Windstream and Frontier Cash in On Netflix-Verizon Spat

Windstream Holdings and Frontier Communications rarely make headlines for their technological advances. They are telco providers that have emphasized underserved rural markets as a way to avoid locking horns with the industry's giants. This naturally isn't a hotbed of growth. Analysts see Windstream and Frontier posting modest declines in revenue through the next couple of years. 

However, Windstream and Frontier became the unlikely beneficiaries of Netflix's ongoing dispute with Verizon . The leading premium streaming video provider has been calling out Internet service companies for their transmission speeds on Netflix content. It's been putting out monthly charts spelling out the speeds that its streams are receiving across the country's broadband providers. 

Netflix and Verizon seemed to have made nice several weeks ago on a deal that would speed up transmissions, but that apparently didn't help matters much last month. Netflix's latest blog post shows Verizon's DSL service is last among the 16 providers singled out by Netflix. Verizon's speedier FiOS offering slipped two slots to 10 on the list. The two companies that passed Verizon were Windstream and Frontier. 

Technically speaking, all three clocked in at a rather unimpressive 1.9 megabits per second. However, Verizon FiOS dipped since April while Windstream and Frontier improved their rates. At the end of the day Windstream and Frontier still have bragging rights. When it comes to Netflix users their modest DSL platforms are not only faster than Verizon DSL, but they are just as good as Verizon FiOS.

Source: Netflix.

There's naturally more to this story than just the bragging rights. Windstream and Frontier are appealing to income investors given the generous payouts that they're currently dishing out. Frontier's yielding a healthy 7% on its stock, and Windstream is clocking in at a whopping 10.3%. Those yields -- particularly Windstream's disbursements -- won't be sustainable for long if earnings follow revenue lower.

Both telcos are trying. They're pushing online and business services to offset the evolutionary decline in landlines. It wouldn't hurt if their broadband platforms grew a little faster, and here is where they can use this Netflix data as a springboard to retain their subscribers and possibly attract new ones. Netflix is a pretty big deal in rural markets where movie theaters and now even Redbox kiosks are hard to come by. If Netflix's read on the data is correct about Windstream and Frontier holding up as well as both of Verizon's online offerings they should be shouting it from the rooftops.

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Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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