An Ignoble Experiment

Verizon (NYSE: VZ) may have halted further builds of its FiOS network into new markets, but where it is converting problem copper-based customers to the fiber-based service it's finding that customers like purchasing speeds of 50 Mbps and higher.

Shammo (Source: Verizon)

As of the end of September, the service provider converted almost 250,000 homes to fiber, adding that it is on track to exceed its target of 300,000 migrations this year.

By the end of the year, Verizon forecasts that it will have less than 1 million remaining customers served by copper in FiOS markets.

"As we do these migrations of DSL and voice customers to FiOS we're migrating them to the broadband product and TV is lagging six to nine months behind that," said Fran Shammo, EVP and CFO for Verizon, during the Wells Fargo 2013 Tech, Media & Telecom Conference. "What we're also seeing is less people are taking the linear TV product and they really want the broadband speeds."

Shammo added that "if you look at the demographics people aged 30 and younger don't care if they have linear TV and are looking at getting their content through other means."

The desire for higher speeds was illustrated in the third quarter, where over 40 percent of its existing FiOS customers subscribed to a Quantum tier, which provides speeds of 50-500 Mbps.

Customers are using the in-home Wi-Fi network that connects to the FTTH (fiber to the home) network to access their various wireless devices such as tablets and smartphones. As they add more devices they need higher speeds to accommodate their usage.

"If you're running water with five people you're eventually going to slow down the hot water and it's going to run cold," Shammo said. "The same thing happens when you're running five wireless devices over your Wi-Fi network, and therefore customers are buying up in speeds to bring in more speed to their own home so their Wi-Fi usage gets more speed."

While FiOS was built to deliver both broadband and TV, Shammo realizes that more of its new and existing customers are increasingly accessing over the top (OTT) content.

"We invested in FiOS for broadband and TV, but we're smart enough to realize that the ecosystem will eventually change and people are bringing in content over the top," Shammo said. "We want to make sure we have the fastest and best broadband connection, which we believe we do because we're the only ones that have fiber to the home besides Google (Nasdaq: GOOG) in certain areas, but we know over the top is going to be more popular."

Verizon has also become an over the top player via its Verizon Digital Media Services, which was just launched to content providers, and its joint partnership with Redbox.

"We're playing in the over the top arena, we're prepared for it and we'll react the way we'll need to," Shammo said.

For more:
- hear the webcast

Read more about: Fran Shammo, FTTH
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2. Consolidated's Childers: We're ready to look at other fiber provider acquisitions

By Sean Buckley

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Consolidated Communications (Nasdaq: CNSL) may still be integrating SureWest into its fold, but according to CFO Steve Childers the service provider is hungry to pursue new deals that allow it to diversify its revenue streams.

Speaking at the Wells Fargo Securities Tech, Media & Telecom Conference, Childers said Consolidated is interested in looking at other service providers that could potentially enhance the reach of its fiber network to deliver metro Ethernet and fiber to the tower (FTTT) services to wireless operators.

"We are looking at assets that would help us continue to accelerate the diversity path and add some top line growth and those are probably based on the fiber side or potentially on the cable leveraging the experience that we're getting with our Kansas City assets," Childers said. "For the right size and the right valuation we would not hesitate to go into another state.

Fiber-based services, including fiber-based wireless backhaul and retail metro Ethernet, were key revenue drivers for Consolidated in Q3 2013.

The service provider reported that metro Ethernet rose 40 percent year-over-year. Being a traditional ILEC, Consolidated can accommodate the needs of larger businesses that want a fiber-based connection and SMBs with Ethernet over Copper (EoC).

"We really think being able to deliver Ethernet now in all of our markets on copper or fiber is really one of the key components of how we're going to deliver business solutions going forward," Childers said. "Over the long term metro Ethernet is going to have more growth opportunities than fiber to the tower."

While it sees great potential with retail metro Ethernet, it is seeing positive results with its wireless backhaul business. During the quarter it added service to 68 new tower sites has 180 other towers under contract.

"The fiber to the tower opportunity is not going to last forever, but we don't think we're at the end of it yet," Childers said. "It's probably more mature in the more metro markets than what we are seeing in the rural areas we serve."

Childers added that some of the wireless carriers "are still doing their first wave of build outs there so we still think there's some opportunity while it's there."

For more:
- listen to the webcast

Read more about: Consolidated Communications
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3. Birch introduces 3 broadband speed tiers for SMBs

By Sean Buckley

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Birch Communications is now offering its small and medium-sized business customers three new speed options, including 12, 18, and 24 Mbps options, as a way to extend higher speeds to a segment whose options typically consist of expensive T-1 or cable modem services.

Business customers will have the option of purchasing the new speeds on either a standalone basis or as part of a bundle. They will also continue to offer their entry-level speeds of 1.5, 3 and 6 Mbps.

Before the debut of these tiers, Birch had primarily offered four data speed options: a 1.5 Mbps T-1 for just data, an integrated voice and data T-1, and two bonded options of 3 and 6 Mbps. It also offers a 3 and 6 Mbps DSL service offering.

Birch said that new options are about broadening its appeal to a larger set of SMB customers.

"We designed these new speed tiers to extend our current broadband offering so that we would have the right speed for every type of business," said Christopher Ramsey, senior vice president of sales and marketing for Birch, in a release.

While the service provider said the new speed tiers will be available across its footprint, it did not reveal pricing for the service, which will likely be delivered via IPDSL via a third party.

Laura Wagner, Marketing Manager for Birch Communications told Fierce Telecom in an e-mail that the company is "also actively engaged in developing/evaluating additional higher broadband speeds over copper, including Ethernet over copper, over our facilities network."

The timing of this service comes as Birch continues to expand through various acquisitions, including its recent deal to purchase Ernest Communications in June. Earlier, Birch completed what it said was the last phase of its multi-year network upgrade and expansion project where it upgraded 43 central offices, for a total of 290 COs.

For more:
- see the release

Updated article on Nov. 13 with more information about technology used to deliver service and future service plans.

Read more about: Business Services
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4. Alteva's unified communications services drive revenue rise to $7.5M

By Sean Buckley

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Cloud services provider Alteva (NYSEMKT:ALTV) reported that unified communications (UC) revenues jumped 12 percent year-over-year to $4 million, contributing 54 percent of the company's total revenues.

Overall company revenues were $7.5 million, up 7 percent from $7.1 million in Q3 2012. Likewise, gross profit increased by 21 percent to $4.4 million in the third quarter of 2013 from $3.6 million for the same period in 2012.

Alteva said that the improvement in gross profit is the result of two factors: an increase in UC segment revenues and reducing costs by selling the USA Datanet assets and a workforce reduction in the Telephone segment.

"While we expect our UC revenues to increase at an annual growth rate comparable to that of the overall UC market, we are committed to this growth with an emphasis on profitability and margin enhancements," said David Cuthbert, Alteva's president and CEO, in the earnings release. "Our sales and marketing efforts are successfully positioning Alteva as a premium service provider for middle market business customers."

Driven by the addition of new clients and an increase in services to existing customers, the UC segment contributed approximately 54 percent of revenues in the third quarter of 2013 as compared with 51 percent for the same period in 2012.

Telephone revenues from its existing rural telco business were $3.5 million, up slightly from $3.4 million in the same period a year ago.

The service provider said that telephone revenues were "slightly higher as a result of an increase in access lines rates and modest growth in broadband Internet services revenues, partially offset by access line losses."

Shares of Alteva were listed at $7.93, up 17 cents, or 2.19 percent in Wednesday morning trading on the New York Stock Exchange.

For more:
- see the earnings release

Earnings summary: Wireline telecom earnings in the third quarter of 2013

Read more about: Unified Communications
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5. Google Fiber begins lighting up customers in Provo

By Sean Buckley

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