Despite a disturbing drop in broadband subscribers over the spring, Centurylink is betting the future on faster data speeds, IP video service and a new OTT video entry.
CenturyLink Inc. (NYSE: CTL), the third-largest US telco by subscribers, spelled out its plans to boost broadband speeds further, extend the reach of its IPTV product and launch a "skinny bundle" OTT service by year's end on its second-quarter earnings call earlier this week. Downplaying the company's unexpectedly heavy loss of 65,000 broadband subscribers in the spring period, CenturyLink executives insisted that the losses were just temporary blips due to a shift in marketing focus from standalone data services to bundled products.
"We did expect broadband additions to be affected by the pivot away from the standalone broadband customers, but the impact was greater than we anticipated," CenturyLink President and CEO Glen Post told analysts on the call, according to a transcript supplied by Seeking Alpha. He noted that "about 20% of the decline was driven by a higher than expected number of slow and nonpaying customers," while "a significant percentage of the churn is related to standalone broadband customers who are less loyal than our traditional bundled customers."
With the quarterly decline, CenturyLink ended June with just under 6 million broadband subscribers, down from slightly over 6.1 million a year ago yet still more than all US service providers but the top four -- Comcast Corp. (Nasdaq: CMCSA, CMCSK), AT&T Inc. (NYSE: T), Charter Communications Inc. and Verizon Communications Inc. (NYSE: VZ).
Still viewing broadband as the key to their future, CenturyLink officials highlighted their plans to boost data speeds across the company's sprawling footprint over the rest of the decade. Those plans call for raising data download speeds to at least 40 Mbit/s in 85% of their top 25 markets and at least 100 Mbit/s in 55% of those markets by the end of 2018. Also, by the close of 2019, the company is aiming to have about 11 million addressable units, representing 42% of its total addressable units, capable of receiving 100 Mbit/s or higher. Plus, it's aiming to offer speeds of 100 Mbit/s or greater to over 70% of the addressable units in its top 25 markets by then.
"We see speeds of 40 Mbit/s to 100 Mbit/s as competitive today in virtually all of our markets," said Post, whose company has also rolled out 1 Gig speeds in more than a dozen markets. "We expect that usage curve to continue to increase over time, moving to the 100 Mbit/s or 200 Mbit/s range over the next several years."
In conjunction with the broadband speed hikes, CenturyLink also continues to expand the reach of its IPTV product, Prism TV. With that product already available in more than a dozen markets as well, the company wound up the second quarter with 311,000 Prism TV subscribers, up from 258,000 a year earlier and 302,000 at the end of March.
But, even more than Prism TV, CenturyLink is focused on developing its forthcoming OTT video offering, now being tested in a small pilot under the Prism Stream brand. Plans call for launching a much bigger trial of an app-based streaming service later this year, using "skinny bundles" that would feature local broadcast channels.
"We've had one trial and we're going to have another more robust trial of an over-the-top product that we expect to be able to bundle, and we are bundling voice as well," Post said. "With the skinny bundle, we'll also offer the broadcast network channels with that, which is a little different from a lot of, some of the, offers that are out there today. So we think that will be a differentiator as we bring those local channels with the over-the-top cable channels."
In doing so, CenturyLink will enter an increasingly congested OTT video market filled with other large, ambitious players. Rivals will include AT&T, which is ramping up to launch three DirecTV-branded streaming services in the fall; Dish Network LLC (Nasdaq: DISH), which launched its Sling TV service early last year; and Hulu LLC , which is aiming to launch a live streaming service early next year. (See Time Warner Binges on Hulu.)
— Alan Breznick, Cable/Video Practice Leader, Light Reading