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Qwest raising prices during economic slump

By Jeff Smith, Rocky Mountain News (Contact)

Published May 6, 2008 at 8:06 a.m.

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Qwest Communications is raising the prices of some of its Internet services by as much as 11 percent as it struggles amid the current economic and housing slump.

The Denver telco is betting demand won't wane or, as prices of individual services go up, more customers will be spurred into subscribing to phone-Internet- television "bundles." Qwest also hopes to attract new customers as it triples Internet speeds in key markets this year.

Price increases came up during Qwest's first-quarter conference call Tuesday.

Qwest reported earnings of $157 million, or 9 cents a share, in the quarter, while revenues slipped 1.4 percent to $3.4 billion as the company continues to experience steep losses in its traditional land-line business. Qwest shares fell 6 percent.

An analyst on the investors' conference call noted that other telecommunications carriers are planning to hike prices of "core services." He wondered if Qwest would do the same.

"We will do price increases; that is our plan," Qwest CEO Ed Mueller responded. "We believe there is room in the market for the (increases) and where we can, we're taking them."

Qwest on April 20 increased its "Price for Life" rate for new high-speed Internet service customers by $3 a month, according to spokeswoman Kate Oravez.

The slowest tier of DSL now is $29.99 a month, up 11 percent from $26.99 a month, for customers who also have a Qwest home phone package. Customers who locked in the $26.99 "Price for Life" rate aren't affected.

Mueller said in a telephone interview that Qwest plans to target the prices of individual services, which he characterized as "cheap." He called such services "inelastic," meaning he doesn't believe demand will change much even if prices go up.

Donna Jaegers, a telecommunications analyst at Janco Partners in Greenwood Village, noted that Qwest over the years has subtly raised prices of selected services. "Longer term, it doesn't help them keep market share," Jaegers said. But she said it could help push consumers into more expensive bundles of communications services. And that, she said, "makes a stickier consumer," or one less likely to switch providers.

Qwest's average revenue per customer is up 7.8 percent from $51 a month to $55 a month because of sales of bundles.

Price hikes, though, come as Qwest's high-speed Internet growth is anemic, said Jaegers.

Qwest is trying to lure customers from cable companies by boosting Internet speeds to 12 and 20 megabits a second in key markets. Qwest tallied 13,000 new subscribers from those efforts in the first quarter, but the faster service is still available in only a few neighborhoods in the metro area.

smithje@RockyMountainNews.com or 303-954-5155

Measure would allow bid for phone increase

State legislation passed Tuesday would allow Qwest Communications to seek a modest rate increase in basic telephone service from the Colorado Public Utilities Commission.

Qwest initially backed an amendment that would have allowed it to hike its current $14.88 a month rate by as much as 32 percent. But the Denver telco said it supported compromise legislation by state Sen. Chris Romer, D-Denver.

Romer's amendment "gives the PUC authority over the prices of Qwest's regulated services and is consistent with almost every other state," said Chuck Ward, Qwest's Colorado president.

The PUC would be required to examine such factors as Qwest's cost of service and the national average for comparable service. The PUC recently said the national average for basic service is $16.11 a month, about 8 percent more than Qwest's current rate.

Comments

  • May 6, 2008

    10:24 a.m.

    Suggest removal

    holekeeper writes:

    I just killed all services with quest. They act like they are the only game in town and treat you like crap. I switched over to comcast for internet, cable, and home phone. I am willing to pay a few dollars more for good service. Quest Sucks!

  • May 6, 2008

    11:42 a.m.

    Suggest removal

    Kslayer writes:

    Comcast Sucks!!!!!!!! Good luck after your temporary low price. By the way, Comcast DSL is a joke. it's riddled with problems, and the speeds are slower then promised. Not to mention, when your power goes out, so does your phone.

  • May 7, 2008

    7:03 a.m.

    Suggest removal

    windbourne writes:

    I think that it is time to tax Qwest based on number of employees and then offer a discount of 100% for US employees.

  • May 7, 2008

    7:58 a.m.

    Suggest removal

    steve00 writes:

    C'mon Sprint xohm(wimax)!!!

  • May 7, 2008

    3:44 p.m.

    Suggest removal

    sunnydays08 writes:

    Qwest service has vastly improved over the last couple of years. They are rated #1 in service for their internet offerings whereas Comcast customer service is rated very low. Call Qwest today and you will receive top rated service and attention. Ever wonder why Comcast raises it's cable rates so frequently----and not their phone services--it's because Comcast is the only game in town when it comes to cable and can offset the prices of the same services offered by other companies with their cable price hikes. Believe it--if Comcast was the only provider for high speed internet, you wouldn't be able to get their subpar service for what they offer it for now. It would be alot higher. Qwest is the better deal.

  • May 8, 2008

    2:18 p.m.

    Suggest removal

    afronaut writes:

    Qwest actually provides a single wire from you house to the hub giving you a consistent speed, while comcast provides a wire bundled together for everyone's use in that area. Thus if there is more people using internet the speed is slower but if there is only a few people on the internet the speed is increasingly faster. That is how they are able to claim that their internet is faster than qwest's.