Bell Aliant Q2 earnings slip slightly, but broadband, IPTV results raise outlook

Bell Aliant (Toronto: BA-UN.TO) may have seen a slight 1 percent dip in Q2 2011 revenues to CAD 693 million (USD 734 million), but strong growth in broadband and IPTV drove it to increase its full year revenue guidance.

Based on its Q2 results, Bell Aliant has raised its operating revenue guidance for 2011 to between CAD 2.72 billion (USD 2.86 billion) and CAD 2.78 billion (USD 2.93 billion), while retaining its previously set guidance for EBITDA, free cash flow and adjusted earnings per share.

As seen with other Canadian and U.S.-based telcos much of Bell Aliant's CAD 7 million (USD 7.3 million) losses were the result of declining local and long-distance voice subscribers.

"The growth rates of our Internet and TV revenues have increased while the rates of decline in our traditional voice and data services have slowed," said Karen Sheriff, president and chief executive officer, Bell Aliant in the earnings release. " Our significant investment in a world-class fibre-to-the-home network is contributing to this improvement and gives us confidence that we are on the right path to returning to overall revenue growth."

Here's a breakdown of key company metrics:

  • Access Line Loss: During the quarter, Bell Aliant's local and long distance revenues declined CAD 13 million (USD 13.7 million) (4 percent) and CAD 3 million (USD 3.16 million) (2.7 percent), respectively, in Q2 versus Q2 2010 due to 5 percent lower Network Access Service (NAS) connections.
  • Broadband Access: Similar to other recent quarters, broadband continues to be a big seller for Bell Aliant. As of the end of June, the telco had 855,000 broadband customers. However, Bell Aliant only added 4,000 new broadband subscribers in the quarter versus 8,000 in Q2 2010 due to a result of declining growth in legacy DSL services and cable competitors offering DOCSIS 3.0 services. One of the growth engines that did perform well in Q2 was its FibreOp Fiber to the Home (FTTH) service. During the quarter, Bell Aliant added 8,000 new subscribers, which gave it a total of 22,000 FTTH subscribers as of the end of June. A good number of the new FibreOP subscribers that were migrating from DSL and Fiber to the Node (FTTN) networks.
  • Video Services: Like fiber-based broadband, IPTV continues to be a growth engine in Bell Aliant's consumer wireline portfolio. During the quarter, the service provider reported CAD 10 million (USD 10.5 million) in IPTV revenue. As of the end of June, Bell Aliant added 5,000 new IPTV customers bringing it 59,000 total IPTV customers.

Obviously, the challenge for Bell Aliant going forward will be maintaining its IPTV and FTTH momentum by adding new features and functionality options like its FibreOP 2.0 service for existing customers migrating to the new service and new customers.

FiOS lead to ‘strong’ second quarter performance for Verizon

Verizon's wireline business saw operating revenues of $10.2 billion, a decline of 0.3 percent compared with the year ago quarter but an improvement over a shortfall of 2.2 percent in first-quarter 2011 revenues compared to first-quarter 2010 earnings. Newly acquired Terremark Worldwide contributed $98 million in revenue, representing 100 basis points of wireline revenue growth, in second-quarter 2011.

Revenues for Verizon's FiOS consumer retail FTTH services generated approximately 57 percent of consumer wireline revenues in second-quarter 2011, compared with approximately 48 percent in second-quarter 2010. Consumer revenues overall grew 1.3 percent compared with second-quarter 2010. Consumer ARPU for wireline services was $92.44 in second-quarter 2011, up 9.4 percent compared with second-quarter 2010. ARPU for FiOS customers remained more than $146, Verizon stated.

Verizon added 189,000 net new FiOS Internet connections and 184,000 net new FiOS TV connections in second-quarter 2011. Verizon had a total of 4.5 million FiOS Internet and 3.8 million FiOS TV connections at the end of the quarter.

FiOS penetration stands at 30 percent or more for both services, Verizon asserted. FiOS Internet penetration was 34 percent at the end of second- quarter, while FiOS TV penetration was 30 percent. Verizon’s FiOS network passed 16.1 million premises at mid-year 2011, the company said.

Broadband connections totaled 8.6 million at the end of second-quarter 2011, a 3.3 percent year-over-year increase. FiOS Internet connections offset a decrease in DSL-based Internet connections, resulting in a net increase of 62,000 broadband connections from first-quarter 2011.

Israel acts to boost FTTx deployments

FTTx household penetration in Israel stands at less than 1%, despite the country being home to leading international vendors in passive optical network (PON) technologies, including ECI Telecom, Broadlight, and Passave (acquired by PMC-Sierra).

The situation could change rapidly as a result of government action following a simple question posed by Israel’s Minister of Communications Moshe Kahlon: with all of Israel's capabilities, why is the country not widely deploying FTTx? Kahlon's immediate solution was to approve a pilot FTTx project built by Israel Electric Corporation (IEC) and grant the utility a country-wide license (with financial partnership stipulations) to expand its network.

Bezeq, Israel's incumbent telco operator, will respond vigorously to this competitive threat. In our view, a partnership between IEC, Bezeq, and financial institutions would be the most efficient and sustainable way to bring FTTx to Israel, finally giving the developers of PON technologies a chance to taste the fruits of their labor on their home turf.

With more than 90% of its 7.7 million people living in urban areas, Israel’s population density fits well with PON's point-to-multipoint architecture. Israel's GDP is more than $25,000 (€17,644) per capita, suggesting an adequate level of household income. Also, Israelis are familiar with fixed broadband services, with combined 80% household penetration of DSL and cable.

In addition to the population and economic fit, world-class products from domestic companies and Israeli-based multinational subsidiaries can be used to expand FTTx networks in Israel. ECI can build the PON systems with PON MAC SoCs from Broadlight or PMC-Sierra.

Even with these positives, FTTx networks are expensive to build. But Israel has an advantage here too, as the majority of existing electricity and communications cabling infrastructure in the country is aerial, meaning there is no need for costly and disruptive trenching. And IEC does it one better with its existing fiber infrastructure, which exists today for internal use but could be deployed tomorrow for Israel's consumers.

IEC's approach was pursued by Japan's electric power companies ten years ago when Tokyo Electric (TEPCO), Chubu Electric, and Kansai Electric, among others, began to deploy FTTx networks. Over time, several sold their respective fiber networks to telco operators.

What attracts electricity companies to FTTx? These companies own the poles and rights-of-ways. Fiber-optic cable can reside alongside electricity cables without causing interference. Many electricity companies built fiber networks across their own electricity networks for internal use. With aerial-based infrastructure, the costs of pulling the fiber are not prohibitive. Customer relationships, call centers, and billing systems are in place already, although engineering and support staff must learn the ins and outs of communications services.

IEC received a license to build a fiber-based communications network throughout Israel. However, IEC is restricted to 49% ownership of this venture. The remaining 51% is to be owned by a financial institution or consortium thereof. The Israeli government will be issuing a tender in early August. According to the Ministry of Communications, more than 15 banks will participate in the financial tender.

Critics claim that the need for financial investors shows the lack a business case for nationwide FTTH. The Ministry of Communications counters that the size of the project, one of the largest ever in Israel, warrants the financial support of the country's largest banks.

Bezeq, the incumbent telco, claims to invest over $1 billion annually in network infrastructure and plans to deploy FTTH/FTTB to homes and buildings. We expect Bezeq to speed up its FTTx deployments as IEC expands its network from the initial pilot project in Northern Israel to the rest of the country. Wireless service providers have also expressed concerns about IEC's license.

Others suggest that a partnership should be formed where IEC provides the fiber infrastructure, Bezeq provides the services, and banks provide the funds. While multiple-party partnerships are often difficult to structure and manage, it is hard to believe that a country with fewer than eight million people can support two separate fiber networks.

Eventually though, the founders of Passave (now PMC-Sierra) and Broadlight may enjoy the wireline broadband speeds that their technology has enabled for millions of others around the globe.

Bell Aliant continues FTTH expansion effort in Nova Scotia

Bell Aliant (Toronto: BA-UN.TO) is continuing its ongoing expansion of its FibreOP Fiber to the Home (FTTH) service by dedicating CAD $13 million (US $13.49 million) to bring the service to an additional 27,000 residential customers in the New Glasgow and Annapolis Valley areas.

This latest investment brings Bell Aliant’s total FibreOP investment in Nova Scotia to over CAD $83 million (US $83.6 million).

Beginning later this month, customers in New Glasgow, including the Trenton, Westville, Stellarton and Pictou areas, will be able to access the FibreOP service. Annapolis Valley residents that reside in Windsor, Wolfville, Kentville and New Minas areas will get the service beginning in the fall.

Bell Aliant’s latest deployment drive will complement the deployment it conducted in Halifax Regional Municipality in the Spryfield, Beechville, Timberlea and Lakeside communities. The service provider added that the remaining areas including Halifax, Dartmouth, Eastern Passage, Cole Harbour, Sackville, Hammonds Plains, Waverley, Timberlea, Bedford, St. Margaret’s Bay and Lake Echo will be completed by the end of the year.

In addition to expanding the reach of the FibreOP service, Bell Aliant has been providing its existing data and video customers a new incentive by automatically updating them to FibreOP 2.0 with no additional fees.

Given the large financial bet Bell Aliant is making in expanding its IPTV and FTTH network reach, the introduction of FibreOP 2.0 is a way the service provider can add incremental value and keep its customers happy as the novelty of FTTH eventually wears off.

Verizon adds interactivity features to FiOS in Pittsburgh, Tampa markets

Verizon (NYSE: VZ) is enhancing how users in its Pittsburgh and Tampa Bay area markets interact with their FiOS TV experience with a new version of its FiOS TV Interactive Media Guide (IMG).

IMG allows users to pull together content from broadcast TV, the Internet and users’ own personal media into one media-management system. Since the IMG was initially introduced in 2007, the IMB has become a tool that includes applications for social networking, Internet video, media streaming, account management and multi-screen/mobile viewing.

Based on customer feedback Verizon received in product development labs, field trials and social media forums, Verizon created over 25 new upgrades to FiOS TV IMG that customers in both the Pittsburgh area and the ILEC’s six-county Florida service area can now access.

Customers can access the IMG’s new features–including new DVR enhancements (DVR chaptering and Multi-hub DVR), personalization features (parental control and guide customization), and improved search capabilities–via FiOS TV remote control or through Verizon’s FiOS Mobile application. The FiOS mobile application enables users to use their smart phone (iPhone, iPod Touch, iPad or Android) into a remote control.

At a time when Verizon has scaled back its FiOS rollout plans, the service provider’s move to create an enhanced IMG is a sign it’s focusing adding more value to its FTTH-based product beyond just offering a faster bandwidth pipe.

QCOL adopts Zhone Technologies FTTx network access system to deliver FTTH triple-play network

QCOL, a western Pennsylvania-based Internet services and triple-play provider, will deploy MXK from FTTx network access systems provider Zhone Technologies Inc. (NASDAQ:ZHNE) as its primary Gigabit Passive Optical Network (GPON) access platform for a new fiber-to-the-home (FTTH) network it is building to deliver triple-play services to customers.

Zhone’s MXK system will equip QCOL to deliver affordable, reliable, high-speed Internet access, VoIP, and video services to more than 2,000 subscribers across Fayette County, Penn.; Garrett County, Md., and Preston County, W.V., beginning August 2011.

The system capabilities of Zhone’s MXK platform enable up to one gigabit (1GB) capacity in the home and the ability to support the extreme bandwidth demands generated by multiple high-definition television (HDTV) screens, high-definition digital video recorder (HD-DVR) content, and video streaming within the home. Its scalability and flexibility help future-proof the network for more advanced service rollout, while reducing recurring operating expenses (OPEX) and any adverse customer impact from rollout of these next-generation services, says a company representative.

“The residential and business customers we serve are demanding increasing amounts of bandwidth. We sought a solution to address not only current but future bandwidth requirements,” explains Brian Frazee and Doug Friend, owners of QCOL. “We selected Zhone for the impressive density offered by 8-port GPON cards, along with the MXK’s superior scale, effective network management capabilities, and system flexibility to support multiples services in the same chassis. We were extremely intrigued by the cost savings anticipated for us and our customers.”

With QCOL delivering radio-frequency (RF) video over fiber and the MXK’s ability to support the same via either Passive Optical Network (PON) or point-to-point Active Ethernet, the MXK was a fit for this project. QCOL is also deploying Zhone’s zNID Optical Network Terminals (ONTs) for the end points.

Cincinnati Bell accelerates its FTTH and IPTV plans

Cincinnati Bell (NYSE: CBB) may not be the size of its larger former Bell System compatriots AT&T (NYSE: T) and Verizon (NYSE: VZ), but it is innovating with new products like Fiber to the Home, IPTV and now energy services to offset inevitable declines in its traditional PSTN voice business.

On the FTTH side, Cincinnati Bell has been taking a careful growth approach, passing around 80,000 homes in Cincinnati and Northern Kentucky. Not content to rest on its laurels, the service provider plans to pass an additional 70,000 homes by bringing fiber into specific neighborhoods.

Of course, Cincinnati Bell is being realistic about its FTTH deployment. To augment its Fioptics TV service, the service provider will introduce its own IPTV service over its copper lines sometime later this month.

Ted Torbeck, president and general manager of Cincinnati Bell Communications, told that delivering IPTV over its copper lines is all about scale. By leveraging its existing copper network to deliver IPTV, it will be able to reach three times as many homes today than it can deliver over fiber.

Scaling the reach of a FTTH network, even for smaller ILECs like Cincinnati Bell, still requires a large investment. “We’ve invested $140 million so far and we still have only about 12-15 percent of the market covered,” Torbeck said.

But Cincinnati Bell is not stopping with FTTH and IPTV services. In June, the ILEC made a surprising turn when it announced it would begin offering residential customers electric service via a partnership with Viriden Energy.

Since launching the service late last month, Cincinnati Bell reported it has signed up 1,400 customers for the service. Going forward, the service provider plans to introduce energy service plans for businesses in addition to offering natural gas services.

While it will take time to assess how successful Cincinnati Bell’s bets on IPTV, FTTH and energy will be, these moves represent the service provider’s need to differentiate against the growing cable threat and ongoing wireless voice service substitution.

EVO taps Nokia Siemens Networks for GPON FTTH

Bulgarian ISP EVO Ltd. will use GPON fiber to the home (FTTH) equipment to offer its customers a range of new services, according to the Europe-based systems house. The new services include IPTV.

Nokia Siemens Networks will supply in-home customer premises equipment and optical line termination units for EVO’s upgrade. The supplier of the companion optical line terminals in the central office has not been announced.

“Our goal is to improve the individual experience and satisfaction of our subscribers by providing new high-quality services, and increasing network capacity,” said Rosen Velikov, CEO of EVO Ltd. “Nokia Siemens Networks’ solution will translate into a more cost-efficient network expansion and also guarantee extremely reliable and high-quality data services to our subscribers.”

“Bulgarian citizens demand increased broadband access and new, convergent services. is playing an important role in bridging the broadband gap and setting high service quality parameters for us to meet,” said Dietmar Appeltauer, head of central-east Europe sales for Nokia Siemens Networks. “We are confident that users can benefit from a much improved experience.”

Four Brazil service providers stake claim in country's broadband plan

Brazil’s National Broadband Plan (Plano Nacional de Banda Larga, PNBL) took another step forward as four of the country's largest service providers have confirmed their involvement in the initiative.

Telemar Norte Leste (Oi), Telefonica Brazil (including Telesp), Algar Telecom (formerly CTBC) and Sercomtel revealed they will participate.

Under the new plan, these four service providers are required to begin delivering 1 Mbps minimal speeds for BRL35 (US$22) a month.

Broadband services would be delivered over a 23,000 km fiber network that will be run by former state monopoly telco Telebras to deliver broadband services 40 million households by 2014.

China Telecom chooses Alcatel-Lucent PON for Fibre Cities project

China Telecom has selected Alcatel-Lucent (Euronext and NYSE: ALU) to supply PON equipment for its “Broadband China, Fibre Cities” project. The project aims to supply more than 26 million people in unserved and under-served areas of China with new broadband services.

The "Broadband China, Fibre Cities's project will see the deployment of a mix of PON technologies connecting homes, office buildings and remote “nodes.” The nodes will then support fiber-to-the-node (FTTN) delivery of broadband services, wherein the final distribution of broadband signals will use existing copper wires. Alcatel-Lucent will supply its Intelligent Services Access Manager (ISAM) product family, which includes a mix of GPON, EPON, and DSL technologies.

Wei Leping, Chairman of China Telecom Science & Technology Committee, said, “China Telecom launched ‘Broadband China, Fibre Cities’ strategy at the beginning of 2011, which aims to realize optical network coverage in all the cities in three years. By 2015, China Telecom will achieve an FTTH coverage of 100 million households and 30 million FTTH subscribers. Leveraging Alcatel-Lucent Shanghai Bell's leading broadband access portfolio and Alcatel-Lucent's enriched deployment experience for other operators worldwide, we are able to provide the urban users the experience of web surfing at the speed of light."

Rajeev Singh-Molares, President of Alcatel-Lucent’s activities in the Asia-Pacific Region, said: "This project represents another major milestone in the rapid modernization of China's telecom landscape, and highlights the deepening relationship between Alcatel-Lucent and China Telecom, one of the world's largest and most dynamic service providers."

Following the deployment, China Telecom will be able to offer subscribers a range of consumer and business services including IPTV, video on demand, voice over IP (VoIP), and more at speeds of up to 50 Mbps, all with guaranteed quality of service (QoS) levels. This project is part of China Telecom’s plan to extend its FTTH coverage to 100 million users by the end of China's 12th Five-Year Plan (2011-2015).