Qwest hiking prices during economic slump
By Jeff Smith
Rocky Mountain News
Wednesday, May 7, 2008
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.
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
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
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
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,
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
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.