This cable company stopped marketing TV to its customers. This is what happened.

When Frontier Communications emerged from bankruptcy in 2021, it faced a serious question about the future of its cable business. The company had stopped selling TV services during the pandemic in 2020, with long installation times considered less safe for technicians.

With the worst of the pandemic and bankruptcy behind them, executives at the Norwalk, Connecticut-based telecom company had to figure out how to move forward.

“There was a question at the time: what should we do? Are we going to reopen TV sales or not?” recalls John Harrobin, executive VP of Consumer at Frontier. “So we did a full review and concluded that no, we are not going to offer TV to our new customers.”

Frontier’s fateful decision two years ago looks prescient at this point.

The ongoing dispute between Charter Spectrum and Disney transportation is causing heartburn in the entertainment industry. Where Chris Winfrey, CEO of Charter, describes the battle as an existential one. ‘We are on the edge of an abyss. Either we move forward with a new collaborative video model, or we move forward,” he told investors on a call last week.

Ten years ago, Charter’s threat to abandon its old TV business would have been laughable, with its still-rich profits and tens of millions of subscribers. But that’s not the case now, much to the chagrin of the entertainment companies that rely on the billions of dollars in annual cash flow from cable television.

Frontier does not operate on the same scale as Charter Spectrum. Its footprint covers just over 16 million homes in a number of states including Connecticut (including Spectrum’s hometown of Stamford), West Virginia, Illinois and Texas. When it made the decision to stop marketing its video service in 2021, it had around 500,000 TV subscribers. Spectrum had more than 15 million at the time.

Still, Frontier’s video service generated $620 million in revenue that year, a substantial stream of cash to pay out (Harrobin notes that the company continued to offer video services to existing customers who still wanted them). The problems were the same as Winfrey’s, only exacerbated by Frontier’s size.

“A lot of issues are coming to the fore now,” says Harrobin.

“(Because of the) size of our business, we don’t have the scale to acquire content at efficient rates, and the way the packaging rules work, by requiring all these channels, it’s essentially a burden on consumers that they have to pay for that they don’t look at. The average customer watches about 17 channels or something like that, but pays for more than 100 channels,” Harrobin adds.

Frontier, which had mostly copper wires, decided to focus on building out its fiber-optic network when it went bankrupt. That meant moving away from their old TV businesses and coming up with a new video model, something that will be familiar to those who keep a close eye on the Spectrum-Disney dispute.

“So we said that, yes, if you go forward thirty years, there might be a full loop where we’re going to re-bundle things, but now for the next ten years or so, over-the-top – for lack of a better term: MVPD is probably the right solution for us. So let’s figure out better than anyone else how we can make that possible.”

The result was a partnership with YouTube TV, a virtual multi-channel video provider (vMVPD) that delivers live, linear channels over the Internet, without the need for a cable box. Frontier began referring new customers to YouTube TV in 2021 and introduced billing integration earlier this year, where the YouTube TV service is included in the customer’s internet bill.

“We said we really wanted to go deep with one player who we think is best positioned and who is going to win,” Harrobin said. “So we made a bet. We made a bet on YouTube TV.”

The company did extensive consumer research, he says, and found that consumers liked the YouTube TV service better than many others.

“They were growing faster than other companies at the time and are positioned to win from a scale perspective,” says Harrobin. “But also when you think about ad monetization, and their ability to do that and connect audiences across platforms, they’re in a better position than anyone else. That is their business and TV is a mechanism to create attention and involvement there.”

It helps that YouTube TV also has add-on packages (like a Spanish-language offering and now NFL Sunday Ticket) that could help Frontier enter the market.

“It made them understand the value we could add here,” says Harrobin. “We said, listen, we’ll refer some things to you. You’ll see what we can do.”

Frontier receives some revenue from the marketing of third party services. According to its latest quarterly report, Frontier had video revenue of $229 million in the first six months of this year, including its existing TV business and OTT offerings.

“It was, I think, even better than we expected,” says Harrobin, adding that when the company started billing integration earlier this year, “sales really took off.”

“It’s more important than we expected, so we’re ahead of our business case on the overall offering of the partnership,” he adds.

Frontier reported more new fiber customers in the first quarter than the rest of the major cable providers combined for its residential broadband, suggesting the strategic pivot is working.

Charter Spectrum may not be thinking about the same model (Winfrey suggested it could lean on its upcoming Xumo partnership with Comcast, which will merge streaming content), but it’s certainly thinking about leaving its old TV business in the dust .

And Frontier’s satisfaction with the way things are going indicates that the influence, perhaps for the first time since the advent of cable television, may indeed lie with the distributor.