CenturyLink (NYSE: CTL) is aware that when Charter Communications (NASDAQ: CHTR) completes its acquisition of Time Warner Cable (NYSE: TWC) the merger will give CenturyLink a larger threat in its residential and business service capabilities, but the telco says it has the right weapons to compete.
Speaking to investors at the Bank of America Merrill Lynch 2015 Media, Communications & Entertainment Conference, Glen Post, CEO of CenturyLink, said that while the new Charter will be a larger threat, it will give the telco a way to gain market share as these MSOs work through the integration process.
"We do see this as an opportunity for us because there will be a lot of missteps and confusion with the merger and we'll take advantage of that," Post said. "We'll continue to roll out higher speed, more fiber. And where we have done that we have seen very high take rates of this product, so we don't feel threatened by this merger."
CenturyLink faces cable competition in 90 percent of its footprint, with Comcast being its largest competitor. Comcast (NASDAQ: CMCSA) covers 40 percent of its markets, while Charter and Time Warner Cable take 40 and 15 percent of its markets, respectively.
CenturyLink has a number of weapons in its broadband arsenal it will use to battle the new Charter, including its growing GPON-based fiber-to-the-premises (FTTP) roll out and enhancing its copper network to deliver higher speeds with a mix of bonding and vectoring.
On the FTTP front, CenturyLink has made considerable progress in expanding its footprint to business and residential customers.
As of the end of the second quarter, it passed 475,000 businesses with plans to increase it to a total of 500,000 businesses by the end of the year. Likewise, it passed 600,000 homes with 1 Gbps GPON and is on track to reach FTTH service to 700,000 homes by the end of 2015 and has seen good take rates for the service.
Fiber is only one part of its broadband equation.
CenturyLink says by using a mix of vectoring and bonding it's possible to deliver higher speeds of up to 200 Mbps over its existing copper network to 65 percent of the footprint it operates in, which serves for consumers and small- to medium-sized businesses (SMBs).
The telco said that these technologies will enable it to deliver between 40-200 Mbps to 1.2 million homes.
"We think we'll reach an additional 1.2 million households with a new approach of a bonding/vectoring combination where we're going to bring 40 to 200 Mbps -- depending on where you are in the network -- to 1.2 million households," Post said.
This revelation about the broader use of vectoring and bonding comes after the telco revealed in August that it had begun trialing a new 100 Mbps service over its existing copper network for consumer and business customers in Salt Lake City.
At that time it said that it would examine how that kind of service would help it from a competitive standpoint before it makes a decision to roll it out in other markets.
While consumers are certainly a key target, CenturyLink is no less anxious to bring the higher speed copper-based services to its small to medium business (SMB) customers.
By offering these services along with GPON where it's available, CenturyLink is hoping to increase its market share with local SMBs by posing a greater challenge to local cable operators Comcast and Charter.
"We have relatively low penetration of the small- and mid-sized businesses in our markets of about 20 percent on average," Post said. "From the cable company standpoint, we have the upside in GPON versus the downside, so we're really excited about this GPON roll out and the higher speeds that will enable us to compete better with the cable companies."
Today, CenturyLink breaks out the speed capabilities into three segments: 70 percent of its footprint can get access 10 Mbps or more, 55 percent has access to 20 Mbps and 30 percent has access to 40 Mbps or more.
Post said that the combination of vectoring/bonding, the fiber-to-the-premises (FTTP) build and other fiber expansions should put it in a better competitive position.
"With our GPON rollout to 700,000 homes by year end and additional investments in our fiber network footprint should enable us to better compete because we have low market share," Post said. "We only have 15-20 percent market share in many of these markets so when we're rolling out fiber it's really a new market for us in many ways."
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