CenturyLink sees over the top video as, potentially, its main delivery mechanism for video services, reflecting the changing viewing habits consumers have over an existing broadband connection.
Stewart Ewing, CFO of UBS 44th Annual Global Media and Communications Conference, told investors that CenturyLink wants to reach a broader audience than it could via a facilities-based IPTV service.
“We expect to make some margin on this and get much wider distribution,” Ewing said. “It’s more of what people are going to be looking for.”
Earlier this year, the telco began a trial of an OTT service outside of its Prism footprint in four markets. The telco plans to officially roll out the OTT option to various markets early next year.
What’s initially attractive about the OTT product is that it can immediately address a broader market than CenturyLink can address today.
CenturyLink could use the OTT video product in other areas where it offers IPTV service today. In particular, CenturyLink wants to attract users who can only get, or only want, 10 Mbps broadband service. Today, customers have to order a 25 Mbps minimum connection speed to get the Prism service.
“We’ll have a huge footprint what we can provide this product,” Ewing said. “It’s over the top with a Roku device and we’ll have local channels so we think for at least some time that will be a differentiator of our product.”
As it transitions more towards an OTT offering, the question is what will it do with its existing Prism IPTV service?
In the third quarter, the service provider added 17,000 new Prism IPTV customers.
Ewing said that while it will continue to offer and honor its IPTV Prism service, CenturyLink has no immediate plans to offer it any new markets. “At this point we’ll continue serving the markets that we’re in and we think over time the over the top product might replace the Prism product over time,” Ewing said. “We’re not going to discontinue selling it and if we can get the channels delivered that consumers want the Prism service could potentially go away over time.”
CenturyLink is hardly alone in evolving its video delivery methods to consumers.
Fellow telco Consolidated Communications, one of the early IPTV providers, is also leaning more towards an OTT option as well. While Consolidated has not revealed any specific OTT plans, the service provider sees OTT as being a driver for new broadband growth.
Driving broadband growth
Ewing said that main goal with the OTT video is to bolster its broadband subscriber base.
“What we’re interested in is driving broadband growth over time,” Ewing said. “We think OTT video will enable us to drive broadband growth.”
Being able to drive further broadband growth is clearly a key priority for CenturyLink. During the third quarter, the service provider dropped 65,000 subscribers as it focused its efforts on attracting higher-paying triple play customers.
By leveraging the CAF-II funding it is eligible for in multiple states, CenturyLink expects it will be able to increase its broadband subscriber base, particularly in areas where it could not address before due to their rural nature.
“Another positive that we have from a broadband growth standpoint is the CAF-II monies we have,” Ewing said. “We’ll pass about 1.2 million homes when that program is completed with 10/1 Mbps and these are markets that did not have internet service or 1.5 Mbps or lower capacity.”