IP Democracy: Qwest To Expand 20 Mbps Option, Steer Clear of IPTV

Qwest Communications held a strategy update call (webcast here) this morning and revealed that it will expand its fiber-to-the-node initiative to boost the number of homes in its territory that are capable of buying higher speed broadband service. Although not a surprising development, Qwest confirmed that it is not upgrading facilities so that it can offer video services over its telephony plant, as its fellow telcos AT&T and Verizon have done.

Because bandwidth demands are on the upswing, with streaming video services the largest portion of Internet traffic, Qwest will accelerate its fiber-to-the-node (FTTN) build-out in 2008, CEO Edward Mueller said during the call. The telco will spend $300 million to increase broadband capacity to 1.5 million homes, with download speeds increasing to 20 Mbps.

The average cost per upgraded home is $175 and Qwest expects to generate an additional $10 per month in revenue per home as a result of the upgrade, with a payback period of only five years. It's little surprise, then, that Mueller believes "the business case is super-conservative" for this initiative.

Mueller said the areas for upgrading will cover selective pockets of 20 markets, ten of those consisting of Qwest's top ten markets. "We're picking our high-return runs," he said, meaning that the areas slated for upgrade are the best financial performers, and likely the most upscale territories, for Qwest.

Qwest has no ambitions to offer facilities-based video. "Our fiber to the node deployment is not intended as a deployment of IPTV," Mueller said. "We're staying with DirecTV," Qwest's video partner.

How will Qwest get the extra $10 per month then? One obvious answer is that the higher speed service will carry a bigger price tag, although Mueller didn't say that specifically. Another new revenue generating service that might accompany or be used to justify the faster broadband option is gaming. "Gaming alone is surpassing Hollywood's revenues," Mueller said.

Qwest also plans to step up its mobile broadband efforts. Qwest plans to launch a fixed-mobile convergence product in 2008 and will expand its high-bandwidth mobile offerings. Unlike AT&T and Verizon, Qwest doesn't own a mobile carrier. Qwest's mobile partner is Sprint-Nextel.

Posted by Cynthia Brumfield on December 17, 2007 3:46 PM to IP Democracy