Qwest to Spend up to $300M on FTTN

Qwest Communications International Inc. (NYSE: Q) announced today that it plans to spend up to $300 million to pass an additional 1.5 million homes with its fiber-to-the-node network. (See Qwest Reports Q3.)

"As we look to the future, we're convinced that increased bandwidth to our customers is critical to our long term success," said Qwest CEO Ed Mueller on the company's third-quarter earnings call this morning.

Mueller says that Qwest will deliver more than 20 Mbit/s in bandwidth to each home on this network. With pair bonding, Mueller says, "we believe it may be possible to double that speed."

By expanding the availability of all that bandwidth, there is speculation that Qwest might be looking to follow AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ)'s lead with a TV service. "Management expects to offer speeds above 20 Mbit/s, which we believe could set the stage to offer terrestrial video," writes UBS AG analyst John Hodulik in a note to clients today.

Mueller, however, said, "we're not having a new video strategy, we're staying with DirecTV," when asked on the conference call.

Since Mueller was appointed CEO in August, he has been reviewing Qwest's businesses and this mild increase in capital spending on the fiber-to-the-node network is the first significant initiative of his tenure.

His lack of any sweeping pronouncements and grand plans have worried some -- and Mueller says he understands. "I get the uncertainty but I think it's reasonable coming in at the end of August and having a strategic review," he says. "I get that the cloud is over there, I understand that and we're willing to put up with that."

Qwest's stock is trading near its 52-week low and, though the company's net income jumped by a lot this quarter, the gain was almost exclusively due to a one time $2.1 billion tax benefit.

Table 1: Qwest's 3Q07 Earnings

Growth in broadband subscribers has also begun to slow, but Qwest is saying the slowing housing market is partially to blame and that its competition is facing similar market pressures.

— Raymond McConville, Reporter, Light Reading