Lumen Technologies turns up the first block of its cloud edge nodes in the third quarter

In Q3, Lumen Technologies turned up its first block of cloud edge nodes and additional node blocks are well under way, according to Lumen CEO Jeff Storey.

Lumen, which was formerly known as CenturyLink, announced its edge compute strategy last year. In 2019, Lumen said it had more than 100 edge compute nodes across the U.S., but it's in the process of adding 150 more around the globe.

"The edge computing market is forecasted to be anywhere from $10 billion to $40 billion over the next several years, and we are very focused on leveraging our widely distributed fiber and edge data facilities to aggressively pursue this opportunity," Storey said on Wednesday's earnings call, according to the Seeking Alpha transcript. "I'm pleased to say that we're already making great progress on our cloud edge plans."

Thanks to its large fiber network, both its backbone and on-net buildings in cities, Lumen has laid claim to reaching 98% of the enterprises in the U.S. with low latency of 5 milliseconds one way with its edge compute nodes. Services and applications are moving to the various edges to provide low latency for services and applications such as 5G, IoT, augmented reality and virtual reality.

Even before the cloud edge compute platform officially launched, Storey said Lumen had a major media company as a customer on the edge platform. That unnamed company is using it to deliver live sporting events, and "it is providing them exactly the capabilities and performance they hoped," according to Storey.

"A very different type of enterprise customer already deploying on the Lumen cloud edge is CyberReef," Storey said, as an example of how cloud edge could be used. "CyberReef provides remote learning solutions for public school systems, and the Covid pandemic is driving tremendous growth for their services."

Storey said CyberReef's Kids Internet Defense Shield required highly distributed compute resources combined with high-capacity network connections and tiered Internet infrastructure, in order to put security tools close to the school systems they support.

"In other words, Lumen's cloud edge platform and the Lumen network were a perfect fit for this customer and a great example of how high-performance networking combined with distributed compute can deliver next-generation services," Storey said.

Also in the third-quarter, Lumen opened the doors on its Lumen cloud edge experience center in Denver. The center allows customers, partners, and vendors to remotely deploy edge compute technologies on Lumen's platform and test them with live networking under real-life conditions, according to Storey.

"Within a couple of days of the launch of the experience center, a major cloud service provider loaded their cloud extension software to begin testing, and we are working with other partners and customers to begin testing their applications as well," Storey said.

Storey said Lumen was "deeply investing" in its cloud edge strategy.

"We have hundreds of people dedicated to cloud edge to make sure that we have the right capabilities in place for our customers," Storey said. "So we're investing through this cycle, looking at how to continue to grow the business."

Lumen is using its capabilities to combine network, compute and application management for custom implementations of edge compute. Lumen is also in the process of rolling out a bare metal service on its edge compute nodes, which will be consumable on the fly, dynamically provisioned and attachable to networks.

"What we see from enterprise customers is they need to move that compute resource back closer to where that data is acquired so that they can analyze and act on it faster without having to transport it around and move it around," Storey said. "So we're very close to where that data is actually created and where it needs to be analyzed. It gives the benefit of on-premise computing with also the benefits of cloud computing because we can move it into a cloud environment. They don't have to have their own data center.

"We can do it virtually. We can do it on physical machines. We can provide their compute resources in a variety of ways."

RELATED: Lumen CTO Dugan shines a light on new brand name and what it means for enterprises

The cloud edge platform is one of the cornerstones of Lumen's Fourth Industrial Revolution strategy, which it announced when the name was changed from CenturyLink to Lumen Technologies in September. Along with the name change, Lumen has made a purposeful shift towards aggressively going after emerging opportunities with growing addressable markets. 

"Lumen is more than just a new name and logo," Storey said. "In a world that is rapidly changing, it signals a new era for our company where we combine an all-digital delivery model, software-defined networking, and one of the very best fiber and network infrastructures into a platform of capabilities designed to drive our customers' success."

Lumen by the numbers

As part of the new branding, CenturyLink was split into three separate entities: Lumen Technologies, CenturyLink and Quantum Fiber. Lumen Technologies' platform brings together a global fiber network, edge cloud capabilities, and security and communication and collaboration solutions while Quantum Fiber is a subscription-based, fully digital platform for delivering fiber-based products and services to residents and small businesses. The CenturyLink brand is still being used for residential and small business customers over traditional networks.

Going forward, Storey said Lumen would break out Quantum Fiber in more detail.

Thanks in part to large federal contracts, Lumen's enterprise segment increased to $1.44 billion in the quarter compared to $1.43 billion in the same quarter a year ago. On a sequential basis, enterprise grew 0.4%.

The small-to-medium-sized business (SMB) continued to struggle in the third quarter, mainly due to small businesses trying to find their footing after closing earlier in the year due the Covid-19 pandemic. SBM sales were down 5.7% in the quarter to $635 million compared to $674 million a year ago. Storey said the SMB results were in line with the company's expectations, but SMB will continue to be impacted by the pandemic going forward.

Wholesale revenues decreased in the third quarter to $949 million, which was down from $1 billion in the same quarter a year ago.

For the quarter that ended in September, Lumen reported net income of $366 million in Q3 2020, an increase of about 12% compared to last years‘ result of $302 million.

Lumen posted total revenue of $5.17 billion and diluted earnings per share of 34 cents compared to $5.35 billion and 28 cents per share a year ago.