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U.S. telecom operator CenturyLink Inc. (CTL - Free Report) plans to launch over the top (OTT) services in the beginning of 2017. However, the launch will follow the ongoing trials of its OTT video services in four new markets, as declared by the company in Mar 2016. Moreover, the growing momentum of CenturyLink’s Prism IPTV service has prompted the company to plan the OTT launch.

The company claims that its new OTT service does not imply the end of its Prism IPTV services. CenturyLink’s Prism TV services have been doing considerably well and have brought in substantial revenues for the company. In the second quarter of 2016, the company added nearly 9000 Prism TV customers, ending the period with roughly 311,000 customers, up 20.5% year over year. Meanwhile, the company believes that the OTT service launch will give its video segment businesses the much-needed boost. Also, the growing popularity of OTT video services among the millennials is a major positive.

CenturyLink’s OTT Plans

Initially, customers will be able to access 17 channels coupled with a set of local channels. The company expects this OTT service to bring in more profits by operating only 17 channels instead of 200 or 400, as a cost effective measure in the competitive market. Additionally, the company intends to offer higher broadband speeds with the OTT service. However, the OTT launch is contingent upon the success of two of CenturyLink’s deals through which the company will club the 17 channels with the local channels. This procedure may take up to a few months. Amid all these, the company views basic Internet and high-speed data as the two major factors that will drive growth.

OTT Service: A Runaway Success

OTT is an application or service that is used for the delivery of audio, video and other media over the Internet, without the need of a traditional cable or satellite pay-TV service like Comcast Corp. (CMCSA - Free Report) or Time Warner Cable for the control or distribution of content.  It is usually, if not often, less expensive than other traditional methods of delivery.

Thus, OTT video services are enjoying increasing popularity and viewership among the millennials. This has resulted in phenomenal success for companies like Netflix Inc. (NFLX - Free Report) and Hulu.com. In Sep 2016, AT&T Inc. (T - Free Report) announced plans to launch its online streaming OTT service DIRECTV Now by the end of 2016. Also, networking giant Cisco Systems Inc. (CSCO - Free Report) and cloud-based service provider Evergent Technologies are collaborating to launch an end-to-end solution for OTT video service operators.

Meanwhile, the OTT service launch will help CenturyLink reach out to more customers outside its Prism TV footprint. The company has already completed negotiations with content providers and is also forging ahead with its marketing and operational plans.

The Bottom Line

CenturyLink has been widening its Prism TV footprint and its strategy to explore the OTT segment bodes well. Moreover, compared to its IPTV service, the OTT service will require lower bandwidth which will benefit CenturyLink’s operations over the long haul.

CenturyLink currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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