Tier-1 and Tier-2 Telcos Battle Cable Broadband with Fiber as DSL Dwindles

Tier 1 and Tier 2 telcos find growth in the fourth quarter and in 2020 as they expand fiber availability and respond to new demands set by the COVID-19 pandemic. 

  • quarterly stats

After years of declines, traditional Tier-1 and Tier-2 telcos finally gained some broadband ground in 2020. The top wireline provider added about 40,000 subscribers in 2020 – compared with a loss of about 590,000 subscribers in 2019.

Bruce Leichtman, president of LRG Research, said in a recent report that 2020 was a year of broadband growth for Tier-1 and Tier-2 telcos. “Telcos had positive net annual broadband adds for the first year since 2014,” he said.

In this report, we cover two major types of providers:

Tier-1 Telcos: 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.

Tier-2 Telcos: 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 been expanding their FTTH footprints.

Look at the chart below to get a glimpse into how this segment of providers performed during the fourth quarter. These rankings were calculated from information in service providers’ earnings reports. 

Provider Total Broadband Subs Subs added/lost Broadband Revenue
AT&T 15.4M 273K* $3.1B
Verizon  7.13M 92K Fios $2.75B
Lumen 4.54M 54K** $731M
Frontier 3.1M -111,000 $834M
Windstream  1.1M 60K (added for the year 2020) not reported
Consolidated  792K 11 $66.3M
TDS Telecom 493K**** 5K+ $153M***
Cincinnati Bell  436K 1,600 $267M
Shentel  103K***** 18K $53.7M
  * lost 242K IP non-fiber and 33K DSL subs    
  ** lost 19K lower speed subs    
  *** includes  283,900 wireline, 209,400 cable    
  ***** includes cable, DSL, FTTH and broadband wireless  

Tier-1s Shed DSL, Enhance Fiber

A big theme for large telcos, such as AT&T and Lumen, was the decline of low-speed DSL subscribers as they expand fiber to more homes.

After a slight pause in 2020, AT&T has committed to build fiber to an additional 3 million-plus locations across more than 90 metro areas, and Lumen has 675,000 FTTH customers and has enabled 2.4 million sites.

AT&T and Lumen lost legacy DSL subscribers during the quarter. Specifically, AT&T lost 242,000 IP non-fiber and 33,000 DSL subscribers and Lumen lost 19,000 low-speed subscribers.

It should be noted, however, that AT&T and Lumen did report gains in FTTH. AT&T added 273,000 fiber subscribers and Lumen added 54,000 subscribers who purchased speeds of 100 Mbps and higher. Meanwhile, Verizon added 92,000 new Fios internet subscribers during the fourth quarter.


However compelling Tier-1s’ FTTH plans are, New Street Research said in a report that “we expect to see very little impact from new fiber deployments in 2021 and only a slight impact in 2022.”

Tier-2 Diverse Transitions

Tier-2 telcos continue to make progress with their broadband builds. Providers in this segment are building broadband with both fiber and cable. Shentel, TDS Telecom and Windstream are also expanding their respective cable footprint holdings with DOCSIS 3.1 technology.

Frontier and Windstream – two telcos reemerging from Chapter 11 protection –have set FTTH as a major priority.

Frontier has set a new focus on gaining 9,000 consumer fiber net adds in the quarter, up from 7,000 fiber net adds in the third quarter. The telco said that this was the sixth straight quarter for positive fiber broadband net adds and it attributed its strong growth to the fact that it introduced 1 Gbps services in 2019. Frontier ended 2020 with 3.3 million consumer customers and had an average revenue per customer of $87, down from 3.4 million customers in the fourth quarter of 2019.  The company also said it lost 31,000 consumer DSL customers in the fourth quarter, up from 21,000 in the third quarter.

Windstream Kinetic added 60,000 new broadband customers in 2020, meeting its goal for expanding the customer base. Kinetic also extended its gigabit services and now reaches 589,000 locations across its footprint. Given the challenges of rolling out broadband, Windstream is developing what it calls “creative partnerships” to bring fiber internet service to the most rural customers.

Though FTTH is a key priority in Windstream’s next-gen broadband plans, Windstream is just as keen on enhancing its cable holdings. The provider expanded cable gigabit service to 70,000 residents of Georgia.

Consolidated, TDS, Cincinnati Bell and Shentel are progressing with FTTH and cable broadband.

Consolidated’s fourth-quarter broadband additions remained flat overall. However, the telco has launched plans to bring fiber to 1.4 million incremental homes, 1 million of which are in the northern New England footprint. To achieve these goals, the service provider entered into an agreement with Searchlight Capital Partners, which agreed to invest $425 million in the company. It is also partnering with local communities, such as Eastbrook, Maine, to bring fiber broadband to nearly 500 municipal locations, connecting residences and businesses. 

Cincinnati Bell, which was purchased by Brookfield to become a private company, saw FTTH gains in both Cincinnati and Hawaii. In Cincinnati, FTTP internet subscribers totaled 239,900 at the end of the fourth quarter, adding 20,700 customers during the year. FTTP is available to approximately 500,000 addresses, more than 60 percent of Greater Cincinnati.

In Hawaii, FTTP internet subscribers totaled 59,800 at the end of the fourth quarter, adding 4,400 customers during the year. FTTP is available to 184,300 addresses in Hawaii.
 
TDS Telecom connected more than 67,000 addresses to its network, bringing total fiber addresses to 307,000 in existing and what it calls “growing expansion markets.” TDS Telecom is being no less aggressive to enhance its cable network, which now has about 450,000 service addresses. By upgrading the HFC network to DOCSIS 3.1, TDS Telecom now provides 1 Gbps speeds in several markets.

Broadband was clearly a key driver for Shentel during the fourth quarter, adding a combined 18,800 high-speed data customers. Cable was the clear leader in the provider’s broadband results. Shentel Cable added more than 14,600 new subscribers because of what CEO Christopher French said was “strong demand for faster data speeds at a fair value from our customers who are increasingly working and learning from home.”

The rural provider is also making progress with its Glo Fiber FTTH and broadband wireless initiatives. During the fourth quarter, Shentel added 4,000 net Glo Fiber customers in its first full year of operations and signed up about 100 net Beam fixed wireless customers, which was launched in October.

To keep up with the Q4 broadband earnings, make sure to check out our total broadband report: From AT&T to Shentel: Tracking the Top 17 Residential Broadband Service Providers.

 

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