Qwest-DirecTV Marriage Continues

10:40 AM -- Qwest Communications International Inc. (NYSE: Q) and DirecTV Group Inc. (NYSE: DTV) have announced a five-year extension of their relationship, which allows Qwest to resell DirecTV services. The original agreement began in 2004 and is now in place through 2014.

With this agreement, Qwest continues a video strategy that goes against conventional wisdom. Its "Baby Bell" brethren, AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), decided years ago to invest billions into their networks in order to deliver their own video services. Qwest has taken a lot of heat for not doing the same.

Qwest decided it either didn’t have the financial muscle or the stomach (or both) to build its own video product. Quite frankly, the jury is still out as to which strategy makes the most sense. I’ve spoken to many a financial analyst that argue they’d rather receive a few dollars in DBS resale commissions every month than lose thousands of dollars per sub in the hopes that a long-term video build strategy will provide adequate investment returns over time. Time will tell us which strategy makes the most sense, and for whom.

Financial arguments aside, the new Qwest-DirecTV deal offers some interesting details, which in theory, give Qwest a more competitive video product. New features available to Qwest include remote DVR programming and integrated TV-telephony features like TV caller ID and one-touch call back (using a DirecTV remote) of missed calls. Will these features be enough for a Qwest triple-play bundle to effectively compete with a tru2way- and EBIF-powered Comcast Corp. (Nasdaq: CMCSA, CMCSK) or Cox Communications Inc. bundle?

— Bernardin Arnason, Managing Partner, Pivot Group , and Chairman, TelcoTV 2009

Interested in learning more on this topic? Then come to TelcoTV 2009, the telecom industry’s premier event for the exploration of a comprehensive entertainment convergence strategy, to be staged in Orlando, Fla., November 10-12. For more information, or to register, click here.

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