Qwest's video regulatory change dress rehearsal in Colorado

Sean Buckley, FierceTelecomQwest's (NYSE: Q) latest move to get cozy with Colorado's local and state regulators is a clear sign that the telco finally wants to become a major telco TV player. Although it will likely move to appeal to other states in its 14-state region, it appears to be using its Colorado home base as a way to gain some initial leverage.

At issue is the way video franchises have been awarded.

Cable operators or telcos had to appeal to the local town or city to get a video franchise. However, as reported in the Denver Post citing a recent study by the University of Minnesota, 20 states from 2005 through 2008 passed laws that shifted franchise awarding power from the local to the state level.   

Telcos like Qwest argue that by switching the franchising process to the state level it can simplify the process of entering markets to compete with cable operators who enjoyed a monopoly as the only video provider in town.

To obtain its video franchising goals, Qwest is not only lobbying state legislators to get their vote heard in the next legislative session, but also appealing to local community consumer groups such as the Greater Metro Telecommunications Consortium and Colorado Municipal League.   
With aggressive cable operators like Cox Communications already attacking Qwest's FTTN service territories with not only its traditional video and DOCSIS 3.0 services, the service provider needs another revenue source like video to stem ongoing landline voice losses.

Of course, Qwest is not exactly a novice video player. Besides its ongoing DirecTV satellite TV resale offering, the former US West was an early provider of TV over copper using the old Fiber to the Node (FTTN) gear from the now defunct Next Level Communications.

But with a lot of financial troubles to wade through, current Qwest CEO and Chairman Ed Mueller phased out the limited Choice TV offering in late 2008 and decided that the better route would be to pursue a reseller arrangement with DirecTV and continue to look at ways to use its ongoing Fiber to the Node (FTTN) rollout for online video services.

At the time, Qwest asked for changes in video franchising regulations, but obviously had no offering to bring to the table. And while Colorado lawmakers considered changing the laws, the measure was killed in 2007.

So what's prompting state and local lawmakers to take another look at video franchising rules this time?

Well, for one, Qwest believes it can deliver a broader and competitive telco TV service across its traditional ILEC footprint thanks to its impending merger with CenturyLink (NYSE: CTL).

Darryn Zuehlke, director of Denver's office of telecommunications, which administers the city's cable franchise, for one, told The Denver Post that "Qwest is anticipating that . . . at some point in the near future they actually will be able to provide a video service with a demonstrated product because CenturyLink has video franchises in other parts of the country."

Although CenturyLink has been somewhat conservative with its IPTV service, having only rolled it out in five markets with plans for two full scale commercial rollouts this year, it's not hard to imagine them wanting to leverage Qwest's well-established FTTN network to deliver video to consumers.  
Still, as Dennis Huber told me in a previous interview when I asked how they could use Qwest's FTTN assets to expand its IPTV service, "It's not just the Fiber to the Node network, but also the metro optical network," adding that there's lots of moving pieces to consider in terms of copper plant and core network conditions that differ from market to market.

Regardless of the approach that the eventually newly combined company will take with delivering video, it's clear that if Qwest gets the regulatory changes it needs, it will enable it and its new parent CenturyLink to bring video across its entire ILEC footprint.--Sean