CenturyLink Targets Q2 for OTT TV Launch

Telco testing that service in four markets; notion that CenturyLink might try to resell DirecTV Now resurfaces (Updated)
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CenturyLink plans to kick off the commercial availability of a new OTT TV product in the second quarter as the telco continues to push ahead with trials in four markets.

The current plan is to launch the product in some markets in “early” Q2, and then expand on that into mid-year and the rest of 2017, Maxine Moreau, president of consumer markets at CenturyLink, said Wednesday on the company’s Q4 earnings call.

CenturyLink has not announced expected pricing for the service, but Glen Post, CenturyLink’s president and CEO, reiterated that the OTT product the telco is working on will look to distinguish itself with a slimmed down package that features local channels. Post also said the OTT offering will support a network-based DVR capability.

RELATED: CenturyLink CFO: OTT-TV Offering Might Replace Prism TV Product

“Our trials are getting really strong reviews right now,” he said.

Post said CenturyLink continues to “deemphasize” Prism TV, its current full-freight IPTV service that’s powered by the Ericsson Mediaroom platform, and that his company believes that the economics of an OTT offering will be more attractive.

Content costs for the current Prism TV product “have really gone out of sight that last couple of years,” Post said, noting that truck rolls and provisioning costs cut into the margins to the point that it’s difficult to get a good return.  CenturyLink’s operating expenses rose $15 million, or 2.4%, primarily due to higher Prism TV content costs.

The OTT product, he said, won’t require trucks rolls and will enjoy wider availability due to the lower bandwidth requirements versus Prism TV.

“We have really deemphasized the Prism [TV] product because of the margin issue,” Post said, holding that its “real value” is its ability to pull-through additional services and bring new customers in the door. He said about half of Prism TV subs are new to CenturyLink.

Update: The possibility that CenturyLink might consider tapping into a third-party solution for OTT-TV, like DirecTV Now, was raised again.

“We’re looking at every option,” Post said in response to an analyst's question, adding that if the content costs were favorable with a service like DirecTV Now, “we’d certainly take a look at that…We are talking to all the service providers, looking at every possibility there.”

At an investor conference in December 2016, CenturyLink CFO Stewart Ewing opened the door to the idea of reselling DirecTV Now. CenturyLink already resells the traditional satellite-based DirecTV service. CenturyLink wasn’t aware that AT&T was also working on an OTT service, “Otherwise, we would just talk to them about potentially reselling theirs, and we may very well do that,” Ewing said at the time.

CenturyLink ended Q4 with 325,000 Prism TV subs, adding about 7,000 in the period, and about 40,000 for the full year.

CenturyLink doesn’t view video as a “significant revenue opportunity” in 2017, cut it does have the potential to become one in the years ahead, Post said.

The telco also ended the period with 5.94 million broadband subs, down from 6.04 million at the end of 2015.  However, the company increased the percentage of addressable units capable of getting speeds of 100 Mbps (3.3 million) or 1 Gbps (1.3 million) by 31% and 53%, respectively, versus the year-ago quarter.

CenturyLink pulled in Q4 revenues of $4.3 billion, and net income of $42 million (8 cents per diluted share).  Q4 and full-year fell short of company expectations due to lower strategic revenue growth, the company said.

Post, however, said CenturyLink remains excited about the long-term strategic benefits it expects to get from its proposed acquisition of Level 3  Communications.