CenturyLink (NYSE: CTL) is again driving the idea that fiber-based broadband is the fashionable item with its plans to extend its 1 Gig fiber into 16 markets.
While the 1 Gig service will enable it to deliver a service that cable can't match in the consumer segment, the rollout will have an even larger effect on the small to medium businesses (SMBs) for which fiber-based solutions are hard to come by.
Similar to fellow ILEC AT&T (NYSE: T), CenturyLink has taken a targeted approach to its 1 Gig expansion, targeting a mix of businesses and consumers. In 10 markets it will deliver the fiber-based service to a mix of consumers and businesses, while in six others it will focus on businesses.
This is not the first time that CenturyLink has been offering GPON-based 1 Gbps service to businesses. CenturyLink set the stage for a larger deployment earlier this year when it launched the service in the Salt Lake City area for SMBs that reside in multi-dwelling unit (MDU) buildings.
Following the momentum it began in the Salt Lake City market, the 1 Gig service is a motivating force to drive more of its cloud services to SMBs that are looking to outsource functions like storage, e-mail and the management of customer premise equipment (CPE).
GPON-based broadband will help extend three of its key core cloud assets, including not only the assets it acquired from Savvis and Tier 3, but also its own home-grown Managed Office capability.
Being able to offer the Managed Office capability over a 1 Gbps-based connection makes sense. Managed Office provides a host of bandwidth-hungry services, including network and hosted VoIP, managed CPE, hosted apps and cloud storage and security software.
But this is not just another best-effort service. Leveraging existing fiber routes, CenturyLink said it will ensure quality of service (QoS) by connecting the GPON-enabled buildings to its MPLS backbone.
"From our perspective, it was pretty natural to put our cloud assets together with GPON so when you move your business to the cloud it feels like it's in the closet next door," said Shirish Lal, senior vice president of marketing for CenturyLink, in an interview with FierceTelecom.
Rosemary Cochran, principal of Vertical Systems Group, said that while the sweet spot for higher speed Ethernet bandwidth is between 100-400 Mbps, the ability to bundle the higher speed with other cloud-based services will be key in helping it recoup the revenue it loses when converting customers off of TDM-based T-1 and SONET circuits.
"As Ethernet gets rolled out and they start to replace the TDM and SONET bandwidth, Ethernet revenue is not making up for that lost revenue, so you need to add value somewhere," Cochran said in an interview with FierceTelecom. "Having the cloud and a bundled offering will help people move."
Cochran cautions that a key challenge is how far the MDUs are located from local facilities. Depending on demand for the service, CenturyLink could extend the fiber network into more MDUs that weren't on its initial deployment list.
In areas where CenturyLink currently does not have fiber or can't build an immediate business case to deploy fiber facilities, it will serve customers with a mix of traditional lower speed DSL and Ethernet over copper (EoC). Over the past year, the service provider has been expanding the reach of its EoC network.
Another key concern will be specific availability and pricing. The service provider has not revealed exactly where in the 16 markets it will initially roll out the service.
Putting aside the questions about availability, CenturyLink's fiber drive is about increasing business revenues. During the second quarter, the telco generated $1.56 billion in total revenues, up 2.6 percent year-over-year as growth in high-bandwidth offerings and data integration revenues offset lower legacy services revenues.
It will take time to assess how effectively CenturyLink will deliver on its 1 Gbps promise, but it's clear that it has set a path to drive more cloud services into the SMB segment--one that's been clamoring for new solutions.--Sean