Windstream expands pay-TV play to Kentucky, looks to drive ARPU, higher broadband speed use

By Jim O'Neill on Oct 13 2015 at 6:30 AM
Windstream expands pay-TV play to Kentucky, looks to drive ARPU, higher broadband speed use

Windstream, the telco that a year ago announced it was entering the pay-TV market with its Kinetic TV product in Lincoln, Nebraska, this week said it would next bring the service to Lexington, Kentucky.

Like its inaugural deployment that bowed in April, Windstream is targeting a market with roughly 50,000 potential customers and again will, as in Lincoln, face off with incumbent Time Warner Cable.

Windstream will offer the service over a FTTN network, planning to make Kinetic TV available later this fall with, of course, a high-speed Internet option and phone service. Based on Ericsson’s (nee Microsoft’s) Mediaroom platform, Kinetic offers the usual bells and whistles expected of an IPTV play, including HD channels, free whole-home DVR, a wireless set-top box, video on demand and instant channel change.

In December, Lexington signed a 10-year franchise agreement with TWC, but not without rancor. Windstream is coming in as an overbuilder and won’t have to deliver service to every potential household in the community, allowing it to, if it wished, cherry pick prime neighborhoods.

The Lexington Herald-Leader said Windstream’s deal with the city includes a $56,000 payment to the city within the next two months and an annual $6,000 payment through 2024.

In Lincoln, a basic TV and Internet bundle starts at $60 and goes as high as $130 for a tripe-play package that includes phone service, about the same a TWC.

It has yet to announce pricing for Lexington.

Windstream, during its Q2 earnings call, said it was seeing “strong initial take rates” of its Kinetic service in Lincoln.

But, as anyone in the pay-TV industry will acknowledge, broadband is the future, but having a pay-TV offering like Kinetic is sometimes key to opening doors… for now.

For Windstream, it has helped double current average revenue per user (ARPU).

“On average, monthly ARPU for a bundled customer with Kinetic is twice the average double-play bundle ARPU,” Bob Gunderman, Windstream CFO said during the Q2 earnings call. “Kinetic is a great example of how we are making incremental investments to more fully leverage our network capabilities to drive growth.”

Windstream has released no subscriber figures for Lincoln, but the company is far more invested in its broadband business, where it has some 1.12 million subscribers.

Gunderman said the company has seen an increase in the number of customers in Lincoln, for example, willing to pay for higher broadband tiers as a result of Kinetic. Something it obviously hopes to duplicate in Lexington and beyond.

The company is using Connect America Funds to expand and support broadband service to approximately 400,000 rural locations. The annual support of $175 million over the seven-year period equates to over $1.2 billion.

The CAF-2 funding, said Windstream CEO and President Tony Thomas, during the Q2 call, enables it to “continue to serve rural locations that would be otherwise uneconomic to serve without universal service support and make substantial investments at many new locations. The returns on these investments will be accretive to free cash flow while better positioning our network for the long-term.”

Gunderman, meanwhile, pointed out that Windstream revenues were being driven, in part, by sales of faster internet speeds and add-on broadband services.”

“We continue to push fiber deeper into the network and shorten loop lengths, to enhance capacity and broadband speed availability and drive growth within our broadband franchise,” he said.

For Thomas, Kinetic is a direct line to higher broadband speeds and increasing revenues.

“I think the best way to think about the ARPU uplift is more just from the monetization of speed itself,” he said on the call. “That's the real opportunity we have is the vast majority of our customers are on speeds less than 10 meg and now we have the opportunity to sell 25 meg, 50 meg and even 100 meg going forward.

Stay tuned.

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