CenturyLink Banks on Virtualization Rewards

CenturyLink is counting on its virtualization efforts to reap significant opex and capex rewards over the coming years, according to CEO Glen Post.

Post outlined the company's use of SDN and NFV during CenturyLink's fourth-quarter earnings call Wednesday evening. At the close of last year, CenturyLink had virtualized about 60% of its points-of-presence (POPs) with a goal of 100% of those virtualized by the end of 2019, Post said, according to a transcript of the earnings call by Seeking Alpha.

"We also have almost 50% of our network capabilities currently controlled through our SDN network, so (we have) virtualization of those capabilities," Post said in the transcript. "We have virtualized WAN service availability, virtualized interconnect between VPN customers; just a number of virtualization steps we've taken. Again, 50% of those capabilities are virtualized today."

Once the virtualization efforts are completed in about two years, Post said CenturyLink expects to save more than $200 million a year in capex.

"And also, we expect major opex cost savings as a result of this virtualization of the SDN, NFV network builds," Post added. "So those are the type of investments we'll continue to make, making our network more efficient."

While it hasn't always been the case, capex and opex savings were originally cited as the primary reasons for moving to virtualization through implementations of SDN and NFV. AT&T said last summer it was reaping the rewards of SDN and NFV on the opex side, but, due to increased network traffic, not as much on the capex side, according to this story by Telecompetitor.

Post said on the earnings call that one of the benefits of virtualization was it allowed CenturyLink to go outside of the company's footprint to offer its services to businesses it couldn't previously reach. Post said that thanks to virtualization it was reaching 4.8 million businesses.

"So that's the type of advancements we're seeing," he said "We think it [virtualization] can really help reduce our cost as well as provide revenue opportunities."

Post also cited the flexibility of virtualized services for customers, which includes giving them the ability to distribute their own bandwidth where it's needed. CenturyLink launched its SD-WAN service last year, which Post used as an example for increased levels of automation and customer self service. Among other things SD-WAN provides customers with cost savings versus just using MPLS, virtualized routing, analytics optimization and security functionality on a single platform. (See CenturyLink Throws Hat in SD-WAN Ring and CenturyLink's Nowak: Lessons Learned From SD-WAN.)

"The SD-WAN product has started to enjoy some market acceptance in terms of POCs and trials that are going on in the marketplace and we'll see that really grow in terms of interest in the product as well as in actual conversions to an SDN platform," Post said. "We've moved many of our facilities to be able to be virtualized and take advantage of the SD-WAN product, about 50% of the network to-date, and we continue to drive towards that so that the entire network is capable of working through that SD-WAN platform."

CenturyLink is taking a different tack than most operators by internalizing its third-generation SDN/NFV roadmap through the use of its own software. (See Seen & Heard: Less Is More for CenturyLink.)

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As for CenturyLink's $34 billion deal to buy Level 3 Communications, which was announced in October, Post said on the call that all of the state and federal filings were completed and that the company expected to finish up the international filings over the next few weeks. On the technical side of the deal, CenturyLink has formed an Integration Management Office to coordinate and drive the integration planning process.

Light Reading News Editor Iain Morris outlined the impact of the Level 3 deal on CenturyLink's capex plans this year and the downturn in CenturyLink's revenues over the past three months. (See CenturyLink's Capex Axe to Fall on Infinera, Ciena – Analyst.)

— Mike Robuck, Editor, Telco Transformation