CenturyLink to conduct metered broadband trial later this year, Ewing says

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As CenturyLink (NYSE: CTL) continues to expand the availability of higher speed copper and 1 Gbps GPON service, it is considering whether implementing metered usage plans could boost its broadband revenue base.

Speaking to investors during its fourth quarter earnings call, Stewart Ewing, CFO of CenturyLink, said that it will trial metered usage sometime this year.

However, CenturyLink did not provide any specific details about which markets the trial will be conducted in, nor what the metered pricing plans would be for its copper and FTTH-based products.

"Regarding the metered data plans; we are considering that for second half of the year," Ewing said during the earnings call, according to a Seeking Alpha transcript. "We think it is important and our competition is using the metered plans today and we think that exploring those trials later this year is our expectation."

The idea of CenturyLink metering broadband or implementing usage caps is not entirely new. In 2013, a number of end-users in a DSL Reports forum said they were confused about the telco's bandwidth cap and usage policies. A group of users were given a warning they went over their cap, while other "heavy users" got no warning or were told the service provider does not implement usage caps.

Nor is CenturyLink alone in looking at some form of metered broadband billing. Fellow telco Cincinnati Bell's CFO Leigh Fox said during the Wells Fargo 2015 Technology, Media & Telecom Conference in November 2015 that metered billing could create another new revenue opportunity, with a particular emphasis on power users who are using their broadband lines to access over-the-top video content. However, Fox did not reveal if Cincinnati Bell had any specific metered billing plans.

Regardless of its plans for metered billing, a near-term priority for CenturyLink will be on returning its broadband base back to growth. Due to the new credit policy it implemented in mid-year 2015 -- one that targets users who sign up for service and don't pay their bill -- subscribership declined about 22,000 during the quarter.

Glen Post, CEO and president of CenturyLink, said that with the majority of the decline related to the credit issues is behind them it could start seeing some broadband growth in the first quarter.  

"We hope we worked in most of that fourth quarter, so we think those changes we made last year on the credit requirements and the higher prices, ... hopefully we will see ... what that can be in the first quarter," Post said.

At the same time, the service provider continues to increase the amount of homes that can get 40 Mbps or higher on its copper network as well as expanding its GPON-based FTTH network. As of the beginning of the year, CenturyLink passed over 940,000 homes with its GPON network and 490,000 businesses, while providing over 30 percent of its market area with speeds of 40 Mbps or higher.

"While we are focused on specific actions to drive sales revenue growth of our strategic product and service in 2016 and beyond, we expect to drive further penetration of our consumer business and GPON footprint of over 900,000 households and almost 500,000 businesses, and have 3 million households enabled for Prism TV service. And we expect to continue to expand high bandwidth data services GPON and Prism, enabling further revenue upside opportunities," Post said.

Here's a breakdown of the company's key metrics:

Consumer: Due to gains in its broadband Internet and Prism IPTV results, total consumer segment revenues were $1.51 billion for fourth quarter 2015, up 1.3 percent year-over-year from fourth quarter 2014.

Within the consumer segment, strategic consumer revenues were $773 million in the quarter, a 6.3 percent increase over fourth quarter 2014.

Throughout 2016 CenturyLink will continue to expand the penetration of its GPON-based fiber-to-the-premises (FTTP) services into more consumer homes and businesses.

CenturyLink continued to make progress on the IPTV front, adding about 16,000 new Prism customers during fourth quarter 2015 and more than 190,000 addressable homes in new and existing service areas, ending the quarter with nearly 3.2 million addressable homes.

Post said that it continues to see subscriber uptick in Prism IPTV subscribers, particularly in the markets where it offers the services over its FTTH network.

"We grew our Prism markets with GPON capabilities from 600,000 to 700,000 in fourth quarter and we are seeing really strong take rates, where we have GPON in these homes and businesses, so that is a really positive for us," Post said. "We average about, right now, just in this early on, we just released that we got about 15 percent penetration in our GPON markets of the GPON products, so it has grown."

Business/Wholesale: Driven by demand for high-bandwidth data services in fourth quarter 2015, strategic business revenues were $1.60 billion in the quarter, up 1.4 percent year-over-year from the fourth quarter 2014. High-bandwidth data services revenues from business customers grew approximately 9 percent year-over-year.

However, these gains weren't enough to prevent the segment from declining 1.6 percent year-over-year to $2.66 billion, a factor it attributes to decline in low-bandwidth data services and legacy revenues which were partially offset by growth in high-bandwidth data services revenues.

From an overall financial perspective, CenturyLink reported core revenues of about $4 billion in the fourth quarter 2015.

Operating revenues were $4.48 billion, up slightly from $4.44 billion year-over-year from the fourth quarter 2014 due to the increase in revenues from CAF-II support during fourth quarter 2015, along with strength in high-bandwidth data services and consumer strategic revenues.

CenturyLink said that these increases "were partially offset by the declines in low-bandwidth data services, as well as the decline in legacy revenues which was primarily driven by access line losses and lower long distance revenues."

For the full-year 2015, operating revenues decreased to $17.9 billion from $18 billion in 2014. Core revenues decreased to $16.1 billion in 2015 from $16.3 in 2014.

Looking forward, CenturyLink said that CenturyLink expects first quarter 2016 operating revenues to decrease compared to fourth quarter 2015 primarily due to anticipated declines in legacy, hosting and low-bandwidth data services revenues. 

Shares of CenturyLink closed at $24.59, down 22 cents, or 0.89 percent, in Wednesday afternoon trading on the Nasdaq stock exchange.   

For more:
- see the earnings release
- and the Seeking Alpha earnings transcript

Special Report: From Adtran to Zayo: Tracking wireline telecom earnings in Q4 2015

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