Frontier's fiber frenzy: 10M FTTP locations by end of 2025

News Analysis Jeff Baumgartner, Senior Editor, Light Reading 8/6/2021

Having exited bankruptcy in late April, Frontier Communications is getting serious about its fiber upgrade plans.

The company announced Thursday (August 5) an accelerated buildout plan that will result in Frontier's fiber-to-the-premises (FTTP) network passing 10 million locations by 2025. Frontier intends to get there by ending 2021 with 4 million fiber passings and then adding another 6 million fiber passings under a revised, multi-year "Wave 2" plan.

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(Source: Frontier)

Some of Frontier's fiber buildout acceleration is baked into 2021, as it now expects to complete buildouts to 600,000 total locations during the year, up from a previous plan to pass about 495,000 locations. As a result, Frontier's 2021 capex is now pegged at $1.8 billion, up from a prior plan for $1.5 billion.

The new buildout plan will leave about two-thirds of Frontier's broadband-enabled footprint served by fiber, "with the status of the remaining one-third TBD," Nick Del Deo, an analyst with MoffettNathanson, explained in a research note following Frontier's investor day held Thursday. "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."

Frontier, now led by former Vodafone UK exec Nick Jeffery, also shed more light on the anticipated costs. While the 600,000 Wave 1 homes will render an average cost per passing of $500 to $600, the additional 6 million homes to be built out in the coming years will be more expensive – $900 to $1,000 each. Del Deo points out that Frontier's original first tranche of 3 million homes had embedded a cost of about $600 per passing, which helps to explain this cost difference.

Frontier is still ironing out how it will pay for the full plan. Frontier, which has $1.5 billion of liquidity today, says it is fully funded through early 2023 and claimed to have access to multiple sources of capital for the fiscal year 2023 and beyond.

Frontier didn't elaborate on those potential sources, but Del Deo speculated that the company could raise more equity, forge a partnership or secure a direct investment, or possibly divest the Wave 3 homes that are not part of the current 2025 fiber upgrade plan. The analyst said it's likely that Frontier will need at least $2 billion to finance its current plan.

Fiber pricing aggression

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% in a "terminal state," Del Deo noted.

Frontier will likely need to get aggressive with marketing to hit those numbers. Meanwhile, it did introduce new pricing for residential fiber broadband service, with entry-level service clocking in at 500 Mbit/s.

Click here for a larger version of this image.
(Source: Frontier)

Frontier said it won't charge an activation fee. It also introduced a new next-day installation program, whereby customers can choose to have service installed the next day or pick a preferred install day, Saturdays included.

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

With it all put together, 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.

Q2 snapshot

Frontier posted Q2 2021 revenues of $1.62 billion, down 7.9% from the year-ago period. Though fiber broadband revenue rose 13.6%, to $268 million, total data and Internet services revenues dropped slightly to $839 million due primarily to a drop in copper-based subscribers.

Business and wholesale revenue dipped 9.5%, to $707 million.

Frontier ended the quarter with 2.8 million total broadband customers, adding 12,000 net fiber customers in the period. Frontier ended Q2 with fiber service ARPU of $63.10, and a consumer fiber service churn rate of just 1.5%.

Frontier constructed 157,000 fiber passings in the period, up 51% from the pace in Q1 2021. It ended the quarter with about 400,000 businesses within 250 feet of Frontier fiber, and about 23,000 towers within 1 mile of Frontier fiber.

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— Jeff Baumgartner, Senior Editor, Light Reading