As Lumen navigates through its turnaround plan, the service provider focuses on taking costs out of its operations while enabling customers more flexibility in accessing network resources.
This is all tied into the service provider’s broader ExaSwitch initiative. ExaSwitch enables “participants” to route traffic dynamically and quickly between networks without third-party intervention. Such participants will include ISPs, cloud providers, large content providers, and enterprises.
Lumen has ExaSwitch platform capabilities running in various large cities such as Chicago, Dallas, and Virginia. He plans to expand the platform’s reach to all major markets in North America with large internet hubs.
Speaking to investors during the TD Cowen 52nd Annual Technology, Media & Telecom Conference, Chris Stansbury, Lumen's CFO, said that the company can’t be successful by selling network services in the same telecom-centric way.
“If you think about where we are going as a company, we want to make access to the network seamless,” he said. “Today, network access is slow, and it's messy. We’re entering a world where you can get point-to-point connectivity on demand.”
Stansbury added that this “unlocks a lot of value for the customer because additional service offerings are tied to that, including security tied to that, like edge compute and the ability to move workloads around your network.”
Realizing cost savings
Besides improving how its customers access and procure bandwidth and services, Lumen’s network efforts are also tied to its efforts to reduce costs.
Since Lumen was the product of several acquisitions of other providers like the former Level 3 Communications and Global Crossing, today runs four discrete networks for its enterprise services business.
Stansbury said 70 to 80 percent of its revenue will be on what he calls a “unified network by the end of 2024, and all of it will be on this network by next year.”
Another complex process that Lumen has gone through in taking out its business costs is reducing its workforce as it embraces automation into its business processes.
According to various reports, Lumen cut nearly 2,000 employees in late April, a large percentage of which was voluntary.
Stansbury said the job cuts and other efforts are part of a broader effort to realign its overall business.
“We’re reshaping the company,” he said. “We need to shape shift the organization to support that.”
He added that its total employee base is central to its migration strategy. “Headcount is a big piece of it,” Stansbury said. “We are simplifying processes around the network and improving the customer experience because we are integrating things that were never integrated in the past. That means you need fewer human beings to get things through the system than you did in the past.”
Unifying billing, products
As Lumen pivots from selling and supporting legacy services, it plans to integrate the separate billing and product sets it acquired from the various companies it and its predecessors acquired.
It currently has the former product and billing infrastructure from four companies—Level 3, CenturyLink, US West and Global Crossing—which requires the customer to place multiple orders.
“What this means is if you want to buy a product as a customer to service your footprint, you’re often buying four different products that could originate from one of 13 order entry systems, and it’s just a mess,” Stansbury said. “There was never a focus on unifying those, which unlocks a lot of cost potential going forward.”
He added that the move to integrate all these systems will help it be more responsive to customer needs.
“Our focus is on the pivot to the future,” Stansbury said. “These are healthy cost reductions with an improved customer experience.”
Legacy challenges persist
While Lumen has set a new growth path for its enterprise business, it still faces substantial challenges, mainly due to the decline of legacy TDM-based services.
This trend was seen in its first-quarter earnings, as Business Segment Revenue declined 8% sequentially to 2.59 billion.
“Legacy declines are real, and I would say they have accelerated to some extent, and that masks progress in the near term,” Stansbury said. “There are clear migration paths for some of that product set, but in other cases, there are not, so we manage that business for cash.”
He added that the decline in legacy business is made worse by the wholesale terms other providers offer to deliver off-net services to customers outside their network.
“All of this is aggravated by bad behavior in the telecom industry, including off-net re-rate activity that drives short-term results and is not customer-focused,” Stansbury said. “It’s the old way of playing the game, which we have to live through, but that’s not how we’re playing going forward.”
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