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Frontier Communications Still Losing Telephone Subscribers, But Adds Data Customers

Phillip Dampier May 7, 2009 Frontier 6 Comments

FrontierFrontier Communications reported its 1st quarter 2009 results this morning, demonstrating a growing proportion of its overall business is coming from data products and services.  Frontier is an independent telephone company serving rural and suburban communities across the United States, with its largest market being Rochester, New York.

CEO Maggie Wilderotter put a positive spin on an otherwise lackluster report, showing the company’s revenue had declined when compared with last year’s same quarter results.

“I am very pleased with Frontier Communication’s 2009 first quarter results bolstered by our “Rolling Thunder” promotional campaign,” said Maggie Wilderotter, Frontier Communications Chairman and CEO.

“Frontier surpassed 600,000 High-Speed Internet customers and as of today has surpassed 150,000 DISH Network video customers. Our first quarter High-Speed growth was the best since the first quarter of 2008 and our first quarter DISH video growth was equal to all video subscribers added during the entire year of 2008. We took market share from our cable competition and we improved our customer churn. Access line losses improved for the third consecutive quarter, Wilderotter reported.”

Revenue for the first quarter of 2009 was $538.0 million compared to $569.2 million in the first quarter of 2008, a 5 percent decrease. Revenue declined primarily as a result of customers disconnecting wired telephone lines, partially offset by a 7 percent increase in data and internet services revenue. The company has been increasingly relying on data products and services to make up for the steady loss in wired telephone customers.

Frontier Communications relies on copper wiring for telephone and data services, and a satellite reseller agreement with DISH Network to deliver video programming.  In Rochester, the company continues to be an also-ran for high speed data and video products, as many consumers prefer higher speeds available from Time Warner’s Road Runner product, and don’t want satellite equipment on or near their home.  But Frontier retains a healthy advantage in serving telephone customers, particularly among older residents.  Frontier’s challenge remains the changing demographics of their customer base.  Younger residents are accelerating their reliance on cellular phones or Voice Over IP services for telephone calls, and are not subscribing to traditional wired telephone service.

Frontier’s ongoing erosion of their core business – providing wired phone lines, has become a constant theme in their financial reports over the past several years.  Company officials attempt to spin the problem by noting that line erosion, or service disconnects, is decelerating.  They also blame economic conditions and foreclosures for some of their disconnects, something many treat skeptically.  Frontier executives recognize their survival depends on a broadening of their product lines to stay relevant in the telecommunications marketplace.

Frontier embarked on a strong promotion earlier in the quarter internally dubbed “Rolling Thunder.”  Customers in many Frontier service areas received mailers promoting one year of DISH Network service for $9.99 per month, a wired telephone line with unlimited long distance calling bundled with popular phone features, high speed Internet DSL service, free access to Frontier’s wi-fi network, and a free Dell netbook in return for a two year service contract and a discounted bundle price.  The package was popular among lower and middle income residents in Rochester seeking the netbook promotion, and also a less expensive video package, at least for the first 12 months.

Wilderotter called the promotion the most effective the company had ever run, with limited “retailiatory” marketing from Time Warner or other competing providers.

Frontier’s conference call to investors also touched on the company’s plans to apply for broadband stimulus money to build out their data network in more rural service areas, to continue to leverage their wi-fi product, which is now being included at no additional charge for all Frontier high speed Internet customers, and to test and deploy new set top boxes to combine DSL and DISH Network to deliver video content to subscribers’ television sets.

That last point is ironic, considering the company continues to insist in its Acceptable Use Policy that 5GB of broadband usage per month is the right amount subscribers should avoid exceeding.  They will assuredly do just that playing just one or two on-demand movies delivered by the DSL-DISH Network set top box.  It’s another rhetorical nail in the coffin for any usage cap argument coming from Frontier, particularly when the company’s claims that network growth may impede its ability to serve its customers will be challenged like never before from this box!

Audio from this morning’s conference call, along with individual clips of interest, will be forthcoming shortly.

Currently there are 6 comments on this Article:

  1. Tim says:

    They really need to get with the program and somehow update their lines. They need to install fiber and better start doing it now. Any data provider needs to get updated to the 21st century if they want to survive nowadays. Verizon fired back at Cablevision for topping their 50Mb offering by saying that the user will never use that much bandwidth or that most places don’t support that kind of bandwidth. I think Cablevision is just thinking ahead how things will be. It amazes me how much lack of foresight is streaming around about bandwidth. Bandwidth is only going to grow. It will never shrink and it is sheer folly to think that it should or will. If you think in that respect, then you better find another way to make a buck because you will be forced out of the market and gone the way of the dinosaur.

    http://www.cdfreaks.com/news/15881-Verizon-fires-back-at-101Mbps-Internet.html

  2. Smith6612 says:

    I guess Frontier has seen some light from backing off from the caps. Sure, they’re losing phone customers but that’s how many of the telephone companies have been simply due to Cellular phones and those cable companies. Just as an FYI, newer DISH Network receivers already have an Ethernet port on the back of them which are in fact active (I have this hooked up at my Frontier connection location). The ViP 655 HD receivers use that Ethernet port for 1080p Streaming of Video on Demand. A 5GB cap wouldn’t let you watch ONE movie if it’s in 1080p…

  3. Jim says:

    What happened to the “we’re dropping the cap”. It’s still in the TOS so any other talk is just lip flapping.

    I did like the 70% margin in the Frontier recording…. I’d love a 70% margin on product I sell.

    But that cap is most decidedly STILL in place.

    • Smith6612 says:

      Not sure if it is still in place or not, as last month on my Frontier line I used over 200GB and I didn’t hear a peep from them. This month that line is already at 15GB.

    • The “cap” has been dropped at least until 2010. The legalese is still there. But now that we have additional ammunition from their “set top box” announcement, which I can assure you will eat data like there’s no tomorrow, the moment they start toying with a cap again, we’ll be slamming them big time for creating their own problem AND providing a box to customers that specifically requires far more bandwidth than they would have likely used before.

      There is a reason why I wade through these investor conference calls. You really gather quite a lot of things to tuck away and throw back in their face if/when they get greedy.

  4. Uncle Ken says:

    The comment section on this site topic is very hard for me to follow. (Im sure it’s me) KB vs. MG vs. GB and a cross between speed, capacity, and amount allowed. Yes I can do the math. The fact it is still in the TOS and is a binding thing. Audio words or some internet clip are not. I know when I first got RR I had to sign real papers…. not a pledge on some stupid email. Is it still in the TOS today? If it is your bound by that not an audio promise. What about the people that signed up before? Do the get new hard copy papers of the new TOS to sign? Mr. Smith HELP ken

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