Nick Jeffery will be appointed president and CEO of Frontier Communications effective March 1, 2021, succeeding Bernie Han.

Frontier Communications today announced a “holistic transformation” of its business from a copper-based landline company to a fiber to the home internet service provider, with plans to eventually offer fiber to the home service to nearly six million residential customers, approximately three million already served by fiber networks acquired from Verizon and AT&T.

As part of that transformation, Frontier today announced yet another new CEO, Nick Jeffery, will take over from current CEO Bernie Han in March 2021. Jeffery was CEO of Vodafone UK, one of Great Britain’s largest mobile operators. Jeffery agreed to replace Han, who became CEO and president only a year ago, in return for a $3.75 million signing bonus, a $1.3 million annual salary, and eligibility for more than $8 million in annual bonuses and equity awards.

“I am honored to be appointed Frontier’s next CEO, and I am excited to lead the company in its next phase,” Jeffery said in a statement. “Frontier owns a unique set of assets and maintains a competitive market position. My immediate focus will be on serving our customers as we enhance the network through investments in our existing footprint and in adjacent markets while building operational excellence across the organization.”

Frontier has been in Chapter 11 bankruptcy since April 2020 and is being reorganized to eliminate about $10 billion in debt and another billion annually in debt-servicing interest payments. Frontier’s bankruptcy plan will give four investment firms — Elliott Management, Franklin Mutual, Golden Tree Asset Management, and HG Vora, effective control over Frontier. The four are reportedly behind the decision to install Jeffery as Frontier’s new CEO to protect their financial interests. He has a reputation of repairing damaged customer relationships and improving sales, while also being willing to cut costs and simplify services sold to customers. Jeffery will also be joined by former Verizon executive John Stratton, who has accepted a position of executive chairman of the board. Jeffery is expected to lead the company out of bankruptcy sometime in early 2021.

Frontier has repeatedly promised to retire significant parts of its copper wire network and expand fiber to the home service, but over the last decade most of Frontier’s fiber footprint has been acquired from other phone companies, notably Verizon and AT&T. Most of Frontier’s own fiber expansion has come from installing service in new housing developments and in rural areas where it received taxpayer or ratepayer-funded subsidies to expand service to unserved areas.

In a conference call held earlier today, Frontier executives signaled the company will not hurry to deliver fiber upgrades to Frontier customers. In some of the most opaque language ever uttered in a Frontier conference call, company officials warned some Frontier customers may actually find themselves sold to another service provider. The company plans to divide its copper customers into two categories: those destined to be a part of Frontier’s fiber future and those left stuck on copper or sold off after Frontier “strategically reevaluates individual state operating performance employing a virtual separation framework” — all to “optimize our returns on invested capital.”

Frontier emphasizes its planned total of “nearly 6 million fiber-enabled households” will come to fruition “over the long term.” In 2020, the company plans to bring fiber service to approximately 60,000 new households in six states, many in new housing developments Frontier was already expected to serve.

Frontier’s modernization plan will likely sell unprofitable service areas and selectively upgrade many customers over a ten-year period to fiber optics. (Source: Frontier Communications)

“We have completed construction of about 60% of our target locations and continue to ramp quickly and remain on target to reach our year-end goals,” said Han. “Although, it is still very early in the process, our offer is very appealing to customers. While we are successfully converting existing copper customers to fiber, most of our early gains are coming from winning net new customers. Early penetration and ARPUs are performing at or above targets.”

In 2021, the company announced it had “planning and engineering” underway for unspecified fiber to the home service upgrades in copper service areas “in select regions.” But most of Frontier’s fiber upgrades will take place over the next decade. Specifically, Frontier plans to wire up to 2.9 million homes with fiber using a combination of its own money and subsidy funds provided by the FCC. Frontier’s new owners have signaled they will not go out on a limb to finance rapid fiber upgrades, and you better live in a state where fiber upgrades are being given priority.

“Of the 2.9 million new fiber homes passed for the modernization plan, roughly 2.6 million of them are in […] California, Texas, Florida and Connecticut and […] West Virginia, Illinois, New York and Ohio,” Han noted.

“The modernization plan is expected to be completely self-funding […] and has been developed with strict return on capital hurdles, allowing for very attractive returns,” said Robert A. Schriesheim, chairman of the Frontier’s Finance Committee of the Board. “The expected shift in the subscriber base from the modernization plan will increase the percent of fiber subs from 45% today to 87% over the plan horizon and will drive a transformation of business mix that is expected to result in 75% of revenue coming from fiber products in the long-term as compared to about one-third today.”

Shaw is western Canada’s dominant cable operator.

While American cable companies have cut back investing in their high-speed broadband services as competition languishes, a price and service war has erupted between western Canada’s biggest cable and phone companies, with consumers winning the benefits of increased investment and fierce competition.

Shaw Communications, the largest cable company west of Ontario, has just upped the ante with the introduction of 1,500/100 Mbps unlimited internet service for $127 (all prices in $US) a month. The new speed tier, known as Fibre+ Gig 1.5,  is delivered over Shaw’s existing DOCSIS 3.1 cable broadband network, and is already available in Winnipeg, Calgary, Edmonton, Vancouver, and Victoria, and is gradually expanding outwards to smaller cities, including Banff in Alberta, and Burnaby and Dawson’s Creek in British Columbia. Shaw also offers a traditional gigabit unlimited plan in most of its service area, offering 940/25 Mbps for $88/month. Both high-speed plans include a two-year contract.

“The hard work and investments we’ve made in building, upgrading and expanding our Fibre+ and Fast LTE networks and services — nearly $22.8 billion over the past seven years — allow us to deliver these ultrafast speeds to western Canadians over our existing infrastructure,” said Zoran Stakic, chief operating officer and chief technology officer. “These ongoing investments are the foundation to providing our customers service beyond one gigabit today and ultrafast speeds to more places in the future.”

“We know that there’s a growing segment of people — including heavy gamers, content creators and super streamers — who need access to ultrafast internet services, and that need has only increased during the pandemic as many of our customers manage the reality of having multiple people working from home and sharing bandwidth,” said Paul Deverell, president of Consumer, Shaw Communications. “With the launch of our Fibre+ Gig 1.5 product, we are delivering the speeds and capacity needed by today’s super users and data-heavy customers, while confirming Shaw’s position as the western Canadian leader in gigabit speed deployment.”

Telus is western Canada’s largest phone company.

Shaw’s increased investment is designed to fend off its chief competitor, Telus. In 2020, Shaw discovered a growing number of its broadband customers defecting in favor of Telus, the region’s telephone company. Telus is expanding its own high-speed offering, which relies on fiber to the home service. In some areas, Telus offers 940/940 Mbps service on a two-year contract for $76 a month and a 1,500/940 Mbps plan for $127 a month — which matches Shaw’s price but vastly exceeds Shaw in upload speed. To further sweeten the deal, Shaw gives its premium-speed internet customers discounts on Shaw Mobile services — including the exclusive rate of $25 per month on Unlimited Data wireless plans for Shaw Fibre+ Gig 1.5 and Fibre+ Gig internet subscribers.

Shaw claims its infrastructure has made it possible to offer gigabit service to at least one million more western Canadians than Telus. Telus has been gradually scrapping its legacy copper wire network in favor of fiber optics, but will likely take over a decade to complete the transition in significantly populated communities.

While Canadian cable companies are pushing DOCSIS 3.1 to the limit, American cable companies have taken it easy this year, reducing estimated budgets for network investment, returning to data caps, and putting further upgrades to next generation DOCSIS 4.0 on hold for at least a year or two. With AT&T and Verizon distracted and focused on spending billions to build 5G wireless networks, both companies have stopped significant expansion of fiber-to-the-home service for residential customers, reducing competitive pressure on cable operators. This reduced competition allows cable companies an opportunity to raise rates on broadband customers, and Charter Spectrum has done exactly that, announcing a general $5/month increase on residential internet service to take effect by the start of 2021.

Customer satisfaction with fiber to the home internet service is so high, one industry leader says the only time customers cancel service is if they move or die.

Carl Russo, CEO of internet equipment vendor Calix, says phone companies are relying on fiber optic networks to turn their struggling businesses around except in the most rural areas of the country.

“Fixed wireless will sometimes be the right choice and Calix’s software supports it. But our telco customers with fiber will lose very few customers. If they provide strong, customer-focused service, no one will have a reason to switch,” Russo told Dave Burstein’s Fast Net News. “It’s only a slight exaggeration to say customers only churn if they move or die. This is provided the service provider chooses to ‘own’ the subscriber experience. A service provider that invests in fiber but doesn’t further invest in an excellent subscriber experience is still vulnerable.”

Russo argues that fiber to the home service has been the right choice for most of the developed world for several years now, at least where there is hearty competition between providers.

Where competition is lacking, phone companies often still rely on archaic DSL service, which is increasingly incapable of competing with even smaller cable operators. Phone companies are now up against the wall, forced to recognize that existing, decades-old copper wire infrastructure cannot sustain their future in the broadband business. Companies that drag their feet on fiber upgrades are bleeding customers, and some companies are even in bankruptcy reorganization.

Russo

Fiber networks are future-proof, with most offering up to gigabit speed to consumers and businesses. But upgrading to 10 Gbps will “add little to the cost” once demand for such faster speed appears, Russo said.

Fast Net News notes that France Telecom, Telefonica Spain, Bell Canada, and Telus have all proven successful using fiber to the home service to compete with cable companies to market internet access. Companies that approved less costly fiber to the neighborhood projects that relied on keeping a portion of a company’s legacy copper network, including AT&T, BT in the United Kingdom, and Deutsche Telekom in Germany, have had to bring back construction equipment to further extend fiber optic cables to individual customer homes — a costly expense.

Even public broadband projects like Australia’s National Broadband Network (NBN) paid dearly for a political decision to downsize the NBN’s original fiber optic design to save money. The NBN was hobbled by a more conservative government that came to power just as the network was being built. Many NBN customers ended up with a more advanced form of DSL supplied from oversubscribed remote terminals, which delivered just 50 Mbps to some subscribers. For-profit companies have also been pressured to keep costs down and limit fiber rollouts by Wall Street and investors. Verizon FiOS is the best known American example, with further network expansion of the fiber optic service essentially shelved in 2010 at the behest of investors that claimed the upgrades cost too much.

Underfunded upgrades often bring customer dissatisfaction as speeds cannot achieve expectations, and many hybrid fiber-copper networks are less robust and more subject to breakdowns. In the United Kingdom, BT’s “super fast” broadband initiative has been a political problem for years, and communities frequently compete to argue who has the worst service in the country. BT’s fiber-to-the-village approach supplies fiber internet service to street cabinets in smaller communities that link to existing BT copper phone lines that are often in poor shape. Customers often get less than 50 Mbps service from BT’s “super fast” service while a few UK cable companies are constructing all-fiber networks in larger cities capable of supplying gigabit internet speed to every customer.

Calix is positioned to earn heavily by selling the equipment and infrastructure that will power future fiber network upgrades that are inevitable if companies want to attract and keep customers. A new round of federal rural broadband funding will help phone companies pay for the upgrades, which means many rural Americans will find fiber to the home service in their future.

The death of DSL?

If your local phone company does not offer fiber-to-the-home service, it risks seeing its market share as a broadband competitor drop to zero, according to new research from Wall Street analyst firm MoffettNathanson.

As the cable industry prepares to deploy DOCSIS 4.0, capable of much faster upload speeds in the gigabits and downloads as fast as 10 Gbps, the future of telephone companies that have under-invested in their networks for years is dire. The research firm’s “Equilibrium Forecast” sees DSL’s market share in areas where cable broadband is available dropping to zero. Phone companies that have invested in fiber half-measures, including fiber to the neighborhood, IP-DSLAM, and VDSL technology that traditionally delivers internet speed between 25-75 Mbps are not far behind. Only true fiber-to-the-home service stands a chance at protecting phone company broadband market share.

“DSL [and] mid-tier [fiber/copper combinations are both] obsolete,” researchers said in a private note to investors. “Broadband is increasingly a two-horse race between cable and telco fiber-to-the-home service, where it exists.”

The COVID-19 pandemic has only increased problems at the nation’s legacy phone companies, as customer losses accelerate in favor of cable company delivered internet. In the first quarter of 2020, cable company broadband sign-ups increased 122% compared to the same quarter last year, while phone companies said goodbye to at least 65,000 subscribers. Last year during the first quarter, telcos managed to add 20,000 customers.

Leichtman Research Group reports that most customers are looking for stable and reliably fast internet service, and phone company DSL delivers neither. Having a speedy and dependable connection has become crucial as tens of millions of Americans work from home to avoid contracting the illness. Sharing that internet connection with kids staying home from school quickly caused a spike in upgrade orders.

“The increased level of usage was enough to convince many customers that they needed higher speeds to handle the number of simultaneous users in their home,” MoffettNathanon wrote.

Many phone companies lacking fiber were unable to deliver on upgrades, and customers that could went shopping for alternatives. At the same time, large DSL providers like Frontier Communications and Windstream have become mired in bankruptcy and have been losing residential customers for years. MoffettNathanson told its investor subscribers it was time to declare DSL effectively dead as a competing technology, with fiber service variants like U-verse and other flavors of VDSL near-dead.

“As with legacy DSL, it is increasingly clear that this segment is simply not competitive anymore. Equilibrium market share in this cohort, if one looks out far enough, is 100/0.”

MoffettNathanson expects cable operators will achieve an 85% market share for broadband service in markets where their chief competitor is a phone company yet to provide fiber-to-the-home service. If phone companies do not embark on immediate fiber upgrades, the damage to their market share could be permanent, especially after DOCSIS 4 arrives, according to the researchers, because the newest cable broadband platform may be able to erase fiber’s speed advantage.

Even with the threat of COVID-19 and a virtual nationwide work-from-home initiative, the new owners of Frontier Communications’ network in Washington, Oregon, Montana and Idaho are moving rapidly to repair persistent network issues, create a backup network, and lay the foundation to bring fiber to the home service to 85% of its customers over the next three years.

Ziply Fiber of Kirkland, Wash., formerly known as Northwest Fiber, acquired the Frontier Communications service areas in the Pacific Northwest just as Frontier itself was on the verge of declaring bankruptcy. It will waste little time upgrading Frontier’s copper wire network to get fiber service to customers fast.

“After Frontier bought Verizon’s landlines and FiOS networks in Washington and Oregon in 2010, it felt like the last decade was a phone company driving in neutral,” said Dale Prescott, a FiOS customer in Washington State. “You could feel Frontier never wanted to spend any money out here. It was like they were a caretaker of Verizon’s network, and while we got some service improvements here and there, Frontier also took away a lot too.”

Service reliability suffered, especially in areas that remained served by copper over the last decade. Customers reported lengthy outages and waiting times for repairs, and DSL speeds were actually reduced in some areas because deteriorating network infrastructure could no longer support earlier, faster speeds. In a decade of service, Frontier only managed to provide fiber connections to about 33% of its customers, the vast majority of it acquired from Verizon.

“Frontier never invested much in its network, and what it did invest seemed mostly to keep the lines from falling off the poles,” Prescott said. “Businesses got slightly better service when Frontier boosted its fiber capacity, primarily to serve commercial customers. But if you lived in the sticks, your service got worse over time, not better.”

Ziply Fiber plans to change that experience with a promise to regulators to spend about $500 million overhauling Frontier’s network in the region. Most of that spending will be devoted to upgrading customers to fiber optics. Just a few weeks after closing on its acquisition of Frontier landlines, Ziply told residents in 13 communities to expect fiber upgrades that began this spring. The majority long suffered with Frontier DSL, often at speeds as low as 3 Mbps.

Among the first towns to get fiber service are Kellogg, Moscow, and Coeur d’Alene — all in Idaho. Work has already commenced and is expected to be finished by fall. Ziply wants to keep construction costs as low as possible, so it intends to do aerial deployment of fiber by wrapping the optical cable around existing copper wire telephone cables already on the pole. This process, known as “overlashing” will simplify installation by not requiring additional space to place fiber cables next to existing telephone wiring or going to the effort of removing the existing copper wiring, which raises costs.

Overlashing has met with some controversy, however. Telephone companies are strongly in favor of allowing the process for optical fiber installation because they rarely need permission or costly permits from utility pole owners, often electric utilities. Opposition comes primarily from some electric companies, which claim overlashing can make existing installations “unsafe” by placing too much weight on existing wiring, which may have been installed decades earlier. Those electric utilities also stand to make money from forcing companies to seek new permits for placing fiber on poles, and that permission does not come free of charge.

Fiber customers will be able to select internet plans up to 1,000 Mbps. Enhanced DSL service in some areas is available at speeds up to 115 Mbps, but most of these service areas will probably be served by fiber to the home service, eventually.

Ziply Fiber Upgrade Projects (May, 2020)

• Washington—Anacortes, Kennewick, Pullman, Richland and Snohomish
• Oregon—Coquille, Coos Bay, La Grande, North Bend
• Idaho—Coeur d’Alene, Kellogg, Moscow
• Montana—Libby

To further speed fiber upgrades, Ziply acquired Wholesail Networks, already contracted to manage fiber network design for Ziply. Company officials quickly identified multiple weak spots in Frontier’s network, particularly relating to its resiliency when fiber cables were cut or copper wiring was stolen. Ziply is building in network redundancy, with each portion of its network served by at least two sets of fiber cabling and identical equipment in each of more than 130 central switching offices. In many markets, Ziply will maintain at least three redundant fiber connections to make certain if one (or two) networks go down, customers can still be served by a third with no interruption in service.

Ziply is also avoiding the usual nightmares customers experience when switching between one company’s systems to another. Frontier’s customers suffered significantly from a cutover from Verizon’s operations and billing systems, which often left them disconnected or mis-billed. To prevent that from happening again, Ziply literally cloned Frontier’s existing back office systems, so customers won’t experience any “cutover” problems.

Ziply executives have been candid about the network they are acquiring. They told regulators the network was in reasonably good condition in some places, but not all. Ziply promised to fix the network weak spots, resolve customer repair orders at least two-thirds faster than Frontier did, and make comparatively broader investments in network operations. Analysts predict Ziply has a better chance of success than Frontier did, primarily because Frontier’s operations were mired in debt, making new investment in network upkeep and upgrades difficult.