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Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Consolidated Communications First Quarter Earnings Conference Call. Please be advised that today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.
And I will now turn the call over to Philip Kranz, Senior Director of Investor Relations. Philip, you may begin your conference.
Good morning, and thank you for joining the Consolidated Communications' first quarter 2023 earnings call. Our earnings release, financial statements and presentation are posted on the Investor Relations section of our Web site at ir.consolidated.com. Please review the Safe Harbor provisions on Slide 2 of the presentation. Today's discussion includes forward-looking statements about expected future events and financial results that involve risks and uncertainties that may cause actual results to differ materially from those expressed today. A discussion of factors that may affect future results is contained in Consolidated's filings with the SEC. In addition, during this call, we will refer to certain non-GAAP financial measures, which are defined and reconciled in our earnings presentation and press release.
With me today are Bob Udell, President and Chief Executive Officer; and Fred Graffam, our Chief Financial Officer. Following their prepared remarks, we will open the call for questions.
Before I turn the call over to Bob, I'll note on April 13, we announced the receipt of a take private proposal from Searchlight Capital and British Columbia Investment Management. Since the announcement, the Board has established a special committee consisting of independent directors of the Board to review and consider the proposal as well as any other alternative proposals or other strategic alternatives that may be available to the company. Given that the process is ongoing, we will not be able to take any questions related to this matter during our Q&A session.
I will now turn the call over to Bob.
Thank you, Philip, and good morning, everyone. First, let me say there is a lot of enthusiasm and excitement across our organization. A key initiative for us was starting the year with the leadership team realignment. We added key leaders to our consumer business and commercial and carrier businesses and brought on a new CFO in addition to making other strategic changes. The depth of go-to-market experience with these new leaders is incredible, and I am quite pleased with the immediate contributions of our collective team.
More importantly, we are seeing strong early momentum and are building the foundation for growth in the future. Some Q1 highlights include a new quarterly record of consumer fiber broadband net adds of over 12,300 on the growing strength of video and fiber. Second is the positive total consumer broadband net adds of over 2,400. This means that just in the first quarter, we are well above our full year 2022 consumer broadband net adds, offsetting DSL losses. Third, consumer fiber broadband revenue grew 56% which contributed to consumer broadband revenue growth of over 6%.
Consumer broadband fiber ARPU is up 5.7% and fiber churn improved to an industry leading 1%. We are seeing favorable trends for video and fiber. Notably, we experienced the highest month of consumer fiber net adds in our history at approximately 5,200 in March and approaching 6,000 in April. These levels are well beyond our historical net adds in an average month and position us for even higher fiber net add activity in our second and third quarters. Lastly, we're well positioned to meet growing demand for installations and to efficiently conduct future fiber builds given our inventory position.
Let's turn to Slide 4, which highlights our journey from a copper-based telecom to a leading fiber broadband provider. We continue to make great progress on our multiyear plan to bring fiber to more than 70% of our footprint. And through our actions during 2023, we're solidifying the foundation for a return to growth in 2024. Our fiber network is projected to reach roughly half of our addressable locations by the end of this year, and we are targeting a compound annual EBITDA growth rate in the mid teens for 2024 through 2026. We're also looking for EBITDA margins to approach mid to high 40% levels over the long term as we drive highly profitable fiber penetration across our three revenue groups; consumer, commercial and carrier, while leveraging our existing cost structure.
On Slide 5, I'll summarize the key aspects of our fiber investment thesis. We couldn't be more excited with the long-term growth opportunity that fiber provides us. With symmetrical speeds that are upgradeable to beyond our current 10 Gig capability, it's a superior product to cable and fixed wireless. Fiber's future proof technology is essential, particularly as data demand continues to grow. To this end, a recent McKinsey report projects data traffic to expand by 20% annually in the next five years. And they further cite that fiber is arguably the only fixed broadband technology currently capable of delivering the speed and capacity expected by governments, businesses, and consumers.
We also enjoy several distinct structural advantages, including our incumbent position. We have been serving many of our communities for decades, and we know our fiber expansion markets very well. We have a fiber-rich carrier class network that we can cost effectively extend including existing conduit capacity for buried facilities and pole access where we have aerial plant. These network advantages provide us with favorable unit cost, including an industry leading cost to pass, offering us strong return on investment opportunities as we execute on our plan.
Looking now at Slide 8, I'll update you on our fiber build. In the first quarter, we upgraded nearly 54,000 locations. With our supply chain and labor in good shape, we are on track to upgrade at least 225,000 fiber locations during 2023. Our total fiber passings now extend to just over 1 million locations, or 40% of our overall service area, up from 10% in 2020. Now as we discussed in the last quarter, we've reached an important inflection point with our fiber coverage such that we are able to generate increasingly positive overall consumer net broadband adds. As a result, we are now consistently growing our overall consumer broadband revenue. This is a key catalyst for us as we move closer to overall revenue growth.
Looking out to 2026, we expect that more than 70% of our passings will be fiber by the middle of the year, representing an increase of more than 7x our fiber coverage in 2020. We fuel our builds with increased penetrations, public private partnerships, and have continued flexibility with our capital structure and our portfolio of assets. First and foremost, we're focused on driving penetration across our existing base of over 1 million fiber passings, which of course will boost our revenue and cash flow providing support to fund additional fiber builds. Second is the continued pursuit of grant or infrastructure funding opportunities that align with our plan.
When synchronized appropriately with our fiber builds, these governmental funding opportunities help to offset rural builds for complete areas. This is a key component as we continue our expansion. We've been awarded over 150 million of broadband partnership and grant funding opportunities since 2019 across our markets. We've earned a very positive reputation with our previous public-private partnership wins, which in turn leads to new opportunities in neighboring communities. At the end of first quarter, we were tracking nearly 140 million of additional broadband government partnership opportunities, which is up by 40 million from the prior quarter. This does not include any potential opportunities as part of the $42 billion BEAD program. As many of you are aware, BEAD opportunities are expected to come to market over the next 12 months.
In summary, we are doing well on the continued execution of our fiber build. We will continue to be nimble in order to flex the build as opportunities and plans evolve. Let me now highlight our fiber cohort penetrations which are improving. Our Q1 2021 cohort is nearly 30% at the two-year mark, which is above our target of 24%. We are very pleased with the performance of this cohort, which includes particularly strong results from some areas where we had public-private partnerships. Moving to our Q1 '22 cohort, penetration is 14.7% at the one-year mark, which is above our target of 14%.
During our Q4 call, we outlined a comprehensive strategy to increase penetration across all of our cohorts. And I'm ecstatic with the results that we are seeing from these initiatives. Put quite simply, we're doing exactly what we said we would do. Our record Q1 '23 consumer broadband fiber net adds for March were 5,200. And this momentum continues in April where we are approaching 6,000 fiber net adds. To put this into perspective, our prior monthly record was 4,300. Key factors for this upward trajectory include our re-rally efforts with video and fiber and its superior value proposition.
Also continued growth in our consumer sales partners and our door-to-door headcounts, which are now up 4x since year end. We continue to see more upside with sales channel optimization along with improvements being made on our e-commerce and call center tactics. Importantly, our install capabilities are keeping pace with our growing sales activity. And as I mentioned, we have CPE in stock ready to deploy for our current installs. Looking ahead, we'll continue executing on all of these key initiatives to keep momentum going and to further build upon our first quarter 2023 results.
Now, let's turn to Slide 11 where I provide additional perspective on the progress we're making in the consumer fiber business, which is contributing to overall consumer broadband revenue growth. Growing this area of our business is a key factor for us as we lay the foundation for overall revenue growth in 2024. In Q1, we added 12,300 Fidium fiber subscribers, an increase of 60% versus the prior year. Fiber broadband revenue was 26.1 million, up 56% year-over-year, and a 10% increase from the fourth quarter. These positive results in our fiber business contributed to overall consumer broadband revenue growth of 6% in first quarter.
Fiber subscriber trends remain consistent with over 70% choosing our 1 Gig or higher service, while the vast majority are new subscribers. Our transformation to fiber from copper continues to grow with fiber now making up 37% of our consumer broadband connections, which is up from 25% just a year ago. Looking at ARPU, fiber ARPU exceeds copper by over $14 or 27%. This is a meaningful difference and provides us with ample upside to continue driving significant revenue and EBITDA, as our mix shifts increasingly to fiber. In the first quarter, consumer fiber broadband ARPU was up 5.7% year-over-year, driven by the increase in speed mix, as subscribers are favoring our 1 Gig product offering. Additionally, we're also seeing an uptick in interest for our 2 Gig product.
Let's turn to our commercial and carrier channels. With nearly 58,000 fiber route miles and over 14,500 on-net buildings, we believe we are the leading fiber-based provider in the markets we serve. We offer fiber broadband connectivity and cloud-based services to deliver differentiated solutions targeting customers, ranging from small businesses to large enterprises and carriers. Our go-to-market strategy includes direct and inside sales as well as the agent or partner channel. Under new leadership, we are focused on simplifying our offerings, enhancing our coverage and improving our speed to market to capture more businesses, both on-net and near net.
Within commercial data services, we saw year-over-year growth in Dedicated Internet access, SD-WAN and cloud voice. We are making investments to increase our core network capacity, which benefits all three customer revenue channels. We have enabled 400 Gig in transport services in our core networks and enabled 100 Gig into our metro networks capable of delivering 10 Gig of connectivity to any customer's address served by our fiber network. The bottom line is new fiber passings within our consumer routes provide opportunities for us to leverage the same fiber to grow both carrier and commercial data and transport services. We increased our on-net buildings by 3.5% in the first quarter after normalizing for Kansas, which correlates the higher margins, increased opportunity to upsell, a greater ability to ensure the best customer experience and more opportunities for additional connections.
I will now turn the call over to Fred who will provide more insights on our first quarter financial results. Fred?
Thanks, Bob, and good morning. I am pleased with the progress we made in the first quarter and especially with the momentum in our consumer fiber business. Total operating revenue for the first quarter was $276.1 million and adjusted EBITDA was $75.4 million. Revenue in Q1 saw a decline of $11.8 million or 4.1% versus the prior year on a normalized basis for last year's Kansas and Ohio divestitures. Approximately half of the decline or $6.2 million was driven by lower overall voice revenues across the business.
Other products and services revenue accounted for 38% or $4.5 million of the decline, mainly due to reduced recognition of public-private partnership construction projects. The remaining decline reflects lower video and network access revenue. As Bob mentioned, we continue to see growth in the consumer broadband business through continued strength with our Fidium fiber product. The momentum in this area is a key driver for overall revenue growth in 2024.
As discussed in our fourth quarter call and as reflected in our guidance, we expected a decline in 2023 EBITDA principally due to sales of certain non-strategic assets and pressure in our legacy business. The decline of reported adjusted EBITDA of $31.8 million for the quarter included $12 million for non-strategic asset divestitures, $11 million related to declines in the areas of voice, video and access revenue, $6 million of compensation expense related to employee recruitment, increased headcount and commissions due to the ramp of Fidium fiber sales and installations in the quarter, as well as overtime related to maintenance activities due to storms in New England.
Now I'll review revenue by customer channel. All of these revenue comparisons will be against normalized Q1 2022 results. Turning to our consumer channel, total revenue was $109.8 million, down 2.2% compared to a year ago. Consumer broadband revenue was $68 million, up 6.4% as we continue to see strong fiber revenue growth of 56%. Consumer fiber net adds were up 60% from a year ago as the adoption of Fidium fiber accelerates.
For the quarter, we delivered record broadband fiber net adds of 12,337. With our fiber coverage now at 40% and our strategy demonstrating increased momentum, we are proud to see continued improvement in the second quarter. Consumer fiber ARPU was $67.51 in the first quarter, up 5.7% year-over-year and 0.6% sequentially driven by speed mix, as customers continue to take higher speeds of our fiber services. The fiber mix of Gig+ is up 14 percentage points on a year-over-year basis.
Consumer voice revenue was $32.3 million, down $4.5 million, or 12.2%, primarily due to continued erosion of access lines and associated services and long distance revenue. Video revenue was $9.6 million, a decline of $2.1 million, or 17.7% year-over-year as we continue to deemphasize our linear video. The transition from video is also driving a reduction in video programming costs, thus improving margins and free cash flow.
Commercial revenue was $95.5 million, down $4.3 million, or 4.3%. Data services revenue was $53.1 million, down 1% year-over-year. Despite the decline, we were seeing growth for Dedicated Internet access which is up 16%, SD-WAN was up 41% and cloud voice was up 3%. Voice services revenue was $32.6 million, down $2.3 million, or 6.5% in the recent quarter, primarily due to a decline in access lines as commercial customers are increasingly choosing alternative technologies.
Other revenue within commercial was $9.8 million, down $1.5 million largely due to a decline in sales of business systems equipment and special project revenue. Carrier revenue was $37.6 million, flat versus the prior year. Data and transport services revenue was $32.9 million consistent with last year. In the first quarter, our carrier transport revenue benefited from capacity upgrades in the fiber-to-the-tower business and the continued delay in certain tower negotiations, which have largely offset expected market rate adjustments.
As previously discussed for the full year 2023, including the effect of churn and pricing step downs, we expect a revenue reduction of approximately $10 million. Once we are beyond these renewals, we believe we have the opportunity to grow our carrier business through capacity upgrades for our wireless and wholesale customers as well as adding new tower connections. Wireless tower connections under contract totaled 4,137, up 5% versus last year.
Network access revenues totaled $24.4 million, down $1.3 million, or 4.9%, primarily due to declines in special access circuit revenue as carriers move from TDM to Ethernet-based transport solutions. Cost of services and products expense declined $4 million against prior year GAAP results due to savings from lower video programming costs including the impact of the sale of our Kansas operations and a decline in access costs related to prior year PPP. These costs were partially offset by an increase in required contributions to the federal and state Universal Service Fund as a result of an increase in the annual funding rates in 2023. Utility and fuel costs also increased in the current year.
Selling, general and administrative expenses increased $8 million versus GAAP results last year primarily due to severance costs and labor costs for additional sales headcount in 2023. We also saw an increase in advertising expense due to greater promotional activities for our fiber broadband products and higher professional fees for various systems enhancements and customer service improvement initiatives. These increases were partially offset by a decline in property and real estate taxes in the quarter. Net interest expense was $33.9 million, an increase of $4.3 million compared to a year ago. The increase was a result of higher interest on the term loan.
Now turning to capital expenditures. Committed capital expenditures totaled $145 million for the quarter. Included in our CapEx spend was $34 million of build CapEx for passings, constructed and released; $7 million for build CapEx for construction in progress; $5 million of core CapEx which supports all of our business lines and is not included in our cost per passing; $29 million related to an increase in our construction and CPE inventory; $40 million of success-based capital for our consumer and commercial businesses. The split of success-based capital is approximately 60% consumers, SMB and 40% business and carrier. Please note that consumer success-based capital relates to both fiber and copper installs, includes capital related to our other consumer offerings, and includes a modest approximately 10% allocation for indirect costs.
Finally, first quarter capital included $30 million for obligatory and digital transformation. For the quarter, our obligatory capital was elevated due to plant replacement costs related to major storms in northern New England in both January and March. As Bob mentioned, we have considerable build and CPE inventory on hand due to previously committed inventory purchases. Such purchases are highly weighted towards the first half of the year and are expected to benefit us in future quarters. Simply stated, we are in a strong position to execute on our fiber build and consumer installation goals for the year.
For our build, we continue to estimate our average cost per passing to be approximately $650 in 2023. And we continue to manage our average direct cost to connect at the $750 to $800 range. In the first quarter, we were approximately 10% higher due to overtime from higher connect activity, as well as some spillover from January and March storms in northern New England. Moving to our capital structure, approximately 77% of our total debt is fixed. Recall that we have a $500 million interest rate hedge against our $1 billion term loan through July 2023. Further, our $1.1 billion of senior notes have fixed coupons. Notwithstanding the heightened interest rate environment, our overall average cost of debt is 6.61%, up from 6.48% in Q4.
We continue to evaluate our interest rate hedging strategy and will report any meaningful changes in the second quarter. Our net debt leverage was 4.76 turns in March 31. As of March 31, the company maintained healthy liquidity with cash and short-term investments of approximately $336 million and $213 million of available borrowing capacity on our revolving credit facility, subject to certain covenant ratios. With regard to our 2023 outlook, it remains unchanged and is outlined on Slide 15. Please note that while the overall CapEx outlook has not changed, we modestly adjusted the percentage breakout between fiber build, success-based and obligatory and digital transformation capital.
Now I'll turn it back to Bob.
Thank you, Fred. Before opening for questions, I encourage you to review our recently issued 2022 ESG report which highlights our commitment to sustainability and our ESG journey. This of course includes our transition to fiber as it is more environmentally sustainable and uses less energy than cable or DSL. Fiber also requires less repair and maintenance and can be easily upgraded to provide exponentially faster speed as technology and consumer needs grow.
Let me also reiterate that our transformation to a fiber-first broadband company is gaining strong momentum. We have new go-to-market leaders on board and the team's combined expertise is accelerating our go-to-market actions. As an organization, we are focused and collectively executing on our strategic priorities for the year which include increasing fiber penetration across our three Cs, delivering an improved customer experience, as demonstrated by high NPS scores, and driving operational efficiencies. And finally, with April consumer broadband fiber net adds of nearly 6,000, we are off to a great start in second quarter.
Operator, we will now take questions at this time.
Thank you. [Operator Instructions]. We will take our first question from Greg Williams with TD Cowen. Your line is open.
Great. Thanks for taking my questions. I do know you said you can't talk about the Searchlight, BCI here, but I am curious. Is there a deadline or a general timeframe on a decision around exploring any of these strategic alternatives? And just the second question is on your game plan for capital. You've got no maturities till '27, plenty of liquidity. But to fund the build, you're going to need to I think access capital. By my model, it's late '24, 2025. I'm curious if I'm in the general ballpark, and how you envision that to occur? You will see meaningful EBITDA uplift in 2025. So that will give you probably more access to the debt markets. Is that the way of thinking about it, or are there other sources to access capital such as further asset sales? Thanks.
Yes. Let me take the latter part of that first, Greg. It's Bob Udell. It's good to hear your voice. The flexibility we have in capital has been demonstrated, I think, almost on a recurring basis. We're very focused on getting the best return. And we have a good ramp coming out of first quarter. We feel good about that. And that's the best way to fund as you said, producing more net adds that improve EBITDA run rate, and we believe we're looking forward at that. We also have demonstrated asset monetization, which puts us in a good position. And the public-private partnership momentum continues to build, which helps us get our dollars to go further as well as expand our passing. So along that line, I think we'll exceed the 70%. I'm not willing to speculate how much we'll exceed that. But we've got good momentum. And I think you capture all the levers we have to pull. Related to the offer to buy the company, you know that's being handled by the independent committee. We're going to keep the management team focused on running the business and keeping the momentum we've established, and then let the independent committee manage the process around Searchlight's interest and the partner company.
Fair enough. Got it. Thank you.
[Operator Instructions]. We will take our next question from Michael Rollins with Citigroup. Your line is open.
Thanks and good morning. First question is just looking at the EBITDA for the first quarter, can you talk about what are the opportunities through the year to improve EBITDA to get back to at least the low end of the guidance range?
Yes. The most powerful thing -- good morning. It's Fred. The most powerful thing we can do is continue to see the momentum in the fiber business. As you can see, we had a substantial step up in consumer fiber revenue in the first quarter, that is going to be the main driver of the business for the rest of the year. We're in a position where we have a expense base that can support substantially higher number of customers than we currently have. And therefore, the business scales nicely. It's high margin revenue on the fiber side. And so no, I think we're -- I think the only other thing I would point out is we did have a meaningful number of one-time expense items in the first quarter related to storms in New England. We had a substantial step up in overtime expense. We had two major storms. So we don't expect that to recur for the rest of the year. But frankly, the most powerful thing we can do in the business is drive fiber revenue, high margin and we're going to continue to keep a strong focus on our expense base throughout the year.
Just following on the last question, as you go through this process with the independent board and considering what to do, do you envision Consolidated sharing more disclosure on the multiyear financial plan, so public investors can also get a deeper sense of the full level of investment that the company is planning in terms of dollars as well as the benefits that you're looking to extract from those investments over time?
Yes. Mike, I think that you're seeing us do that. And so we're going to let the special committee, as I mentioned earlier, focus on guiding that process. But we're going to focus on sharing more detailed information as we continue to get momentum across all of our markets and further along in the plan, and we're coming out of first quarter with some more information on cohorts. And certainly, you'll start to see more around small biz as doing the work [ph] continues to get traction. So I think it's not necessarily related to the process, although the special committee may guide us on that. It's really build around as our plan matures, wanting to keep guiding you all in the street on what the investment potential continues to produce.
Thanks very much.
[Operator Instructions]. Ladies and gentlemen, that is all the time we have for questions today. I would like to turn the call back over to Mr. Bob Udell for closing remarks.
Well, I want to thank you all for joining the call today. We certainly appreciate your support for the company and for tuning in. I look forward to updating you on our next call, and have a great day.
Ladies and gentlemen, this concludes today's conference call and we thank you for your participation. You may now disconnect.