Qwest on Fiber Binge

Qwest (Q) sheds some light on its fiber optic network expansion plan.

The Denver-based phone giant plans to string optical cable to neighborhood terminals and boost residential Internet connection speeds to deliver video, says CEO Dick Notebaert in an interview Tuesday.

For the vast majority of Qwest's territory, the plan calls for this "fiber to the node" approach being used by No.1 telco AT&T (T). Notebaert says the quality of copper lines attached to homes are good enough to handle the higher speeds. "There's no need to tear up yards," Notebaert says. In new housing developments Qwest will run fiber directly to the home, says Notebaert.

Qwest was the only remaining local phone giant that hadn't spelled out its fiber-optic strategy.

Telcos have been feeling the squeeze from cable companies like Comcast (CMCSA) and Cablevision (CVC) as triple play -- TV, Internet and calling service bundles -- have successfully stolen phone customers.

To date, Qwest has been reselling satellite TV service from DirecTV (DTV) to answer the cable threat. But now the Rocky Mountain phone shop is laying the lines for a more direct turf war with cable.

A clue to Qwest's plan came on a conference call Thursday, when communications cable supplier CommScope (CTV) told analysts that Qwest was going with a "fiber to the node" plan.

"We will participate substantially in that," CommScope executives said on the call. In fact, with Qwest as a new customer CommScope saw the coming orders as one reason to boost its financial outlook for the year.

Notebaert says the fiber project will not require additional spending but merely a shift from old line gear to new stuff. "Last year we spent over 30% of our capital budget on bandwidth. This year it will be 50%," Notebaert says.

The money will come from "de-emphasizing investment in legacy" phone systems, " he says.

But while Qwest is certain about the type of fiber infrastructure it will build, Notebaert says he has not decided what approach to use on video.

At the moment, Notebaert says he's attracted to the idea of giving customers a fast connection and letting them gather their own video. "My vision is more along the line of content shifting," says Notebaert. This would allow users to "pull down content" and watch what they want, when they want.

He says Qwest is also "monitoring IPTV to see what the customer take rate is."

AT&T introduced its IPTV offering called U-Verse this year and says it has 20,000 customers. Meanwhile, New York rival Verizon (VZ) got started more than a year ago with its fiber-optic connections and counts 348,000 customers as of the first quarter.

Qwest shares rose 14 cents to $9.02 in midday trading Tuesday.

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