I don’t write many positive articles about the largest US telcos. This is mostly because these are the competitors for most of my ISP clients, but also because the big companies are on the wrong side of issues like net neutrality and privacy. It’s generally pretty easy to find things to dislike about any one of the big carriers.
But I have to say that I am impressed with CenturyLink’s foray into cloud computing. They got into it early and they have carved out a decent market niche. Cloud services is already a huge business and will grow much bigger. I read a recent statistic that says that only about 13% of US corporate data today is stored in the cloud. That leaves a lot of room for industry growth.
The two big giants of the cloud storage industry are Amazon and Google. In fact, Amazon is so large that I read that Amazon has five times more data center capacity today than the next 14 competitors combined, including Google. But I also have read reviews that talk about Amazon as the ‘Walmart of cloud storage’. They are cheap – they have lowered cloud data storage prices 42 times since they started. But they are also somewhat generic and this comes from having a suite of products that tries to satisfy everybody.
But companies like CenturyLink and Peak 10 have created a niche in the cloud computing market by offering customized services. For example, Peak 10 has concentrated on the medical and the gaming industries. CenturyLink cut its teeth on providing services to governments and other large businesses.
There are several components to cloud computing – data storage, transport, computing power and software centralization. Amazon has clearly moved ahead of everybody else in storage capacity, but one has to wonder if this is a long-term advantage. It appears that data storage is moving towards being free, or nearly free. Obviously with the upcoming Internet of Things there is going to be more pressure put onto storage capacity, but the dropping prices for data storage is what has led to the repeated Amazon price cuts
CenturyLink competes much better in the transport arena. They were born out of the merger of Qwest and US West, with Qwest having significant fiber assets throughout the US and the hemisphere. They continued to expand their fiber post-merger and most of the US is close to a CenturyLink fiber. While transport prices have dropped, particularly on the major intercity routes, transport to smaller markets is still a very lucrative business, and having fiber in those markets gives CenturyLink an advantage in many regions.
Amazon also has the edge today in computing power by virtue of owning so many data center assets. Amazon is not ahead only by virtue of sheer number of data center computing assets, but they have also been working feverishly on building faster and more energy efficient servers and switches. This gives them a temporary market advantage, but these kind of advantages usually don’t last too long. There is a major industry shift towards software defined networking and this is going to result in cheap data center routers and switches for everybody.
I wrote this blog as an example that it’s possible for a company to reinvent itself. I don’t think anybody has been thought to be stodgier than CenturyLink for the last decade. While Verizon and AT&T have been adding data customers, CenturyLink struggled with old copper. But CenturyLink is now a player in cloud products and they have recently launched credible new business lines by building fiber-to-the-home networks and also launching their Prism DSL product that is similar to AT&T’s U-verse. I hold CenturyLink out as an example to my clients. If they are able to take the steps needed to make sure that they will be relevant decades from now, then so can any other ISP.