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Cable Technology Feature Article

October 30, 2008

Qwest Consumer Voice Now Only 29 Percent of Total Revenue

By Gary Kim, Contributing Editor

One trend we can note about AT&T (News - Alert), Verizon and Qwest is that more and more of their revenue is coming from business, wholesale, wireless and global customers, instead of the traditional consumer wireline revenue segment.
In its most recent quarter, for example, Qwest (News - Alert) generated just 42 percent of total revenue from consumer services, including voice, video, wireless and data.
Qwest generated 31 percent of total revenue from business customer segments and 24 percent from wholesale. Basically, 64 percent of revenue comes from customer segments other than consumers.
In fact, consumer voice, which is most exposed to market share shifts as well as secular changes in demand for wired connections, now represents just 29 percent of total Qwest revenue.
That sort of thing will be hard, if not impossible, for smaller telcos to replicate. But it is worth noting that it is not only wireless that sets Verizon (News - Alert) and AT&T apart from other providers in the market. With Qwest, they are able to play in business customer segments and global accounts in ways smaller providers simply cannot.
The point is that though it is important for firms such as Qwest to develop new broadband-based revenues to offset declines in wired voice, the percentage of consumer revenues likely will decline in importance over time as other sources assume greater importance.
Still, Qwest's fortunes in the consumer segment are highly dependent on broadband. After fumbling consumer broadband marketing in the second quarter, Qwest doubled its second quarter broadband access net additions.
Qwest also seems to be having good success with its fiber-to-the-node services. Qwest now is marketing to 1.5 million potential customers and added about 40,000 new fiber-to-the-node subscribers in the quarter.
The subscriber take rate of 7 Mbps or faster service in the fiber-to-the-node footprint is nearly 70 percent, Qwest says.
Qwest also generated over 60,000 new high-speed Internet subscribers in total. During the quarter Qwest featured an offer that provided 1.5 megabit speeds for $14.99 per month for an introductory period.
Qwest also has found that its new FTTN service has "about a 50 percent change in churn," says Thomas Richards, Qwest COO. "So that if you have a customer that doesn’t have HSI and you have a customer that has HSI, the churn rate difference in those two market segments is 50 percent."
Business market revenues were $1.0 billion for the quarter, which is an increase of three percent sequentially and seven percent year over year. That was the fourth consecutive quarter of annual total revenue growth for business markets and the sixth consecutive quarter of growth in recurring revenue, which improved by three percent year over year.
Qwest says it had particularly good results among larger customers and within the federal government space. Business data and Internet services grew by 13 percent year-over-year.
Data and Internet revenue now comprise 65 percent of total business markets revenue. Qwest also grew revenue for enterprise networking services by nearly 40 percent year over year. Qwest video penetration also stands at 12 percent of primary access lines, which places Qwest as best in the industry, the company says.

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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Mae Kowalke