TDS Telecom has 23% of its addresses covered by fiber

TDS Telecom continues to enhance its last mile network with fiber, reaching over 23% of the premises in its wireline footprint with its FTTH network.

Vicki Villacrez, SVP of finance and CFO for TDS Telecom, told investors during its third-quarter call the fiber expansion is all about making broadband a key priority for the company.

“As I look at wireline, we have been very focused on rolling out our broadband strategy, which has included our fiber investments both within the core business as well as into one adjacent trial market,” Villacrez said during the earnings call, according to a Seeking Alpha transcript. “And so right now, from a fiber perspective, we have about 23% of our service addresses covered by fiber.”

The broadband expansion strategy is focused on providing two key elements for customers: 1 Gbps speed and IPTV.

Villacrez said that residential customers are taking advantage of more of the telco’s broader set of available speeds.

“Our residential customers continue to choose higher speeds of up to one gigabyte in our ILEC markets, and approximately 23% of our customers are now taking 15 megabits services or greater,” Villacrez said. “That's compared to 18% a year-ago, driving a 4% increase in average residential revenue per connection in the quarter.”

Along with providing higher broadband speeds, TDS continues to enhance its IPTV service footprint. Wireline IPTV connections grew 8% and with 3,700 new connections over last year.

Villacrez said that on average “IPTV markets are reaching the 30% penetration level” and “94% of our IPTV customers are on triple-play bundles,” allowing it to keep churn levels low.

Besides its own capital investments, TDS Telecom’s participation in the FCC’s Alternative Connect America Cost Model (A-CAM) program will give it more funds to deepen the fiber footprint, particularly in rural areas.

“We remain actively engaged with the FCC and are still advocating the A-CAM program be fully funded to the level of its initial offer by or before the end of the year,” Villacrez said. “This program is most critical to our ability to be able to serve our most rural customers.”

Bonding boosts copper speeds

While fiber is the preferred last-mile medium, TDS Telecom is being no less aggressive in increasing the capabilities of its copper network.

The service provider is using copper bonding and other technologies like VDSL2 to provide higher speeds in areas where it can’t prove out a business case for FTTH t today.

Being a medium that’s dictated by the distance between a central office (CO) and a customer’s location, the speeds TDS Telecom can deliver will vary.

“We have been rolling out copper bonding and copper bonding has been focused to provide up to 15-megabit to 50-megabit speeds, depending on loop length,” Villacrez said.

But the 15 and 50 Mbps tiers are just one part of a broader plan TDS Telecom has for its copper network. Having already covered about 26% of its service addresses with copper bonding, Villacrez said that “we're even working on bringing copper bonding in 2018 to 100-megabit speeds.”

Additionally, the A-CAM program is helping TDS Telecom bring services at speeds up to 25 Mbps and that's covering about 22% of its service addresses.

Residential, wholesale lift wireline results

TDS Telecom’s investments and subscriber increases in broadband and IPTV continued to provide a boost for the company’s overall results. However, the service provider still faces the challenge of ILEC residential voice declines, which rose 5% in the quarter.

Here's a breakdown of TDS Telecom’s key metrics:

Commercial: Revenues dropped 6%, a factor it attributed to lower CLEC sales resulting from its strategy to refocus the segment on serving customers who do not require leased facilities. By placing more of its customers onto its own network, TDS Telecom says it can reduce costs and increase profitability.

Wholesale: Revenues increased 13%, due to support received under the A-CAM program, which became effective in January. TDS Telecom said A-CAM is helping to fund the company’s obligations under this program.

Total Wireline: Revenues rose 2% to $179 million. At the same time, wireline cash expenses decreased 2% on lower employee cost and cost of providing services, offset by the growth in IPTV programming.

Financials: TDS Telecom’s parent Telephone and Data Systems reported total operating revenues of $1.15 billion for the third quarter of 2017, down from $1.3 billion in the same period a year ago.