Tag Archives: retiring copper

Frontier Plans to Kill Copper

CEO Nick Jeffery of Frontier said at a recent investor conference that the company believes it will be out of the copper business within five years. The company is facing the same dilemma as the other big copper owners like AT&T, Lumen, Verizon, and Windstream.

The company has an interesting path ahead to get rid of copper. At the end of the first quarter of this year, Frontier still had 9.9 million copper passings compared to 5.5 million fiber passings. But that oddly doesn’t translate into a greater number of copper customers, with 1.6 million fiber customers compared to just under 1 million copper customers.

This demonstrates the extent to which Frontier has lost DSL customers over the last decade. For much of the last decade, Frontier was the biggest percentage loser of broadband customers almost every year and quarter. At the end of 2017, the company had over 3.9 million broadband customers compared to 2.6 million now. Frontier shed some customers in the asset sale in the Northwest to Ziply, but most of the customer losses are from DSL customers fleeing to some other technology.

The company announced a goal last year to reach 10 million fiber passings by the end of 2025, so it will continue to overbuild copper areas with fiber. That should cover about half of the remaining copper passings. When Jeffery talks about getting out of the copper business, he’s talking about eventually walking away from the remaining 4 – 5 million copper passings.

But that may not turn out to be as drastic as that sounds. Many of Frontier’s copper passings will be overbuilt with fiber or some other technology as a result of the BEAD and other federal and state grant programs. Frontier will likely be participating in many of these grants to reach it’s goal of 10 million total fiber passings.

The other technology that has to be putting a big dent in DSL is FWA wireless from cellular companies. The pricing is similar to DSL pricing, but the speeds are faster. The cellular companies are marketing to the same demographic that has stayed with DSL even where cable broadband is available – households for whom price is more important than broadband speed. Verizon and T-Mobile have sprung from nowhere to gain 4.1 million FWA customers nationwide over the last year or so – and a lot of those customers must be switching from DSL.

My guess is that Frontier won’t have to cut many DSL customers dead in five years. Between their own fiber expansion, the many grant programs, and FWA cellular wireless, it seems likely that most of Frontier’s remaining DSL customers will be off copper by then. But there will inevitably be some unlucky remaining customers who will get the notice that their copper will be going dead with no offered replacement. My best guess is that Frontier’s exit from copper might be relatively easier than if the company tried to kill copper today, as is being done by AT&T and Verizon. Those two telcos are taking a lot of grief when they discontinue active copper customers. But in five years it’s likely that very few people will even be interested in the remaining Frontier copper. My guess is that market forces will get the company out of the copper business without too much pain.

The Beginning of the End for Copper

The FCC voted last Thursday to relax the rules for retiring copper wiring. This change was specifically aimed at Verizon and AT&T and is going to make it a lot easier for them to tear down old copper wiring.

The change eliminates some of the notification process to customers and also allows the telcos to eliminate old copper wholesale services like resale. But the big consequence of this change is that many customers will lose voice services. This change reverses rules put in place in 2014 that required that the telcos replace copper with service that is functionally as good as the copper facilities that are being removed.

Consider what this change will mean. If the telcos tear down copper in towns then customers will lose the option to buy DSL. While cable modems have clobbered DSL in the market there are still between 15% and 25% of broadband customers on DSL in most markets. DSL, while slower, also offers lower cost broadband options which many customers find attractive.

I don’t envision AT&T and Verizon tearing down huge amounts of copper in towns immediately. But there are plenty of neighborhoods where the copper is dreadful and the telcos can now walk away from that copper without offering an alternative to customers. This will give the cable companies a true monopoly in towns or neighborhoods where the copper is removed. Customers losing low-cost DSL will face a price increase if they want to keep broadband.

The rural areas are a different story. In most of rural America the copper network is used to deliver telephone service and there are still a lot of rural customers buying telephone service. You might think that people can just change to cellular service if they lose their landlines, but it’s not that simple. There are still plenty of rural places that have copper telephone service where there is no good cellular service. And there are a lot more places where the cellular service is too weak to work indoors and customers need to go outside to find the cellular sweet spots (something we all remember doing in airports a decade ago).

Of a bigger concern in rural areas will be losing access to 911. A lot of homes still keep landlines just for the 911 capabilities. Under the old rules the carriers had to demonstrate that customers would still have access to reliable 911, but it seems the carriers can now walk away without worrying about this.

The FCC seems to have accepted the big telcos arguments completely. For instance, Chairman Pai cited a big telco argument that carriers could save $40 to $50 per home per year by eliminating copper. That may be a real number, but the revenue from somebody buying voice service on copper is far greater than the savings. It seems clear that the big telcos want to eliminate what’s left of their rural work force and get out of the residential business.

This is a change that has been inevitable for years. The copper networks are deteriorating due to age and due even more to neglect. But the last FCC rules forced the telcos to work to find an alternative to copper for customers. Since AT&T and Verizon are cellular companies this largely meant guaranteeing adequate access to cellular service – and that meant beefing up the rural cellular networks where there aren’t a lot of customers. But without the functional equivalency requirement it’s unlikely that the carriers will beef up cellular service in the most remote rural places. And that means that many homes will go dark for voice.

This same ruling applies to other telcos, but I don’t think there will be any rush to tear down copper in the same manner as AT&T and Verizon. Telcos like Frontier and Windstream still rely heavily on their copper networks and don’t have a cellular product to replace landlines. And I don’t know any smaller telcos that would walk away from customers without first providing an alternative service.

It’s hard to think that the FCC is embracing a policy that will leave some households with no voice option. The FCC is purposefully turning a blind eye to the issue, but anybody who knows rural America knows this will happen. There are still a lot of rural places where copper is the only communications option today. Our regulators once prided themselves on the fact that we brought telephone service to every place that had electricity. We had a communications network that was the envy of the world, and connecting everybody was a huge boon to the economy. We could still keep those same universal service policies for cellular service if we had the will to do so. But this FCC clearly sides with the big carriers over the public and they are not going to impose any rules that the big telcos and cable companies don’t want.