Qwest greenlights $300M FTTN rollout

Qwest Communications’ directors have approved its management’s fiber-to-the-node (FTTN) deployment plans, new chief executive officer Ed Mueller said during the company’s quarterly earnings call today. But the company isn’t yet saying what set of services will justify the strategy.

The company will set aside $300 million for FTTN deployment--$70 million to $100 million this year and $200 million next year--with the goal of reaching 1.5 million homes. Qwest plans to offer 20 Mb/s broadband speeds but, Mueller said, “with pair-bonding technology, it may be possible to double that speed.”

Mueller seemed to puzzle analysts somewhat by maintaining that, despite its commitment to FTTN, the company would not alter its current strategy of using DirecTV as its partner for video services. “We’re not having a new video strategy,” Mueller said. “We’re staying with DirecTV. We’ll take advantage of any products and services that come over higher-speed [connections], even maybe backhaul opportunities.”

A mix of high-speed services will justify the FTTN investment, Mueller said, declining to be much more specific. “It’s our belief that there will be plenty of products and services that will flow over high-speed bandwidth. To have it pinned down to one or the other…We wouldn’t share our return factors on that…We really believe this is a prudent spend.”

“I can’t give you all the products and services today that would be put on there,” he said later. “It would be crazy to think I knew them all.”

One analyst registered discomfort with that uncertainty, particularly in the absence of a terrestrial video service--the most obvious offering to yield a return on fiber deployment. “It definitely makes me nervous that there’s an expectation that there will be, in a very general sense, new prods and services that generate a return on invested capital as opposed to a clear and precise perspective as to exactly how the return is going to be realized,” the analyst said.

Mueller replied, “Next question,” and moved on.

Though the new CEO referred to the company’s deployment goal as 1.5 million “additional” homes, he declined to say how many homes Qwest currently reaches with FTTN.

“I don’t think the FTTN announcement is any different than what we’ve been doing other than we’re accelerating it a bit,” he said.

Qwest has well over 10 million homes in its footprint.

Analysts have suggested recently that Adtran has already begun assisting Qwest's FTTN rollout, since the equipment vendor has attributed more than 10% if its revenue in the past two quarters to Qwest.

"Qwest had previously deployed NextLevel’s VDSL solution, acquired and we believe subsequently discontinued by Motorola, which likely spurred its search for new vendors," Morgan Keegan analyst Simon Leopold said in a research note today. "Qwest already purchased DSLAMs from Adtran, and we view the DSL-based FTTN business as incremental. The award may include Adtran’s new Total Access 5000 FTTx multi-service access node. We think it is reasonable to expect Qwest to spend $70 million to $100 million with Adtran in 2008."