Frontier Communications expects to begin offering a “linear video” service this year, said John Jureller, Frontier executive vice president and chief financial officer, at the Goldman Sachs 24th Annual Communacopia Conference yesterday. The event, which took place in New York City, was also webcast.
Advances in compression technology and in server architecture and technology have now made such an offering more feasible, he told investors at the event and on the webcast.
Frontier has offered video in areas that it acquired from AT&T and Verizon using platforms developed by those companies for some time, so apparently Jureller’s reference was to areas outside of those territories. Outside the former AT&T and Verizon territories Frontier until now has relied on a partnership with Dish Network for video.
Having its own linear video offering will better position Frontier to offer triple play services, Jureller said. “It will be great from a customer [acquisition] and customer retention perspective,” he commented.
Frontier will be one of the largest recipients of funding through the government-run Connect America Fund program. The company recently agreed to accept $283 million annually in funding for six years to bring broadband to rural areas of its service territory where broadband is not available today – and according to Jureller, that funding is $133 million more than what the company has been receiving in traditional voice-focused high-cost Universal Service Fund support, which will be phased out as CAF is phased in.
Jureller said Frontier won’t be contributing additional capital of its own to meet its build-out requirements but said that instead the company expects the CAF funding to cover those costs. The revenue impact could be $100 million annually, based on the company’s 670,000-household build-out requirement and an average speed of 12 Mbps and assuming some customers also will take the company’s digital security offering Frontier Secure, Jureller said.
The company also stands to get an even bigger CAF windfall assuming its planned acquisition of Verizon operations in California and Texas moves ahead as planned. Verizon accepted about $50 million annually in CAF funding for those territories on the condition that the Frontier deal moves ahead. That funding would be applied toward bringing broadband to 100,000 households in the two states, Jureller said.
Frontier expects to do a minor CAF build in 2015, spending approximately $50 to $60 million, with deployment accelerating in 2016 and 2017, he added.
Jureller noted that Frontier anticipates getting take rates in the high-20% to high-30% range within a few months of launching broadband service in areas that previously lacked that capability.