CenturyLink CEO: Fiber wins over 5G, wireless and hybrid fiber coax

CenturyLink is defining itself as the go-to provider of fiber-based services for business customers, according to CenturyLink CEO Jeff Storey.

Speaking on the company's second quarter earnings call Wednesday afternoon, Storey, the former CEO of Level 3, said that CenturyLink would continue to micro-target new fiber builds in additional neighborhoods and cities. CenturyLink sees fiber as the winning hand for its future success, which was evidenced in its recent announcement to deploy 4.7 million miles of new fiber from Corning across the company's intercity networks in the U.S. and Europe. 

RELATED: CenturyLink extends fiber reach in U.S., Europe

"We know that when we have a building on-net, our fiber-based services provide a better, more reliable and higher margin solution than competing infrastructure," Storey said on the earnings conference call. "Fiber beats twisted pair copper, hybrid fiber coax, and it beats wireless, whether it's 5G or not, fiber wins. It's highly flexible and increasing speeds, it is secure and really is the basis for all the other competing technologies.

"We just do one thing differently. We take fiber all the way to the customer, and customers always want fiber when they can get it. You can expect us to continue investing to expand the reach of our access fiber network."

To highlight the pace of CenturyLink's fiber frenzy, Storey said CenturyLink added 5,000 new fiber-fed buildings in the second quarter, compared to 4,500 in the first quarter. By contrast, Level 3 used to add around 500 fiber buildings per quarter.

While fiber trenching can be expensive and disruptive, CenturyLink can tap into the fiber conduit it has collected over the years from acquisitions such as Level 3, Qwest, Broadwing and WilTel.

Storey said that fiber was well suited to meet the demands of emerging opportunities driven by artificial intelligence, machine learning and big data applications.

"Fiber-based solutions are better able to satisfy what we see as four key market trends," Storey said. "The need for highly scalable capacity, now ranging into multi gigabits per second; the need for connecting and increasing number of widely distributed locations; the need for the network itself to protect the privacy and security of our customers; and finally, the need to move bandwidth intensive computing resources closer and closer to the edge to reduce latency and unnecessary backhaul of traffic.

"Expanding our on-net building footprint certainly helps us meet these needs. But we've implemented a number of other initiatives to ensure CenturyLink maintains our position as the premier fiber based provider for enterprise customers."

Storey said that CenturyLink recognizes that access and long haul transport are only parts of the overall fiber equation.

"There's increasing demand for computing capabilities at the edge of the network, and we believe we're uniquely positioned to capitalize on this market opportunity," he said. "In addition to our far-reaching fiber network, we operate a large number of edge locations that are well suited to enable edge computing. In the coming weeks, we expect to announce the details of our investments in our widely distributed and extremely well-connected edge computing infrastructure."

Storey said that CenturyLink's dark fiber business, which will benefit from the fiber expansion, is providing connectivity to hyperscale cloud providers and enterprises.

"We are quietly a very large dark fiber sales company," he said. "We don't emphasize it that much externally, but we love it. We have great customers."

Storey also mentioned CenturyLink's win of a $24 million contract with the U.S. Census Bureau to provide secure cloud connectivity for next year's census, which was announced on Thursday.

"CenturyLink will help to collect the census digitally by providing the bureau with managed trusted internet protocol services or MTIPS at speeds of 40 gigabits and higher," he said.

CenturyLink's second quarter numbers

In the quarter that ended June 30, CenturyLink had net income of $371 million, which was a 21% increase over last year's $292 million. CenturyLink's total revenue was $5.58 billion, while diluted earnings per share came in at 35 cents compared to $5.90 billion and 27 cents per share in the same quarter a year ago.

Revenue declined 1.2% both year over year and sequentially in CenturyLink's enterprise segment. The enterprise segment had revenue of $1.50 billion during the second quarter, compared to $1.52 billion in the same quarter a year ago. CenturyLink expects its enterprise revenue will rebound in the second half of this year.

"If you think about our enterprise segment, our sales in fourth quarter, and January and February, were impacted by the government shutdown, but we saw good sales in March and we saw good sales in the second quarter of this year," said CenturyLink CFO Neel Dev on the conference call.

While most of the larger cable companies are adding broadband customers, CenturyLink had a net loss of 56,000 broadband subscribers. CenturyLink lost 78,000 subscribers who were taking speeds of below 20 Mbps, but added 22,000 customers for speeds of 20 Mbps and above. Dev said the growth of broadband subscribers for speeds of 100 Mbps and above had increased 100% on a year over year basis. 

"Broadband revenue for the second quarter 2019 grew 1.8% year over year, which compares to growth of 1.4% last quarter, driven by our efforts to increase penetration in our competitive assets and investing in fiber," Dev said. "Voice revenue on a year over year basis declined 13% this quarter compared to 12% last quarter. The decline in other revenue continues to be driven by our decision to de-emphasize our Prism video product."

During the earnings call, Storey said CenturyLink's internal teams continued to review the possibility of CenturyLink selling off its consumer business, but that the review is a lengthy process.