CenturyLink (NYSE: CTL) may finally be making a move to extend its Prism IPTV service to Qwest markets over the acquired company's Fiber to the Node (FTTN) last mile network infrastructure.
Speaking at last week's UBS Best of Americas conference, CenturyLink CFO Stewart Ewing said that it is delivering video as part of a broadband bundle to consumers along with DSL-based broadband data, traditional voice and wireless via its partnership with Verizon Wireless (NYSE: VZ).
While there has been speculation that CenturyLink may be interested in purchasing Sprint, Ewing said that the Verizon relationship enables it to offer a quad-play bundle and that building its own video service is its real priority.
CenturyLink currently offers its Prism IPTV service in eight markets. To fill out areas where it either can't prove a business case to provide IPTV or it is not available yet, CenturyLink will continue to offer satellite-based TV services via its partnerships with Dish Network (Nasdaq: DISH) and DirecTV (Nasdaq: DTV).
"We have always thought that video is more important than wireless was and hence our relationship with first Dish, DirecTV and our build out of our IPTV service to a million homes in the legacy footprint and our view to looking to extend that service into the Qwest markets as well," Ewing said.
Throughout the rest of 2011 and throughout 2012, CenturyLink plans on spending about $150 to $200 million to build out Qwest's existing Fiber to the Node (FTTN) network to about 1 million homes. However, adding IPTV in Qwest's former territory won't add to its capital budget because it's just another application that will ride on top of the FTTN connection.
"Where we have higher speed Internet access service available at 25 Mbps or better, IPTV is just another application that will ride on top of the broadband service," Ewing said. "There has to be some additional cleanup of the network just from a signal perspective, but the capital is really success-based after you roll out the higher speed broadband service."
To deliver its IPTV content to customers, CenturyLink has built one national centralized video head end located in Columbia, Mo., connected to its fiber network. When it brings IPTV into new markets, the service provider will spend $1 million to $2 million building a local head end to carry local off-the-air content, which is encoded and combined with national content.
"The fiber network attached to all of the areas that we serve from a customer perspective allows us from a centralized location to really provide distributed products all of across country to our customer base," Ewing said.
But IPTV expansion into other markets is just one of CenturyLink's new plans.
As for Savvis, CenturyLink is contemplating how it can in addition to cross selling its products to existing CenturyLink and Qwest enterprise and government customers, they would like to develop a product for the small to medium business (SMB) customer.
"We feel like the one product that Savvis is missing is directionally toward the small to medium business customer base with more of a shared cloud infrastructure," Ewing said. "We're working with Savvis and think we can offer a product to offer to our small and mid-sized customers in that space as well."
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