Qwest trialing VDSL2, expects broadband video revenue

Qwest Communications expects to find new revenues in broadband-based video services, and will trial VDSL2 technology later this year to enable its fiber-to-the-node (FTTN) network to deliver more bandwidth for video, the company said today in announcing its first-quarter results.

Unlike AT&T and Verizon, Qwest has declined to get into the video business directly, preferring to partner with DirecTV for its triple-play bundle, and Qwest Chairman and Chief Executive Officer Ed Mueller told analysts he is still not impressed with the margins of “me-too” video products but expects broadband video to deliver additional average revenue per user (ARPU).

“We are not a me-too on the video product,” Mueller said. “We are having good progress on DirecTV. We still believe the future will be a combination of good product as well as Internet-provided video. Our platform is set up for that. We are very much interested in people providing that. It is emerging, and we are watching that. We are encouraged by who is taking our faster speeds, and our FTTN is going well.”

Mueller said Qwest is already adding $5 to $10 to consumer ARPU based on higher speed services alone and believes there is more money to be made.

“Primarily the content providers are going to have to come to the party, and I think they are going to,” Mueller said. “We are being reasonable in assuming there will be an ad-based component to this, which is extraordinarily exciting to us.”

Qwest Chief Operating Officer Tom Richards said Qwest is not yet pursuing the hybrid video option that some independent telcos are considering, using a set-top box that combines a video feed from a satellite provider such as DISH or DirecTV with a broadband connection for on-demand or other Internet video, but added that the company is still looking at its options.

The VDSL2 trials will start later this year, Richards said. Qwest shut down the very early VDSL deployment it did in Colorado and Arizona for a video offering.

“We are actually starting to do some trials on taking our 20-[megabit-per-second] FTTN product to a fairly significant higher speed,” Richards said. “It’s a pretty new technology from a standards perspective. By the latter part of the year, assuming the trials go well, we’ll see that as part of the norm.”

Despite declining revenues, Qwest was able to report a 37% increase in net income to $206 million, based on aggressive cost controls and the nature of the lost revenue. Most of the revenue decline was directly attributable to closing out the wireless MVNO that Qwest has replaced by reselling Verizon Wireless service, and the termination of some unprofitable wholesale business, Qwest Chief Financial Officer Joe Euteneuer said.