The last of the big incumbent telcos to report financial results, Qwest issued its quarterly earnings report this morning showing a surprising return to profitability. Largely due to a big jump in its DSL customer base, Qwest posted net income of $88 million, compared to a loss of $528 million during the previous quarter. Year-over-year Qwest’s net income rose by about 54%.
Revenue, however, stayed relatively flat, both year-over-year and sequentially at $3.48 billion.
The big star of the quarter was DSL, which throttled ahead by 178,000 net new customers, a run-rate more than double the 80,000 net new DSL adds during Q1 05. By quarter’s end Qwest served 1.68 million DSL customers, representing 50% growth over Q1 05 levels.
Qwest attributed its DSL growth in large part to its bundles of voice, video and data services. The telco offers a DirecTV video option in a packaged bundle and during the quarter Qwest added 44,000 net new video customers, its highest quarterly gain since it began offer the multichannel video option. As of the end of Q1 06, Qwest served 228,000 video subscribers, more than double the 100,000 video customers served at the end of Q1 05.
| Qwest Key Stats ($ in mil., units in 000s) | |||||
| 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 | |
| Total access lines | 15.34 | 15.09 | 14.93 | 14.70 | 14.55 |
| DSL customers | 1,120 | 1,190 | 1,340 | 1,500 | 1,678 |
| % of total lines | 7.3% | 7.9% | 9.0% | 10.2% | 11.5% |
| Quarterly adds | 80 | 70 | 150 | 160 | 178 |
| Video Subscribers | 100 | 120 | 151 | 183 | 228 |
| Wireless Subscribers | 743 | 744 | 748 | 770 | 784 |
| Operating Revenue | $ 3,449 | $ 3,470 | $ 3,504 | $ 3,480 | $ 3,476 |
| Net Income | $ 57 | $ (164) | $ (144) | $ (528) | $ 88 |
Qwest issued its Q1 earnings report this morning (more later), but during the company’s earnings call, Chairman/CEO Dick Notebaert sounded defiant and decisive in his statements that Qwest has every intention of charging third-party providers for improved delivery to Qwest’s broadband subscribers.
Notebaert said that Qwest is pursuing “value creation” opportunities, one of which is charging third-party content and applications providers fees for improved delivery to end-users.
Let me say very clearly: Qwest supports net neutrality and we have done so from the very minute the FCC policy statement was issued last August 5. Kevin Martin stated those principles and we support him. That policy was meant to ensure that there is no impediment to anyone’s ability to fully utilize the net. It does not mean, it does not mean and was never intended to mean that we cannot provide our customers with differentiated services that enhance their position in their markets.
Notebaert made clear that Qwest intends to charge content providers for “the opportunity to enhance” those providers’ customer experience. He emphasized that Qwest will be paid for this service.
Our goal is to offer customers including content providers the opportunity to enhanced their customer experience and provide faster delivery for their products. And we will be paid accordingly for this product segmentation opportunity.
Notebaert ended his firebrand-ish interlude with this final comment: “For this industry to grow, we must leverage opportunities, which the Internet clearly is.”
You know, I wonder if the phone companies are even the least bit aware that people — including many Senators and Members of Congress, not to mention investors — are getting nervous about these ballsy statements (where are their PR people? their lobbyists?). The cable guys have done it right — cable execs have steadfastly stayed muted when it comes to the topic of network neutrality.
Posted by Cynthia Brumfield at 5:33 PM | Print | Comments (8)
Hoping to pressure New Jersey legislators as they contemplate a bill that would grant phone companies state-wide franchising rights, the Communications Workers of America (CWA) has kicked off a radio ad campaign in the state against the initiative. In a classic case of the-enemy-of-my-enemy-is-my-friend, the CWA has picked up on cable’s catchy “no more sweetheart deals” tag-line in its campaign. (A CWA web page devoted to this effort is here while the audio for the ad is here.)
The union’s big beef, of course, is that Verizon is trying to stop its workers from organizing and New Jersey is ground zero for this dispute. The CWA contends that Verizon Wireless pulled 600 jobs out of the state and moved them to South Carolina rather than deal with an organized workforce.
The cable industry has almost no unionized workers, but that doesn’t seem to matter to the CWA. The union sees a good opportunity to stick it to an adversary, and cable is probably quite happy with CWA right now.
Posted by Cynthia Brumfield at 11:42 AM | Print | Comments (3)Apple Computer is on a tear and the fates seem to favor the Cupertino, CA-based company. News of two developments that are so squarely good news for the company came yesterday.
First, France has backed down on its demand for a law that would have forced Apple to open up its DRM system. The French Senate removed language from pending legislation that would have opened up Apple’s security system, a requirement that, if enacted, would have prompted Apple to stop doing business in the country. (On a weird side-note, French consumer groups will hold on May 7 a “silent” protest regarding the Senate’s removal of the language.)
Another big win for Apple emerged yesterday. It seems that the online music giant has prevailed in its fight with the record companies to keep the price of music downloads at $.99/each. I think Good Morning Silicon Valley’s John Murrell said it best when recapping these two victories: “The search continues for an irresistible force to match up against the immovable object that is Steve Jobs.”
Posted by Cynthia Brumfield at 11:18 AM | Print | Comments (0)Media giant Time Warner issued its Q1 06 earnings results this morning showing improved profitablity on flat revenues, with its cable division shining as the engine of growth. Time Warner’s overall revenues were almost flat at $10.46 billion (compared to $10.36 billion a year ago), but net income jumped to $1.46 billion, compared to $915 billion during the year-ago quarter due to growth in the highly profitable Time Warner Cable. AOL, on the other hand, was another story altogether.
“I think the guys are shooting the lights out,” CEO Dick Parsons said during Time Warner’s earnings call, referring to the very impressive performance of the cable division. During the quarter, Time Warner Cable added 82,000 basic subscribers, more basic subscribers than were added during all of 2005 and the biggest quarterly gain in this key measure in six years.
Every single metric (excluding the always-variable ad revenue) was up for Time Warner Cable, a testament, executives say, to the power of the triple-play bundle of voice, video and data services. “The obvious and correct conclusion to take awy from these results is that the triple-play bundle is working,” Parsons said.
Indeed, Time Warner added 346,000 net new residential high-speed customers during the quarter, more than triple the net new modem subscribers added during Q1 05, and nearly one-third more the number of net new high-speed customers added during Q4 05. At the end of the quarter, Time Warner served approximately 5.2 million high-speed customers.
Digital telephony growth hit a high-water mark during the quarter, with Time Warner Cable adding 270,000 net new VoIP customers, up about 78% over the net voice adds during the year-ago quarter and up about 10% over the growth levels in Q4 05. By the end of the quarter, Time Warner Cable counted 1.37 million voice customers, more than quadruple the total digital voice customers at the end of Q1 05.
Digital TV service also gained steamed during the quarter. Time Warner Cable added 241,000 net new digital customers, a run-rate 134% higher than a year-ago, and 21% higher than the net new digital adds for Q4 05. By quarter’s end, Time Warner Cable’s digital customer base reached 5.6 million, breaking the 50% penetration level for the first time.
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Time Warner Cable |
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(in mil. except %) |
|||||
| Subscribers and Penetration | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Homes passed | 19.28 | 19.383 | 19.514 | 19.63 | 19.734 |
| Subscribers | 10.91 | 10.905 | 10.923 | 10.957 | 11.039 |
| Basic penetration | 57.0% | 56.0% | 56.0% | 56.0% | 56.0% |
| Year-to-year internal sub growth | -0.20% | 0.00% | 0.20% | 0.70% | 1.20% |
| Total Customer Relationships | 11.648 | 11.698 | 11.74 | 11.804 | 11.941 |
| Revenue Generating Units | 20.495 | 21.088 | 21.739 | 22.491 | 23.435 |
| Digital Video | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Digital video subs | 4.909 | 5.053 | 5.202 | 5.401 | 5.642 |
| Quarterly net adds | 0.103 | 0.144 | 0.149 | 0.199 | 0.241 |
| Digital subs % of basic subs | 45.0% | 46.0% | 48.0% | 49.0% | 51.0% |
| High Speed Data - Residential | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| HSD subs | 4.122 | 4.323 | 4.557 | 4.822 | 5.168 |
| Quarterly net adds | 0.103 | 0.201 | 0.234 | 0.265 | 0.346 |
| HSD subs % of basic subs | 37.8% | 39.6% | 41.7% | 44.0% | 46.8% |
| HSD subs % of HP | 21.4% | 22.3% | 23.4% | 24.6% | 26.0% |
| High Speed Data - Commercial | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| HSD Subs. | 0.182 | 0.193 | 0.203 | 0.211 | 0.216 |
| Quarterly net adds | 0.009 | 0.011 | 0.01 | 0.008 | 0.005 |
| Digital Telephone | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Digital Phone Subs. | 0.327 | 0.614 | 0.854 | 1.1 | 1.37 |
| Quarterly net adds | 0.152 | 0.242 | 0.24 | 0.246 | 0.27 |
| % of homes passed | 1.7% | 3.2% | 5.0% | 5.0% | 8.0% |
At the other end of the Time Warner spectrum stands AOL, which continues to rapidly lose customers and struggle to find a way toward stability. During the quarter, AOL lost 835,000 U.S. customers, making the former online giant the size it was during Q1 00. In other words, AOL has rolled back the clock six years in terms of its U.S. online subscriber reach.
| AOL U.S. Subscriber Counts | |||
| (in mil. except %) | |||
| # Subs. | Change | % Change | |
| 1Q 00 | 18,648 | 1,204 | na |
| 2Q 00 | 19,406 | 758 | 4% |
| 3Q 00 | 20,306 | 900 | 5% |
| 4Q 00 | 21,531 | 1,225 | 6% |
| 1Q 01 | 22,711 | 1,180 | 5% |
| 2Q 01 | 23,410 | 699 | 3% |
| 3Q 01 | 24,188 | 778 | 3% |
| 4Q 01 | 25,241 | 1,053 | 4% |
| 1Q 02 | 26,051 | 810 | 3% |
| 2Q 02 | 26,528 | 477 | 2% |
| 3Q 02 | 26,657 | 129 | 0% |
| 4Q 02 | 26,481 | -176 | -1% |
| 1Q 03 | 26,192 | -289 | -1% |
| 2Q 03 | 25,348 | -846 | -3% |
| 3Q 03 | 24,658 | -690 | -3% |
| 4Q 03 | 24,259 | -399 | -2% |
| 1Q 04 | 24,022 | -237 | -1% |
| 2Q 04 | 23,354 | -668 | -3% |
| 3Q 04 | 22,708 | -646 | -3% |
| 4Q 04 | 22,204 | -504 | -2% |
| 1Q 05 | 21,696 | -508 | -2% |
| 2Q 05 | 20,778 | -918 | -4% |
| 3Q 05 | 20,100 | -678 | -3% |
| 4Q 05 | 19,475 | -625 | -3% |
| 1Q06 | 18,640 | -835 | -4% |
Despite a 3% sequential rise in ad revenue, AOL’s overall revenues dropped 2% sequentially to $1.98 billion. During the earnings call, Time Warner executives tried to argue that growth for the online unit will pick up during the second-half of 2006 due to AOL’s stepped-up initiatives to convert customers to broadband subscriptions and greater emphasis on driving traffic to AOL’s portal.
Two other divisions of Time Warner, film and publishing, were relatively weak. The film division’s revenue dropped by nearly 8% to $2.78 billion due to the blockbuster hits such as Million Dollar Baby that dominated the year-ago quarter. Time Inc., the publishing division, stayed flat at around $1.1 billion due to, well, weaknesses in the publishing industry generally.
Time Warner’s networks, which include Turner Broadcasting, HBO and The WB Network, ticked up by 3% to $2.4 billion.
During the earnings call, Parsons announced that Time Warner is negotiating with media mogul John Malone’s Liberty Media to buy Liberty’s 50% stake in CourtTV network. Time Warner owns the remaining half. Parsons also said that the company is negotiating with Liberty to swap assets for Liberty’s 4% share of Time Warner.
Posted by Cynthia Brumfield at 10:01 AM | Print | Comments (0)Courtesy of TechDirt, this essay on network neutrality by Sir Tim Berners-Lee, the widely respected inventor of the Internet. Berners-Lee makes the case that the Internet was built on the very ideas of clean design and independence of layers, with no checking of packets for content permission.
It is of the utmost importance that, if I connect to the Internet, and you connect to the Internet, that we can then run any Internet application we want, without discrimination as to who we are or what we are doing. We pay for connection to the Net as though it were a cloud which magically delivers our packets. We may pay for a higher or a lower quality of service. We may pay for a service which has the characteristics of being good for video, or quality audio. But we each pay to connect to the Net, but no one can pay for exclusive access to me.
In passionate terms, Berners-Lee urges U.S. lawmakers to make sure the Internet stays neutral.
The Internet is increasingly becoming the dominant medium binding us. The neutral communications medium is essential to our society. It is the basis of a fair competitive market economy. It is the basis of democracy, by which a community should decide what to do. It is the basis of science, by which humankind should decide what is true.Posted by Cynthia Brumfield at 7:50 AM | Print | Comments (0)
Just when we thought the idea of professionally produced TV shows for the web was in hiatus, Microsoft has come along and revived the idea. According to this scoop by Lorne Manly in today’s New York Times, Microsoft will unveil today a series of deals to create Hollywood-produced programming for its MSN portal.
The first is a multimillion dollar deal with producer Ben Silverman and his company Reveille to create 10 pilots for web-friendly shows. These aren’t going to be just lean-back programs, however. The shows will be built so that users can interact or interactively respond in some fashion.
To harness the Web’s attributes, many of the shows and applications will wrap around them community offshoots, commerce opportunities and the ability to dig deeper for related segments or information. Product placement, a specialty of Mr. Silverman, will also be an integral part of the programming.
Moreover, picking up on what seems to be a mini-trend of backwards migration, Silverman will also have the option of turning the web-based programs into full-fledged shows aimed at the TV set, with Microsoft sharing in any profits of that “secondary” market.
This is Microsoft’s second bite at the original web programming business — in a premature move, the company spent (and wasted) tons of money in the late-90s to create original “TV” shows for the Internet. However, despite rival Yahoo’s difficulties in producing high-end video content for the web, the timing may be right now given the proliferation of video-friendly broadband and the obvious popularity of other early-stage web entertainment efforts.
Posted by Cynthia Brumfield at 7:32 AM | Print | Comments (0)
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