CenturyLink acquisition of Level 3 would bring additional conduit, reduce fiber installation costs

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CenturyLink says that its proposed acquisition of Level 3 Communications will give it a broader array of fiber assets that could reduce installation costs in areas where it had not previously had a presence.

Glen Post, CEO of CenturyLink, told investors during a call about the acquisition and its third quarter earnings that since Level 3 had already built out fiber conduit that pass buildings and other points of presence (PoPs), the service provider could scale its fiber network even faster.

“With Level 3 network, they have a lot of a conduit available, which reduces the cost of build in these areas significantly down to like 50 cents a foot, now when you just pull in five or two conduit,” Post said. “So there’s tremendous potential over time with those assets.”

RELATED: CenturyLink's Post: Level 3 deal will complement our FTTP, copper-based broadband builds

In particular, the access to additional conduit could assist CenturyLink as it looks to enhance its fiber-to-the-premises (FTTP) program for businesses and residential customers.

On the business side, CenturyLink’s FTTP buildout focuses on locations where there’s a density of small- and medium-sized businesses within each multi-tenant unit, such as office buildings, office parks or even mixed-use business and residential developments.

In its latest fiber build that it announced in October, CenturyLink extended FTTP services to businesses located Phoenix, Denver, Seattle, Albuquerque, Salt Lake City, Tucson, Colorado Springs and Minneapolis/Saint Paul.

As part of that strategy, CenturyLink continues to look for near-net opportunities. These include buildings that are within close proximity to the fiber the company already has in the ground, allowing it to rapidly scale service to business customers. CenturyLink would be able to leverage existing Level 3 conduit to address additional customer locations it might not have been able to before via its own network.

CenturyLink has set an aggressive strategy to increase residential broadband speeds via fiber and hybrid copper/fiber technologies like G.fast, which can enable up to 1 Gbps speeds in some cases over very short copper loops. CenturyLink set a goal to equip its 25 top markets with more than 90 percent of homes and businesses passed with 40 Mbps or higher service, and more than 70 percent to have 100 Mbps by 2019. Finally, more than 20 percent of its homes will be passed with GPON to enable 1 Gbps or more.

Besides having access to conduit, the acquisition will give CenturyLink more on-net fiber enabled buildings. With the capability to put more business customers on its own fiber in areas outside of its traditional ILEC territory where Level 3 has already installed fiber into buildings, CenturyLink will be able to convert circuits it had to rent from other providers onto its own network.

Stewart Ewing, CFO of CenturyLink, said that converting off-net circuits to on-net circuits is part of a broader network rationalization process that will allow it to be more responsive to the businesses it serves.

“When we convert off-net to on-net, we control the customer experience and provide a better customer experience,” Ewing said. “We're no longer for paying somebody else to provide that service for us and we’ve reduced the revenue of our competitors because we're no longer paying our competitors to provide that service.”