Statements by US RBOC Qwest this week, given in interviews by its CEO, and other senior executives, makes it clear that the company will not go after IPTV in the same way that its bigger cousins, Verizon and AT&T, have.
Instead it will focus on bringing its entire broadband network up to 20Mbps in time for a day when entertainment is all internet based, and in the meantime keep on selling the DirecTV satellite TV service.
If you take a look at the map of its reach, in dark blue below, it looks like it won some horrible lottery for the least attractive territories to put wires across in the first place. If this was to be a relief map it would show mountains, plains, deserts and other obstacles, and low population concentration, as well as low wealth levels, to pay for telecommunication services. That’s not everywhere in its coverage area, but as an aggregate across the US it drew the short straw, and so its approach has to be different.
Talking to Telephony Online its chairman, CEO and CTO all confirmed that it had reached very different conclusions from the other major RBOCs about how to deal with entertainment and compete with cable operators.
Qwest is expecting fat broadband pipes to be the conduit for a wide range of video-on-demand offerings, including high-definition video and what it will not pursue is a service that duplicates cable or satellite content and challenges these services. Perhaps that’s because cable has found it just as hard to attack the Qwest. Well no, that’s not true because someone is attacking Qwest.
Last year it lost 1 million of its access lines and they mostly came from its domestic household lines. That amounts to a drop of 7% of its total access lines down to just 13 million, a fact that the new Qwest management puts down mostly to increased competition.
Qwest doesn’t have the same motivation to replace fixed lines with its own wireless lines, because it somehow managed to lose its own wireless network, and is now an MVNO on the Sprint network. It did acquire a working cellular system when it bought US West, back in 2000, but that was still analog back then and Qwest couldn’t afford to upgrade it, so it ended up eventually in the hands of Verizon Wireless.
Consumers now are substituting cable, wireless and VoIP for Qwest fixed access lines and Qwest has been too busy fighting a rearguard action against this using product bundling to take on the IIPTV challenge.
In the first nine months of 2007, Qwest voice revenues fell by $350 million compared to the same period during 2006. Its broadband revenues rose by $254 million, so its broadband effort is not quite closing the gap on lost business and it needs perhaps, over a full year, another $130 million of broadband gains, to stop leaking revenues and turn its growth positive.
Broadband is now 29% of Qwest’s revenue, from just 2.4 million broadband customers, compared with 8.9 million domestic access lines.
But the early years of Qwest addressing broadband has left the perception that Qwest DSL lines often operate at pedestrian speeds compared to cable, sometimes below 500 Kbps. Local cable companies (a handful of which are actually owned by Qwest in Phoenix, Denver, Salt Lake City, and Omaha)
can manage closer to 6 or 12 Mbps and that’s what has stimulated the plan to push out fiber closer to the network edge, and convert DSL loops using ADSL2+ and VDSL2, in the hope that at least some of the shorter loops can achieve 20 Mbps and above.
‘We believe very much in video, and we also believe in the power of the internet,’ CTO Pieter Poll said in a US interview. ‘We are trying to look a little ahead. The young consumers of the future will want broadband on demand, and they are more interested in interaction and in the symmetry of the service. We have a great relationship with DirecTV, and they have a core competency in content. What we want to be able to provide is that 20-megabit internet connection that is more important to the younger consumers of today. They not only don’t want a wireline phone, they also don’t want to have a TV ‘ because they use video on demand.’
Qwest will also begin adding VDSL2 where the loops are extremely short, and shoot for speeds between 20 Mbps and 50 Mbps, and also try pair bonding, where two lines are used to multiplex a single signal across VDSL2. This has the benefit of giving two way (uplink and downlink) high speed internet, and that’s how Qwest hopes to outperform cable when it moves to DOCSIS 3.0, though no-one has really proved a market requirement for uplinks in the 50 Mbps range as yet. The company clusters homes together into 350 homes at the end of each distribution point in its network, and that means it can support each of these with single gigabit Ethernet lines, which it says fits it current network shape.
And instead of building QoS into its own network, Qwest will opt out of the content equation entirely and leave it to internet players to provide HD content.
You’d think that Qwest management see the company as the coolest of all the RBOCs, bypassing the hazards of IPTV and heading straight for the internet generation, but the truth is that the company is still leaking money, is still losing customers and has little hope of anyone buying it, because of those factors, that and the fact that every dollar spent on the Qwest network, will return less than if the same amount were spent on one of the other US networks.
If it does not stem the access line losses in the medium term, it will enter a painful financial spiral that will cut off millions of US homes from high quality telecommunications services.