Telcos Fiber Transition Faced Challenge from FWA, Dwindling Copper Base in Q3 2022

While the top telcos—AT&T, Lumen and Verizon—continue to see gains with their respective fiber broadband builds, they continue to bleed legacy copper customers.

The top wireline telcos lost about 135,000 broadband subscribers in the third quarter of 2022. This contrasted with the nearly 40,000 net adds in the same period a year ago.

Specifically, there’s a continued discrepancy between copper losses and fiber gains. Wireline telcos gained about 550,000 fiber subscribers during the quarter and had nearly 685,000 non-fiber net losses.

Bruce Leichtman, president and principal analyst for Leichtman Research Group, noted in a recent quarterly broadband report that there were “net losses for wireline phone providers.”

Doug Dawson, president of CSG Consulting, said in his Pots and Pans column that despite the copper losses, the investment in fiber creates a platform for future gains. “The underlying story for the big telcos is that they continue to add customers on fiber,” he wrote. “While many of the customers in those counts were converted from DSL to fiber, the fiber growth bodes well for the future of the telcos.”

Another exciting factor affecting cable and traditional wireline operators is the growing presence of fixed wireless access (FWA).

Broadband fixed wireless’ influence continued to be felt in the third quarter as the two largest providers—T-Mobile and Verizon saw gains during the quarter. T-Mobile added 578,000 new fixed wireless subscribers to end the quarter with a total of 2.1 million subscribers.

Likewise, Verizon added 342,000 new fixed wireless subscribers, ending the quarter with a total of 1.1 million subscribers.  “Over the past year, fixed wireless services have accounted for nearly 80 percent of the approximately 3,260,000 net broadband additions,” Leichtman said.

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

AT&T, Lumen, Verizon Continue Transitions

The transition from lower DSL copper-based networks to fiber is a crucial battleground for the largest telcos. In the near term, these providers will continue to

AT&T grew in fiber, adding 338,000 net new AT&T Fiber customers. This marked 11 straight quarters with more than 200,000 net adds. However, the telco lost 57,000 non-fiber subscribers during the quarter.

Still, Pascal Desroches, senior EVP and CFO told investors during its third-quarter earnings call that AT&T Fiber subscriptions are driving up broadband revenue and customer ARPU. 

“Broadband revenues grew 6.1 percent due to fiber revenue growth and higher broadband ARPU, driven by a customer mix shift to fiber,” he said. “Our fiber ARPU was $62.62, and we expect that to continue improving as more customers roll off legacy promotional and simplified pricing constructs.”

A key focus for AT&T is transitioning customers from copper-based DSL services to fiber. The service provider has set an aggressive pace to extend fiber service to more than 30 million locations by the end of 2025.

During the past nine quarters, Desroches said it has “advanced its 4.3 million AT&T Fiber subscriber base to now approaching 7 million.”

Likewise, Lumen is progressing with its Quantum Fiber FTTH builds. The telco added 31,000 Quantum Fiber customers, improving from last quarter due to what CFO was part of its “pivot to a market-based approach and adjust our go-to-market strategy.” Lumen has 889,000 Quantum Fiber subscribers, with 813,000 subscribers within the 16 retained states.

During the quarter, Lumen enabled 210,000, with approximately 195,000 of those enabled locations in its 16 routine states, bringing the total enabled locations in the retained states to 3 million as of the end of September.

However, Lumen’s fiber builds were impacted by permitting delays and labor issues.

“Enabling locations is hard work, and the permitting process and third-party labor supply have been a significant headwind for us this year,” they said. “While we are not satisfied with our enablement pacing year to date, it is important to note that we established a new factory internally as we pivoted from micro-targeting to a market-based approach. This includes an end-to-end process from planning to engineering, construction, and finally enablement.”

Verizon may be more vocal about its broadband wireless prowess these days, but Fios continues to see growth. During the third quarter, Verizon added another 61,000 new customers.

“Our Fios team had another good quarter here despite a low-mover environment,” said Matt Ellis, EVP, and CFO of Verizon. “We're very focused on broadband through fixed wireless access, but our Fios business continues to perform very strongly and add customers to that network.”

Regional Providers Evolve Fiber Play

Like their Tier 1 counterparts, Tier 2 telcos continue to evolve their last-mile networks. These providers are continually migrating their networks to fiber and gaining customers.

At the top of the list is Frontier, which has continued to progress with its broadband fiber builds. The telco announced in November that it reached the halfway point to its initial target of building fiber internet to 10 million locations by the end of 2025. The company started its current fiber build program in late 2020, reaching 5 million total locations.

During the third quarter, Frontier added 66,000 fiber broadband customers, resulting in fiber broadband customer growth of 15.8 percent compared with the third quarter of 2021.

Consolidated, a telco that has grown its footprint through acquisitions that gave it a presence in places like Northern New England, saw fiber broadband growth in the third quarter. The telco added 12,100 fiber subscribers and achieved what it says was three times “fiber subscriber growth year over year leading to positive net broadband adds for the second consecutive quarter.”

It also upgraded 116,000 locations, bringing its total 1 Gbps-enabled fiber locations to nearly 1 million.

Bob Udell, CEO of Consolidated Communications, said in an earnings release that it is on track with its fiber expansion plans.

“We are on track to complete at least 400,000 fiber location upgrades this year and reach 1 million total fiber locations," he said. "We remain committed to our five-year plan to bring FttP to 70 percent of our addressable market.

Likewise, Shentel is progressing with its Glo Fiber product.

Glo Fiber data net adds were approximately 4,000, up 90.1 percent over the third quarter of 2021 and 19.3 percent over the second quarter of 2022. Shentel’s broadband revenues grew 7.7 percent to $62.4 million due to an 8.7 percent increase in residential and SMB revenue. The telco said this was due to a 127.6 percent and 3.8 percent increase in Glo Fiber and incumbent cable broadband data RGUs.

Windstream is pursuing its FTTH growth on several fronts. In November, it announced that it would expand its 2 Gbps service as part of Kinetic’s multi-year $2 billion capital investment to deploy fiber across its 18-state footprint. Also, the company is crafting public-private partnerships with cities, counties and other groups to drive fiber deeper into the network faster.

Windstream reported that consumer revenue rose three percent year-over-year. It sequentially added approximately 33,000-gigabit broadband subscribers and more than 100,000-gigabit broadband subscribers year-to-date. As of the end of the third quarter, over 1.3 million total locations now have access to FTTH services.

Finally, TDS Telecom reported that it continues to expand its FTTH footprint, which grew 7 percent yearly. The telco now serves 1.5 million service addresses across its markets. During the quarter, TDS Telecom added 33,000 marketable fiber service addresses to its footprint.

TDS Telecom has a clear focus on network expansion. It began offering FTTH service in Billings, Montana, and Green Bay, Wisconsin, and announced fiber expansion into 18 other Wisconsin communities. In total, today, we have nearly 100 communities in our fiber expansion program at various stages of development.

In its cable markets, TDS has upgraded its plant to offer 1 Gbps services across its footprint and is deploying fiber in what it says are “opportunistic areas.”

Michelle Brukwicki, senior vice president of Finance and CFO of TDS Telecom, told investors during its third-quarter earnings call that it is “directing our investments to expand our fiber footprint in new and existing markets and to enhance our product offerings, which are “driving revenue and broadband connection growth.”

Like other telcos and cable operators, the telco was not immune to supply chain and labor issues.

“We continue to face challenges that present cost pressures and stress our ability to meet our address delivery timelines in the short term; we are actively managing and mitigating the impacts of inflationary increases, labor shortages and supply chain challenges,” said “And with our actions, we are well-positioned to achieve our longer-term strategic plans.”