Lumen remains confident that it can bring fiber broadband to 500,000 new locations by the end of the year.
During the quarter, Lumen accelerated its Quantum Fiber-enabled pacing, deploying approximately 130,000 fiber locations. This brought the total number of fiber-enabled areas to about 3.4 million as of June 30.
On a year-to-date basis, Lumen told investors during its second quarter 2023 call that it added approximately 250,000 fiber-enabled locations, bringing it closer to its goal. “We're pleased with our progress on the quantum bill with fiber enablement outpacing our first-quarter result, and we expect further acceleration in the third quarter,” Stansbury said. “This gives us confidence that we will meet or exceed our plan of 500,000 locations in 2023.”
Kate Johnson, CEO of Lumen, said the telco can scale its footprint even further. “With the fiber enablement factory delivering predictable output now, we're well positioned to nearly double our current Quantum Fiber footprint to over 7 million locations in the next four years,” she said.
Ramping FTTH
Lumen continues to focus on penetrating its deployed fiber network assets through its Quantum Fiber broadband product, a move it says can maximize subscriber and ARPU growth.
In the second quarter, Lumen added 21,000 Quantum Fiber customers, bringing its total subscriber base to 877,000. The provider also saw fiber ARPU increase sequentially and on a year-over-year basis to about $61 in the second quarter.
“We are focused on penetrating our deployed fiber assets through our simplified Quantum Fiber broadband product to maximize subscriber and ARPU growth,” Stansbury said. “New customers are seeing the value and quality of Quantum Fiber, with most choosing our flagship symmetrical gig and, in some cases, multi-gig service, benefiting our fiber broadband ARPU, which grew sequentially and year-over-year.”
Earlier this year, Lumen Technologies reduced the target for its residential Quantum Fiber expansion from 12 million to between 8 million and 10 million after pausing its build-on locations with the potential to deliver better profitability.
“Our Quantum Fiber 18-month penetration rate of the 2021 vintage was approximately 20%,” Stansbury said. “The performance of our 2021 vintage continues to track below that of 2020 at these milestones, and I expect the same will be true of our 2022 vintage. This performance was the catalyst for us to reevaluate our quantum build enablement targets during the fourth quarter of last year, refocusing our efforts on locations that provide the best opportunity and returns for Lumen.”
Given our more disciplined approach to our build, we expect that our 2023 vintage will exhibit a more robust performance.
In the mass market segment, revenues declined 2.3% sequentially. The telco’s mass markets fiber broadband revenue grew 3.3% sequentially and represented approximately 31% of mass markets broadband revenue.
It lost 77,000 copper customers as more customers migrated to higher-speed cable, fiber, or FWA services. Lumen ended the quarter with 2.9 million total Mass Markets total broadband subscribers.
As of June 30, Lumen’s penetration of legacy copper broadband was approximately 11%.
Stansbury said most of its fiber broadband builds are in areas with low copper customers. “As it relates to the copper subs, the reality is that many of our Quantum builds are really in markets where we don't have many copper subscriptions remaining,” he said. “So, our best guess is that this is being driven by some pressure from fixed wireless, which is not unanticipated.”
Evolving the Quantum Fiber brand
As Lumen looks to scale its fiber broadband base, the service provider adopted its Quantum Fiber brand in August 2022. At that time, the Quantum Fiber service brand debuted with speeds of 8 Gbps using fiber broadband in cities near Denver, Minneapolis, and Seattle.
In December, the telco announced it would expand Quantum Fiber to more than 30 cities and metro areas in the U.S. Quantum Fiber offers multi-gigabit speeds and new, multi-gig rates in select locations.
While Stansbury could not disclose Quantum Fiber's brand penetration, he emphasized that the company plans to boost Quantum Fiber's marketing efforts to bolster its subscriber base.
“We expect to add subscribers faster in the second half of the year with our significant increase in quantum marketing,” Stansbury said. “Our marketing plans are ramping in conjunction with our conversion of the CenturyLink Fiber brand to Quantum Fiber later in the third quarter of this year, potentially further benefiting subscriber growth as more potential customers can benefit from our world-class quantum digital experience.”
Another potential target for Quantum Fiber is the small to medium business (SMB) market. The company and its predecessor have lost momentum in this market to aggressive cable operators ramping up their business service units. “SMB has yet to be the primary focus as we're ramping up enablement,” Stansbury said. “But the team is working on SMB pricing, and it's a huge opportunity for us just given the share we've lost to cable over the years.”
Lumen’s total second-quarter 2023 revenue was $3.7 billion, down from $4.61 billion for the second quarter of 2022.
