Abiding by the Connect America Funding Phase II (CAF-II) deployment rules, Frontier Communications Corp (FTR - Free Report) recently expanded broadband services in the rural areas of eight states — Florida, Idaho, Illinois, Indiana, Michigan, Tennessee, Texas and Wisconsin.
These states will join Arizona, Connecticut, Georgia, Montana, New York, North Carolina, Pennsylvania, Washington and West Virginia, which have already reached the 40% milestone. Per Federal Communications Commission's (FCC) program, any company accepting funds from the CAF program should complete broadband deployment in 40% of the eligible locations by the end of 2017.
CAF-II is an FCC reform initiative that aims to provide broadband services to an estimated 23 million Americans in rural uncovered areas. Broadband has been deemed a necessity in current times. After meeting all of the CAF-I requirements in third-quarter 2015, Frontier Communications is striving to expand in new markets using the CAF-II funds.
Previously, Frontier Communications received more than $283 million in annual CAF-II support from the FCC in 2015. The fund enabled the company deploy broadband services to more than 6,50,000 rural locations that could not be reached previously, economically. Overall, Frontier Communications is on track with CAF-II obligations.
Meanwhile, post the acquisition of Verizon's $10.5-billion worth wireline assets in California, Florida and Texas, Frontier Communications planned to use its eligible funding from the CAF-II to provide broadband services to underserved areas of California and Texas.
In California, Frontier Communications is using $32 million in CAF-II funding annually over the next six years for broadband deployment in Verizon’s high-cost service areas. During this period, the company forecasts that CAF-II funding will enable it to bring 10/1 Mbps broadband service to nearly 77,000 rural locations within this territory.For Texas, Frontier accepted $16.5 million in CAF-II funding to bring broadband services to nearly 37,000 locations in high-cost areas.
On a national basis, Frontier Communications provides broadband to more than 331,000 customers and small businesses in CAF-eligible areas. The company has enhanced speeds to almost 875,000 additional homes and businesses. The company’s efforts and FCC’s resources through the CAF program complement each other. Additionally, Frontier Communications is promoting broadband offerings to households, with new access and improved speeds. By the end of 2017, the company aims to reach more than 500,000 homes and businesses.
Frontier Communications has plans to raise $332 million in annual funding to make available broadband services for 774,000 households and business.
Frontier Communications is not the only service provider trying to deploy fixed broadband wireless to accelerate rural broadband expansion. Fellow rural-centric providers like CenturyLink Inc (CTL - Free Report) , Consolidated Communications Holdings Inc (CNSL - Free Report) and Windstream Holdings Inc (WIN - Free Report) are also exploring similar opportunities to conduct trials of fixed wireless spectrum in the range of 3.54-3.70 GHz frequency band.
Zacks Rank & Price Performance
Currently, Frontier Communications is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
On a year-to-date basis, shares of Frontier Communications have lost 86% compared with the industry‘s decline of 54.7%.
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