CenturyLink (NYSE: CTL) found that cable providers' Ethernet over HFC facilities are becoming a sound alternative source to fulfill large customer needs as it expands its service footprint outside of its traditional wireline territory, illustrating that there are growing options for special access wholesale services.
The service provider's revelation comes as the FCC nears the end of its investigation into the competitive state of the special access market that's traditionally been controlled by ILECs like CenturyLink, AT&T (NYSE: T) and Verizon (NYSE: VZ).
In 2014, the service provider launched an initiative to expand the amount of non-ILEC Ethernet Local Access (ELA) providers as a way to increase the number of locations it could reach with Ethernet services.
CenturyLink said in an FCC filing that since "the kickoff, the number of buildings with non-ILEC Ethernet access available has increased exponentially," adding that "we project growth in 2016 and beyond."
The telco noted that it has a number of options for last mile access, including EoHFC and EoCopper from a growing host of cable operators and CLECs.
"CenturyLink noted the tremendous success of this initiative, due to the now-widespread availability of cable-provided Ethernet-over-fiber and Ethernet-over-hybrid fiber coax (HFC) and CLEC-provided Ethernet-over-copper access services," CenturyLink said. "CenturyLink also demonstrated that the quality and performance of these services--in terms of class of service (CoS) and service level agreements (SLAs)--are comparable to ILEC-provided Ethernet services, and that CenturyLink frequently purchases Ethernet-over-HFC services because they meet the needs of most of its Ethernet customers."
While cable operators such as Comcast (NASDAQ: CMCSA), Cox and Time Warner Cable (NYSE: TWC) have been building out and expanding their fiber-based Ethernet networks, CenturyLink said these same cable MSOs are providing services over their existing HFC networks that can meet the needs of a growing amount of business customers.
Cable providers' Ethernet over HFC service can provide up to 10 Mbps symmetrical speeds, a service CenturyLink says can "be used to fulfill a significant percentage of CenturyLink's Ethernet access orders" at a lower cost than Ethernet over Fiber.
But speed and cost are only part of the equation that's made EoHFC an attractive option for CenturyLink's out of region Ethernet service. The service provider noted how cable operators are offering three classes of service (CoS) over their Ethernet over Fiber offerings: high, medium and low.
Interestingly, the service provider found that most of its customers choose to buy low CoS for Ethernet provided over fiber and that service level agreements (SLAs) "are immaterial to a customer unless it uses the service for a particularly jitter-intolerant application."
What's more, most of the telco's out of region customers don't know the difference whether their services are being carried over fiber or HFC.
"For most of CenturyLink's customers, cable-provided Ethernet-over-HFC and Ethernet-over-fiber services are indistinguishable in performance," CenturyLink said.
Likewise, CLECs such as XO Communications and Alpheus continue to grow their Ethernet over Copper network offerings, a trend that's also benefiting the telco's out of region Ethernet drive. EoC offers 20 Mbps speeds and above, which covers a large part of its customer base.
The end result of these competing alternatives is that they will drive other ILECs to drive down prices, a phenomenon that's increased as cable providers have increased their Ethernet footprints.
"The ILECs are responding to this competition with pricing promotions, and CenturyLink anticipates seeing further price reductions as competition continues to expand," CenturyLink said.
- see the FCC filing (PDF)
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