Optical/IP Networks

Windstream Double-Play Trims Line Loss

Has Windstream Communications Inc. (Nasdaq: WIN) found the answer to wireless substitution?

The independent telco believes so. Windstream is offering consumers a $59.99 double-play offer with 3-Mbit/s Internet access and unlimited local and long-distance calling that has a “for life” price guarantee. As a result, Windstream CFO Tony Thomas told the Credit Suisse Global Media and Communications Conference today, broadband penetration is up and access line losses in 2009 were below 5 percent.

“When you look at our consumer offering, it is anchored around broadband and bundling,” Thomas said. Consumers are willing to pay for a wireline voice service that is inexpensive and bundled with broadband, “for the convenience of making a long-distance call from their home.”

Windstream has a 37 percent penetration of high-speed Internet access lines, Thomas said, exceeding the penetration rates of larger incumbents like AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), as well as other independents serving rural areas, such as CenturyLink Inc. (NYSE: CTL) and Frontier Communications Corp. (NYSE: FTR)

Even with that level of penetration, however, broadband subscribership grew 10 percent in 2009, over 2008, Thomas said.

Windstream has been transforming its business to depend less on wholesale and voice services and more on broadband revenues and business offerings in Tier 1 cities, including Orlando and Charlotte, as well as its more traditional Tier 2 and Tier 3 markets, Thomas said. As a result, consumer broadband and business revenues now represent 52 percent of Windstream’s revenues.

Thomas also argued against wireless as the most economical way to deliver broadband to rural regions, saying wireline service providers remain better able to deliver faster speeds to those areas, albeit needing some help. “We think wireline companies are very well positioned. We think we can get to 98 percent coverage in an economical way with the assistance of some kind of subsidy.”

Wireless calls today are only wireless until they hit a cell tower, Thomas noted, and then they ride fiber or copper wireline networks to a mobile switching center. Wireline operators are deploying fiber to those cell towers today and to provide business services, making the underlying economics for extending wireline services for broadband in rural areas more compelling, he believes.

“The most efficient providers of broadband in America are wireline companies -- it’s a matter of physics. We are not constrained by spectrum, we are constrained by distance.”

Thomas said Windstream has been pleased so far with what the Federal Communications Commission (FCC) has released concerning the goals of its National Broadband Plan.

“We share their goals [for broadband penetration],” Thomas said, observing that the 10-year network transition plan makes sense. “But we know we have to wait to see the details.”

Windstream will leverage its NuVox Communications acquisition, completed in February, to deliver more IP-based services to its business customers, according to Thomas. Windstream already offers value-added offerings such as network security, data back-up, PC support, Web-hosting, and Web-conferencing.

— Carol Wilson, Chief Editor, Events, Light Reading

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