Speaking at the second day-one SUPERCOMM morning keynote, Tom Gerke, executive vice chairman of CenturyLink reported that the leaders of the new ILEC, a combination of the former CenturyTel and EMBARQ, have been chosen and now the fun part of integrating the two companies begins.
With 90 days under their belt as CenturyLink, Gerke gave a quick update on where the company currently stands. The new CenturyLink now operates in a combined 33 states with 7.34 million access lines, 2.1 million broadband customers and has 440,000 video subscribers. Although CenturyLink's video play has mainly consisted of satellite services, the ILEC is trialing IPTV over copper in various markets, including Wisconsin, Columbia, Mo. and Jefferson City, Mo. Stopping short of saying they are going to do a full blown IPTV network rollout, Gerke said that ILEC feels encouraged by what they have seen so far with video. "An exciting part of the combination is the ability to look forward to see if there are further opportunities for us to expand a facilities-based approach within the company," he said.
But the focus is not just on technology alone. To serve its customer base, CenturyLink has developed a localized approach that has representatives that understand the markets and services they are selling. "In our business that local ownership has been an approach long used by CenturyTel and we have adopted it and it works quite well," Gerke said. Now the real fun and proof will be in how the newly merged company will be able to integrate their respective back office and operational systems.
Serving the unserved
Following the theme of this year's broadband show, a major focus for CenturyLink is broadband access.
Although CenturyLink like Verizon chose not to take part in the upcoming broadband grants, CenturyTel is still challenged by serving more sparsely populated and even rural areas. This is a major issue for CenturyLink since once you take away large markets such as Florida and Las Vegas, NV much of the CenturyLink's market reach consists largely smaller and rural towns.
Gerke said that while CenturyLink covers the same amount of geography after Frontier's acquisition of Verizon's lines, they are about one-fourth the number of households per square mile, and if you take out Vegas and Florida it's about 17 households per square mile. "When we talk about the challenges of reaching the unserved it really illustrates what drives that," Gerke said. "The lower customer density results in longer distance and is more expense. It's not just higher capex but also the backhaul and the operating expense that goes with it."
In its Fort Meade, Fl. market, for example, 76 percent of the lines are within the core or urban with 25 percent outside. Serving the lines outside costs five times more than what it takes to serve the lines within the city core. Since LECs already typically have a network footprint (at least traditional copper lines) throughout a market, Gerke thinks that they are in the best position to help fill in the broadband gap.
"With a nominal amount of effort through loop shortening, additional electronics and additional fiber, you can get there," Gerke said. "It only takes that additional incremental spend to get there."
And while CenturyLink recognizes the FCC's call for a national broadband plan, the industry won't be able to achieve it, says Gerke, unless there's a public/private partnership in place. A proper public/private partnership should include three common elements: cooperative public private effort; modernization of USF support; reform intercarrier compensation to support universal broadband. This public/private investment strategy should be able to support not only immediate needs, but the ability to use optical-based networks that can scale to meet future needs.
"A key component of this is private investments that should take care of those areas where there's economically viable standalone opportunities, but when you get beyond that there has to be partnership that's predictable and sustainable," Gerke said.
But any broadband plan won't work if regulatory environment don't support it. Two regulations key to expanding broadband availability into more areas for service providers like CenturyTel will be revamping the Universal Service Fund (USF) and intercarrier compensation rules.
Whether the USF funding arrangement is realigned through a legislative process, the key will be in making sure that funding gets extended to the outlying areas that today just can't be served economically. "The donut holes are going to be taken care of, but what's important is making sure you get the support to those lower density areas," Gerke said.
No less important is intercarrier compensation. The system has been set up to compensate carriers from others that use their network to terminate calls, for example. In calling for a reformed USF system, Gerke believes that there should be a balanced transitional approach and that the pain of reform be balanced with affordable benchmark rates.
"Our company and I believe the rest of the industry is behind the fact that we need to simplify it and make it more predictable," he said.