Recently the CFO of CenturyLink, Stewart Ewing, spoke at the Bank of America / Merrill Lynch 2014 Global Telecom and Media Conference. He had some interesting things to say about the future of CenturyLink that contrasts with some of the things that other large carriers like AT&T and Verizon have been saying.
The most interesting thing he had to say is that CenturyLink sees the future of broadband in the landline link to a home. He cannot foresee 4G wireless as a substitute for a landline wireless connection. He doesn’t see wireless delivering enough bandwidth in coming years as demand at homes keeps growing. Already today the average CenturyLink residence uses slightly less than 50 Gigabits of data per month and that is far above the data caps for 4G plans. He doesn’t think cellular can deliver the needed speeds, and unless the cellular model is drastically changed, it’s too expensive and capped at really low levels.
So CenturyLink plans to continue to upgrade its rural plant. About two thirds of CenturyLink’s customers can get 10 Mbps or higher today and the company is working to make that available everywhere. Contrast this to AT&T and Verizon. They have both told the FCC that they have plans to convert millions of rural lines to 4G LTE. I have written about this many times and see it as one of the biggest threats on the horizon to rural broadband. LTE is a great product when you want a burst of fast data to your cell phone. But the LTE network is not designed to serve multiple video streams to large numbers of households. 4G is also capable of some fairly impressive speeds that are significantly in excess of 10 Mbps, but those speeds drop quickly as you move away from a cell site.
It’s fairly obvious that AT&T and Verizon favor LTE since it is their own best economic benefit - their wireless operations dwarf their landline businesses. Nobody can argue with a straight face that LTE is the best way to provide data for customers from either a a performance or a cost basis. Cellular coverage is still poor in a lot of rural America and so forcing people off of copper and onto wireless will degrade the ability of many rural households to get broadband. But these two companies have a big financial incentive to move people from low-priced landlines to expensive cellular connections. It makes me think that if the FCC really cares about rural America that they ought to be divesting the landline business from AT&T and Verizon to remove the wireless bias.
CenturyLink says they are worried about the FCC changing the definition of rural broadband to be higher than 10 Mbps. They say that speed is difficult to achieve in their DSL plant and that they are far more comfortable with a definition of around 6 Mbps. It’s honestly refreshing to hear a telco executive tell people the truth for a change. The other big telcos spew a lot of rhetoric to sway the FCC or to assuage the public and it’s unusual to hear somebody tell the unvarnished truth to the public.
Those who follow my blog know that I promote a high definition of broadband. Households want the ability to stream multiple videos simultaneously. And you can expect in just a few years for there to be a much greater demand for HD quality video and a climbing demand for 4K video. The average urban household that has choice is already finding 10 Mbps to be far too slow. Just this week Verizon increased its minimum FiOS speeds to a symmetrical 35 Mbps. I know this is a really big technological expectation for CenturyLink and other rural telcos still using copper, but the definition of broadband needs to keep pace with what the normal household wants to buy, and that number is going to keep climbing year after year. If we don’t set the bar high then rural places are going to fall further behind the speeds available in cities.
CenturyLink does expect to continue to expand the footprint of its Prism TV product. This is a paired and bonded DSL product that can deliver up to 50 Mbps for customers somewhat close to a central office. CenturyLink has made this available to over 2 million customers and plans to make it available to 300,000 more in 2015.
Interestingly, CenturyLink does not plan to expand WiFi hotspots. Some other carriers seem to be in a race to put in hot spots but CenturyLink cannot see a way to monetize the effort. Of course, CenturyLink will put a hotspot in for a business that asks for one, but they don’t intend to build hotspots of their own. I have also written about this topic several times. Nobody who is not serving a captive audience like at an airport or in an airplane has been able to get much money from selling Internet by the hour. And while the giant cellular carriers benefit greatly by more WiFi, I have yet to hear of a deal where they are paying somebody to install public hot spots. Comcast says they have installed hundreds of thousands of hot spots and they recently announced that they are turning the wireless modems of all of their residential customers into hot spots. But to me that seems more like a move that is going to antagonize the public greatly with little obvious monetary benefit. I think CenturyLink is being prudent to stay away from this business until somebody shows a way to make money with it.