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Qwest "triple play" exposed
Partnership with DirecTV IS window dressing
Big thanks to Andy Vuong of the Denver Post for his interview with Qwest CEO Dick Notebaert (see http://www.denverpost.com/business/ci_4863836 ). In the interview, CEO Notebaert refutes analysts who say the arrangement where Qwest resells DirecTV satellite TV service as part of their triple play of landline telephone, DSL broadband internet access. A quadruple play is achieved by reselling Sprint Nextel cell phone service. Notebaert states that there is positive margin on reselling the satellite TV service in lieu of selling video services off their own infrastructure and that "this is a good thing."
I agree that all positive margin on reselling another service provider's service is a good thing. But how much of a margin, or "good thing" is that to make the Wall Streeters happy? Would there not be more "good thing" if your own infrastructure could generate high margins on as many services as the market would bear? Wouldn't the investors love that?
The article goes on to mention Qwest's flirtation with IPTV in a "few select neighborhoods" across the 14 state service area. The article also mentions quotes from CFO Oren Shaffer regarding a "deceleration" of wire line losses (like the almost 800,000 lines lost in 2005).
And now the brutally "Frank" analysis: Until Qwest (or any other RBOC) can offer a high margin video service, Wall Street will remain unimpressed. The experimentation with IPTV in "a few select neighborhoods" is an indication that IPTV over telephone copper wire is pretty CAPEX intensive otherwise we would see a national rollout tomorrow. In other words, Qwest is only willing to offer IPTV in markets where they can't miss in terms of cost per sub and ARPU. This means only rich neighborhoods can expect to see an IPTV service from Qwest. Also, the time necessary to wire so many Central Offices/pedestals/remote terminals for IPTV (need ADSL2+ boxes everywhere) is sure to be many years.
Free advice to Dick Notebaert (and you don't even have to invite me down to the Starbucks on the 16th St. mall for a tall mocha, no whip): ditch the copper wire! Put WiMAX base stations on every CO and run IP services over the ATM that links 'em all. Go VoIP (just oen big softswitch will serve every sub)! Go IPTV (forget all those expensive ADSL2+ boxes)! Oh and don't forget you can go mobile, too, from those same base stations on the same CO's your company paid off a long time ago. There is no wired service you are selling now that you can't replicate on WiMAX. Think of the margin. And, that's a good thing.
Frank Ohrtman
WMX Systems
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