Consolidated ramps up fiber connected towers to 2,700, but price compression remains an issue

Now that Consolidated Communications has begun to integrate FairPoint into its broader fold, the service provider is ramping up the reach of its fiber network to more wireless towers but is still facing demands from its wireless customers to realign contracts.

Bob Udell, CEO of Consolidated Communications, told investors during its fourth-quarter earnings call that despite a challenging pricing environment, the service provider continues to connect more wireless operator towers to its fiber network.

Udell Consolidated
Bob Udell

“We continue to work through that squeeze from a price compression perspective but are doing so in a way that allows us to acquire new sites,” Udell said during the earnings call, according to a Seeking Alpha earnings transcript. “We signed actually 68 sites in January in addition to the 50 plus that we have in the pipeline from fourth quarter.”

RELATED: Consolidated’s Udell: We see opportunities to improve broadband penetration in FairPoint’s markets

In January, Consolidated signed a deal to equip 68 new towers in Maine, replacing circuits that were previously supplied by a cable operator. Additionally, this wireless operator ordered upgrades to 114 towers in Minnesota and Illinois.

After completing its latest wireless backhaul sale in January, the total number of connected towers Consolidated has under contract had increased to over 2,700.

Udell said that the demand from wireless operators for additional capacity could help to mitigate the pricing compression issue.

“In terms of how far through that price compression impact, I think we're in the seventh or eighth inning,” Udell said. “We have some things still to work through in 2018. But I believe, we've got enough momentum in new opportunity to offset that. I would see it being locally relatively flat in terms of impact.”

Metro Ethernet rising

Regardless of the pricing issues, Consolidated’s commercial and carrier data and transport service revenue rose 1.4% or $1.2 million during the fourth quarter, reflecting growth in data and transport services like metro Ethernet and voice services.

Data and transport services were $84.7 million, up year over year from $49.3 million while voice services were $55.5 million.

Metro Ethernet and cloud are two key contributors to Consolidated’s data business revenue mix, rising nearly 7% and 10%, respectively.  

“The main drivers in data and transport are the Metro Ethernet focus and that being our lead product in our consultative sales strategy,” Udell said. “With higher cloud adoption we've seen continued momentum in Metro Ethernet.”

During the quarter, Consolidated secured several MPLS, cloud and disaster recovery contracts. This included a new 20-site MPLS network in Minnesota, data center sales in Kansas and Northern New England, and sales of its cloud secure and cloud disaster recovery services.

But large businesses are only one element that Consolidated plans to emphasize in upcoming quarters. The service provider is adding new resources to support its small to medium business (SMB) customer base.

“We see great opportunity to provide more value to SMB customers who benefit directly from the speed increases and ultimately drive increased ARPU, reduced churn and win back of market share,” Udell said.

Enhancing New England’s capabilities

In tandem with increasing consumer broadband penetration in the former FairPoint’s Northern New England territory, Consolidated will ramp up its new region’s business services capabilities.  

The service provider plans to offer New England-based businesses a series of premise hardware virtualization and DDoS mitigation services that solve data security and business continuity challenges.

Among those services is its virtual customer premises equipment (vCPE) offering, marking the service provider’s movement toward network functions virtualization (NFV) for business customers. vCPE is available now in Maine, New Hampshire and Vermont.

Being a fully managed solution, FairPoint manages all routing components, along with service upgrades and maintenance. Because the service incorporates redundancy and built-in geographical diversity, the provider claims there’s no downtime with vCPE service delivery. vCPE also provides service level assurance-backed, dedicated symmetrical Ethernet services.

“In addition to upgrading broadband speeds and overall investments in the network, we're expanding and enhancing our commercial products and services,” Udell said. “We recently announced the expansion of enterprise business services across Northern New England, including premise hardware virtualization which is a cloud-based routing solution that provides scalability and built-in geographic diversity and benign service mitigation product that solves data security and business continuity challenges for our customers.”

Besides the vCPE product, Udell said, “We are also launching our suite of cloud services MPLS and SD-WAN in Northern New England during the second quarter of 2018.”