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Charter into Top 3 Ethernet Providers, Surpasses Verizon

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As per data provided by the Vertical System Group’s Mid-Year 2016 U.S. Carrier Ethernet Leaderboard, Charter Communications Inc. (CHTR - Free Report) has surpassed Verizon as the third largest Ethernet carrier in the U.S. The ranking is based upon the retail port share of each provider.

Notably, Charter is believed to have gained considerable synergy from its recent horizontally integrated merger with previously Time Warner Cable and Bright House Networks. AT&T Inc. (T - Free Report) and Level 3 Communications Inc. still occupy the top two positions per the report.

A Significant Jump

At the end of 2015, Charter lacked the necessary retail port share i.e. greater than 4% to be listed in the leaderboard. However, Time Warner Cable was ranked fifth at that point of time. But after the recent mergers, Charter has gained access to a large base of fiber and hybrid fiber coax footprint. This has been instrumental in providing Ethernet service to many small and medium scale businesses (SMB).

Additionally, Charter can leverage Time Warner Cable’s Ethernet footprint to provide services to large business enterprises as well. Charter saw an uptick in SMB related businesses in the second quarter of 2016.

Verizon Falls Behind

In recent times, Verizon Communications Inc. (VZ - Free Report) has witnessed declining Ethernet Cable orders, with its customers opting for a switch to cable multi-service operators (MSO) for the purpose. Additionally, Verizon sold its wireline assets in California, Florida and Texas to Frontier Communications Inc. This is likely to have impacted the figures considered for the ranking. However, Verizon is slated to introduce its ‘Titan’ Ethernet program through which it intends to price its Ethernet cable offering aggressively to entice wholesale as well as retail customers and control churn.

At present, Verizon’s fiber presence is restricted to certain locations. However, with the completion of the acquisition of XO Communications’ fiber network next year, Verizon will look to intensify its Ethernet penetration in the future, thereby leveraging its Ethernet service offerings. This can take Verizon back to the lost position and even challenge the incumbent leaders, going forward.

The Bottom Line

The spotlight is now on the Ethernet market, with both telecom operators and cable MSOs vying for a reasonable share. As the industry gains further accretion, expanding its scope and makes way for higher Internet speeds, increasing competition is likely to induce price compression in the future. However, one thing is for sure - SMB’s are going to be the ultimate beneficiaries of such a competition.

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