From his home outside Elizabeth, a fast-growing exurb southeast of Denver, Bill Joplin sees wave after wave of new houses rolling across the high plains.
The homes, which range from $300,000 to $700,000, often come with hot tubs, wood floors and stainless steel kitchens. But there is one missing feature: high-speed Internet.
“Neither Comcast nor Qwest reach me yet, so I have to get by with dial-up,” Joplin said. “Web pages can take several minutes to boot up. Downloading Windows updates takes hours.”
Salvation for Joplin may come from the nationwide battle among phone companies such as Qwest, cable companies such as Comcast and a growing number of satellite, wireless and other tech startups specializing in high-speed Internet.
Each company wants to lock up the American living room by delivering a long-promised “triple play” of high-speed Internet, phone service and television.
To win the broadband battle, companies must build a high-speed Internet connection into the homes of Joplin and other residents in affluent, high-growth sections of metro areas such as Denver.
It can be a costly undertaking.
Denver-based Qwest has doubled its ability to provide high-speed Internet over the past 2 1/2 years through a service called digital subscriber lines, or DSL. Since 2002, Comcast has spent $400 million in Colorado to upgrade its lines to carry high-speed Internet.
A must-win market slice
Qwest needs high-speed Internet to boost its cash flow. The phone company was hoping to save money and drive traffic onto its long-distance phone network by buying long-distance provider MCI, but it was outbid by Verizon. Now Qwest is looking at other growth options.
“DSL is one of the few growth areas Qwest can tap,” said Phil Weiser, an associate professor of law and telecommunications at the University of Colorado. “And if they don’t do it, Comcast will.”
Qwest has 1.1 million DSL subscribers out of 15.3 million phone customers in a 14-state territory that stretches from Minnesota to Oregon. The service is available to 70 percent of its phone customers, mostly in the more densely populated areas.
Qwest saw a 63 percent jump in its DSL business for 2004, even as Qwest and all the Bells continued to lose local phone customers.
Last year, Qwest installed 4,000 remote terminals – refrigerator-sized boxes jammed with electronics – that extend the reach of its DSL networks.
But this year, Qwest’s broadband expansion is slowing. The company has announced plans to install only 2,000 DSL remote terminals through August.
Qwest began fiber-to-the- home service last month in an upscale development in Lone Tree, but only 80 homes will be wired by year end.
Qwest’s capital expenditures will decline 7 percent this year, according to UBS Investment Research, but Qwest says they will remain the same as last year. UBS predicts the three other regional Bells will raise spending. Verizon will spend 16 percent more and SBC will spend 12 percent more, mainly on fiber to the home. BellSouth will spend an extra 6 percent.
“We continue to race to get DSL out because the demand is there,” said Scott Russell, Qwest’s director of DSL product management. “But it becomes cost-prohibitive to tear up every street and every backyard.”
Last year, Qwest became the first Bell to offer DSL separate from phone service in response to a growing number of young consumers who are ditching land lines and using only their cellphones.
Qwest also is leading the Bells when it comes to new wireless technologies such as WiMax, which would allow Qwest to set up towers in cities or rural areas and beam a high-speed Internet signal out at least 15 miles. That would allow Qwest to hit higher Internet speeds and avoid the costly fiber deployments being made by SBC and Verizon.
But the other Bells have offered lower pricing with their DSL services. SBC recently slashed its DSL price to $14.95 per month in its service territory. Qwest charges $40 per month for a similar service.
Comcast, the largest cable company, has a substantial presence in Colorado thanks to its acquisition of Arapahoe County-based AT&T Broadband in 2002.
The Philadelphia-based company provides cable television service in Colorado to 680,000 customers, primarily in Denver, along the Front Range and into the mountains. Its upgraded cable network allows Comcast to handle two-way traffic for Internet, video-on-demand and phone service.
Comcast has about 6.5 million high-speed Internet customers, about a third of its 21.5 million television subscribers in 35 states. There are a total of 34.5 million broadband subscribers nationwide, and analysts expect that figure to double in the coming decade.
“High-speed data growth at Comcast has roughly doubled since the (AT&T) deal,” said Scott Binder, senior vice president of Comcast in Colorado. “But our growth in Colorado has been sharper.”
Pluses and minuses
Comcast has several advantages over Qwest. It can quickly upgrade the speed of its cable network in the future, while Qwest will ultimately be constrained by the amount of copper wire in its network.
The cable giant also has a head start on advanced video services, such as high-definition television, video on demand and digital video recorders that allow viewers to fast-forward past TV commercials.
Most importantly, Comcast has lots of financial legroom. The cable giant spins off nearly $8 billion in cash each year and has a market value 10 times that of Qwest.
But Comcast is burdened with the need to sign a video franchise agreement with local governments every time it expands into a new community. Qwest is more free to build out its DSL network and generally moves into communities before or right after Comcast.
Startups ready to pounce
Both Qwest and Comcast need to move fast on the broadband front. Small wireless companies using microwave towers already are beaming high-speed Internet into the exurbs and rural areas that neither Qwest nor Comcast reach with DSL or cable.
Denver-based WildBlue, a $500 million experiment funded in part by John Malone’s Liberty Media, began transmitting high-speed Internet on Thursday to its first customer in Strasburg, a town on Colorado’s Eastern Plains.
In downtown Denver, Qwest customers are also being nibbled away by startups like foreThought.net, which are using new technologies to resell faster – and cheaper – Internet and phone service on Qwest’s own copper network.
Qwest last month introduced a $140-per-month bundle that includes local and long-distance phone service, DSL, satellite TV from DirecTV and an added bonus not even Comcast can offer: 500 minutes of cellphone service that Qwest resells from Sprint.
“This bundle will help us lock in loyal customers,” said Qwest spokesman Tyler Gronbach.
Comcast offers circuit- switched phone service only in certain areas of Denver. Its recently launched Internet phone service won’t reach Colorado until 2006, so right now its bundle for Colorado customers includes only cable TV and broadband.
Amidst all this technological innovation, Joplin is still waiting for high-speed Internet out on the plains. Qwest is unlikely to reach him anytime soon with DSL, though Comcast recently laid cable to the town of Kiowa, 8 miles southeast.
Joplin’s neighbors have sampled wireless Internet providers with varying success. But he is reluctant to try WildBlue’s new satellite service, which is more expensive than Qwest DSL and requires a $300 upfront fee.
“I feel more comfortable with something that runs over my phone line,” Joplin said. “If we try one of the newer technologies, then we may get rid of our land line altogether.”
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com
