It’s a strange world when an old-line monopoly suits up as the champion of open competition, but Qwest Communications is carefully plotting just such a strategy for expanding beyond phone service to video.
Of course, two can play that game, and cable TV giant Comcast is marketing a phone service that could jeopardize Qwest’s monopoly even as it maneuvers to protect its own.
It should be fun to watch. We urge public officials who will ultimately referee this competition to protect the consumer interest in having innovation and fair pricing in both communications and entertainment.
Qwest wants to offer cable-like video in selected areas of Denver and other metro-area cities, and Comcast, holder of a non-exclusive Denver franchise, is arguing that the city should force Qwest to undertake a costly project of serving every neighborhood in the city or none at all.
The debate underscores how the convergence of rapidly evolving technologies and business strategies has blurred distinctions in telecommunications. Government will need to take a fresh look at how the evolving structure will best serve public needs.
Traditional phone companies face growing competition from from wireless and Voice over Internet Protocol, or VoIP (which Comcast, among others, offers). In Omaha, cable TV operator Cox Communications has supplanted Qwest as the dominant local phone company, and it also has made a major dent in Phoenix. Philadelphia-based Comcast is looking to add VoIP to its bundle of electronic services in Denver.
The Baby Bells, led by giants Verizon and AT&T (formerly SBC), and soon Qwest, are returning fire by gearing up for video.
“We welcome the competition on the video side, phone and high-speed data,” Scott Binder, Comcast’s senior vice president for Colorado, recently told The Post. But he is pressing for rules that would prevent competitors from cherry-picking more affluent neighborhoods. (Denver voters approved a second cable franchise in 2001, but the system started by Wide Open West and now owned by Champion Broadband never was built out, serving only a few hundred subscribers in Denver and Lakewood.)
Steve Davis, Qwest’s senior vice president for public policy, says Comcast’s build-out demand is “a red herring to forestall competition. … When Comcast built its network, just as when Qwest built its telephone system, they were a monopoly. We were required to build to every customer in the city, required to serve every single customer in the city.” But, as Davis notes, new entrants – second or third providers – don’t have to build out, which “serves no purpose other than to impede competition.” Davis cited a Government Accountability Office study showing cable TV rates were about 15 percent lower in the 2 percent of communities with competing cable firms.
Qwest’s video would travel over its high-speed broadband network, which “passes” about 80 percent of Denver homes, and the rest of the way to residences over copper wire, company spokesman Bill Myers said. The video service would include local broadcast channels, public educational and government channels, and regular cable channels.
The issue is “very much a 21st century problem,” according to David Broadwell of the Denver City Attorney’s office, who said that Qwest had made preliminary contacts with the city and the Greater Metropolitan Telecommunications Consortium, which consists of 30 municipalities. GMTC is working on a model video franchise, but cities would have to approve individual franchises with providers.
Convergence is “a big public policy issue,” Broadwell said. It’s not just a local problem and could lead to a complete overhaul of federal communications law. Broadwell’s primary concern is to preserve some authority for the city and its franchise revenues.
But cities must deal with the here and now. The Salt Lake City council, for example, voted Nov. 17 to give Qwest a video franchise without full build-out. Only if Qwest captures more than 51 percent of the market will build-out kick in. It’s not a perfect solution but evidence that local officials can develop an approach away from monopolies and toward choice for consumers.
