Frontier Communications plans to launch linear video service to more than 40 markets, representing approximately three million households, over the next three to four-years.
Once complete, video service will be available to about 50 percent of the 8.5 million households in Frontier's existing footprint. Frontier also will be adding video subscribers as the result of its acquisition of Verizon properties in California, Texas and Florida.
In total, Frontier will pass about seven million homes with video-capable networks.
Some might think Frontier Communications is making a mistake, investing in linear video at a time when the market actually is shrinking. The same sort of argument was made about AT&T’s acquisition of DirecTV.
|source: Marketing Charts|
But actions by other actors, such as Google Fiber, show that the business case for a fiber to home network is dramatically improved when an ISP can sell both high speed access and entertainment video. In other words, selling two or three services boosts average revenue per account.
Also, adoption of streaming services will slow, sharply, soon, some predict. Combined with slowish erosion of linear subscription behavior, that suggests a rather longish period where linear remains a key source of revenue and cash flow for any fixed network service provider.
High speed access might still be the anchor, as voice revenue dwindles. But linear video remains significant.
|source: Telco 2.0|
Compression technology might have quite a lot to do with the business model. Frontier says its high definition TV signals will consume just 2.5 Mbps per channel.
So a household with four HDTVs active at once will only require 10 Mbps.
Frontier also says the incremental capital investment to enable 1.3 million households for video will require less than $150 million spread over several years.