FCC's 25 Mbps broadband definition isn't dampening CenturyLink's investment plans

Sean Buckley, FierceTelecom

CenturyLink (NYSE: CTL) may be the third largest telco, but it is clearly taking a contrary view over its larger ILEC brothers AT&T (NYSE: T) and Verizon (NYSE: VZ) on the FCC's recent move to redefine broadband speeds to be a minimum of 25/3 Mbps.

When asked during its fourth-quarter 2014 earnings call whether the FCC's new standard would stunt any new broadband investments, Glen Post, CEO and chairman of CenturyLink, responded that it is not important because the company is already increasing data speeds wherever it can.

"We're selling solutions, not just speed, so we'll continue to do that," Post said during the earnings call, according to a Seeking Alpha transcript. "It will change how we define broadband probably going forward but it won't impact necessarily our investment in broadband."

From all accounts, the service provider appears to be steadfastly focused on expanding both its existing fiber-to-the-node (FTTN) and GPON-based fiber-to-the-premises (FTTP) service footprints.

Broadband expansion was clearly a highlight of CenturyLink's fourth-quarter earnings report. On the FTTN side, the service provider expanded the availability of its 20 and 40 Mbps services by more than 45 percent over 2013. Still, that leaves a large portion of its customers only able to get 10 Mbps and below.

Following initial deployment of the 1 Gbps service to residential customers in certain parts of Omaha and Las Vegas and select business customers in Salt Lake City, CenturyLink said it would provide the 1 Gbps service to residential and business customers in 10 cities and business customers in another six cities.

The consumer GPON service that CenturyLink has been talking about in 10 markets has had a good response from customers, said Karen Puckett, EVP and COO of CenturyLink, during the earnings call. "We like the halo effect that's just in new markets and then the business GPON [is] equally important."

However, one issue with the FTTP deployments is the company is not stating exactly what parts of these markets are actually getting service.

In January, a report emerged that in Denver, the service provider said it is offering the 1 Gbps service in 16 of the city's core neighborhoods. Eligible customers can get a standalone 1 Gbps service for $151.95 a month, but that requires a two-year contract, or $124 a month if purchased as part of a bundle that includes wireline voice service.

Perhaps CenturyLink's opinion about the FCC's broadband definition could be related to the fact that unlike AT&T and Verizon, CenturyLink does not have the distraction of maintaining a wireless business and can dedicate more of its attention to wireline broadband.

Case in point is Verizon. The telco recently reached a deal to sell off wireless properties in three former GTE markets to Frontier in California, Florida and Texas. It also reached a deal to sell over 11,300 of its company-owned wireless towers to American Tower Corporation for $5 billion. By shedding these assets, Verizon would be able to have more cash on hand to pay off its recent AWS-3 wireless spectrum purchase.

Another possible reason CenturyLink is not worried about the 25/3 Mbps standard is the FCC probably won't do much to penalize service providers that still offer lower speeds.

Karl Bode, editor of BroadbandReports, suggests in a report that the FCC's metric's "primarily going to be used as a high-water mark in policy discussions."

While CenturyLink is now the third largest telco, the service provider's roots are as an independent rural telco that resided outside of the once heavily regulated Bell System monopoly that wasn't known for moving quickly. Bringing fiber-based and advanced services into new Greenfield developments and more affluent areas is the best way to justify the targeted investments it wants to make while marketing the fact that at least some of its customers meet the new broadband standard. It will do this by allocating capital in markets where it feels like it can get the best bang for its investment buck.--Sean

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