Altice USA has begun to deliver 1-Gig service via its cable plant in its Optimum footprint in New York, New Jersey and Connecticut, but the company remains undaunted in its decision to push ahead aggressively with a fiber-to-the-premises (FTTP) network upgrade in the region.
Altice USA's justification boils down to a multi-pronged strategy that's primarily driven by lowering operating costs and boosting service performance, alongside a plan to lean more heavily on the operator's legacy hybrid fiber/coax (HFC) network for wireless backhaul, Altice USA CEO Dexter Goei explained Tuesday in a discussion with MoffettNathanson analyst Craig Moffett.
Altice USA offers 1-Gig service to about half of its Optimum footprint on HFC (via DOCSIS 3.1). But that will continue to serve as a stop-gap of sorts as the company moves ahead with FTTP network upgrades that have recently slowed down due to delays in permitting during the pandemic. That slowdown, however, hasn't altered Altice USA's determination to continue charging down the fiber path.
"The cost savings are so significant ... the [network] performance is dramatically different," Goei said.
On the operational side, Altice USA expects to get a financial lift because opex costs on its FTTP network should drive downward as customer touch point costs and other "instance rates" also scale downward.
Goei said Altice USA's sister companies in other parts of the world have seen some "material changes" in opex when deploying FTTP in markets where they also operate HFC networks. Specifically, he noted that those companies, such as Altice Europe, have seen a reduction of instance rates of 40% and more in areas served by FTTP. He estimates that Altice USA spends about $800 million to $900 million a year on customer touch points, and expects that to come down "significantly" over time on the company's new FTTP network.
He also expects those FTTP upgrades to help Altice USA firmly match up with Verizon in Fios markets and extend its lead on the telco in non-Fios areas.
Where Verizon is less focused on Fios, "we'll have a materially better network than they will have," Goei said. "We will have overbuilt their entire fiber-to-the-home footprint in [the Optimum markets] in the next two years. On top of that, we'll have an attractive wireless product to add to it. That's going to make us from a convergence standpoint much more attractive than Fios and Verizon put together."
Evolving role for the HFC network
Moffett asked if it's a conspiracy theory to believe that Altice USA wants to shift residential video and broadband traffic onto FTTP to help free up space on an HFC network equipped with small cells. That would put the HFC network in position to play an even greater role offloading wireless traffic for Altice USA and its mobile partners.
"It's not a conspiracy theory," Goei said. "The most valuable part of our business is our fixed line assets and our networks. We are going to monetize our assets as best we can. We've had discussions with all of the wireless providers in terms of helping them densify their network … We believe in helping out wireless 'competitors' improve their networks to the extent that we can get good economics on our products."
He likewise remains unworried about "5G substitution in any shape or form" for residential broadband, but remains bullish about Altice USA's own mobile service, which just reinstated a promotional price that starts at $20 per month.
Altice Mobile, which launched last fall via an MVNO with Sprint along with an assist from AT&T, ended Q1 2020 with about 110,000 subscribers. Goei said Altice USA is working on a timetable to get transitioned to the T-Mobile network following its recent merger with Sprint.
"We are tweaking the model," Goei said of the company's mobile business. "We're in the very, very early innings of [network] convergence here."
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- Altice USA expands 1-Gig footprint
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— Jeff Baumgartner, Senior Editor, Light Reading