Frontier CEO says most of its fiber net adds are coming from cable

Frontier Communications was one of the lucky few operators to add broadband subscribers in Q2 2022 and during an investor conference this week CEO Nick Jeffrey revealed it has cable to thank for a large part of its success. He noted that while cable has historically had a very strong position in the broadband market, it is facing two key speed bumps that could help give fiber the upper hand.

According to Jeffrey, Frontier has three main sources of broadband growth: move activity, copper to fiber migrations and winning share from cable. “It’s very, very clear that we are taking the majority of our customers from cable. No doubt about that,” the CEO said. “It’s clear that when fiber turns up in your neighborhood, it’s the best alternative. So, we’re doing really, really well against cable.”

Indeed, Frontier’s 54,000 fiber net additions outpaced its copper losses to leave it with 8,000 broadband net adds in Q2. That compared to losses of 21,000 broadband subscribers at Charter Communications and 40,000 at Altice USA. Comcast failed to add any new broadband customers in the same period.

As Jeffrey and his executive team have worked to turn the company around following its emergence from bankruptcy last year, the CEO said Frontier has gaining back penetration in markets it previously ceded to cable.

In its base fiber markets – which include about 3.2 million fiber passings – Jeffrey noted penetration historically sat around 50% and has begun to creep back up toward that level. In Q2, penetration in those markets reached 42.6%, with that figure up 20 basis points sequentially. “There’s no reason why it shouldn’t reach our terminal projection rate of 45% or higher,” Jeffrey said.

Frontier is also seeing good momentum in its new fiber markets, with penetration coming in right in the middle of its projected 15% to 20% range at the one-year mark.

While Jeffrey said cable has historically done an “amazing” job building a strong market position, he noted it is currently facing two key obstacles: the decision whether to upgrade to DOCSIS 4.0 at great expense or switch to fiber and the unraveling of its legacy bundles.

“Fiber is a fundamentally better product than cable. And that means that at some point cable’s going to face a very difficult choice. Either upgrading to DOCSIS 4.0, which is a hugely capital-intensive program that will take many years to roll out at scale and even when it does the end product is still worse than fiber is today,” he said. “The other route that cable may well go – and some have – is to change horses completely and start building fiber networks.”

Jeffrey added the cable’s previously successful cable-linear TV offering is beginning to fall apart as more consumers switch to streaming offerings. While cable has begun to transition to fixed-mobile bundles, Jeffrey said the jury is still out on whether those will deliver the same level of success.

As to where Frontier expects to see pressure itself, Jeffrey said he believes “it’s inevitable” that fixed wireless services will “nibble at our copper base” in more rural areas. However, like Frontier’s cable rivals, he questioned the long-term viability of the service.