Rural wireless operator
Frontier Communications Corporation
) has announced the availability of wholesale carrier Ethernet
services in 23 of its 27 states it operates. Previously, Frontier
offered Ethernet services on a retail basis, but wholesale
Ethernet was restricted to only few areas.
Wholesale Ethernet Virtual Private Line (EVPL) Silver service
provides connectivity between multiple locations with rates up to
20 Mbps for copper-based connections and up to 1 Gbps for
fiber-based connections. Through EVPL, Frontier is targeting
Internet service providers, competitive regional carriers and
inter-exchange carriers that are intending to provide Ethernet
services to business customers.
Apart from multipoint connectivity, Frontier's EVPL Silver
service provides Internet access, regional interconnects, and
also reports on network performances and service level
agreements. The unique feature of EVPL is that it increases
customer's bandwidth with the aid of software thereby curtailing
expenses and improving customer experience.
According to research firm IDC, total Ethernet service revenue is
expected to increase from $5.2 billion in 2012 to $9.2 billion in
2016 primarily due to high bandwidth scalability, cost
effectiveness and ease of deployment. However, Frontier's
Ethernet services will face competition from the largest Cable
multi service operator (MSO) in the US
) is also offering Ethernet-based service for business in 20 of
the top 25 US markets for nearly two years.
Frontier's legacy wireline business also faces steep competition
from wireless and offerings from
Time Warner Cable's
) VOIP (voice over internet protocol) service. The access line,
which accounts for most of Frontier's overall revenue continues
to decline and has registered an 8% year-over-year drop in the
fourth quarter of 2012
Recently, rating agency Standard and Poor's (S&P) lowered
Frontier's rating to junk status based on competition in the
cable business and wireless substitution. Moreover, the company
has a high debt position of $8.5 billion at the end of the third
We believe that if Frontier can match the wholesale customers'
pricing preference then it would provide a new revenue stream
thereby compensating for the company's persistent access line
Frontier Communications has a Zacks Rank #3 (Hold). We currently
have a Zacks Rank # 1 (Strong Buy) on
), which is slated to release its fourth quarter results on Feb
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