CenturyLink has no plans to drop its Prism IPTV service, but given the challenges of acquiring content, the service provider has indicated that an over the top (OTT) model is a better option for future video services growth.
Glen Post, CEO of CenturyLink, told Goldman Sachs' 25th Annual Communacopia Conference that it will formally launch the service early next year following ongoing trials.
“We believe it will be more profitable for us and we can handle 17 channels versus 200 or 400 channels and trying to manage those costs and be competitive in that area,” Post said. “We think over the top video is going to be a real positive for us and still drive the pull through.”
The service will initially include 17 channels, which will be bundled with a set of local channels. CenturyLink determined as a result of customer research that most users want this amount of channels.
“A customer does not want to watch broadcast video because they want it when they want it,” Post said. “It’s a tough reality for the content providers, but when we talk to them it’s a tough discussion and they know if they don’t do it they will be behind other competitors.”
A key point is that it can be bundled with the company's array of broadband packages. In markets where it delivers Prism IPTV, the telco is seeing strong results.
Additionally, it has a large amount of customers that subscribe to satellite TV via its agreement with DirecTV and others remaining from the DISH agreement.
“Today, with our video product, we’re getting about 95 percent pull through of high speed internet and 50 percent of those customers are new to CenturyLink,” Post said. “We’ll continue with our video product and we think we can get the same impact with OTT that we get with our Prism product.”
Although it is still hammering out agreements to get local channels for the OTT offering, CenturyLink is close to completing deals with two content providers to complete the 17 channel package.
“We’re within 2 agreements of having a total package done to have the 17 channels, and that is what we need to bring it to market,” Post said. “It will still include local channels, but we’re taking a while to get all those done, which will be ongoing over the next several months.”
Post said that real value with OTT is that the telco can potentially sell its customers additional broadband speeds.
Being able to drive profitability isn’t turning out to be easy in the near-term. During the second quarter, the service provider dropped 65,000 subscribers as it focused its efforts on attracting higher-paying triple play customers.
Amidst the decline, CenturyLink continued to make progress with its higher speed offerings, particularly 40 Mbps. Over 8.4 million addressable households and businesses were able to get access 40 Mbps or higher speeds, including 1.2 million GPON-enabled addressable units.
“We believe it will be profitable, but the real value will be bringing in the other services like high speed internet and Internet of Things that we expect to be a driver for us in the months ahead,” Post said. “It’s going to be profitable, but basic internet and high speed data that will drive the profits.”
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