- Lumen is trialing a product that will cut out the need for carrier-neutral facilities
- If all goes well, it plans to roll out this product to its customers in late 2025
- Lumen estimates this new product could create a market valued at about $15 billion
Lumen’s CEO Kate Johnson teased a new product in yesterday’s fourth quarter 2024 earnings call with investors. The product seems to be something that will allow enterprises to spend less money with carrier-neutral facilities and more money with Lumen Technologies.
Johnson said enterprise CIOs need to move workloads between locations, including on premises, at the edge and among public cloud providers. “And it needs to be cost-efficient and friction-free,” she said. “But it’s not. Legacy networks were not built for a multi-cloud world. So, enterprises were forced to use carrier-neutral facilities to access the cloud connectivity market, driving growth in costly and inefficient cross connects.”
Lumen has a plan to fix this problem, and it’s using itself as “customer one.”
Johnson shared the below graphic on the company’s earnings call. The graphic shows that enterprises, wholesale customers and public-sector customers need to connect to different hyperscalers. To do this, they’ve been going through carrier-neutral facilities. This traditional connectivity requires dedicated ports and links for the connection to each cloud, resulting in higher cost, higher latency and less efficient routing.
Lumen’s new product will replace the carrier-neutral facility with its own Lumen Multi-Cloud services powered by ExaSwitch.
Johnson said Lumen is now trialing the new product internally for its Quantum Fiber quote-to-cash process. Quote-to-cash refers to the complete sales process from the moment a potential customer requests a quote through the negotiation and acceptance of the quote, order fulfillment, invoicing, and finally, payment collection.
Johnson said order processing workloads are hosted on one public cloud, leveraging its native capabilities for seamless provisioning. But once the order processing is complete, that data required for business operations and financial reporting is then transferred to Lumen’s own corporate data warehouse, which is hosted in a completely different public cloud, using Lumen’s own network fabric, which is now directly connected to three big public clouds in a virtual networking ecosystem.
“Our Quantum Fiber quote-to-cash network architecture bypasses carrier-neutral facilities and eliminates physical cross connects and their fees, as well as reduces overall port usage,” said Johnson. The outcome is a modern, multi-cloud network architecture at lower cost than traditional architectures, with improved network speed, security and reliability.”
Lumen’s CFO Chris Stansbury said, “We’re creating an innovative networking ecosystem that will bring new value to enterprise CIOs in today’s multi-cloud AI-first world. And this will give Lumen access to a net new total available market that we estimate to be at least $15 billion.”
Lumen plans to bring this architecture to its customers in late 2025.
Lumen’s $8.5 billion in AI revenue
The year 2024 was a good one for Lumen regarding raking in some revenue related to artificial intelligence (AI). It inked $8.5 billion in sales with big tech companies, including Microsoft, AWS, Google and Meta to provide them with long-haul fiber to connect their data centers. “We continue to be in deep discussions with several customers to build new routes, and we’re going to provide more detail on those deals as it makes sense to do so,” said Johnson.
Not only is the company getting new business to build fiber connections between data centers, but it’s also selling its private connectivity fabric (PCF) in conjunction with the fiber.
Yesterday, Stansbury said the PCF sales from 2024 will provide flexibility and liquidity to reduce Lumen’s debt and be able to invest in its simplification and modernization efforts. But he said the company won’t see much PCF revenue in 2025. “That’s really more ’26, ’27, ramping fully in ’28,” said Stansbury.
Johnson was asked if Lumen will be able to retain its lead in providing fiber to hyperscalers for their AI needs.
She said, “We’re grateful for the lead. It was nice to get $8.5 billion in there before anybody else realized that this was a market. But we’re paranoid, and we’re going to maintain focus on building out the competitive moat.”
She said while other companies (think AT&T, Verizon and Zayo) can offer long-haul fiber, what really differentiates Lumen is its PCF. “We’re pretty pumped about our position,” said Johnson.
