walking a high-speed tightwire
By Jeff Smith
Rocky Mountain News
Friday, February 10, 2006
Qwest Communications is trying to walk the fine line between
pleasing Wall Street by controlling spending while still
reinvesting enough in its network to fend off rivals and
satisfy city officials in its major markets. This week, two
top executives were in Portland, Ore., making the case that
Qwest can provide all the high-speed services residents
there need and that the city shouldn't waste money building
its own $470 million fiber network.
Some city commissioners don't think Qwest's plan is
aggressive enough and want to continue to explore building a
super-fast network on their own or with another partner.
Donna Jaegers, a telecommunications analyst at Janco
Partners in Greenwood Village, indicated that the Portland
example illustrates the difficult spot Qwest is in. She
noted the company's recent story to Wall Street has been one
of financial discipline to generate cash -- perhaps to pay
down debt, perhaps to pay a dividend to stockholders, and
with an eye toward turning a small profit.
But Qwest also must defend itself against Comcast and
others, which are turning up the heat with bundled offerings
of cable TV, high-speed Internet service and digital voice
in many of Qwest's largest markets. Now, even
municipalities, such as Portland, are eying the possibility
of building super-fast networks.
Qwest is "looking at all big markets, trying to think of how
they're going to defend themselves," Jaegers said. "It
makes it harder to tell a consistent story to Wall Street,
but I think Qwest needs to" aggressively reinvest.
Otherwise, she said, Comcast and others may walk all over
Qwest is expected to shed more light on its
capital-investment plans when it announces its 2005 year-end
The company appears to be trying to finesse the situation.
It has continued to keep firm control on expenses while
gradually expanding the availability of high-speed Internet
services and touting new video services to come in places
such as Salt Lake City and metro Denver.
But it hasn't set any timetables for launching cable-TV-like
services, instead saying its big video play remains through
satellite-TV partner DirecTV.
Just talking about new services might be enough to keep
customers from switching to other providers, Jaegers said.
On the other hand, customers have long memories, and Qwest's
service problems under previous management didn't engender
loyalty, she said.
Also, many customers complain they still can't get
high-speed Internet service in their neighborhoods. Qwest
says DSL Internet service is available in about 80 percent
of Denver-area households.
What happens in cities such as Portland may force Qwest's
hand earlier than it would like.
Steve Davis, Qwest senior vice president of public policy,
and Balan Nair, chief technology officer, traveled to
Portland this week in part to discourage the city from
building its own half-billion-dollar network.
Davis said in a telephone interview Thursday afternoon that
the meeting with city commissioners was nothing unusual,
noting "many cities want to know what the prospects are for
higher bandwidth and cable-TV competition."
His message: It's not yet economic to build fiber to the
home except in new subdivisions, and Qwest has an ongoing
"fiber-to-the-neighborhood" investment plan that will enable
it to offer video and higher-speed Internet services over
copper wires in the future.
Davis said technological advances could put speeds over
copper wire beyond 10 megabits to 15 megabits a second by
2007, which he believes is plenty for the foreseeable
Brendan Finn, interim chief of staff for Portland City
Commissioner Dan Saltzman, who is in charge of the city's
cable bureau, came away skeptical. Finn said some of the
area's most prominent technology businesses say they need an
even faster fiber network to support their work. Fiber to
the home would bring speeds of about 100 megabits a second.
"We were kind of sitting here, waiting to see what they
would do," Finn said of Qwest. "Obviously, they would be a
Now, he said, the city plans to continue exploring its
- 1 cent