Qwest facing uphill battle

TV services proving no easy sell

Jeff Smith, Rocky Mountain News

Tuesday, May 22, 2007

BROOMFIELD - If the city council here is any indication on the future of Qwest Communications' bid to win municipal TV franchises, the company faces an uphill climb.

Qwest made its pitch last week to the community's elected officials and received a less than enthusiastic response.

"We want to make a significant investment in the community," Bill Myers, Qwest's assistant vice president for Colorado, said in his opening statement to the councilors. He said Qwest would bring "turbo broadband speeds" and competitive TV service, and intended to deploy those services "as broadly as possible."

The pitch drew skepticism.

Councilors said Qwest hadn't done enough to bring DSL high-speed Internet into their community, and there were questions about the readiness of the TV technology.

Qwest talked to the city about using a new video on demand-type technology called Internet Protocol TV, or IPTV.

And several councilors indicated they desire to have competitive TV service only if Qwest offers it to every resident in the city, not just specific neighborhoods where it would likely get more customers.

The Broomfield meeting marked the beginning of an accelerated effort by Qwest since a Federal Communications Commission order went into effect prohibiting communities from imposing "unreasonable" buildout requirements.

The order will allow Qwest this summer to put a community on a 90-day clock to reject or approve a formal application. It seems likely Qwest will go to a 90-day clock if other communities show as much resistance as Broomfield.

Broomfield councilors knew all about the new FCC order. And they still weren't receptive to Qwest's plan.

The question is whether that will change when push comes to shove.

Myers said Qwest has only so much money to invest in TV services and is in the process of talking with communities in Utah, Washington and Oregon. Denver-based Qwest's "parochial interest" would be to get investment flowing here, he said.

His message was clear: If Broomfield says no, then another community, perhaps nearby, perhaps out of state, will get the investment and the competitive TV services.

Two Qwest officials, including Myers and a consultant, came for the pitch. Comcast also sent a consultant and two officials to the meeting. About 20 residents attended the study session.

One of Qwest's arguments is TV prices drop significantly where there's competition, such as in Phoenix, where Cox Cable and Qwest do battle.

Councilman Vincent Bazek said if Qwest is allowed to pick the neighborhoods it wants to serve, that won't enhance competition or lower prices citywide.

Bazek said Broomfield has been trying to get DSL Internet service throughout the community, but "my history is that Qwest doesn't always do things on a timely basis."

Councilwoman Lori Cox said it made her angry when Qwest went to the state earlier this year in a failed bid to try to get a statewide franchise and bypass local control. "We know what's best for our communities," she said.

Qwest is proposing to extend fiber to the neighborhood and deliver IPTV to homes through existing copper phone wires, which come in twisted pairs.

Myers said Qwest will be able to deliver two high-definition TV signals, one digital signal and higher-speed Internet service.

Through one set-top box, a resident could watch three different channels on three different TVs in the house, as well as get high-speed Internet service at 5 to 7 megabits a second, about four times as fast as standard DSL.

Councilman Brian Kenyon wondered if Qwest would be able to offer the NFL Ticket as it does through its satellite TV partner DirecTV.

"We would not have access to that," Myers said.

Another issue councilors quickly identified: IPTV, in Councilman Dennis McCloskey's words, "is not quite ready for prime time."

Myers acknowledged Qwest still is conducting trials.

"The issue is the set-top box, not speed over the copper (wires)," said Qwest consultant James Campbell.

But Councilman Bob Gaiser, who seemed familiar with the technology, said he's "not too thrilled with IPTV" and questioned its viability and capacity.

Myers noted that Qwest CEO Dick Notebaert has said he's not going to deploy the service until it's ready, but that planning and upgrading the network and phone lines for the service must be done in advance. He said Broomfield was picked because Qwest thinks the network can be upgraded in a faster time frame than many others.

Qwest maintains that a second wireline TV entrant shouldn't have to bear the financial risk of offering service throughout a community without first enjoying a certain level of market success.

Although Qwest has the copper phone line infrastructure in place, there is a tremendous cost to extend the fiber-optic network to a neighborhood, Campbell said. Campbell said the reality is that everyone agreed to buildout requirements in the late 1990s, including Qwest in Phoenix, and everyone missed them and had to renegotiate their agreements.

Comcast representatives didn't speak at the session.

John Aragon, Comcast's senior director of government affairs, said in an interview Friday the company's position hasn't changed: It agrees competition is good, but thinks Qwest should face the same buildout requirements Comcast did. He said there's nothing in the new FCC order that prohibits cities from requiring "reasonable buildout time frames."

It took Qwest months just to get on the Broomfield agenda. The city doesn't seem in a hurry to make a decision and told Qwest to come back when it's ready to offer something similar to what Comcast did.

Stocks watch

Qwest

Q: NYSE

+17 cents

• Notable: Qwest stock on Monday broke through the $10-a-share barrier for the first time since March 6, 2002. Shares closed at $10.01, up 17 cents. The Denver telco's profits have been widening, fueled by cost-cutting and growth in sales of high-speed Internet services and telecommunications "bundles."

smithje@RockyMountainNews.com or 303-954-5155