part of its business, and we don’t doubt that growth can get better from where it is today, but we think this will continue to be a segment that weighs on the company’s overall results.

Light Reading’s Jeff Baumgartner opines that “Frontier’s accelerated FTTP buildout plan, revised pricing and plans for 2-Gig service should pressure cable competitors to match up with speeds and pricing. Frontier’s moves might also cause those cable operators to give more consideration to “mid-split” or “high-split” upgrades that dedicate more upstream capacity to their DOCSIS 3.1 networks, accelerate their pursuit of new DOCSIS 4.0 technologies, or shift to full FTTP upgrades in select areas.”

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References:

https://www.businesswire.com/news/home/20210805005317/en/Frontier-Communications-Accelerates-Fiber-Build-Out-to-Reach-10-Million-Locations-By-End-of-2025

PowerPoint Presentation (q4cdn.com)

https://www.lightreading.com/opticalip/fttx/frontiers-fiber-frenzy-10m-fttp-locations-by-end-of-2025/d/d-id/771336?