As Lumen adopts artificial intelligence (AI) to enhance its internal business processes, the service provider finds ripe opportunities to support business customers with its array of IP and fiber-based services.
Speaking to investors during its first-quarter earnings call, Kate Johnson, President and CEO, said the telco is seeing a spike in orders for dedicated networks from its business customers.
“We're seeing a dramatic rise in demand for high capacity, low latency network, and edge services, often requested in custom private networks,” she said.
Johnson added that this trend results from its business customers migrating to AI and cloud structures.
“We believe this is driven by the advent of GenAI and the complexity of hybrid multi-cloud architectures,” she said. “We've established a dedicated team focused on capturing this demand, and we are confident this will be an important tailwind for our turnaround. It is a spike in demand, perhaps a once-in-a-lifetime opportunity to leverage what we do best at Lumen.”
Fiber, channel partner capabilities
In tandem with private networks, the service provider is seeing continued demand for wavelength services and dark fiber. Business customers can access Lumen’s growing optical network and its on-demand capabilities.
In late 2022, Lumen announced that it would invest another 6 million fiber miles, which is expected to be installed by 2026.
Upon completion, Lumen's U.S. intercity investment will reach nearly 12 million fiber miles, creating diverse routes to more than 50 major cities nationwide. Additionally, Lumen continues upgrading its infrastructure using a multi-conduit system, allowing for the quick deployment of the latest fiber technology.
“Customers are coming to us for a couple of reasons,” Johnson said. “Number one, we have conduits, so we can continue to over-pull fiber and give much flexibility and room to grow. The second reason is the digital platform and our mission of delivering capacity on demand at every network level. It's the value proposition of doing business with Lumen, so that's the first part.”
She added that the other key element of its business services strategy is to further develop its channel partner program. Participating channel partners have access to sales, marketing, development, operational, and maintenance support throughout the entire customer lifecycle.
Unsurprisingly, Lumen’s channel partner program focuses on customer opportunities integrating IP and SASE offerings.
“We're excited to continue to recruit and help our partners be as productive as humanly possible,” Johnson said. “We're seeing improvement there, but it's not enough yet. And so, I look at it as a huge opportunity to have more feet on the street selling these net new capabilities. And I think we're improving at building the rhythms around a true commercial engine, which is both direct and indirect for these net new capabilities like NaaS, like enterprise, to cloud connectivity through ExaSwitch, and like Lumen Defender with our security offerings.”
Enterprise revenue challenges, opportunities
Despite the momentum Lumen is seeing for private networks and channels, the service provider saw some revenue headwinds during the first quarter.
Lumen’s considerable enterprise revenue declined 5.8% to $858 million. “Continued strength in IP and enterprise broadband within grow product revenue was offset by lower VPN and voice, which contributed to the declines in our nurture and harvest products,” said Chris Stansbury, Lumen's CFO.
While Lumen’s public sector revenue declined 2.8% to $420 million, influenced primarily by declines in nurture and harvest, which more than offset growth within our growth and other product revenue, the provider is seeing growth potential with government agencies.
“We continue to see traction with large bookings in this space, which take time to ramp to revenue, and these wins give us continued confidence that the public sector will be the first sales channel to return to sustainable growth this year,” Stansbury said.
The service provider also continued to see revenue challenges with wholesale, which declined 11.3% year over year to $730 million. Not surprisingly, legacy TDM products in its wholesale channel saw revenue contract by 17.2% year-over-year.
Stansbury said this contraction “is primarily driven by telco partners that are shedding legacy services, adding that “our harvest product revenue will likely continue to decline over time and is an area that we will manage for cash.”
He added another critical focus of potential future growth for Lumen’s enterprise segment: "to continue to pursue opportunities for cost optimization when we help customers migrate from off-net legacy and TDM-based services onto Lumen's network.”
Take a look at our first quarter earnings page.
For related articles, visit the Network Design Topic Center.
For more information on high-speed transmission systems and suppliers, visit the Lightwave Buyer’s Guide.
To stay abreast of fiber network deployments, subscribe to Lightwave’s Service Providers and Datacom/Data Center newsletters.