Consolidated’s Udell: We’re well positioned to address 5G, small cell backhaul

Consolidated Communications said that its growing fiber network and wireless backhaul skills will enable it to play a large role in the wireless industry’s evolution to 5G and small cells.

Bob Udell, CEO of Consolidated Communications, told investors during its first-quarter earnings call that its pending FairPoint acquisition will enable to scale its dark and lit fiber solutions for wireless operators.  

“When you look at our markets, Pittsburgh has a geography that lends itself to small cells and Kansas City has some density,” Udell said during the earnings call, according to an earnings transcript. “This has really given us the chance to show that we can do everything from a hybrid managed bandwidth to a dark fiber and radiohead engineering and cabinet deployment for a wireless partner that needs to fix an issue quickly.”

But providing fiber solutions is just one part of the equation. The service provider will also provide a number of turnkey solutions such as small cell siting and installation for wireless operators deploying small cells.

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"As 5G evolves, we think we're really well positioned with the turnkey or an a la carte small cell solution for our wireless partners,” Udell said. “The added scale that comes certainly with some of the geography in the Northern New England area positions us in an excellent spot to capture some of those opportunities.”


In particular, Consolidated could play a part in Verizon’s ongoing 5G network rollout as a backhaul partner in the Tier 2 cities the wireless operator rolls out services. Such a thesis makes sense as Consolidated is already one of Verizon’s partners.

“This combination that will give us scale to play larger with Verizon as they want to build out this 5G network will allow us to extend our fiber footprint,” Udell said. “We're continuing to participate in the technology forums that allow us to stay close to those decisions, but I do think it's going to be an evolution versus a 2-year, 3-year phenomenon and it will recharge the carrier space.”

FairPoint provides backhaul scale

When Consolidated completes its acquisition of FairPoint, the service provider will have an even larger fiber footprint from which it can offer fiber-based services for tower and small cell applications.

FairPoint announced in its first-quarter earnings release that for the remainder of 2017, it expects to add over 200 additional fiber-to-the-tower Ethernet connections bringing the total count to more than 2,100 tower Ethernet circuits. The service provider noted that 25 additional circuits were completed in the first quarter of 2017.

"Well, scale matters. We're seeing that from a wireless backhaul, for example. You have the big wireless providers moving to unlimited plans. They put in thousands of sites over the last 15 years," said Udell. "And whether they're at the end of a term or midterm, they're leveraging that scale and those distributed sites into a stronger contract opportunity, if you're willing to renegotiate.

“We're very, very encouraged by the robustness of FairPoint's fiber network,” Udell continued. “If you look at what's happened to bandwidth costs since 10 years ago, where a megabit was maybe $50, and now in 2017 its 80 cents per megabit, you can see the trend is accelerating on bandwidth pricing.”

But even before Consolidated completes the FairPoint deal, the service provider’s carrier channel is seeing increased demand for small cell and dark fiber solutions.

Today, Consolidated has about 1,300 towers under contract, 150 of which are under construction.

“We have had some early successes in our North region with small cell densification network in two urban markets, which we deployed,” Udell said. “We are active with a number of RFPs and are in an excellent position in the markets within our service area.”

Udell added that “despite this positive momentum, we have been experiencing continued bandwidth price compressions most visible in our carrier channel, and this has resulted in some contract revenue write-downs and midterm renewals to secure more sites and longer term extensions.”

Ethernet, cloud drive commercial segment

Consolidated’s dedication to expanding its fiber network is helping it drive up commercial and carrier revenues, which totaled $76.8 million in first quarter, up slightly year-over-year from $76.7 million in 2016.

In the commercial segment, Consolidated said growth was driven by a 24% increase in Metro Ethernet units, particularly for multi-site businesses.

Udell noted that 40-50% of its Ethernet growth is from customers migrating from TDM-based T-1 circuits.

“It allows us to extend the relationship with the customer and get a little more wallet share as we layer on the cloud service and data center,” Udell said. “In the expansion areas as we pass new buildings and extend our fiber network, we're seeing a pretty good impact of combining our fiber-based Metro Ethernet with the cloud portfolio.”

The service provider is also seeing growing interest in its cloud product suite, including its Cloud Secure, Cloud Wi-Fi and Unified Communications offerings.

“Cloud is an important part of our sales conversation, and customers appreciate our expertise and expanded commercial product portfolio in our effort to solve their business problems,” Udell said. “Cloud Services have grown 10% since our mid-2016 launch crossed all markets.”

Here’s a breakdown of Consolidated’s other key metrics:

Consumer: In the consumer segment, broadband revenues, which includes VoIP, data and video, were $51.7 million, down from $54.6 million in the first quarter of 2016. However, voice services revenues were $12.9 million, a decline from $14.5 million.

Financials: Consolidated’s total first-quarter revenue was $169.9 million, up from $188.8 million in the first quarter of 2016, which included $11.4 million of revenue from businesses which the company divested in 2016, the equipment sales business and the Iowa ILEC property.