Qwest's growth seen in Internet
By Ken Alltucker
The Arizona Republic
Wednesday, Oct. 12, 2005

The telephone business today is vastly different from the industry Dick Notebaert broke into 37 years ago with a job washing trucks for Wisconsin Bell.

Today, Notebaert runs the nation's fourth-largest telephone company, Qwest Communications, which is fending off cable, wireless and Internet-based competitors in the rapidly changing industry.

Nowhere is Qwest's competition more heated than Arizona.  The former US West's phone monopoly has eroded as Cox Communications and others have chipped away at the company's core telephone business.  Qwest's access lines have dwindled from 3.3 million in 2000 to 2.5 million as of early 2005.

But Notebaert is optimistic about his company's chances to stem customer losses by packaging offers with an array of voice, video and data services.

"Our goal is to grow the business," Notebaert said during a visit to Phoenix on Tuesday.  "You can count access lines, but others might count dollars or high-speed Internet connections.  We have to grow our business, and that's a shift (in thinking).  There's no room to be a victim here."

Since Notebaert took over as Qwest's chief executive in June 2002, he has managed to whittle away nearly $9 billion in debt to improve the company's balance sheet.  Qwest also waged high-profile battles by engaging in an unsuccessful bidding war for MCI and filing a complaint with federal regulators alleging that the pending merger of SBC Communications and AT&T Corp. could be anti-competitive and harmful to customers.

Now, Notebaert is preparing to bring that feisty attitude to Arizona.

Qwest has slashed prices for its high-speed Internet service and has offered discounted rates for customers who order bundled services of phone, cable TV and Internet.  The company also won preliminary approval from the Arizona Corporation Commission to change pricing on some services.

Yet Notebaert believes that Arizona's proposed changes do not go far enough.  Chief among his complaints is that federal and some state regulatory bodies constrain Qwest and other traditional phone companies while taking a more hands-off approach with competitors such as Cox and wireless providers.

"Does the commission regulate the communications market?  The answer is no," Notebaert said.  "Does the commission regulate Qwest?  The answer is yes."

As Qwest's main competitor in Phoenix, Cox Communications boasts a large lead in the race to sign up high-speed Internet customers and increasingly is packaging its cable and Internet services to snare phone customers.  A Federal Communications Commission report issued in July showed that Arizona's cable providers enjoy the nation's widest margin over phone companies in high-speed Internet customers.

At the end of 2004, Arizona cable companies had 549,613 high-speed Internet connections, or four times the 136,260 connections reported by phone companies.

Notebaert said the wide lead is in part due to Cox having deployed its high-speed Internet service before Qwest did.

"We came to the dance late," Notebaert said.  "So, in a sense, as we sign up (high-speed Internet) customers, we're taking a huge amount of market share because they had 100 percent."

Reach the reporter at ken.alltucker@arizonarepublic.com or (602) 444-8285.