AT&T today announced the signing of a multi-year agreement to utilize Frontier Communications’ Ethernet and fiber optic networks to bring fiber connectivity to large enterprise customers outside of AT&T’s current footprint, as well as support the deployment of AT&T’s 5G mobile network. Historically, within its footprint, Frontier has competed with AT&T, as well as Verizon and Lumen Technologies, for enterprise customers. However, today’s announcement highlights Frontier’s apparent shift in strategy.

Frontier Communications’ enterprise revenue comprises ~1/3rd of its historical Commercial segment. Still, the company’s current focus is on small- and medium-sized businesses (SMB), as opposed to large enterprise customers. To this end, Frontier’s CEO Nick Jeffery stated during the company’s recent Investor Day that “large enterprise customers have complicated needs, long sales cycles, they need a lot of investments… and generally generate lower returns than SMB customers”.

Fiber Network Agreement – AT&T, Frontier Communications

Frontier Communications’ network enables AT&T to offer large enterprise customers high-speed, low-latency, and secure connectivity in markets where it does not own a fiber network or is currently not planning to build one. Particularly, this agreement allows AT&T to quickly reach large enterprise customers in Frontier’s service territories spanning 25 states.

Frontier Communications – Network Service Territories

Frontier Communications Network Map

AT&T will also use Frontier’s network to strengthen the nationwide deployment of its 5G network. In addition, AT&T will leverage Frontier’s Ethernet network to enhance its connectivity between cell towers and its core network.

AT&T – Fiber Network

As of September 30, 2021, AT&T’s business fiber network enables high-speed connections to 2.5+ million U.S. business customer locations. More broadly, 9+ million business customer locations nationwide are within 1.0k feet of AT&T fiber.

Build-Out Plan

AT&T is building-out additional fiber across its network footprint. To this end, the company plans to reach 2.5 million incremental customer locations passed by the end of 2021. Finally, long-term, AT&T targets 30 million locations by year-end 2025.

Frontier Communications – Fiber Network

In 2021, Frontier Communications outlined a fiber-to-the-premises (FTTP) expansion strategy whereby its fiber network would pass 10 million locations by the end of 2025.

“Waves” of Frontier Communications

Frontier Communications’ fiber-to-the-premises (FTTP) deployment will occur in three “waves”, as follows:

  • Wave 1: during 2021, Frontier expects to pass 600k new locations with fiber, resulting in ~4 million fiber locations passed by year-end. In terms of cost, the company targets $500 to $600 per passing
  • Wave 2: over 4 years (2022 to 2025), Frontier anticipates passing an incremental ~6 million locations with fiber, resulting in total fiber locations of 10 million by year-end 2025. In terms of cost, the company targets $900 to $1,000 per passing
  • Wave 3: remaining 5 million copper locations can be upgraded to fiber, resulting in potential passings of 15+ million post-2025
Frontier Communications Planned Expansion Fiber Passings

Frontier Communications’ Wave 1 fiber build-out will be highly selective, targeting locations with lower costs of deployment. As the company progresses to Wave 2 fiber deployments, in more expensive locations, its focus will shift to achieving economies of scale in its fiber build costs.

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