Telcos Escalate Pressure on Cable with Ongoing FTTH Builds

Telcos may still be trailing cable operators in the broadband race, but their ongoing FTTH builds could help narrow the divide. 

  • Broadband Competition

Telcos may still be trailing cable operators in the broadband race, but their continuous FTTH builds could help narrow the subscriber divide. 

Traditional telcos are at a crossroads. As more customers want higher speeds, this group is moving to deploy fiber to the home (FTTH) across select markets as their traditional DSL and POTS voice base dwindles. This is being driven on two sides: Tier-1 telcos and Tier-2 telcos.

The big three--AT&T, Verizon, and Lumen—are all seeing growth in fiber-based broadband. Tier-2 telcos include a diverse mix of players in rural and secondary markets. Like the Tier-1 telcos, several Tier-2 telcos have also expanded their FTTH footprints.

Jonathan Chaplin, Managing Partner of New Street Research,

“Fiber assets are likely to escalate, and that’s going to be a growing source of pressure for cable operators,” he said during the recent "Unpacking the Controversies in Telecom & Cable” webinar.

Look at the chart below to see how telcos performed during the quarter. Broadband Communities developed these rankings from the information in service providers’ earnings reports. 

Provider Total Broadband Subs Subs Added/Lost Broadband Revenue
AT&T 14.2M 289K fiber adds $2.3B
Verizon  6.8M 98K Fios $2.89B
Quantum Fiber (CenturyLink) 4.6M -77,000 $1.38B
Frontier 2.79M -9,000 $243M
Windstream  1.15M 15K (not reported)
TDS Telecom 523K 9,200 $162M
Cincinnati Bell  439K 1,200 (not reported)
Consolidated  391K -2819 $69M
Shentel  116K 4K $57.9M

Tier-1 Fiber Growth Continues

Though telco penetration of fiber-to-the-home (FTTH) subscribers is still dwarfed by cable, it’s hard not to notice the progress Tier-1 and Tier-2 telcos are making with subscriber penetration into the third quarter. Consider AT&T and Verizon.

During the company's earnings call, Pascal Desroches, CFO of AT&T, told investors that most of the fiber customers it added were new to AT&T.

“We had our highest-fiber gross adds ever, and we continue to win share wherever we have fiber,” he said. “We added 289,000 fiber customers in the [third] quarter, and more than 70 percent of fiber net adds are new AT&T broadband customers … this gives us great confidence as we continue to build out our fiber footprint.”

Likewise, Verizon snapped up 98,000 new fiber subscribers.

Another notable move came from Lumen. The telco reached a deal to sell off part of its copper and fiber local business in 20 U.S. states to Apollo Funds in a deal expected to close in the second half of 2022.

Lumen had about 2.5 million locations enabled with FTTH within the 16 states it retained and will continue to operate at the end of the third quarter. Lumen typically enabled 400,000 locations per year, and it expects that pace will continue in the fourth quarter.

Jeff Storey, president and CEO of Lumen said that the company plans to ramp its FTTH build. “As we accelerate our investment in Quantum Fiber, in 2022, we expect to ramp that enablement pace to [more than] 1 million new locations, on our way to hitting a run rate of 1.5 million to 2 million enablements per year as we exit 2022,” he said. “When deploying Quantum Fiber, we typically expect penetration rates of 40 percent or better, with an average build cost of less than $1,000 per location-enabled.”

Tier 2 Telcos, Competitors Progress with Fiber

Tier 2 telcos continued to make progress during the third quarter. While they serve markets that are

Frontier led the pack, adding 185,000 new fiber locations during the quarter. This brings year-to-date new homes passed with fiber to nearly 450,000. At the same time, Frontier added 29,000 new FTTH subscribers.

Nick Jeffrey, CEO of Frontier, said the FTTH gains were “nearly a fivefold increase over the same period a year ago.”

He noted that “most of our fiber broadband at this quarter was new to Frontier, demonstrating our ability to win new customers.”

Other providers like Windstream, Shentel, and Cincinnati Bell continue to expand their FTTH networks by partnering with local communities.

Windstream, which added over 15,000 FTTH providers during the third quarter, has increased partnerships with states and communities to expand rural broadband for unserved and underserved areas. It also expanded gigabit internet connections to more than 105,000 new locations in a $2 billion capital network investment program.

Likewise, Shentel, which added 2,100 new Glo Fiber customers during the quarter, executed 17 new Glo Fiber franchise agreements like Frederick, Maryland, and others in 2021, adding 160,000 target passings for a total of over 304,000 franchise approved passings. In all, Shentel’s broadband homes and businesses passed grew sequentially 17,000 to about 296,000.

Cincinnati Bell, a private company, has been engaging in various public-private partnerships with communities within Ohio and Kentucky. For example, Cincinnati Bell announced earlier this year that it would expand its fiber network in three northern Kentucky counties--Campbell County, Kenton County, and Boone County—to serve all 207,000 consumer and business addresses in those counties with fiber-to-the-premise gigabit Internet in the next 24-36 months.

Another provider worth noting is Consolidated. In July, Consolidated announced it would bring fiber internet services to 122,000 homes and small businesses in the first half of 2021, setting the company on its way to complete 300,000-gigabit-speed fiber connections by the end of the year. Network builds are also underway in California, Illinois, Maine, Minnesota, New Hampshire, Pennsylvania, and Vermont.

Bob Udell, CEO of Consolidated, said during the third-quarter earnings call that the telco “upgraded 97,000 passings to fiber Gig capable service in the recent quarter and completed 219,000 upgrades year-to-date.”

He added that the telco would surpass its FTTH targets for 2021.

“We are on track to exceed the aggressive plan we set of 300,000 fiber upgrades for this year,” Udell said. “These network upgrades are the path forward for growth and to pick the first phase of our transformation, which is just beginning to take shape.”

For TDS, the fiber expansion strategy is also centered around a multi-year vision. The telco is focused on extending fiber into its existing incumbent telco markets and expanding into new markets like Wisconsin, Idaho and North Carolina, and Montana.

Vicki Villacrez, CFO of TDS Telecom, told investors during the third-quarter earnings call that expanding its fiber deployment program “significantly advances our goal to bring state-of-the-art broadband capability and competition to more growing communities.”

“As a result of this strategy, 40 percent of our wireline service addresses are now served by fiber, which is up from 34 percent a year ago,” she said. “This is driving revenue growth while also expanding the total wireline footprint eight percent to 891,000 service addresses.”

Additionally, TDS Telecom can deliver 2 Gbps speeds in its Spokane, Washington, and Meridian, Idaho markets. Villacrez said, “we’ll launch two gig products in all of our new fiber expansion markets.”

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