The average revenue per user (ARPU) for Frontier broadband customers is up, and according to CEO Nick Jeffery, that has occurred, in part, because of the company’s pricing strategy. The company now has two price points in fiber markets – 500 Mbps and 1 Gbps – and Jeffery’s future strategy involves establishing what he calls a “speed/pricing ladder” that could include 10 Gbps service in the future with relatively simple network upgrades.
Jeffery made his comments at an investor conference today, noting that when he became CEO a year ago as Frontier was about to emerge from bankruptcy, he was perplexed by the pricing that was in place.
“It was really complicated and hard to understand,” he said, which created “internal complexity and customer confusion.”
In addition, low-speed service was priced at a premium in comparison with the competition, while high-speed service was priced at a discount to competition.
The company’s two price points in fiber markets now are $49.99 monthly for 500 Mbps service and $79.99 for 1 Gbps service.
The 500 Mbps service provides “a really attractive on-ramp for customers” and “we also have a logical upsell to gigabit service,” Jeffery explained. As more customers upgrade to gigabit service, ARPU increases. He declined, however, to reveal what percentage of customers take gigabit service.
2 Gbps and Beyond
Frontier’s plan to offer 2 Gbps service next year is part of the speed/pricing ladder plans.
Noting that Frontier is a “resurgent company” and “attacker brand,” Jeffery said the 2 Gbps offering will “plant a flag in the ground” and help “regain our position as an innovator.”
The 2 Gbps offering will “meet nascent customer demand” and will help “pull through” sales of 1 Gbps service.
“So, we’re building a speed/pricing ladder,” Jeffery said.
As for a potential future 10 Gbps offering, Jeffery noted that “the Frontier network is already end-to-end 10 gig-capable.”
One of the “great attributes of fiber,” he said is that “it’s relatively low-cost and quick to upgrade to higher speeds, unlike some cable competitors that have to do more heavy engineering and re-investment to be able to do that.”
While much of Jeffery’s discussion at the investor conference was a rehash of strategic plans announced earlier this year, he did provide some additional details.
Key to Frontier’s strategy are ambitious fiber plans. The company already has mapped out aggressive fiber deployment plans, including making fiber available throughout most of its local service territory in what it calls “Wave One” and “Wave Two.” Plans for Wave Three remain fuzzy, but Jeffery revealed a bit more of the company’s thinking there.
The areas referred to as “Wave Three” include those where it is more difficult to cost-justify fiber deployment and, according to Jeffery, the company is studying several options there, including a divestiture, a joint venture, or undertaking deployment with the help of some of the funding that the government has allotted for broadband over the last year.
Frontier’s plans call for the company to reach an average 45% take rate in fiber markets. Asked to back up that forecast, Jeffery noted that at one time, Verizon had take rates exceeding 45% in some of the markets that it sold to Frontier. Although those take rates had dropped below 45% when Frontier made the purchase, Jeffery argued that Frontier should be able to regain the same share that Verizon once had.
Jeffery made his comments at the UBS Global TMT Virtual Conference 2021. A replay is available at this link.