en.Wedoany.com Reported - US fiber provider Lumen clarified its strategic positioning during its August 4 earnings call: rather than attempting to revive growth in its traditional telecom business, it is building more fiber networks, software, and control capabilities around AI-driven connectivity demand. The company said its strategic revenue has jumped to 53% of total revenue, and it plans to add 40 million miles of fiber in the US by 2031, bringing total coverage to 58 million miles.

Lumen CEO Kathleen Johnson told analysts on the call that the company is combining network, software, and ecosystem in ways other traditional telecom operators are not. She believes AI is making distributed infrastructure more complex—data flows laterally between data center clouds and AI factory clusters (east-west, i.e., data center interconnect, DCI) and extends vertically to enterprise premises (north-south)—while also creating demand for simpler connectivity and control. Horizontal scaling is the fastest-growing segment, especially long-haul connections along "AI corridors" between distributed clouds.

This trend is driving industry-level deals: Google Cloud has designated Verizon to handle a £1 billion DCI dark fiber deal; Zayo is building 8,000 miles of new long-haul fiber with Nvidia, traversing the "fastest-growing AI corridors." But Lumen President and CFO Christopher Stansbury acknowledged that the economics of these fiber builds are "terrible"—the cost of digging new trenches and laying new conduits keeps returns at or below the cost of capital.

Lumen's strategy does not rely on fiber itself for profitability, but rather on changing the calculus through Alkira, a business it acquired a month ago. Alkira has been integrated into Lumen Connect, allowing customers to leverage any fiber anywhere with the same strategy and service controls, managed through a single management interface. Johnson noted that telecom operators failed last time because innovation occurred around the network rather than within it, and Lumen aims to reclaim the software layer—Alkira is precisely the mechanism that pulls control and intelligence back inside the network. The company's fiber routes in the US are rapidly doubling, with 90% of hyperscale cloud access points upgraded to 400G.

Chief Technology Officer Jim Fowler said Lumen is not selling fiber per se, but rather a capability that makes fiber, cloud, clusters, and security functions work together as a single network. He estimates that Lumen's Network-as-a-Service (NaaS) business is growing at three times the market rate, with over 20% of NaaS adopters in the second quarter being new customers, while existing customers are also adding NaaS circuits rather than merely migrating from legacy services.

Financial data shows Lumen's strategic revenue grew 14% year-over-year, accounting for 53% of total business revenue (up from 45% a year ago). 100G and 400G wavelength business in the North American enterprise market grew nearly 11%, with sales up nearly 35%. The company said the east-west connectivity market (cloud-to-cloud, data center-to-cloud) is growing at 10-13%, while the traditional enterprise north-south premises-to-cloud market is only 1-2%. Meanwhile, legacy business revenue fell 15% in the quarter. Stansbury said extending the life of legacy products will not be a pillar of future success; enterprise voice is reaching end-of-life, accounting for only a "very low single-digit" percentage of sales. The company is maximizing cash flow from old networks and redeploying it into higher-return services, with an internal "modernization/simplification" program expected to deliver $700 million in annual savings by year-end and $1 billion next year.

Lumen's digital revenue currently stands at just $39 million. Stansbury said the company is studying "the economics of individual circuits and go-to-market paths" to more aggressively shrink its legacy portfolio. Although AI forecasts are constantly being revised, including downward, and software does not automatically transform low-margin telecom operators into high-return tech companies, Lumen is attempting to change the telecom operator playbook in a coherent way.