CenturyLink to bring IPTV to Qwest markets, expand FTTN network

CenturyLink (NYSE: CTL) has made it official that it's going to extend its Prism IPTV service into the former Qwest territory with plans to bring it into one or two markets this year.

Stewart Ewing, CenturyLink

Ewing

Ewing revealed the ILEC's plans during the 22nd Citi Entertainment, Media and Telecommunications Conference.

"We pass about a million homes today with our IPTV service and expect to provide service to at least one Qwest market in 2012 and potentially two markets," said Stewart Ewing, EVP and CFO of CenturyLink.

Such plans should not be of a major surprise as CenturyLink hinted that they would bring the Prism IPTV service to the Qwest markets last fall.

While CenturyLink was a bit later to the IPTV service game, it continues to make progress with the service roll out, passing 1 million homes as of the end of 2011.

And while Ewing acknowledges that the IPTV customer base is still relatively small (it had 50,000 subscribers at the end of Q3 2011), he reported the service is resonating with consumers in the areas it is available.

With a 210,000 mile fiber network in place from its acquisitions, it can from a centralized basis provide distributed products like IPTV to the customer base. All of Centurylink's video content is put into a national head end in Missouri. From there, the content is delivered to each of its current eight markets, which have their own mini-head ends for local content, over the fiber network.   

"The (IPTV) customer base is still small, but we did increase the customer base 25 percent during the third quarter," he said.

Going forward, CenturyLink plans to maintain a two-pronged video service strategy that leverages both IPTV, which it says is an incremental investment to make in areas where it is delivering higher bandwidth data services, and satellite.

Of course, the service provider is aware that more and more consumers are accessing over the top (OTT) video services like Netflix (Nasdaq: NFLX). Despite that the OTT trend, it has no plans to turn its back on providing satellite services as part of a dual or triple play bundle.

"The incremental cost of us rolling out IPTV is not significant," Ewing said. Once you get a 20 Mbps service out there to a customer the incremental cost of layering IPTV on top we view it as another application."

Ewing added that "if over the top eventually takes some of the traditional TV market, we think we'll be well positioned with the bandwidth with have to our customers to participate in that."

In tandem with IPTV, CenturyLink will continue to expand its broadband service footprint in both the legacy CenturyLink, Embarq and new Qwest markets it acquired.

Broadband continues to be a hot seller for CenturyLink. During Q3 2011, the service provider added 57,000 high speed Internet subscribers in Q3 2011 versus only 12,000 in Q2. Part of this expansion includes the ongoing movement of Qwest's existing Fiber to the Node (FTTN) initiative. By the end of 2012, CenturyLink said it will pass 5.4 million homes with FTTN.

Where the FTTN-based service is available, 75 percent of those customers can get speeds up to 20 Mbps with the remaining customers getting 10 Mbps and higher.

"We expect to continue the Fiber to the Node expansion in 2012," Ewing said.

From an overall broadband speed perspective, 20 percent of CenturyLink's total customer base can get 20 Mbps or higher and over half can get 10 Mbps or higher, and two-thirds can get access to 6 Mbps speeds or higher.

"The speeds will continue to improve over 2012 and future years as we continue to build out the IPTV footprint and the Fiber to the Node footprint in the Qwest markets primarily," he said.   

And while there could be potential competition from wireless operators offering higher speed LTE-based wireless services in some markets, Ewing thinks they have the upper hand to serve consumers. On average bandwidth, the service provider is seeing customer average usage continuing to rise to about 18 Mbps, which is double of where it was in 2011.

"We think that although there may be some competition from the lower end--and we've seen average usage continue to grow--it will far outstrip the demand the capacity of the wireless providers to provide the service at your home," he said.

But the copper-based broadband network is not just about consumer services alone. To better target small to medium business (SMBs) clients lower speed Ethernet services, the ILEC has expanded its Ethernet over Copper (EoC) rollout to about 334 new COs in the Qwest markets.

"What Ethernet over Copper allows us to do is provide higher speed services to business customers in those areas to make us more competitive," Ewing said.

For more:
- listen to the webcast

Special report: The most important M&As of 2011

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