CenturyLink's 1 Gbps availability drives consumer awareness, purchases of higher legacy speed tiers

CenturyLink (NYSE: CTL) is finding that in areas like Omaha, Neb., where it is rolling out its 1 Gbps fiber-to-the-home (FTTH) services, a growing number of consumers outside of the fiber footprint are purchasing higher speed tiers available on its copper networks.

Stewart Ewing, CenturyLink


Speaking at the Morgan Stanley Leveraged Finance Conference, Stewart Ewing, CFO of CenturyLink, told investors that the 1 Gbps rollout has created awareness that the telco is another broadband service source.

"Although we only covered 45,000 homes in the Omaha market, it made the phone ring," Ewing said. "Outside of the areas where we had fiber-to-the-home and where we were able to deliver 20 Mbps, 40 Mbps and in some cases 80 Mbps, it allowed us to sell to those customers as well because they were unaware of the fact that they could get the higher speed services for us."

In Omaha, the service provider built fiber to only 45,000 homes that leveraged an existing fiber-centric network built by Qwest in the 1990s to deliver video services.

Feeling satisfied with the uptick in Omaha, the telco announced plans in 2014 to extend its 1 Gbps service footprint to residential and business customers in select locations in 16 cities. During the first quarter earnings call, the telco said it plans to reach 700,000 residential homes with the 1 Gbps service by the end of the year.

CenturyLink hopes it will see a similar trend in the other nine cities where it has plans to build out the service to residential customers.

"The hope is with these other nine markets where we build small portions of those large cities in neighborhoods to make the phone ring in those markets as well to be able to continue to pick up high speed Internet customers and Prism IPTV customers," Ewing said.

But FTTH is only one part of CenturyLink's consumer service growth plan. The service provider continues to expand its Prism IPTV footprint into new markets--including Salt Lake City, which it announced just this week.

As of the end of 2014, CenturyLink passed about 2.4 million homes with the service with plans to add 500,000 home this year. It ended the first quarter with a total of 250,000 IPTV customers.  

Today, much of the focus on expanding the IPTV footprint will be on larger cities, but it has not made final plans on the total amount of cities it would serve yet.

"In terms of how far we could extend it it's really hard to say," Ewing said. "We haven't really gone through and defined all of the potential markets we have, but our focus now is on the larger markets that we picked up with Qwest like Denver, Portland, and Minneapolis."

CenturyLink is upping the competitive ante against its new challenger Google Fiber in Utah, announcing that its Prism IPTV service is now available to a number of Salt Lake City and surrounding area residents and businesses.

At the same time, CenturyLink is seeing the economics to equip homes, particularly those that have been equipped with its GPON FTTH service is improving.

"The economics, at least where we're building GPON to the home, it costs us about $500-600 homes passed and if we're successful in selling a customer our video services it costs about another $500-$600 for a combination of the drop, the NID on the side of house, and the set top boxes," Ewing said. "We're working to reduce the cost of the set top boxes down over time."

For more:
- listen to the webcast (reg req.)

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