Qwest to accelerate cable franchise talks

Jeff Smith, Rocky Mountain News

Published May 12, 2007 at midnight

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Qwest Communications said it plans to accelerate cable-TV franchise negotiations with municipalities, perhaps even putting some on a 90-day clock this year.

The Denver telco's bid for a statewide franchise met a quick death in the state legislature this year, but Qwest could get more leverage in the wake of a federal order designed to stimulate competition. Comcast is the sole cable-TV provider in many metro-area communities.

The Federal Communications Commission order prevents municipalities from imposing "unreasonable" buildout requirements. It also would require a municipality to approve or reject a formal video franchise application within 90 days, although that part of the order won't take effect until July at the earliest.

"We're taking the reformed regime and going back to cities and see if we can negotiate something," Qwest Colorado President Chuck Ward said to the Rocky Mountain News' editorial board this week.

As a last resort, if negotiations reach an impasse, "there may be some cities that we put on the clock."

Ward said Qwest wants to negotiate with about a dozen municipalities in the area, including Colorado Springs. He had a discussion with Denver city officials on Monday. In the past, some local officials have complained Qwest has been the one dragging its feet.

Local government groups across the country, including the Greater Metro Telecommunications Consortium here, have filed appeals to the FCC order, arguing it is arbitrary and violates federal law. The challenges have been consolidated at the Sixth Circuit Court of Appeals in Cincinnati.

While there hasn't been a motion to stay the FCC order, GMTC attorney Ken Fellman said he believes that is a possibility.

It is unclear whether the FCC order has clarified enough for progress to be made in local franchise negotiations.

Ward also indicated some municipalities seem to want Denver to take the lead.

All sides said the FCC order prohibiting "unreasonable buildout" is vague. The order does indicate it would be reasonable for a municipality to consider buildout benchmarks depending on an entrant's market success.

Qwest, other telcos and the FCC argue that competition will result in lower prices for consumers.

Ward cited Phoenix as an example, where Qwest and Cox Cable compete. Cox Cable's rates advertised on its Web site are roughly 5 percent to 10 percent lower in Phoenix than many of its markets in New England and the Southeast.

Ward noted Comcast announced a 7 percent rate increase for the Denver area at the same time Qwest was fighting to get a statewide franchise. Nearly a dozen states nationwide now have such franchises, but not Colorado.

Qwest has maintained that as a second entrant, it shouldn't be required to do a full buildout and it would be too financially risky to do so.

The FCC makes the same point, saying the financial burden was placed on cable companies in exchange for being the monopoly provider.

Comcast disagrees, saying Qwest should be required to make its services available to every household in a municipality. Cable companies maintain that otherwise, telcos will "cherry-pick" the neighborhoods they serve.

Fellman, who also is Arvada's mayor, said Arvada offered a franchise to Qwest without a full buildout, but one that would have required Qwest to distribute video services among geographic sectors of the city.

In other words, if Qwest initiated TV services in several neighborhoods in one side of the town, it would have been required to provide services in a neighborhood in another section of the town.

Darryn Zuehlke, Denver's telecommunications director, indicated Denver favors that approach as well, in efforts to make video services somewhat equally distributed.

Fellman said he doesn't begrudge Qwest using the FCC order as leverage - "if I were them I'd be doing the same thing" - but he questions whether the parties will agree on how to interspret it.

"My feeling is that local governments would have the authority to impose some of the buildout requirements that Qwest previously has refused to accept," Fellman said. But he added: "Maybe there has to be a lawsuit, or another proceeding at the FCC, before we figure out what this means."

Telco's plans

Qwest plans to use a FCC order as leverage in getting cable-TV franchises in the Denver area. Qwest interprets that the order:

• Would give the telco the ability to require a municipality to make a decision within 90 days.

• Would prohibit municipalities from imposing an "unreasonable" buildout requirement. Qwest says that means it wouldn't be required to provide services in every neighborhood unless it achieves a certain success in the market.

Arvada and Denver favor an approach requiring Qwest to at least distribute video services in different areas of a city.

smithje@RockyMountainNews.com or 303-954-5155

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