CenturyLink Embraces Fiber

CenturyLink seems to have done a 180 in terms of embracing fiber. According to Jeff Storey, the CEO of Centurylink, the company is now defining itself as the ‘go-to provider’ for fiber-based services for business customers. This is in sharp contrast to just a year ago when Storey, as the new CEO said that the company would not be pursuing low-return infrastructure investments.

Storey says that CenturyLink added 5,000 business buildings to fiber in the second quarter, following 4,500 buildings in the first quarter of this year. This contrasts to Level 3 that historically added around 500 buildings per quarter.

It appears the company may be taking a page from the AT&T storybook. AT&T has been building fiber around locations where it already has a fiber POP. This strategy has helped AT&T to now pass over 20 million locations with fiber while avoiding the high cost of large overbuilds.

CenturyLink has an extensive national fiber footprint that it’s accumulated from the purchase over the years of Level 3, Qwest, Broadwing and WilTel. Like AT&T discovered, CenturyLink is sitting close to a huge number of existing opportunities with that existing network, and perhaps that’s the new company strategy – to edge-out and take advantage of nearby low-hanging fruit.

Storey says the company has ordered 4.7 million miles of fiber to add into its urban networks. You have to take that number with a grain of salt since one mile of a 48-strand fiber counts as 48 miles of fiber when counted this way. But this is still a lot of new fiber construction. The one thing that readers of this blog will notice is that the construction is likely to be urban – it’s doubtful that the company is ever going to put another dollar into rural infrastructure. The company recently quietly searched around for the possibility of spinning off its rural business but found no takers. This is likely to mean more of the same for its rural customers – mostly neglect.

The company continues to lose broadband customers. In 2018 the company lost 262,000 broadband customers for a 4.6% drop. In the second quarter of this year, the company lost 56,000 net broadband customers but reports that it lost 78,000 customers with speeds below 20 Mbps and added 22,000 customers with speeds faster than that. Like all of the big telcos, it’s losing DSL customers converting to cable modems.

The company has a long way to go to convince Wall Street that its stock has value. In a May blog, I wrote how the company stock had dropped 43% over a year to a price of $10.89. It’s still sitting in that range with the stock price sitting at $11.56 yesterday.

The Level 3 acquisition is likely to be one of the more interesting stories in the history of our industry. Level 3 was the high-flying telecom company, with stock prices that climbed steadily. It seems that Jeff Storey could do no wrong as earnings grew faster than the rest of the sector. But that all came to a halt with the merger with CenturyLink. I’m sure that both companies thought that Storey could pull CenturyLink upward by tying it to Level 3, but just the opposite occurred. This might be one of the biggest cautionary tales ever in our industry and shows how difficult, and perhaps impossible it is for anybody to turn around one of the big incumbent telcos.

What’s most interesting in this story is that Glen Post and the crew from CenturyLink were in the process of that a slow and steady turnaround. A few years before the CenturyLink merger the company had decided to build residential fiber in its many large city markets and take back a significant piece of the broadband business that had been leaking away. In the year before the Level 3 merger the company had built fiber past nearly 1 million urban passings. We’ll never know now if a few more years of that kind of investment could have turned the company around – not to be a high-flyer like Level 3, but to earn decent long-term returns on broadband infrastructure – the kind that come from making a hundred-year investment in fiber.

3 thoughts on “CenturyLink Embraces Fiber

  1. Contrary to consensus about rural fiber deployment, I can say I’ve witnessed it. This is not a defense of CenturyLink, but I can say that CL did install fiber into a very rural and sparsely populated subdivision in Colorado. (It might have been with CAF II funding) In fact it travels 10 miles off the state highway and ends right at the corner of my property. I’d love to get off my satellite ISP and give them a try, but during the dig/bore, the service line from the roadside pedestal was cut – by their own construction team . And, now they say it can’t be repaired because of the county and they asked me to help pay for their mistake and fork over thousands of $ they need to fix – if I’d still like the service. I don’t want it that badly!

    • This has to be CAF II money. The company is not spending any of its own cash on rural fiber. Likely this was intended to beef up DSL in the area.The story that they can’t fix a line cut sounds suspicious.

  2. I consider myself one of the lucky ones. I am served by CenturyLink FTTP at my home in Grimes, Iowa which is also where I work. With the exception of a couple of outages caused by fiber cuts elsewhere in the Des Moines metro area, it’s been reliable. Two blocks north of me the homes that were built 2 years earlier are stuck with 12 Mbps DSL. The patchwork nature of CenturyLink’s infrastructure has handed their competitor, Mediacom, most of the market. But Mediacom’s own struggles with reliability and customer service have left an opening for some new entrants in the smaller suburbs on the periphery of Des Moines. A rural telephone company spun off a new company that has been building FTTP in those “gap” neighborhoods were CenturyLink speeds are substandard and has been doing quite well. All without subsidies because their parent company is willing to play the long game on profitability.

Leave a Reply