Lumen hones cloud strategy, but fiber buildout still front and center

Lumen Technologies is continuing to expand its service portfolio, from offering residential broadband to managed enterprise software. Although the company is shifting to a business strategy more cloud-oriented and less capital-intensive, CTO Andrew Dugan believes fiber network expansion is still one of Lumen’s top priorities.

“I don’t see us backing away from fiber investment,” he said Thursday at a MoffettNathanson investor conference. “As we build out for our mass markets, we’re building deeper into those markets where we’ve chosen to invest.”

Lumen in Q1 2022 reported a nearly 18% year-on-year jump in fiber revenue – increasing to $145 million – within its mass markets business. Dugan added Lumen is “heavily” building out its backbone network by investing in edge computing, increased storage capacity, cooling infrastructure and other components.

“While we are increasing our investment in these higher-level services, it doesn’t necessarily mean that we’re shying away from network expansion and hardening our fiber infrastructure,” he said.

Dugan said Lumen has typically deployed fiber-to-the-home to about 400,000 units per year and is hoping to end 2022 with “an accelerated pace” of over 1 million units passed. He also pointed out Lumen’s Quantum Fiber service – with which Lumen aims to pass a total of 12 million locations over the coming years – currently receives Net Promoter Scores of over 50.

The CTO touched on what CEO Jeff Storey has said about transforming from a telecom to a technology company. Dugan thinks Lumen’s strategy is equipped to deal with the hybrid workforce. It’s doing so by “rounding out” its portfolio with managed services like SD-WAN, SASE and Wi-Fi.

He also highlighted Lumen’s Cloud Connect offering, which attracts customers because Lumen can bundle network connectivity with edge computing capabilities. Further bolstering the digital experience, Lumen a few weeks ago launched the Lumen Marketplace, where customers can seamlessly learn about the company’s products before buying them, Dugan explained.

Lumen is investing in these high-level services not only because they’re less capital-intensive, said Dugan, but because they can be offered in conjunction with Lumen’s infrastructure services.

“We’re shifting our product set to be one that supports a broader set of needs for the enterprise,” he said. “As we build out these security and application support capabilities that support that hybrid environment better, I think we’re really well-positioned.”

Not only does Lumen have demand from enterprises that consume cloud services, Dugan noted hyperscalers are also important customers, particularly as they increasingly require dark fiber. Much of Lumen’s fiber provides the backbone fabric for cloud data centers, he said.

Dugan reiterated the company intends to roll out a multi-gig offering – using XGS-PON capabilities – in the second half of this year, adding XGS-PON can provide speeds of up to 10 gigabits.

On the subject of fixed wireless access (FWA), Dugan thinks it “clearly” has a role in mobile applications and rural deployments, but fiber will ultimately win out.

“My belief is that if there’s fiber to a location, a fiber service will be the most future-proof and deliver the best service, that’s where we’re investing,” he said.