CenturyLink (NYSE: CTL) may be the late bloomer in the telco TV front, trailing its two ILEC brothers AT&T (NYSE: T) and Verizon (NYSE: VZ), but it's clear that it is making progress with its Prism service as it added 15,000 new subscribers in the first quarter of 2012 across the eight markets it serves.
Interestingly, 55 percent of the new IPTV service subscribers it added during the quarter were actually new CenturyLink customers that migrated away from an existing cable operator or satellite plan. At the end of Q1 2012 it had almost 85,000 PrismTV subscribers.
Speaking at the recent The 40th Annual J.P. Morgan Global Technology, Media and Telecom Conference, Stewart Ewing, CFO and EVP of CenturyLink, said that its IPTV service is helping it offset landline losses and drive more people to subscribe to bundles of voice, video and data.
"Prism IPTV continues to have a positive impact on churn and landline loss trends, and we experienced a greater than 90 percent broadband pull through rate with our Prism IPTV sales to new CenturyLink customers," he said, adding that "we also remain on track to launch our Prism IPTV product in our first legacy market later this year."
Expanding the IPTV footprint
Delivering IPTV over Qwest's Fiber to the Node (FTTN) network is the obvious logical place to target its service expansion. To date, the FTTN network reaches 6.3 million living units and is connected 7.1 million by the end of the year.
Earlier this year, the service provider revealed its IPTV plans for the former Qwest markets during the 22nd Citi Entertainment, Media and Telecommunications Conference.
In the markets where FTTN is available, about 80 percent of the customers can get 20 Mbps or higher, while 40 percent can get speeds of up to 40 Mbps or higher.
Since the higher speed services are delivered over VDSL2, the actual speed and availability is dependent on the quality of the copper plant and the distance the customer is from the nearest Remote Terminal (RT).
As it continues to offer higher speed broadband services in select markets, including the legacy Qwest territory, CenturyLink plans to spend over $100 million on expanding and enhancing the Prism service experience.
While part of the IPTV budget will include the expansion into one or two Qwest markets, over half of it will be for supporting new customers and paying for set top box and related subscriber equipment.
"Where you already have Fiber to the Node and you already have 20 Mbps or better available, we view the IPTV Prism product as another application over the broadband network," Ewing said. "You need to make sure the loops are cleaner because there's not as much tolerance with that video signal as you have if you're streaming content over the Internet."
With an ARPU of about $85.00, Ewing noted that the majority of the Prism IPTV customers are new customers that decided to ditch their cable or satellite company.
"A large percentage of the customers--over 55 percent-that we're adding to the Prism product are new customers to the company that are coming from satellite or a cable company or are just moving to the market and choosing our service," he said.
And while it will continue to offer satellite services as part of a triple play bundle in non-Prism markets, Ewing said the Prism IPTV service is creating greater customer stickiness.
"We think that because we can control the quality of the service and we make the service more personalized from a CenturyLink standpoint and get the branding in there which we can't do with the satellite service," he said.
Raising the broadband bar
Outside of Qwest's FTTN markets, CenturyLink's traditional DSL-based service is offered in three other speed tiers: 6 Mbps is available to 70 percent of the customer base; 10 Mbps is available to 55 percent of the customer base; and 20 Mbps is available to 25 percent of the customer base.
Ewing said that he's seeing more existing and new customers taking higher DSL speeds.
"If you look at our new customers that we're adding from a broadband standpoint, about 45 percent of those customers take a 7 Mbps or higher service and 25 percent take a 1.5 Mbps broadband service," he said. "We've seen our customers migrate to the higher bandwidth services and we've been able to provide those services to them."
In terms of pricing, the telco said that while it has made slight increases with its speed tiers, overall prices have been relatively steady with Average Revenue Per User $36.00 (ARPU) for the past year or two.
One opportunity Ewing believes that could enable to drive up broadband pricing as consumers look for new broadband services due to wireless operators incorporating data usage caps on their respective service plans.
"We're hoping to drive prices a little higher over time as others adopt caps," he said. "As the wireless carriers put caps on their broadband services you can receive or you have to pay payer higher prices for higher usage, we think that will drive more people to our network at least when they are in their homes."
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