[1st-mile-nm] Qwest-watchers wait for vision

[Richard Lowenberg]

A rather long posting here, on the awaited year-end 'grand vision' from
Qwest.   All the more reason to promote competition and local initiatives.
rl
----

http://tinyurl.com/2gb4y3

Qwest-watchers wait for vision
No details yet, Mueller says, but here are some things to expect.

By Andy Vuong
The Denver Post
Article Last Updated: 11/24/2007 12:39:34 PM MST

By year's end, Qwest chief executive Ed Mueller will unveil his grand
vision for the Denver-based telecommunications company he took over in
mid-August.

Don't expect drastic change.

Though specifics are still in the works, Mueller shed light on some moves
Qwest will or will not make during a recent interview with The Denver
Post:

The company is not looking to buy a cellphone company, even though the
wireless business is generating plenty of cash for its much larger peers,
AT&T and Verizon Communications. "We don't have wireless assets, and we're
not going to go acquire wireless assets," Mueller said.

Qwest is not going to pursue a broad video play, either. "We're not
committing to a Verizon or AT&T whole video rollout," Mueller said. "We're
not becoming a TV provider."

Qwest will detail its expected returns for the additional $200 million the
company plans to spend next year to boost broadband speeds. Those details
may include which markets will see the investments, with denser cities
likely to be at the top of the list.

Down the road, Qwest may look to partner with third-party companies to
offer high-bandwidth applications and content, such as video-on-demand, to
leverage the faster speeds.

"We're just taking the whole company and looking at every part of it,"
Mueller said of his strategic review. "A lot of it is just getting me up
to speed."

For some, the review is taking longer than expected.

"What are you attempting to bring to the table that's so significant that
it's worth taking this six-month period of not talking to the market and
going into a review mode and really reassessing everything that the
business is doing?" Bank of America analyst David Barden said during
Qwest's third-quarter earnings call in October, according to a transcript.

Since Dick Notebaert announced his retirement as Qwest's CEO in June, the
company's future plans have been murky.

Qwest operates a nationwide fiber-optic communications network and is the
primary local phone service provider in 14 states, including Colorado. It
is facing heated competition for residential customers from cable
operators, such as Comcast.

Analysts pressed Mueller for more details during the call in October, as
Qwest's landlines continued their ongoing decline to 8.9 million, down 7
percent from a year ago.

Barden noted that Mueller is the only member of top management who is new
to Qwest.

Mueller held firm, saying it was "prudent" for him to take until the end
of the year to establish a plan.

The market hasn't reacted kindly to that approach. Qwest shares are
trading at 52-week lows amid the uncertainty about the company's
direction. The stock closed Friday at $6.58, up 12 cents.

Todd Rosenbluth, an analyst with Standard & Poor's, defended Mueller's
decision.

"You've got a new CEO who has a different energy and a different
philosophy on how to run a business than his predecessor," Rosenbluth said
in an interview. "We never expected quick decisions when he came in."

It was widely viewed that Notebaert, during his five-year tenure, tried to
dress Qwest up for a sale, or as one analyst put it, "put lipstick on a
pig." Without any buyers, Mueller's job is to take the lipstick off and
get the pig to perform.

And while the charismatic Notebaert is a salesman by nature, Mueller
appears to be a numbers-crunching executive.

Driven by statistics

He is a champion of the so-called multivariable testing, which uses
statistical analyses and quantitative models to gauge the effectiveness of
ideas and plans. It is a tool he used as head of San Francisco retailer
Williams-Sonoma and Chicago phone company Ameritech.

Though not directly tied to the strategic review, Mueller has implemented
multivariable testing into some divisions at Qwest.

"It's very disciplined," said Stephanie Comfort, whom Mueller promoted
from an investor relations position to the top strategy role in September.
"It's very statistically based, so people in the organization can measure
and see the effectiveness of their ideas in black and white."

Analysts aren't expecting a groundbreaking plan when it's finally
announced. The company will continue to resell Sprint Nextel wireless
service and DirecTV satellite service as part of its residential bundle,
which limits revenue growth.

"We don't expect much on the revenue side, and we don't expect much more
on the cost side," Rosenbluth said.

Qwest returned to profitability under Notebaert's direction, mostly
through cost cuts and high-speed Internet growth.

"What I expect is for him to paint the broad outlines of a strategy," said
Donna Jaegers, an analyst with Janco Partners. "But probably not to
announce an acquisition right away."

Though Mueller said a cellular acquisition is not in the works, he didn't
completely shoot down the possibility of purchasing a company to boost the
enterprise business. The only acquisition Qwest has made recently is its
roughly $100 million deal last year for OnFiber, a metro fiber company.

Jaegers said it could "make a lot of sense for Qwest" to purchase a
regional license when the Federal Communications Commission auctions in
January the 700-megahertz airwave spectrum - considered to be prime real
estate for wireless applications.

She said Qwest could use the license for WiMax, a ubiquitous
wireless-broadband technology that offers faster download speeds than
traditional wireless fidelity, or WiFi, networks.

Though Mueller declined to comment about the auction, it is clear
high-speed Internet will be a key part of the company's future.

Qwest plans to spend up to an additional $200 million on top of the $70
million to $100 million it had already earmarked for its fiber-to-the-node
deployment, where the company runs fiber-optic cables to a neighborhood
and uses copper loops to link homes to the node.

The project, which will cover about 1.5 million homes, will give customers
speeds of up to 20 megabits per second. Mueller said some homes may hit 40
mbps through parabonding, where the company runs two copper loops instead
of one to double the speed.

Qwest's high-speed Internet speeds currently range from 1.5 mbps to about
7 mbps.

The company is reviewing which markets it will target with the fiber
project.

Mueller said whether the company has a cable-TV franchise in a certain
market, such as Portland, will not factor into the decision. The company
will look at deploying into areas where it can also reach businesses.

"We'll obviously look at density, where we can get the most bang for our
dollar," Mueller said.

Andy Vuong: 303-954-1209 or avuong at denverpost.com


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Richard Lowenberg
P.O.Box 8001, Santa Fe, NM 87504
505-989-9110,  505-603-5200 cell

New Mexico Broadband Initiative
www.1st-mile.com/newmexico
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