Qwest makes its fiber work for wireless backhaul, consumer broadband, business

Qwest (NYSE: Q) may be in the process of merging with CenturyLink (NYSE: CTL), but the near-term desire is to continue focusing on its core strategies around expanding its Fiber to the Node (FTTN) footprint and signing more fiber to the cell site tower contracts.

Speaking at this week's Wells Fargo Securities 2010 Technology, Media and Telecom Conference, Qwest Communications' executive vice president and chief financial officer, Joseph J. Euteneuer outlined the service provider's deployment of fiber facilities to simultaneously serve its growing wireless backhaul, consumer FTTN and even business service customers.  

On the fiber to the cell tower side, Qwest has taken a transitional strategy for wireless operators that understands their total wireless backhaul spend.

To date, Qwest has 4,000 cell sites under contract and as of Sept. 31 they were billing 1,000 sites.

With over 18,000 cell sites in its 14-state footprint, Qwest is confident that it could serve at least 8,000 of those sites.

"Of the sites that we have already started to bill, everyone is taking more capacity than we originally started," Euteneuer said. "We're getting more revenue from the contracts and that's all a function of demand."

Getting to that 8,000 fiber-to-the-cell-site goal won't be easy. Euteneuer recognizes that the wireless backhaul market is becoming more competitive with of course cable, but also a host of new specialized players such as Fibertower, TTM, and TowerCoud coming onto the scene.

"Initially, it was us and the cable guys getting into it," he said. "Now, you have every hedge fund creating new fiber to the cell companies and creating competition and distraction. I think the wireless operators taking a step back and saying 'how am I going to maintain all these vendors?"  

As it moves forward with its merger with CenturyLink, Qwest will be able to leverage the combined 34 state footprint to give wireless operators not only a bundled deal for a number of their cell sites, but also help them transition away from copper-based T1s.

"When you think about the demand, your demand on a cell site is today so I can turn up a T1 circuit today and then build the fiber and make the transition accordingly," Euteneuer said. "I got a lot more flexibility in helping them take care of the demand issues versus some of the competition."

Taking a leverage and extend mentality, Qwest's fiber to the cell site program is having an effect on its FTTN drive. During the third quarter, Qwest added 100,000 new homes to its FTTN network as a result of its coordinated fiber build out strategy.

"When we're building fiber to the cell site, we're looking to the left and right to see where homes and businesses are," Euteneuer said. "Where the businesses are, our enterprise sales force are out there pre-selling to try to get those buildings and customers and asking ‘can we get you committed and get you signed up? On the homes, since we're going to be making that run anyway, it is a lot cheaper to start building those homes out."

To date, Qwest has deployed FTTN infrastructure to 4.5 million homes, delivering speeds of up to 40 Mbps with VDSL2 at the same price it was delivering its initial 20 Mbps offering.

And while the service provider is aware that it could double the speeds by going to pair bonding to 80 Mbps, it has no plans to do so at this point.

But broadband speed is only part of the equation.

With only 20 percent of its mass market revenue coming from POTS service, Qwest has been trying to get a better understanding of how consumers want to use their connection.

Qwest is equipping its customer service centers with training rooms with a number of devices you'd typically find in a home such as phones, televisions, video and gaming consoles.

"We're teaching our reps to understand how those devices interface with broadband," Euteneuer said. "Rather than getting you on the phone and trying to convince you that 99.95 is the best product you can buy, it's more of a discussion about what are you trying to do with broadband?"

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