It appears CenturyLink didn't want to miss making an announcement at last week's Citi Entertainment and Media Conference, going with a "me too" approach to IPTV services. The "announcement" was modest, as CenturyLink revealed that they would be extending their IPTV services to one or two new markets in the former Qwest territory. Currently CenturyLink's Prism IPTV service passes 1m homes in select markets and, as of 3Q11, had 50k subscribers. For a telecom provider as large as CenturyLink, however, those numbers are relatively small—but what's interesting is how CenturyLink executive vp and cfo Stephen Ewing characterized IPTV: as just “another application.”

Ewing said, “The incremental cost of us rolling out IPTV is not significant. Once you get a 20 Mbps service out there to a customer the incremental cost of layering IPTV on top we view it as another application.” These sentiments, of course, square with what we've been saying for a while—that since so many providers spent so much time and money on network build-outs and improvements, this was the year to capitalize on those networks with new services, content, and applications.

But CenturyLink's "announcement" seems pretty modest, and offering IPTV in only two markets seems like a paltry "expansion," considering that the company has 210k miles of fiber. With its acquisitions and its expansive network, rollouts like IPTV appear to be an obvious next step. For now, Ewing said that, “The (IPTV) customer base is still small, but we did increase the customer base 25% during the third quarter.”

CenturyLink's network design also makes IPTV easier to distribute, as all of its video content is put into a head end in Missouri and, from there, distributed to each of the 8 markets currently served with IPTV. Each market also has its own mini-head end for local content, and all content is delivered over CenturyLink's fiber network.

Last fall, the company denied speculation that it would expand its Prism service to former Qwest markets. CenturyLink had just inherited Qwest's 1m DirecTV subscribers and was committed to satellite TV. But now the Louisiana-based ILEC says it's following a two-pronged approach to video services: satellite and IPTV. It's a strategy that allows CenturyLink to hedge its bets, capitalize on the satellite subs it's already inherited, and continue to anticipate consumer trends, as greater numbers of Americans access over-the-top video services like Netflix. Ewing said, “If over the top eventually takes some of the traditional TV market, we think we'll be well positioned with the bandwidth with have to our customers to participate in that.”

What is surprising, however, is that CenturyLink does not seem to have an overarching strategy to build out broadband to former Qwest markets. So far the company has just said, vaguely, that it plans to "expand its broadband footprint." Broadband has been a key component to the ILEC's business strategy for a while now, and in 3Q11, the service provider added 57k high-speed Internet subscribers, versus only 12k in 2Q11. Part of these gains, however, come from Qwest's FTTN initiative, which CenturyLink has continued after the acquisition. By the end of this year, CenturyLink estimates that it will pass 5.4m homes with FTTN.

In FTTN service areas, 75% of customers enjoy 20 Mbps speeds, while the remainder of subscribers have speeds of 10 Mbps or higher. As for CenturyLink's big picture, about 20% of subscribers can get 20 Mbps, over half can get 6 Mbps, and two-thirds can get 6 Mbps or higher. According to Ewing, “The speeds will continue to improve over 2012 and future years as we continue to build out the IPTV footprint and the Fiber to the Node footprint in the Qwest markets primarily,” he said.

Of course, CenturyLink will find itself increasingly in competition with LTE services (which we will look into more next week), but for now Ewing said CenturyLink seemed to have an edge, due to its increasing bandwidth. Ewing said that average customer usage is continuing to rise to about 18 Mbps, double where it was a year ago.

Group Offers Practical Partnerships with Vendors, Colleges, Businesses, Communities

These days, it seems like everyone is talking about the cloud, and for those in the ILEC industry, the question is how to capitalize on this new technology in a way that utilizes their investment in fiber and their position in local and regional communities. The executive directors at MARC3 believe they may have an important answer to this question—intelligent, forward-thinking collaboration between a variety of “sectors,” including vendors, academic institutions and, yes, ILECs.

The Midwest Academic & Resilience Cloud Computing Consortium (MARC3) predominately works with community colleges to help them identify twenty-first century jobs, while working together collectively and with small-to-mid-sized businesses to harness the power and possibilities of the cloud. The group is also inviting ILECs to a workshop where cloud collaboration will be the focus and where high-profile connections could generate business possibilities for carriers.

While the group's name may be a mouthful, its mission is practical. The consortium brings together a group of colleges, universities and industry partners investigating the use of cloud computing infrastructure, and believes that collaboration can support teaching and learning, cloud computing education and training, academic research, and entry-level resilience and recovery solutions for small-to-mid-sized businesses. Additionally, the consortium focuses on uses of the cloud by businesses, in a way that augments their day-to-day operational needs.

According to executive director Dick Arns and chief compliance officer John Jones, the consortium believes ILECs could play a key role in cloud computing's future and they are inviting ILECs across the nation to participate in their next workshop, on Aug. 8 at Governors State University in University Park, Illinois. The workshop will feature an address by Congressman Adam Kinzinger (R-IL), and in the room will be top-tier vendors, community college representatives, and hopefully some ILEC executives. Past meetings have attracted big name executives and politicians, and Arns asserts that the face-time and networking possibilities of these meetings are a valuable part of collaboration. According to Arns, “Rural carriers should definitely be involved, because of what they represent—Middle America... they could contract with large data providers to attract new services to their areas. They won't need to borrow the infrastructure; they already have it.”

Arns also believes ILECs could be an important link between the schools and vendors MARC3 already connects. The Aug. 8 meeting will explain the group's aims in greater depth, but basically the model is this: vendors (chip manufacturers, hardware, and software companies) invest a modest sum in local community colleges that then use the investment plus their own resources to run a pilot program as a “sandbox”-like testing ground for the vendor. The pilot program augments the current curriculum of the college, so that students get first-hand experience working with high-profile companies and cutting-edge technology, and professors gain access to improved resources and lab experience.

For cloud computing, job possibilities are also an exciting part of MARC3's collaboration aims. Jones and Arns believe that, as cloud computing becomes more popular, small-to-mid-sized businesses could benefit and local communities could capitalize on the cloud's manufacturing needs: containers, super computers, widgets and so on. With local connections through the community college, areas could bring these jobs to their region and build on connections already establish with big vendors. There's money to be made: Arns sites several recent studies by the Gartner Group, Yankee Group and others, each of which forecast that that the “cloud brokerage service model” is likely to grow to $1t in revenue in the next five years.

At the center of this model could be rural and small carriers, who would provide the broadband needed to keep up with growing HPC services. “Whoever owns the network can possibly make quite the premium,” Arns says. “It [fiber] is too expensive to buy, so it makes sense to go through the ILECs, CLECs and so on, and in the process allow them to light up some dark fiber.” Such local and regional carriers “can better provide service to end users,” according to Arns, “so that Amazon and Google and others can get to those clients.”

But all of this is not just talk. MARC3 has projects already in the works. Recently a top-tier vendor hosted three MARC3 meetings and, with the partnerships formed, immediately was placed into a $1.5m grant application, to get started working with schools on a pilot program. Similarly, in an effort to provide insight into their own cloud computing/ data centers capacities, Dell Computers, in conjunction with local stakeholders (comprised of an Illinois town, a local community college, and a Illinois Congressional District), is launching another pilot program that if successful could arguably provide cloud services to a town of 65k.

Carriers can become a part of this model if they're willing to collaborate in creation of a win-win for all involved, Arns and Jones stated. “We can couple them with a community college in their area and bring the ILECs into this arrangement,” Arns said. And he insisted that the best thing ILECs can do to get involved is to come to the Aug. 8 meeting. Arns said he welcomes interested ILECs to be in contact with MARC3 and ask questions ahead of time, to throw out ideas, and so on. In the end, the group promises a kind of collaboration that makes sense and also makes use of untapped partnerships between some strange bedfellows. But by bringing together a vendor that's willing to invest, a community college that's hungry for hands-on opportunities, and a colloquium that can help apply for grant funds, ILECs may finally have a practical way of capitalizing on cloud computing's lucrative future.

For more information on MARC3's Aug. 8 meeting, go to www.marc3.info or contact John Jones at [email protected] or 773.286.0699.