Lumen Technologies Fiber Build Out Plans Questioned by Analysts

Lumen Technologies is one of a large and growing number of telecom companies counting on a broad expansion of its fiber network. The Fiber Broadband Association (FBA) recently reported that the fiber industry is entering its “largest investment cycle ever” thanks to the efforts of companies like AT&T, Verizon and Lumen.

Lumen hopes to build its fiber network to 12 million new locations over the coming years. But it won’t be easy, according to Lumen CEO Jeff Storey.

“Supply chains are stressed, and we continue working very closely with our diverse and valued suppliers to mitigate risk as we execute on our growth objectives,” Storey said this week during his company’s quarterly conference call, according to a Seeking Alpha transcript. Others have issued similar warnings.

“I don’t want to overstate the issue, but it’s something that we are really paying attention to and working with vendors. We are starting to see some companies hold off on taking new orders. And as we see that, then we are working to put in our mitigation plans to make sure it’s factored into our build plan. But it is an issue that I will highlight as a real one that we have to mitigate.”

Lumen Technologies reported fourth-quarter results and 2022 expectations that generally fell below the forecasts of some financial analysts.

“Lumen’s 2022 guidance will fuel concerns that the company will have no choice but to eventually let leverage rise to inappropriate levels, dial back on investment, cut the dividend, or choose some combination thereof,” wrote the financial analysts at MoffettNathanson. “In particular, 2022 EBITDA [earnings before interest, taxes, depreciation, and amortization] guidance was noticeably below expectations at a time when capex will be elevated.”

“Results at this stage don’t give investors confidence in the company’s ability to earn an adequate return,” wrote the financial analysts at New Street Research.

Lumen and other fiber providers like Frontier Communications and AT&T are moving forward with their fiber buildout plans. Some, like AT&T and Frontier, are reporting big gains in the number of their new fiber customers. But others, like Lumen, are not.

“The past few quarters have been relatively weak for broadband net additions for Lumen, even for its higher-speed fiber offering,” MoffettNathanson said of Lumen’s consumer broadband business. “This quarter’s broadband net adds were at the low end of what the company has reported over the past few years and were shy of consensus estimates.”

The financial analysts at Evercore wrote that Lumen’s business segment drives three-quarters of the company’s revenue, and that too remains stressed. “The jury remains very much out on the company’s prospects in this sector,” they wrote, noting that sales in the company’s business segment declined slightly in the fourth quarter when compared with the third quarter of last year.

New Street analysts say a key metric for Lumen will be the percentage of customers in a given area who opt to purchase its new fiber optic access. If Lumen gets 40% of potential customers to sign up, the company likely will generate profits. “At 30%, the company would likely destroy value,” they warned.

Lumen CEO Storey stated that the company has already managed to get an average of around 29% of customers in its new fiber markets to sign up for its service. And that, he said, is with relatively little marketing.

He expects that number to be above 40% in the months and years to come. “If you look at the quality of the product that we have, we have a very effective competitive product and even with the limited marketing, we are doubling our penetration rates in our traditional copper areas,” Storey said.

New findings from the financial analysts at Cowen are supportive of Lumen’s fiber optic build out plans.  The Cowen analysts recently conducted a nationwide survey of more than 1,000 respondents and found that fiber-to-the-home (FTTH) “take rates” reached 56% among those surveyed.

“Take rate, or more specifically, market penetration, is a key driver of the FTTH business case,” they wrote. “We have previously noted that a penetration rate of 30-35% is the typical minimum break-even threshold when underwriting FTTH projects. When there is one broadband competitor, fiber penetration can approach high-50s and even 60% penetration levels in mature markets.”

Lumen CMO Shaun Andrews said: “One of the things that really differentiates us right now is our focus on fiber as part of the core infrastructure to an edge experience versus a distraction with 5G or content.  And being able to look an enterprise in the eye and say ‘Not only do we have these capabilities, but we will build the fiber to you where you are.’ That resonates with customers, and I think that’s a differentiator.”

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Last month, Lumen reported that they secured a massive $1.2 billion contract with the U.S. Department of Agriculture (USDA), setting it up to give one of the biggest government agency networks a major makeover.

Under the contract, Lumen will “completely transform” the USDA’s network covering 9,500 locations across the country. It will provide a range of services, including SD-WAN, managed trusted internet protocol, zero-trust networking, edge computing, remote access, virtual private networking, cloud connectivity, unified communications and collaboration, contact center, voice-over-internet protocol, ethernet transport, optical wavelength, and equipment and engineering.

References:

https://www.lightreading.com/opticalip/analysts-fret-over-lumens-fiber-plans/d/d-id/775229?

https://www.fiercetelecom.com/telecom/lumen-reels-12b-contract-overhaul-usdas-legacy-network

https://www.fiercetelecom.com/telecom/lumen-cmo-we-think-differently-about-fiber-than-our-competitors

Lumen’s big fiber roll-out push from 2.5M to 12M locations passed in the next few years

Lumen Technologies to empower customers to set up the wavelength subnetworks

CenturyLink rebrands as LUMEN for large enterprise customers; adds Quantum Fiber

Deutsche Telekom expands its fiber optic network in 78 cities and communities

Deutsche Telekom said it has expanded its fiber optic network for almost 7,000 companies in 78 cities and communities. Telekom is providing the companies with up to 1 Gbps speeds. The German based telco has connected industrial parks in the municipalities of Ahrensburg, Deggendorf, Lastrup, Lauf, Mainz and Mannheim among others.

Telekom is laying 560 km of fiber-optic networks to carry out the project and to connect the companies. It is using a trenching process to expand its fiber network.

“Telekom is Germany’s digital engine. That is why we are building our network seven days a week, 24 hours a day. In the city as well as in the countryside. We are massively accelerating our roll-out. In the coming year, we will go one better and invest around six billion euros in Germany. By 2030, every household and every company in Germany should have a fiber-optic connection. We will build a large part of this. But our competitors are also in demand,” said Srini Gopalan, Member of the Board of Management of Telekom Deutschland.

He also commented on the new German government’s plans in terms of digitization: “The new coalition is focusing on FTTH as THE technology of digitization. We explicitly welcome this. Faster processes – including for applications and approvals – will also help us to speed up fiber roll-out. We support the digital set off in our country. Digital networks should bring people together. Their roll-out should no longer be stuck in paper files.”

References:

https://www.telecompaper.com/news/deutsche-telekom-expands-network-for-7000-companies–1413189

https://www.telekom.com/en/media/media-information/archive/turbo-for-fiber-and-5g-643014

MetroNet’s FTTP buildout in Florida; Merger with Vexus Fiber

Continuing with the massive U.S. fiber to the premises (FTTP) movement, regional fiber carrier MetroNet (headquartered in Evansville, Indiana) said it will bring fiber-optic internet access directly to homes and businesses throughout the Deltona, FL and neighboring communities, including DeBary and Orange City.

Deltona marks the third community in Florida that will have access to MetroNet services through a fully funded $35 million investment in the community. The three-year construction project is set to begin in the summer of 2022, with the first customers able to receive service as early as the fall of 2022.

Once completed, Deltona will join the country’s internet elite as a Gigabit City. Only about 40 percent of households in the U.S. have access to symmetrical upload and download gigabit (1,000 mbps) speeds that only fiber optic networks can provide.

“MetroNet is thrilled for Deltona residents and businesses to have access to our future-proof services that will allow sparkling 4k video streaming, glitch-free gaming, crystal-clear virtual meetings, and internet experiences of the future that we can only begin to imagine,” said John Cinelli, MetroNet’s CEO. “MetroNet is proud to soon be able to add Deltona to our growing list of Gigabit Cities.”

MetroNet plans to hire local market management positions, sales and customer service professionals, and service technicians to support the Deltona area. Those interested in joining the MetroNet team can visit MetroNetInc.com/careers to search available positions and to submit applications.

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Last week, Metronet announced it has merged with fellow independent fiber based network provider Vexus Fiber. The combined companies will continue to operate under their existing brands and with their existing executive roster. Financial terms of the deal were not disclosed.

Vexus, based in Lubbock, TX, deploys and operates FTTP networks in Texas and Louisiana, with plans for expansion in New Mexico. Markets currently serving those states include Lubbock, Amarillo, Wichita Falls, Abilene and surrounding areas of Texas, as well as Hammond, Covington and Mandeville in Louisiana. New FTTP networks in the Rio Grande Valley are in various stages of deployment (see “Vexus Fiber to Build FTTH Network in Rio Grande Valley Region of Texas”), Tyler, Nacogdoches, and San Angelo, TX; Lake Charles, LA; and Albuquerque and Santa Fe, NM. Investors in the company included Pamlico Capital and Oak Hill Capital.

Metronet is operating or building FTTP networks in more than 120 communities in Indiana, Illinois, Iowa, Kentucky, Michigan, Minnesota, Ohio, Florida, North Carolina, Virginia, Texas, Wisconsin, and Missouri. It had received cash from KKR last April (see.) “KKR will take stake in Metronet as part of new funding round”) Oak Hill Capital is also an investor.  Both companies provide gigabit or faster broadband services to their residential and business customers.

“We are very excited to welcome Vexus Fiber and their partners to Metronet,” said Metronet CEO John Cinelli. “Vexus has rapid growth and a high-customer-service mindset, similar to Metronet, and joining them allows us to expand our service area to even more Americans.”

“At Wexus, our mission is to bring our high-quality service to as many homes and businesses as possible in the Southwest,” said Jim Gleeson, president and CEO of Wexus. “With this merger, we can reach even more people faster.”

About MetroNet:

MetroNet is the nation’s largest independently owned, 100 percent fiber optic company headquartered in Evansville, Indiana. The customer-focused company provides cutting-edge fiber optic communication services, including high-speed Fiber Internet and full-featured Fiber Phone with a wide variety of programming.

MetroNet started in 2005 with one fiber optic network in Greencastle, Indiana, and has since grown to serving and constructing networks in more than 150 communities across Indiana, Illinois, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Ohio, Florida, North Carolina, Virginia, Texas, Wisconsin, Missouri, and New Mexico. MetroNet is committed to bringing state-of-the-art telecommunication services to communities — services that are comparable or superior to those offered in large metropolitan areas.

MetroNet has been recognized by PC Mag as one of the Top 10 Fastest ISPs in North Central United States in 2020 and Top 10 ISPs with Best Gaming Quality Index in 2021. Broadband Now has recognized MetroNet as the Top 3 Fastest Internet Providers and Fastest Fiber Providers in the Nation in 2020, and #1 Fastest Mid-Sized Internet Provider in two states in 2020. In 2020, MetroNet was awarded the Vectren Energy Safe Digging Partner Award from Vectren. For more information, visit www.MetroNetinc.com.

Media Contact: Katie Custer [email protected] 502.821.6784

References:

https://www.businesswire.com/news/home/20220131005475/en/MetroNet-to-Turn-Deltona-into-Florida%E2%80%99s-Next-Gigabit-City-Through-35-Million-Investment

https://www.telecompaper.com/news/metronet-brings-gigabit-speeds-to-floridas-deltona-through-usd-35-mln-investment–1412491

https://www.lightwaveonline.com/business/mergers-acquisitions/article/14232944/fttp-broadband-providers-metronet-vexus-merge

 

Ziply Fiber deploys 2 Gig & 5 Gig fiber internet tiers in 60 cities – AT&T can now top that!

Ziply Fiber has launched two multi-gigabit, symmetrical broadband Internet tiers– at 2 Gbit/s and 5 Gbit/s – in 60 cities and towns in parts of Washington, Oregon, and Idaho.  The two new fiber Internet service plans will initially be available to nearly 170,000 physical addresses in those three states.  This comes after Ziply conducted a successful small market test in Kirkland, Washington. Customers in Montana will gain access to the multi-gig options later this quarter, with availability expected across most of the company’s existing footprint by the middle of the year.

Pricing for the 2-Gig tier runs $120 per month while the 5-Gig tier costs $300 per month. Both multi-gig tiers will require users to get a special router that includes WiFi 6 compatibility, a 10G WAN port and either a 2.5G LAN port for the 2-gig plan or a greater than 5G LAN port for the 5-gig option.

Ziply is the first among regional and national residential providers — those with a customer base of more than 1% of the US population — to deliver these speeds. By doing so, Ziply has become the fastest major internet provider not only in the Northwest, but across the entire U.S.

Ziply Fiber, formed in 2020 via the acquisition of Frontier Communications’ operations in Washington, Oregon, Idaho and Montana, expects to launch the new multi-Gig tiers to the rest of its footprint by the second quarter of 2022, and to make them available in every new fiber market launched thereafter, said Harold Zeitz, Ziply Fiber’s CEO.

Zeitz told Fierce Telecom that more than half of Ziply’s customers already take its 1 Gbps plan, “so we already have customers who seem to want faster speeds compared to others.”  He added the December trial covered five markets across Washington and Oregon and included a sample group of “tens of customers” who proactively sought access to the faster speed tiers. “There were no problems whatsoever,” Zeitz said of the trial. “We were able to demonstrate measured speed and it gave us confidence to go ahead and launch it broadly.”

Ziply Fiber’s new uncapped and no-contract tiers follow the company’s ongoing deployment of a 10-Gig capable XGS-PON access network and underlying core network.  Zeitz said the launches prove that consumers don’t have to live in a big city to get big speeds. “It’s a revitalization opportunity,” he said. “It demonstrates the future-proof element of the technology.”

The company also sells a 50Mbit/s tier for $20 per month and a 200Mbit/s service for $40 per month. Zeitz estimates that “well over half” of Ziply Fiber’s broadband customers choose the 1-Gig tier.

Zeitz said offering broadband without a cap or a contract puts welcome pressure on the company. “Yes, we think it’s a differentiator, but I also think it helps motivate us to make sure we’re delivering great service, he said.

Other Gig FTTP Internet competitors:

Ziply Fiber’s 5-Gig service appears to raise the bar on a fiber-to-the-premises (FTTP) residential broadband offering offered in multiple states.  With the exception of Google Fiber and Xfinity, none of the top internet providers have dared to push the internet speed limit past a single gig. Google Fiber offers a 2-gigabit plan throughout most service areas while a limited few Xfinity customers can sign up for 3 gigs, but no 5 Gig yet.  Among smaller regional players,  EPB of Chattanooga, Tennessee, currently offers a residential 10-Gig service starting at $299 per month in select areas.North Dakota’s MLGC debuted a 5 Gbps service tier in 2020, while TDS rolled out a 2-gig offering and Dobson Fiber launched a 10 Gbps offering last year.

Here’s the current competitive status from nationwide FTTP providers:

  • Comcast’s targeted residential FTTP service, Gigabit Pro, was recently upgraded to deliver speeds of 3 Gbit/s for $299.95 per month (with a two-year contract).
  • Google Fiber has been expanding the availability of a fiber-based service that delivers 2 Gbit/s down by 1 Gbit/s up.
  • AT&T has hinted that a multi-gigabit service is in the works, but has not announced pricing or launch timing.

Analysis:

The burning question this author has is how will Zipply customers use even a fraction of their allotted 2 Gig or 5 Gig upload and download speeds?  I have over 10 connected WiFi devices in my home where my 100 Mb/sec download speed is sufficient.

“This is for people to develop new use cases, et cetera,” Zeitz concluded. “I think we don’t know all the things that people will do and so we’re an enabler.”

Also, the extra gear needed won’t be cheap. To open up any potential in-home bottlenecks, Ziply Fiber is recommending an Asus AX6000 Wi-Fi 6 router or a similar device. Customers will also need an SFP+ (enhanced small form-factor pluggable) with an RJ-45 connector that’s compatible with the router to deliver up to 5-Gig.  Ziply Fiber is also selling such products online – an Asus router for $449.95, and the SFP+ for $42.99, or both bundled together for $492.94.

For the full 5-Gig, customers will need a wired Ethernet connection to the router. Depending on the performance capabilities the computer, a customer on Ziply Fiber’s multi-gig service will likely need an Ethernet adapter/dongle that supports 2.5-Gig or 5-Gig.

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24 January 2022 Update:  AT&T can now equal 2 Gig and 5 Gig FTTP speeds

AT&T has boosted its existing fiber in parts of more than 70 metro areas around the U.S. to offer 2-Gig and 5-Gig symmetrical upload and download speeds.

“Where we’re launching 2-Gig and 5-Gig, we previously had 1-Gig speeds available,” said AT&T’s SVP of Broadband Product Development Cheryl Choy. The upgrades announced today affect about 5.2 million people out of about 16 million households that AT&T currently passes with gigabit speeds.

Asked why AT&T isn’t increasing speeds for all 16 million households that it passes with fiber, Choy said it’s because the company is “on a PON evolution.” It is in the process of moving from GPON to XGS PON via card upgrades and software improvements. These upgrades allow it to boost speeds above 1-Gig.  Choy said that since 2019 all of AT&T’s newly laid fiber has been capable of multi-gig speeds.

Although the news of multi-gig fiber today did not require any new fiber to be laid, the company is also laying new fiber, and its goal is to cover 30 million customer locations with fiber by year-end 2025.

Pricing:

AT&T also announced it’s rolling out “straightforward pricing” across its AT&T Fiber portfolio. The 2-Gig fiber service costs $110 per month plus taxes with autopay; and the 5-Gig service costs $180 per month plus taxes with autopay.

Prices are a little higher for businesses at $225 per month for 2-Gig; and $395 per month for 5-Gig.

The company will not charge any equipment fees, nor will it require an annual contract or implement any data caps. The service also includes Wi-Fi.

Choy said, “We’ve amped up our Wi-Fi technology.” In late 2020 AT&T launched its Wi-Fi 6 enabled gateway, which provides more capacity for more connected devices. Those Wi-Fi devices will be able to take advantage of the new multi-gig speeds. AT&T’s Wi-Fi currently uses 2.4 Ghz and 5 Ghz spectrum.

According to a survey conducted in 2021 by Recon Analytics on behalf of AT&T, the average consumer has 13 connected devices in their home. But that’s expected to boom in the coming years, which will require more bandwidth.

Finally, as part of today’s news, AT&T said it has achieved up to 10-Gig speeds on fiber in its labs.

https://www.fiercetelecom.com/broadband/att-upgrades-its-fiber-network-offer-2-gig-5-gig-speeds

Ziply Fiber References:

https://www.fiercetelecom.com/broadband/ziply-debuts-2-gig-5-gig-internet-tiers-60-cities

https://www.broadbandworldnews.com/author.asp?section_id=733&doc_id=774718&

https://www.cnet.com/home/internet/ziply-fiber-rolls-out-multi-gig-service-to-170000-homes/?ftag=CAD-03-10abf2b

https://ziplyfiber.com/news/release/735

 

Frontier Communications reports added 45,000 fiber broadband subscribers in 4Q-2021 – best in 5 years!

Frontier Communications added 45,000 fiber broadband subscribers in the fourth quarter, its best performance gains in five years, Frontier’s Scott Beasley said at the 2022 Citi Apps Economy Virtual Conference. The company hopes to expand by 1 million fiber locations this year as part of plan to reach 6 million by 2025.

Comment: That’s great progress for a company that filed for bankruptcy in April 2020 with a plan to cut more than $10 billion of its $17 billion debt load by handing ownership to bondholders. It was the biggest telecom filing since WorldCom in 2002, reflecting years of decline in its business of providing internet, TV and phone service in 29 states.

When combined with legacy DSL losses, Frontier added 9K net new broadband subscribers. Frontier is currently on an aggressive fiber build strategy that aims to add a total of 6 million locations by the end of 2025, resulting in 10 million locations reached in total. Beasley reports the company added 600K new fiber locations in 2021, with a goal of adding another million locations by the end of 2022. Beasley reports that the much discussed supply chain challenges facing the broadband industry have not had a significant impact at Frontier.

“We’ve managed through supply chain constraints and been able to perform very well in our fiber build and continue to ramp that up for 2022,” he said.

  • This marked the first time in more than five years that the Company has posted total broadband customer growth in a quarter.
  • The Company expects to continue growing the total broadband customer base as its fiber build accelerates.

Source: Frontier Communications Q3 2021 earnings presentation

Frontier has completed ‘wave 1’ of this fiber expansion.  The company is now beginning ‘wave 2,’ which will take them through 2025, getting them to 6 million new locations. Build costs in wave 2 are a bit higher at $900 to $1,000 per fiber location.

Frontier envisions a ‘wave 3’ coming, but that’s outside the scope of their current committed-to fiber build. Beasley says Frontier will look to leverage government funding programs and other partnerships to help fund wave 3 fiber builds.

“There could be scenarios where we accelerate the build of some locations in wave 3 into wave 2,’ he said in discussing Frontier broadband growth. “That will likely be a destination of significant government funding as the roughly $45 billion of infrastructure bill funding that goes to broadband will be targeted at locations like wave 3.”

Asked about potential competition from fixed wireless access (FWA) and satellite broadband services, Beasley said neither presents a material threat just yet. While FWA may gain traction in some ultra-dense urban locations and satellite in extremely rural areas, Beasley asserted neither technology will be able to stand up against Frontier’s gigabit fiber offerings. The company already offers 1 Gbps and is planning the rollout of a 2 Gbps plan in the first half of this year as well as a 10 Gbps tier somewhere down the line.  “It’s a technology we’re watching closely but don’t think it can compete with our core symmetrical speeds in fiber,” Beasley said of FWA.

“Against our core gigabit plus offers, 1 gig symmetrical speeds now, we’ve said we’re going to launch 2 gig in the first half of 2022, eventually we’ll move to 10 gig, the core network is 10 gig capable now, we’ve trialed 25 gig successfully in certain parts of the network,” he said. “I don’t think fixed wireless has the capacity to compete with that core infrastructure. It will be competitive in certain niches of the market…but I don’t think it can compete with our core symmetrical speeds and fiber,” he added.

References:

https://kvgo.com/citi-apps-economy-conference/frontier-jan-2022

https://seekingalpha.com/article/4478155-frontier-communications-stock-subscriber-growth-higher-profits

https://www.fiercetelecom.com/telecom/frontier-adds-45k-fiber-lines-posts-first-broadband-growth-5-years-q4

With 45K New Fiber Subscribers, Frontier Sees First Positive Broadband Growth in 5 Years

Cable One joint venture to expand fiber based internet access via FTTP

Cable One [1.] (aka Sparklight) has announced a joint venture (JV) with three private equity firms, seeking to speed its expansion of fiber based Internet access to underserved markets.

Note 1.  Cable One, Inc. is an American broadband communications provider. They are a former subsidiary of Graham Holdings Company. The company’s name and current focus date back to 1997; prior to that time the company was known as Post-Newsweek Cable. Cable One currently serves more than 1.1 million residential and business customers across 24 states with its family of brands.
The company now offers fiber based Internet access with up to 940 Mbps download and 50 Mbps upload speeds.
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The JV will support the accelerated growth of Clearwave Fiber LLC (“Clearwave Fiber”). Clearwave Fiber is a newly formed entity that holds Cable One’s subsidiary Clearwave Communications and certain fiber assets of Cable One’s subsidiary Hargray Communications.
Clearwave Fiber is a newly formed joint venture that holds Clearwave Communications and certain fiber assets of Hargray Communications. Cravath is representing Cable One in connection with the transaction. With the formation of the JV, Clearwave Fiber intends to invest heavily in bringing Fiber-to-the-Premise (“FTTP”) service to residential and business customers across its existing footprint and near-adjacent areas.
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As Cable One detailed in a preview of the deal in November 2021, its JV partners include GTCR, Stephens Capital Partners and the Pritzker Organization. Cable One has worked with all three before, acquiring assets from Stephens Capital in January 2019 and Pritzker in May 2021 and teaming with GTCR on Mega Broadband Investments.

The joint venture reflects a shared commitment from Cable One and the investors to provide fast and reliable connectivity via FTTP internet to underserved markets and will allow for more rapid expansion of fiber internet to homes and businesses in small cities and big towns. Cable One owns a majority of Clearwave Fiber and the private equity investors are committed to make substantial cash investments to support the acceleration of Clearwave Fiber’s expansion.

Clearwave Fiber will be led by Executive Chairman Michael Gottdenker and CEO David Armistead, both of whom were part of Hargray’s executive leadership team from 2007 until its 2021 sale to Cable One, providing continuity of proven leadership and a continued commitment to Cable One’s shared culture, purpose, and values.

“This strategic investment will help accelerate the deployment of fiber-based broadband services to a range of markets, including underserved areas of the country,” said Michael Gottdenker, Executive Chairman of Clearwave Fiber. “Our team is motivated by our shared core values of customer service and improving lives through connectivity and is excited to bring fast and reliable Clearwave Fiber broadband to homes and businesses across the country. We are thrilled to welcome GTCR, Stephens, and TPO to the Clearwave Fiber family and look forward to our continued partnership with Cable One.”

Julie Laulis, Cable One President and CEO said:

“We look forward to supporting and sharing in Clearwave Fiber’s growth over the coming years while remaining focused on our primary business, increasing penetration rates, integrating recently acquired companies and driving higher margins and greater free cash flow. We did not take lightly our choice of partners in this transaction and are excited to be working with like-minded individuals who share our core principles.”

“Five years ago, Gig speeds were virtually unheard of in non-urban markets across the U.S. We are proud to have been able to launch Gig service and level the playing field for rural markets where access to affordable, high-speed internet is just as vital as in more urban markets. A fast and reliable internet connection means rural residents can telecommute rather than having to move to find work. It means access to medical care via telehealth services; the ability to achieve a higher education online; and the cultivation of entrepreneurship and economic growth.”

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KeyBanc Capital Markets analysts indicated in a research note the deal is a positive for Cable One, noting it will allow the company to effectively offload heavy investment in fiber to the JV while maintaining majority ownership. They drew a comparison to WideOpenWest’s recently announced fiber expansion plan, writing that “in contrast to CABO, WOW will fund the expansion on-balance sheet, while CABO’s transactions move off-balance sheet, neither being wrong, in our view.”

“We believe this shows there is a lot of FTTP build opportunity within and around CABO’s footprint (likely more than one Company can handle),” Keybanc’s team conclude

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About Cable One:

Cable One, Inc. (NYSE:CABO) is a leading broadband communications provider committed to connecting customers and communities to what matters most. Through Sparklight® and the associated Cable One family of brands, the Company serves more than 1.1 million residential and business customers in 24 states. Over its fiber-optic infrastructure, the Cable One family of brands provide residential customers with a wide array of connectivity and entertainment services, including Gigabit speeds, advanced WiFi and video. For businesses ranging from small and mid-market up to enterprise, wholesale and carrier, the Company offers scalable, cost-effective solutions that enable businesses of all sizes to grow, compete and succeed.

References:

https://ir.cableone.net/news-events/investor-news/news-details/2022/Cable-One-Announces-Formation-of-Clearwave-Fiber-in-Partnership-with-GTCR-Stephens-Capital-Partners-and-The-Pritzker-Organization/default.aspx

https://www.fiercetelecom.com/telecom/cable-one-targets-rapid-fiber-expansion-jv-deal

https://www.cravath.com/news/cable-ones-formation-of-clearwave-fiber-in-partnership-with-gtcr-stephens-capital-partners-and-the-pritzker-organization.html

https://www.prnewswire.com/news-releases/cable-one-looks-to-the-next-evolution-of-high-speed-internet-301428503.html

AT&T Communications CEO optimistic about wireless revenue and fiber buildout

Speaking at Wells Fargo (Virtual) TMT Summit, AT&T Communications CEO Jeff McElfresh discussed momentum in AT&T’s wireless business, noting that AT&T’s consistent go-to-market strategy has driven improved market position supported by healthy wireless service revenue and EBITDA growth. McElfresh noted that over the past five quarters the company has delivered its best subscriber results in a decade, with nearly 4 million postpaid phone net additions, and 1.4 million fiber net additions. At the same time, wireless delivered its best-ever EBITDA in the third quarter of 2021, up 3.6% year over year.

McElfresh said his company added over 1.4 million fiber net adds in the last five quarters. That was based on AT&T’s conviction to reinvest in what they believe is a very future-forward technology in fiber that’s got superior advantages to any other kind of broadband connectivity offering (e.g. FWA, bundled copper pairs, cable, etc).

McElfresh told the audience that the company’s fiber expansion is “rekindling” its consumer broadband business and that he has a high degree of confidence that the company is hitting “game speed” when it comes to the number of homes passed with fiber that it is achieving every month.

AT&T had approximately 14 million homes passed with fiber as of year-end 2020 and is expected to increase that to 16.5 million homes passed by the end of this year. The company now has 5.7 million fiber to the premises/home customers, including Internet access, VPN, private line, virtual private line, etc.

McElfresh said that he believes AT&T has enough “weight” in the industry that it can work with vendors to overcome any supply chain delays (which the company warned about in July).  He added that he has no concerns about achieving the 30 million locations by 2025 goal based upon the company’s current buildout pace. “I have no concerns about hitting the pace that we need to reach that,” he said.

“What I am focused on more than penetration levels is that we are demonstrating that we can step up our net add performance quarter to quarter.”  In the third quarter, AT&T added 289,000 fiber customers which was down year-on-year from 357,000. However, the company also said that 70% of its net adds were new to AT&T.

To help entice consumers to switch to AT&T’s fiber network, McElfresh said that the company has a dedicated fiber team within its consumer wireline business that is working in neighborhoods to sell fiber optic based Internet access. He added that the telco is measuring the number of fiber net adds they can achieve in 30 days, 60 days and 90 days in those local markets.  The company sees those fiber net add numbers accelerating during each of those time periods.

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Looking forward, McElfresh is encouraged by underlying mobile industry trends and sees limited signs that suggest a near-term shift in demand levels.  He said he believes AT&T’s momentum is sustainable with the company’s simplified plans, targeted subsegment approach, improved customer experience and network performance all helping AT&T retain and attract subscribers, leading to lower churn and increased customer lifetime value.  Reiterating recent comments by CFO Pascal Desroches, McElfresh indicated that AT&T’s outlook for 2022 and beyond does not assume a continuation of outsized industry net adds.  Should recent mobile industry trends continue, he believes the changes made to AT&T’s go-to-market strategy puts the company in a better position to capitalize on healthier than anticipated demand.

McElfresh noted that AT&T continues to see postpaid phone ARPU stabilizing in 2022 with an improvement in international roaming and subscribers adopting higher-ARPU plans balancing the impact of amortization accounting for device promotions. McElfresh said that fewer than a quarter of gross adds and upgrades in the third quarter traded in newer devices for premium promotional offers.  As previously noted, only about 20% of AT&T’s postpaid smartphones are on Unlimited Elite – the company’s highest-ARPU and fastest-growing rate plan.

With postpaid phone ARPU stabilizing in 2022, AT&T expects higher wireless service revenues from a growing postpaid subscriber base. McElfresh also indicated that he believes AT&T can continue to profitably increase its wireless market share going forward and reiterated that the company continues to expect fourth-quarter EBITDA growth to exceed third-quarter levels.

When asked about fiber penetration levels, McElfresh responded, “What I am focused on more than penetration levels is that we are demonstrating that we can step up our net add performance quarter to quarter.”  In the third quarter, AT&T added 289,000 fiber customers which was down year-on-year from 357,000. However, the company also said that 70% of its net adds were new to AT&T.

To help entice consumers to switch to AT&T’s fiber network, McElfresh said that the company has a dedicated fiber team within its consumer wireline business that is working in neighborhoods to sell fiber. He added that they are measuring the number of net adds they can achieve in 30 days, 60 days and 90 days in those local markets and they are seeing those numbers accelerate.

References:

https://about.att.com/story/2021/mcelfresh-wells-fargo-conference.html

https://investors.att.com/~/media/Files/A/ATT-IR-V2/events-and-presentations/final-wells-fargo-transcript-11-30-21.pdf

https://www.fiercetelecom.com/broadband/atts-mcelfresh-company-hitting-game-speed-fiber-build

https://techblog.comsoc.org/2021/09/21/att-ceo-john-stankeys-30m-locations-could-be-passed-by-fiber/

Cowen Analysts: Telcos to lead FTTH buildout; total 82M homes to be passed by 2027

According to a new report titled Fiber to the Home: Navigating the Road to Gigabit America, a multi-sector by Cowen analysts, forecasts  that telco fiber-to-the-home (FTTH) lines will pass 82 million American households by 2027, nearly double the 44 million households passed today. The four biggest U.S. wireline telcos (AT&T, Verizon, Frontier and Lumen) will account for the lion’s share of those deployments, together passing more than 71 million homes with fiber.

The Cowen report also projects that cable operators (cablecos or MSOs) will pass another 5 million homes with fiber lines over the next six years, largely because of Altice USA’s current big push in the New York metro area to match Verizon’s Fios rollout. Cable operators already pass about 5 million homes with fiber.

Overall, Cowen estimates that the US now has 50 million homes passed by fiber lines, with the telcos accounting for most of them.  Here are a few other highlights from the report:

  • Cowen expects state/federal funding of $130B for various broadband initiatives.
  • That will close the digital divide and expand the addressable market for broadband access.
  • FTTH will gain market share (compared to other fixed broadband access) to take ~70% of the net positive broadband subscriber adds by 2027.
  • As a result, 35M FTTH subscribers (26% market share) are expected by 2027; up from 16M (14%) today.
  • FTTH subs take speeds that are 54% faster than non-FTTH broadband subs.
  • The increase in FTTH subs will lead to exciting next-gen home applications (not specified) and ARPU growth.
  • FTTH subs have 13% higher ARPU compared to non-FTTH subs.

Large, midsized and small telcos will all participate in this massive fiber deployment, using FTTH to reverse nearly two decades of broadband market share losses to the cable industry, the Cowen analysts say. For instance, they project the nation’s biggest telcos will add a combined 7.7 million fiber subs over the next five years.

“The next few years will be historic in terms of telco FTTH upgrades, providing consumers speeds of 1 Gbit/s, closing the digital divide, expanding the total addressable market and achieving a ‘Gigabit America’,” the analysts wrote. “After years of hemorrhaging subscribers, we expect Big Telco to stem the tide of losses to Cable…

However, the report does not say that telcos will be gaining broadband customers from cable operators.  Instead, telcos will achieve broadband subscriber gains mainly by upgrading their own remaining 15 million DSL subs to FTTH.

“The cable decade of dominance of DSL-share stealing is over,” the analysts wrote, forecasting that the telcos will overtake the cable companies in broadband sub net gains by 2024. “Cable’s days of stealing DSL subs are over, though only losing modest share (DSL taking the brunt), as the focus will be on defense.”

The Cowen analysts expect cable’s broadband market share to drop very slightly from 61% today to 58% in 2027 while the telcos’ market share creeps up from 25% now to 27% in 2027.

“It’s far from doom-and-gloom for cable operators,” the analysts note. “With cable’s effective marketing plan and speed upgrades, the vast majority of subscriber losses will be from the 15 million DSL subscribers, not cable.”

The analysts expect fixed wireless access (FWA) to play a notable tole in the US broadband market by the middle of the decade, accounting for a small but increasing fraction of high-speed data customers throughout the 2020s. “FWA will establish a solid but niche foothold,” they wrote.

Cowen now expects U.S. service providers to add a collective 17 million broadband subs by 2027, enough to reach 97% penetration of occupied homes and 90% penetration of overall homes, up from 90% and 82% today.  The analysts believe that broadband could achieve utility-like penetration levels of 98% or more, like wired phone service did at its peak last century.

All this fiber optic spending will be a boon for optical network equipment vendors. Specifically, the Cowen analysts single out Calix, Adtran, Ciena, Cisco, MasTec, Nokia and Juniper as likely beneficiaries.

The analysts also see potential for further market consolidation. Some scenarios they envision are Charter buying the Suddenlink portion of Altice USA’s footprint and Charter or Altice USA merging with T-Mobile to form a third converged player in the national market.

References:

The Market Impact of FTTH

https://www.lightreading.com/opticalip/fttx/telcos-to-nearly-double-fiber-footprint-by-2027—report/d/d-id/773768?

 

Open Access Fiber Networks Explained; Underline’s Intelligent Community Network

In Open Access Fiber networks, the same physical network infrastructure is utilized by multiple providers delivering services to subscribers. The Open Access business model has been drawing attention globally as governments and municipalities find the concept of offering competition between providers and the freedom of choice for the subscriber is essential. It has also proved to be a feasible way to connect rural areas where service providers might have a hard time generating enough revenue to justify investing in their own network infrastructure.

Open access fiber networks can be the foundation for distributed healthcare, 5G, and resilient, modernized infrastructure—including responsible energy creation and secure community smart grids.

For subscribers to benefit from the freedom of choice and competition between providers that are delivering services using the same network infrastructure they will need a comprehensive way to browse the assortment of services offered.

Open Access network operators must keep track of:

  • Every single subscriber in the network, their physical address, their “technical address” (switch, switch port, etc.).
  • Which services they are buying from which provider/s.
  • The total number of customers and/or services bought if you’re operating in a three-layer model where you have to report back to the network owners how their network is utilized.

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Already common in Europe with Sweden as the best known example, open access networks are just beginning to gain market traction in the U.S.  While U.S. community-wide network operators like SiFi Networks and UTOPIA Fiber (Utah) have adopted a wholesale-like business model, newcomer Underline is taking a bit more of a direct approach.

“When people say open access in this country, they typically mean ISPs can come in and lease fiber and choose to build a given neighborhood that hasn’t been overbuilt yet. We mean something very different,” Underline CEO Robert Thompson told Fierce Telecom. “We are not a wholesale leaser of fiber. We are the fiber network literally to the doorbell.”

Underline isn’t just providing physical fiber-to-the-home infrastructure, but also a unified billing system and cybersecurity layer. The latter will allow the communities it serves to deploy smart city applications over an on-demand Layer 2 (Data Link layer) connection that will never touch the Layer 3 (Network layer) public internet, Thompson said.

“On the one hand, we directly face consumers and businesses, schools and so forth and we provide them network access connectivity and technology for a monthly connection fee. On the other hand, we look like a network infrastructure-as-a-service provider to the ISPs or content community,” Thompson said.

“We don’t provide IP,” he continued. “We’re going to move your traffic from your house ultrafast over fiber and we’re going to hand off you and your traffic to the internet service provider of your choosing. That ISP is then your IP, the routing of your traffic. They’re connecting you to that glorious world wide web,” he added.

Thompson said Underline will charge users directly on a monthly basis for connectivity, with their chosen ISP getting a portion of that cost. So, for instance, in the case where a subscriber takes a $65 per month symmetric gigabit plan, the ISP will get a $15 cut. Underline also plans to charge licensing and per subscriber fees for use of its technology stack.

Underline is now initiating construction in its first market: Colorado Springs, CO. The company will offer residential speeds up to 10 Gbps and enterprise service up to 100 Gbps, with qualifying households eligible to receive a discounted rate on Underline’s bottom tier symmetrical 500 Mbps plan.

The project will be completed in several stages, with a Phase I build set to connect 24,000 homes and 4,000 businesses with 225 route miles of fiber plant. Initial customers will include the the National Cybersecurity Center, the new Space Information Sharing and Analysis Center and Altia Software.

Thompson says that Phase II will cover roughly the same amount of ground and Underline also has a build agreement with an unnamed city “immediately surrounding” Colorado Springs. Taken together, construction in both phases and the second city will amount to “an exercise of approximately $125 million in total capital.”

“We are after this with a vengeance, and we are very thankfully supported by very strong capital,” Thompson said, noting a “drumbeat of steady announcements of drills in the dirt in new communities” is on the way.

Thompson said Underline is targeting communities with populations between 20,000 and 750,000. He noted that such communities have “historically been basically ignored by the incumbents (large telcos) and which by and large will not qualify” for federal support for broadband deployments.

Beyond that, he said Underline’s market assessments include factors like demand point density per fiber route mile, a population productivity ratio, a competition index and a social equity analysis. The latter is a key priority for Underline and “part of our social purpose,” Thompson explained.

“We want to understand and we actually want to target communities that have a significant portion of their demand points that have no internet at all or very poor internet at home because of socio economic status.  This country’s got to have internet that’s fast, affordable and fair,” he concluded.

References:

https://www.fiercetelecom.com/operators/underline-has-a-different-vision-for-open-access-fiber-u-s

https://underline.com/

https://www.cossystems.com/about/open-access/

https://www.foresitegroup.net/what-you-need-to-know-about-open-access-networks-2/

AT&T CEO John Stankey: 30M or more locations could be passed by AT&T fiber

AT&T CEO John Stankey was interviewed by Brett Feldman, Goldman’s U.S. telecom and cable analyst.  AT&T is both a telecom and media company.  We focus on the former for the IEEE Techblog. Here are selected telecom related comments Stankey made (BOLD font emphasis added):

We’re pulling (market) share back from our two largest competitors (Verizon and T-Mobile).  I feel good about how we’re doing that. There’s more to be done as we invest in fiber, and we can compliment our wireless business with fiber. There’s opportunities for us to take communications further than what we’ve traditionally done at AT&T. And I think that business should be recognized for being a leading global communications business, like it is, very uniquely positioned with more fiber than any other communications company on the face of the planet, with a great wireless asset domestically in the U.S. and in Mexico, an opportunity to bring those things together, and run it incredibly effectively as a focused business. I think we’ve got a great story there.

I think AT&T is in a great position moving forward. I think the industry frankly is in a great position. I think there’s tremendous promise right now in what ubiquitous high capacity bandwidth with the kind of capabilities that 5G brings in terms of the density that it can afford, the number of devices, the ability to use technology to do things like network slice (requires 5G SA core network which Microsoft is building for AT&T) and begin to differentiate the network. I think this is going to be great for society. I think this is going to be great for the U.S. economy as a whole. If I had to bet, we don’t have the numbers for 2021, certainly can’t project 2022, but I have a sense of where this industry is going. (This author totally disagrees, largely because real, standards based 5G has yet to be deployed as there is only a standard for the RAN which doesn’t meet URLLC performance requirements.  No standard for 5G SA core network.).

We’re probably going to see record infrastructure investment coming out of this industry in this period of time. And I think it’s going to equip the United States and our economy and our infrastructure in a way that we’ve never seen. I think that’s going to be incredibly powerful. And I think it’s not only going to be good for AT&T, because I think we have the right kind of wherewithal and the right kind of capability to be right alongside others that are investing at a high clip to bring that infrastructure forward. I think we’ll do just fine with where we are there. I believe when unleashed we have some of the best network minds in the country. I believe that dense fiber footprint that we have that’s denser than anybody else in the United States when engineered properly on top of a great spectrum assets and a great wireless business, it’s going to make our combined product offer and our business even better and more capable to deal with what customers need to do. So, I feel really comfortable about that. And I can do nothing more than not ask you to look at my prognostications, but look at how we’re performing in the market today.

We’ve now started doing some things quietly behind the scenes. We have another muscle to build here, which is how do we begin to work on software to differentiate our products and services in a way that makes our product better than what our competitors can do, because we do have a different asset base, and we are able to serve every corner of the market from the largest of enterprises to the smallest apartment somewhere in the United States. And I don’t think we’ve done as much as we can do in that vein, to actually make that real for our customers and the right products and the right services and the right offers. And so, rebuilding that product engine that we can do that and begin to differentiate allows us to do things that won’t necessarily just hinge on, can I get an attractive handset?

Brett Feldman: I believe your fiber network passes something around 15 million customer locations right now, you’re targeting to ultimately get to 30 million by 2025, that would still only be about half roughly half of the customer locations in the AT&T wireline footprint. Question we’ve gotten is how did you decide what the right target was? Why is it 30? And what really dictates the pace at which you build out fiber?

Stankey replied: Getting this kind of an engine (fiber optic build-out) ramped up to go from building 3 million to 4 million to 5 million homes (locations) past, working through the supply chain, all the logistics that are necessary to build network, it’s not a real simple undertaking. And as I’ve said, my goal is I feel very comfortable, we have places we can go to build 30 million homes (he really means residential and business locations combined) right now on an owned and operated basis, that have very attractive returns in the mid to upper teens. We’re demonstrating every day with our existing base, that we can operate that more effectively, we’ve now crossed over places where we have scale where we’re taking cost out of the business based on fiber replacement, the old infrastructure, we’re seeing that flow through in lower call rates, lower repair rates, better churn, all those things are going to continue to give us goodness moving forward.

Do I think there’s a magic number of 30? No, I don’t. I think there’s a combination of things. One is unlike the investment base, to recognize the good work we’ve been doing. And then in fact, we are building and adding value back to our shareholders. And when they start to recognize that in the form of the equity in the stock, do I believe my credibility and the team’s credibility goes up? Yes, do I believe there’s going to be other opportunities for us to come out, as we hit those scaling metrics that we have in place, the supply chain metrics that we might be able to go in and say, there’s more that we could possibly attack, I’d love to be in that position to do that. And I’ve kind of put that out as a challenge to the management team to say the only thing that stands in the way between you doing 30 million and doing more is your execution and performance.

Brett Feldman: Speaking of execution, execution really has two pieces. It’s deploying the network, and then it’s driving penetration of that network. I believe you had about 5.4 million fiber subscribers as of your most recent quarters, that’s about 35% penetration [1.]. What do you think is the right target for your fiber penetration and how are you going to get there?

Note 1. Fiber-based broadband has clearly established itself as a growth engine for AT&T, which added another 246,000 fiber subscribers in Q2 2021, ending the period with 5.43 million. With about 80% of new fiber subscriber additions new to AT&T, overall broadband revenue growth at the company has finally surpassed declines in its legacy, non-fiber-to-the-premises (FTTP) broadband business.

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Stankey replied: If I look what’s happening right now, and kind of where we are in our maturity scale, one of the things I’m most excited about is our new net adds to fiber right now good, almost 80% of them are new to AT&T. So, we’ve now gotten to this place where we’ve been managing the base. And we’re now shifting over where got a lot of new customers coming in. And in fact, as you saw last quarter, we’re starting to get ourselves to a point where that consumer business is a growth business today, despite the legacy drag on historic telecom products, parts and the like of legacy data products, that the fiber growth is beginning to outstrip that where we have real growth in that business. And we’re now starting to turn that corner real EBITDA growth in that business. And so, I would tell you as I step back from that, we’re going to see consistent growth. But I’m not going to be happy until we have a 50:50 share split in places where there’s two capable broadband providers. And I think there’s no reason with the product is capable as what we have out there and how fiber performs and what we’re able to do and the differentials we see in our customer satisfaction to our most significant competitor often cable in those markets, we were looking at 10, 15 points of difference in satisfaction levels, between other players in the market and ourselves, that we shouldn’t be able to achieve that over time.

Brett Feldman: You had earlier made a slight adjustment to your fiber deployment for this year, you were hoping to do 3 million homes, it’s going to be closer to two and half million and you noted some of the well reported supply chain issues as being a factor. Any update there, is there any further disruption in your supply chains and your ability to secure labor?

Stankey replied:  

And we’re talking about what’s probably effectively about a 90 day delay for us to hit those numbers, and really primarily in this case, got to fiber assemblies. The way fibers built in the distribution network is we engineer it, we provide detailed engineering to our manufacturer, the manufacturer in the manufacturing facility, pre-splices and pre-assembles some of that fiber before we receive it. So, when it goes in, we’re doing less field splicing. And we’re able to basically put it up in the air or bring it through infrastructure in a way that lowers labor costs coming in. And we’re having some supply issues in the factory partly labor driven because of COVID, individuals getting sick not being able to run enough shifts, and carry through and partly some raw material issues. But those have been worked through right now our deliveries over the last 30 days have tracked to what our expectations are.

So, we feel like we’re through that dynamic right now. We should be fine with it. But look the supply chain is fragile at all levels. It’s fragile on everything. Last week, it was the number of generators, we’re deploying for power backup on cell sites, there’s, we’re going to miss a target on some of those by a couple 100 because there’s a resin base connector in the harness and we can’t get the resin. And that resin base connector, it’s a $15,000 generator that’s been held up on something that’s $0.25 part, you see these things popping up, left and right, every corner of the business. So, I don’t know what next week brings, we’re aggressively managing it. We’ve got a great supply chain organization. We’re a scaled provider, with all of our vendors. So, we lean into that, we were able to work through the fiber dynamics because we are the largest consumer of fiber in the United States. We use that ability and that expertise to make sure we get what we need to move through. So, I feel we’re managing through it, okay. I don’t think there’s anything around the challenges we’re dealing with, it gives me concern on guidance where we stand right now, but it’s going to be choppy and a little bumpy moving forward on some of these things as we move through the years.

Typical fiber optic deployment to multiple homes via underground and aerial cable

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Stankey wouldn’t say how the proposed U.S. infrastructure bill might also alter AT&T’s outlook in a way that encourages the company to explore a buildout that goes beyond 30 million locations.

“There’s a degree of uncertainty there,” he said of the bill. “But in its current form [and if] it does actually make its way into law, that’s going to change the landscape of the broadband business in this country … It will also change my posture and point of view on where we should be playing as a company.”

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References:

https://seekingalpha.com/article/4456360-t-inc-t-ceo-john-stankey-presents-goldman-sachs-30th-annual-communacopia-conference

https://www.lightreading.com/opticalip/atandts-fiber-expansion-could-reach-beyond-30-million-locations/d/d-id/772225?

https://techblog.comsoc.org/2021/08/12/atts-fiber-buildout-reduced-due-to-supply-constraints/

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