CenturyCenturyLinkLink
A Leading Rural Telecom Provider inA Leading Rural Telecom Provider in KansasKansas
KCC Broadband & Telecom Roundtable KCC Broadband & Telecom Roundtable –– March 11, 2011 March 11, 2011
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KCC Broadband & Telecom Roundtable KCC Broadband & Telecom Roundtable –– March 11, 2011 March 11, 2011
Presented by John Idoux Presented by John Idoux -- CenturyLink Governmental AffairsCenturyLink Governmental Affairs
CenturyLink: Who We Are
� CenturyLink is a leading rural broadband and communications company serving predominantly rural markets in 33 states.
� CenturyTel and EMBARQ combined to create the 4th largest wireline, and the
largest rural-focused, communications company in the U.S.
+ =
� Approximately 20,000 employees, more than 2.1 million broadband customers, more than 440,000 video subscribers and approximately 7.5 million access lines.
Proposed CenturyLink-Qwest Merger
As of June 30, 2010, CenturyLink and Qwest served approximately 5.2 million broadband customers, 16.2 million access lines, 1.5 million video subscribers and nearly one million wireless customers in 37 states. The combination results in a robust, national 180,000 route mile fiber network, which enables delivery of a diverse mix of offerings and increased scale.
CenturyLink in Kansas
Kansas Statistical Profile
Employees 2170
2009 Annual Payroll $303,727,000
Total Investment $881,131,000
Access Lines 83,000Access Lines
Number of Communities
83,000
119
DSL-enabled Access Lines
84%
Statistics as of 03/31/10 except 2009 Payroll
Kansas’ Rural DemographicsQuincy
CenturyLink in Kansas
Broadband Deployment CostsTo take availability from Incremental Investment
Current 86% to 90% 3116 lines
$2,250 per line$7.0 million
90% to 95%3911 lines
$5,000 per line$19.6 million
95% to 98%2346 lines
$7,000 per line$17.1 million
Less than 100 access lines
QuincyPiqua
Neosho FallsLangdonLehigh
101 – 1000 access lines106
exchanges
2000 – 3000 access lines
Baxter SpringsBurlington
GarnettBaldwin City
Holton
3000 + access linesSpring HillGardner
Junction City
98% to 100%1564 lines (some wireless)
$16,000 per line$25 million
Disclaimer: Investment costs are high level, best available estimates using factors from the NBP and will change
Rural Broadband: Critical Challenges
� Continually increasing speed requirements from customers
� Capacity and network management issues
� Long-term evolution of the network and related costs
� Overcoming rural demographics (demand, costs, distance, affordability; backhaul costs; lack of customer density)
� Challenged revenue sources including universal service funding and access � Challenged revenue sources including universal service funding and access revenues threaten our ability to invest in and serve rural markets
FACT: Low population density
in rural markets means much higher costs to deliver
broadband services.
Universal Service: 5 Fundamental Questions to Achieve the Desired Policy Outcome
Determine what “it” is� Define broadband service, speeds, other parameters
#1
Determine areas that need universal service support� High cost areas; given rate comparability policies
#2
Determine the cost of achieving universal service #3Determine the cost of achieving universal service� Calculate total cost of qualifying high-cost areas (less expected customer contributions)
#3
Determine vendor rules to implement universal service� Provide vendor requirements and deliver on the promise of universal service
#4
Determine how to fund the Universal Service Fund� Apply surcharge to all providers (to establish a broad, neutral contribution mechanism)
#5
Universal Service: Focus on the Areas in Need
� Wire centers provide most efficient basis level of analysis to target high-cost areas� A customer by customer basis would be ideal although impractical
� Census blocks can be used although they do not align with ILEC wire centers losing much efficiency and some measure of effectiveness
� ILEC performance in competitive areas� Whether an ILEC is making money or losing money in Kansas City, � Whether an ILEC is making money or losing money in Kansas City,
Wichita, or Gardner, etc. is irrelevant to the policy question of funding high-cost areas
� Creates competitive disadvantage
� Study areas� Far too broad of a measure to target effective policy as high and low
cost areas are averaged; dilutes the ability to fund high-cost areas
� Existing support structure contributes to disparity in investment
Failure to analyze the problem at the right level will doom policy prescriptions to failure
Policy Prescriptions
Effective Long Term Policies
� Light Regulatory Touch At Retail Level
� Reform USF- Targeted to high cost areas- Broad contribution mechanism by all providers
� Reform Intercarrier Compensation- Implement phantom traffic proposal
Ineffective Interim Solutions
� Interim CAF (Phase I)- Ill-conceived and should proceed to long term
� IAS Elimination- Key to expanding broadband networks until long term CAF is implemented
Let competitive forces regulate retail markets; target USF to
areas that need it most
- Implement phantom traffic proposal (USTelecom), access pumping mitigation, VoIPconfirmation (treat like TDM)
- Reduce intrastate rates to interstate levels(over reasonable transition period) & consideradditional access reductions
- Establish access replacement mechanism within USF
- Implement retail rate benchmark to determinefunding for access replacement
To Be Determined
� Consequences of Losing CAF- Immediate relief of COLR obligations option- No additional investment requirements- Full pricing flexibility- Non-discriminatory treatment including right todiscontinue service
