sign in sign up
<<
Home , Altice USA, EPB, Frontier Communications, Lumen Technologies, TDS Telecom, Ziply Fiber

INDUSTRY ANALYSIS

Fiber Trends: What 2021 Promises For the Industry

The 2021 broadband plans of incumbent telcos, independents, cable operators and electric co-ops will have a ripple effect on consumers and businesses.

By Sean Buckley / Broadband Communities

s the new year begins, Broadband the next decade if the telecom companies Communities is asking industry successfully execute on their plans,” said Acolleagues what will drive the broadband Jonathan Chaplin, equity analyst for New industry in 2021. If anything is clear about the Street Research, in a research note. “This would past year, the COVID-19 pandemic highlighted take FTTH availability from 25 percent to that broadband has gone from being a luxury to a 35 percent of households – we assume growth necessity for remote learning and remote work. in occupied households of about 1 percent.” Key to that is a fiber-based symmetrical Render predicts that the potential number of connection. Whether service is from homes that could be passed by FTTH will be an incumbent telco, a cable company, a even larger when taking into account that a host municipality or an electric cooperative, fiber has of emerging players are building out service to a ripple effect: It gives consumers higher speeds more homes. “There are more than 1,000 other and can serve as an economic development tool providers in the alone – some to attract and retain businesses. small, some medium, some large – that add RVA LLC noted that as of 2020, more than up to more than 10 million,” Render said. 54 million U.S. homes have been passed with “Tier-3 telcos, private competitive providers fiber, growing 10 percent over the previous year. both large and small, municipal providers, rural FTTH passes 50.6 million unique homes in the electric telcos, and cable MSOs are building out United States. Mike Render, president of RVA some FTTH.” LLC, noted that growth declined slightly in 2020 because AT&T met the 14-million mark TIER-1 TELCOS ADVANCE THE as part of its DIRECTV acquisition. FIBER BALL “In 2020, deployments were down a bit AT&T, and Lumen because larger providers, particularly AT&T, (CenturyLink) – companies hit their targets for meeting their FCC that collectively account commitment and paused,” he said. for most U.S. FTTH Nevertheless, New Street Research forecasts deployments – will lead that fiber-to-the-home (FTTH) deployments by FTTH growth. the top eight largest providers will ramp up in AT&T’s FTTH 2021 and beyond (see Figure 3). strategy is paying off: It “We now think that [homes passed] could had 273,000 AT&T Fiber John Stephens increase by 20 million to 60 million over adds in the fourth CFO, AT&T

22 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | JANUARY/FEBRUARY 2021 Fiber Broadband Now Passes Nearly 54 Million U.S. Homes Lumen and Verizon continue to be RVA Provider Study 2020 active. Verizon is focused on touting 5G, but is still growing Fios, adding Homes Marketed Homes Connected 95,000 Fios subscribers in the 60 fourth quarter. 50 53.8 M Homes Marketed “Total Fios 40 10% Growth in 2020 internet net additions of 30 22.5 M Homes Connected 95,000 was the 20 best fourth quarter 10 we’ve had since 2014 and reflected

0 '01 Sep '02 Sep '03 Sep '04 Sep '05 Sep '06 Sep '07 Sep '08 Sep '09 Sep '10 Sep '11 Sep '12 Sep 13 Sep' 14 Sep' 15 Sep' 16 Sep' 17 Sep' 18 Sep' Sep' 19 20 Sep' strong demand for our gigabit Matt Ellis offering,” said CFO, Verizon Figure 1. RVA LLC reports that as of 2020, more than 54 million U.S. homes were passed with fiber, Matt Ellis, CFO of growing 10 percent over the previous year. Verizon, during the earnings call. New Street Research forecast that “Verizon will continue to grow fiber quarter and more than 1 million for starting this year, from $2 billion to homes passed by [more than] 400,000 the full year. John Stephens, CFO $4 billion. homes per year.” of AT&T, told investors during the John Stankey, CEO of AT&T, As it sheds low-speed DSL company’s fourth-quarter earnings call told investors during the fourth- customers, Lumen added 46,000 new 1 that FTTH penetration rates are rising. quarter earnings call that “we’ll be Gbps fiber Quantum Fiber broadband “We had our best AT&T Fiber building somewhere around 2 million subscribers in the third quarter. Though fiber residential locations in that fourth-quarter net adds, even with it lost a total of 75,000 broadband neighborhood.” more challenges associated with the subscribers – a factor related to losing Chaplin agreed that AT&T could 95,000 20 Mbps and below subscribers pandemic, and penetration continues to ramp up deployments if it gets a and 42,000 20–99 Mbps subscribers – grow,” he said. “It’s now at 34 percent.” desired payback. He said that AT&T is it gained 62,000 100 Mbps subscribers. JPMorgan said in a report that to committed to 1 million a year but may “We win maintain growth, AT&T needs to accelerate in 2022 if it gets the returns double its fiber footprint over the next it hopes for in the markets where it has customers where five years by increasing fiber spending, deployed. we invest in fiber, simplify the experience and use micro-targeting in Diverse Types Of Fiber Providers Are Adding To The Total selecting the areas U.S. Cumulative Homes-Marketed By Provider Types we serve,” said Jeff RVA Provider Study 2020 Storey, CEO of Jeff Storey Lumen, during CEO, Lumen Tel - ILEC Tier 1 67.0% its third quarter Tel - ILEC Tier 2 & 3 12.2% earnings call. Private Competitive 8.5% Chaplin said, “We assume Lumen

MSO/ Cable 7.9% will expand sales within the 10 new markets it is targeting, which contain Municipality/ PUD 3.4% about 10 million homes.” Rural electric 1.0% TIER-2, TIER-3 TELCOS 0% 20% 40% 60% 80% 100% TYPE 2020 GROWTH DRIVERS STEP UP Rural Electric Very high Serving customers, Grid network operations, Protecting business, Subsidy Tel - ILEC Tier 2 & 3 High Finishing build, Serving customers, Protecting business, Subsidy Though not building at the same scale MSO/Cable Medium Overbuild ( and smaller players), Greenfields, Offloading heavy users as Tier-1 and rural and regional telcos, Private Competitive Medium Protect business (Wisps), Financial opportunity, Pushing industry () Municipality/PUD/ Related Utility Medium Economic development and retention/ Smart City/ 5G internet service providers Tel - ILEC Tier 1 Low/ Planning more Now clear that fiber protects the core business (WISPs) and electric cooperatives Figure 2. Tier-1 telcos (AT&T, Verizon, Frontier and Lumen) account for 67 percent of the FTTH build, are driving FTTH growth in less but Tier-2 and Tier-3 telcos have been very strong and added to the total FTTH market reach. populated markets.

JANUARY/FEBRUARY 2021 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 23 INDUSTRY ANALYSIS Verizon and AT&T reportedly account for Consolidated Communications, during the third-quarter earnings call. more than 30 million of the homes passed by Another Tier-2 telco ramping up FTTH is Frontier. As it moves through fiber; however, there are more than 8 million the Chapter 11 restructuring process, homes passed by smaller, mostly rural Frontier hatched a 60,000-home pilot FTTH plan. telecom companies. As part of its 2021 FTTH reinvestment initiative, Frontier has begun engineering for brownfield FTTH builds, which will upgrade Render said that diverse types territories. These Tier-2 providers will its existing copper network in of fiber providers are adding to the be joined by a host of Tier-3 telcos, select regions. total FTTH market reach. “While 67 municipalities and electric cooperatives. Frontier also is eligible to get more percent of the FTTH build has been “The eight largest FTTH providers than $370 million of FCC Rural Tier-1 telcos – AT&T, Verizon, Frontier will pass least another 20 million Digital Opportunity Fund (RDOF) funding over 10 years across , and Lumen – Tier-2 and Tier-3 telcos homes over the course of the next , , Connecticut, West have been very strong,” he said. decade.” Chaplin said. “Most of the , , and Chaplin agreed about Tier-2 and incremental build will come from the . Through its self-funding Tier-3 rural carriers’ role. smaller telcos, including Consolidated, modernization plan, Frontier has a “Verizon and AT&T account for Frontier, Lumen, TDS and others.” long-term target (within 10 years) to more than 30 million of the homes Consolidated set an aggressive pass more than 2.9 million homes passed by fiber; however, there are FTTH plan for northern New England with fiber. more than 8 million homes passed and other regions, leveraging its own Bernie Han, Frontier’s outgoing by smaller, mostly rural telecom capital and a $425 million investment president and CEO, said during companies that we tend to overlook,” from Searchlight Capital Partners. It the third-quarter earnings call that Chaplin said. “Roughly half of the plans to extend fiber services to 1.4 the FTTH service is attracting homes passed by smaller carriers were million consumers and small businesses. new subscribers. deployed by them, while the other half “We are embarking on a multiyear “While we are converting existing were built by Verizon as part of the investment initiative [in which] we copper customers to fiber, most of our initial Fios project and sold to them.” will upgrade [more than] 1 million early gains are coming from winning Consolidated Communications, addressable homes with fiber, enabling new customers,” Han said. “We , , us to provide service across all three plan to use the learnings from this TDS Telecom and Windstream have put customer channels and deliver revenue pilot program to better implement together plans to expand their FTTH growth,” said Bob Udell, CEO of our larger-scale build beginning in 2021 and beyond as we convert more infrastructure to fiber.” Chaplin said, “We have assumed NEW FTTH DEPLOYMENTS ANNOUNCED Frontier builds to the low end of Households in millions, 2020-2030 their range in our base case, but if they targeted the high end, there AT&T 3.9 could be another 6 million FTTH Verizon 2.8 homes passed.” 6.8 Other Tier-2 telcos, including Frontier Communications 2.5-9.0 Shentel and TDS Telecom, are no Windstream 1.5 less aggressive. Consolidated Communications 1.4 1.2 Shentel’s Glo Fiber initiative is TDS Telecom 0.1 focused on building out Virginia’s Shenandoah Valley. It passed about Total 20.1-26.6 9,200 new residential and small Source: New Street Research, Company Data business locations, with a total of 20,600 addresses constructed and Figure 3. FTTH will pass at least another 20 million homes over the course of the next decade. 22,300 passed overall.

24 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | JANUARY/FEBRUARY 2021 By the end of 2020, Shentel planned and Blacksburg, Virginia, which Shentel, during the company’s third- to pass about 27,300 new target homes. include approximately 13,500 quarter earnings call. By securing new Glo Fiber franchises in additional targets. TDS Telecom, which is building the cities of Frederick, Maryland, “Glo Fiber has approved franchise out fiber in its existing footprint and and Charles Town, , target passings of approximately in other territories as a CLEC, serves it added more than 15,000 new targets. 117,000 with the strong funnel of 280,000, or 34 percent, of its wireline Shentel also added three additional additional markets and our Edge service addresses with fiber. In its markets: Martinsburg, West Virginia; Out strategy heading into the fourth CLEC markets, TDS is seeing FTTH Lancaster Township, Pennsylvania; quarter,” said Jim Volk, CFO of take rates between 30 to 40 percent.

FTTH BUILDS BUOY BUSINESS SERVICES GROWTH

As service providers roll out FTTH, the networks can Stephens during the Morgan Stanley European Media, serve other purposes, such as providing wireless Tech and Telecom Conference. “So, I have a three-for- backhaul and business services. one in this integrated carrier environment that really Mike Render, president of RVA, said during the recent gives me a different opportunity than others.” Fiber Broadband Association webinar that business Smaller providers, and even municipalities that run services produce a large amount of for the their own broadband networks, also are seeing the value fiber they deploy. in using a fiber network to serve multiple purposes. “Fiber providers pass almost 4 million businesses and Chattanooga’s Electric Plant Board’s (EPB) fiber connect about 1.5 million,” he said. “This is important to network not only provides better residential broadband, the bottom line of the Tier-1 providers, which get more but also benefits businesses and the electric grid. than three times the revenue per customer, especially Dr. Bento Lobo, First Bank Distinguished because they are serving large enterprise customers.” Professor of Finance at the University of Tennessee- Chattanooga, found that 9,500 jobs were created over AT&T sees fiber creating a “three-for-one” revenue the past 10 years since EPB launched its fiber network opportunity. in Chattanooga. “I think about the fiber being part of my core “The fiber infrastructure impacted local economic transport network and serving business customers development in the form of business investments, and connecting to large business customers and new startups, real estate development, and taxes to small business customers, and then I think of it as an the extent of $1.4 billion,” Lobo said. “As much as $141 opportunity to connect the homes,” said AT&T CFO John million of downtown real estate development can be attributed to this fiber infrastructure.” Other communities, such as Wyandotte, Michigan, see a similar impact. Located in southeastern Michigan, Wyandotte operates Wyandotte Municipal Services, providing electric power through a municipal power plant, water service, and cable-based internet. Wyandotte plans to overbuild its cable network with fiber, giving nearly 13,000 homes and more than 700 commercial buildings access to 10 Gbps of internet, IP video and smart-home services. Paul LaManes, Wyandotte general manager, says the city’s plan calls for building out a medical campus that would run through Wyandotte and parallel to the Detroit River. “There are a lot of larger buildings being built on brownfield land that housed doctors’ offices that are part of the hospital, so this project is critical and is part of the city’s strategic economic development plan for More than half of U.S. businesses now have fiber available. Business the city,” he says. “There are several parties in the city services produce a lot of bandwidth for the fiber they deploy. that are going to be using what we are doing to attract Source: RVA LLC development and redevelopment in the city.”

JANUARY/FEBRUARY 2021 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 25 INDUSTRY ANALYSIS

“Our current Chaplin said these service providers was a standout, adding fiber plans include face challenges in serving rural areas 633,000 new subscribers, which LRG roughly 320,000 because they don’t offer the immediate said, “were more than in any quarter service addresses returns that come from larger urban in the past 15 years.” Charter and that will be built and suburban markets. also had sizeable gains over a multiyear “We would caution that plans during the quarter, adding 537,000 and period,” said Vicki announced by struggling or recently 29,000 customers, respectively. Villacrez, senior restructured wireline companies should However, the top telcos added about vice president of Vicki Villacrez, Senior be viewed differently from plans 210,000 subscribers in the third quarter. finance and CFO VP-Finance and CFO, announced by Verizon in 2006 and Chaplin said telcos’ copper-based of TDS, during TDS Telecom AT&T in 2016,” he said. “They are DSL losses are continuing to widen as the company’s entering markets that are for the most more families work and conduct school third-quarter earnings call. “We have part less attractive than markets entered at home. “Telcos are losing non-fiber completed construction of 40,000 fiber previously and lack the track record or broadband subscribers at a pace of close addresses in addition to the 40,000 the resources of those companies.” to 2 million a year,” he said, adding addresses we turned up in 2019 related that the losses are “accelerating at a to this program.” TELCOS’ NON-FIBER fairly alarming rate.” Kinetic by Windstream added LOSSES MOUNT But even in areas where telcos 53,000 broadband customers, putting By using their nearly ubiquitous HFC have launched FTTH, cable remains it well on track to meet its 2020 goal of plant to deliver up to 1 and 2 Gbps, a formidable competitor. Altice has 60,000 net adds. cable operators enjoy a lead over telcos seen higher broadband penetration Jeff Small, president of Kinetic in non-FTTH areas. According to than Charter and Comcast despite by Windstream, said in a release that Leichtman Research Group (LRG), the competing with Verizon Fios in New the company launched a “$2 billion largest cable companies added about York. Likewise, Charter reported initiative to continue growing our fiber 1.32 million subscribers for the third broadband subscriber growth as AT&T footprint and gigabit internet service.” consecutive quarter. deploys fiber in its footprint.

RETIRING DSL

When AT&T announced it would no longer accept new October 1, it ceded its historic properties to its DSL customers, it gave cable another opportunity to cable company competitors.” take market share in markets where AT&T does not offer Dawson suspects AT&T won’t be the only provider FTTH. The telco justified its decision because it offers to retire DSL. “AT&T is the first big telco to announce the consumers higher-speed FTTH and fixed wireless. end of DSL support, but it won’t be the last,” he said. “We are focused on enhancing our network with “I find it hard to think that Verizon won’t soon follow more advanced, higher-speed technologies [such as] now that AT&T has taken a public stance. CenturyLink fiber and wireless, which consumers are demanding,” management has made it clear that it would love to get AT&T said in a statement. “We’re beginning to phase out out of the copper business.” outdated services [such as] DSL, and new orders for the Though Verizon hasn’t signaled plans to shut off service will no longer be supported after October 1.” DSL, it has replaced copper with fiber in some areas. For AT&T added that “current DSL customers will be able instance, in an FCC filing, Verizon said it will “retire the to continue their existing service, or where possible, copper facilities at specified addresses in the fourteen upgrade to our 100 percent fiber network.” (14) , D.C. wire centers.” Doug Dawson, president of CCG Consulting, said in Meanwhile, Lumen separated the traditional copper a blog post that AT&T’s move is a blow to consumers network business into the CenturyLink brand. Industry in places where only cable is present. Customers might watchers say this could better position the company to see higher prices, poor network performance and sell the struggling copper assets. repair delays. Lumen hired financial advisers to help it decide on “Unless some other ISP is building fiber, you no longer any asset sale. “We’ve been open to looking at assets have a choice of broadband provider – it’s the cable like our consumer business,” said Lumen CEO Jeff Storey company or nobody,” he said. “When AT&T announced during the company’s first-quarter 2019 earnings call. “We that it is no longer connecting DSL customers as of have now engaged advisers to assist us in that review.”

26 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | JANUARY/FEBRUARY 2021 Though telcos set an aggressive “Similar to our rapid deployment strategy is Altice USA. During the FTTH plan, Chaplin said cable has of 1-gig across our national network third quarter, Altice USA reported that “plenty of time to respond to the in 2017, the beauty of 10G is that it’s the portion of new customers taking competitive threat.” extremely scalable within our existing FTTH in areas where it’s available is “Before the new deployments have network infrastructure,” said JR already at 44 percent. The company gained much traction, Altice should Walden, Mediacom CTO, in a release. ended the third quarter with more than have completed [its] own FTTH 16,000 customers and passed more deployment; DOCSIS 4 deployments CABLE COULD EYE FTTH than 900,000 homes with FTTH. should be well underway, and the three While DOCSIS gets cable higher Dexter Goei, public cable companies should have a speeds, will cable consider an FTTH CEO of Altice fully developed wireless offering with path? This question arises as more USA, noted, “Sixty their own networks deployed,” he said. consumers and businesses demand percent of our symmetrical bandwidth – a challenge fiber gross adds are CABLE PUSHES HFC’S for existing HFC plant that has been taking the 1-gig BOUNDARIES largely asymmetrical. product, which is a As they look to secure their broadband Chaplin said there are two higher proportion lead, cable MSOs have coalesced strategies: Altice is deploying FTTH in of customers Dexter Goei, around a transition path that enables the footprint, and others taking the 1-gig President, Altice gigabit delivery over existing HFC. are focusing on using DOCSIS 3.1, 4.0 on our HFC plant, While FTTH is being deployed and full duplex capabilities to deploy representing a in greenfield developments, cable higher-speed services on their existing great monetization opportunity.” operators are leveraging DOCSIS 3.1 cable plant. Regional cable operators will also and emerging DOCSIS 4. DOCSIS 3.1 “At some point in 10 to 20 years, have an FTTH role. The National increases prior HFC network capacity cable infrastructure will bring fiber to Cable Cooperative (NCTC), by more than 50 percent. Likewise, the home or fiber so close to the home which represents 700 smaller cable and DOCSIS 4.0 technology supports up to that we’ll call it fiber to the home,” he broadband operators, sees an eventual 10 Gbps downstream capacity and up said. “With all of the electronics in the path for smaller operators. to 6 Gbps upstream capacity, allowing last few hundred meters having been Rob Smith, senior director of for multi-gigabit services over existing removed, the path toward that will be procurement for the NCTC, says HFC networks. pretty gradual.” FTTH enables cable operators to Charter, for one, sees the potential He added that the near-term lower maintenance costs initially for to enhance network speeds. scenario will focus on DOCSIS greenfield deployments. “We’re continuously increasing the 3.1 and 4.0. “The cable industry is “As those members’ cable plants capacity in our core and hubs, and fairly confident it will get to 10G age, they are looking at greenfield areas augmenting the network to improve symmetrical over the course of the next to deploy technology that will give speeds and performance,” said Tom three to four years,” Chaplin said. “If them the features they need without Rutledge, CEO of Charter, during its getting DOCSIS 4.0 deployed in the worrying about constant network third-quarter earnings call. “In the field takes too long, the impetus to upgrades,” he said. “Some of our near term, we have a large opportunity bring fiber closer to the home might members want to consider fiber to the to improve throughput and latency by kick in, but if cable operators can push home since it’s relatively future-proof.” continuing to use already-deployed DOCSIS 4.0 and full duplex, most of In brownfield areas, cable is DOCSIS 3.1 technology. By allocating them will go down that path.” considering a similar path. more plant spectrum to DOCSIS 3.1 Render posed the idea that cable “Other cable operators are deploying IP services, we have the ability to offer could use FTTH to upgrade power FTTH in brownfield areas to play a symmetrical gigabit-plus speeds.” users. defensive role,” Smith said. “When a Rutledge added that DOCSIS “There’s not a lot of overbuilding disruptor like a WISP or an overbuilder 4.0 will give it enough room for 10G yet, but many cable companies are comes into their territory, they will speeds. “The DOCSIS 4.0 specification deploying FTTH in a lot of greenfield determine if PON is the right move.” v allows for multiple paths through markets,” he said. “FTTH can be 10-gig and higher speeds, including used by cable companies to conduct Full Duplex DOCSIS and Extended offloading in certain places where a Sean Buckley is the executive editor of Spectrum DOCSIS,” he said. system is being destroyed by a heavy Broadband Communities. He can be Similarly, Mediacom, in partnership user in an area; they can opt to build reached at [email protected]. with CableLabs and NCTA, conducted out FTTH to that person.” its 10G smart-home field trials in The only multiple service operator Ames, . (MSO) pursuing a large-scale FTTH

JANUARY/FEBRUARY 2021 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 27