Template Tools
Qwest's Sensible Stimulus Request: 173K Unserved
Tuesday, 04 May 2010 11:43
Wyoming_hillsQwest is asking for RUS money to reach 526K homes at 12 megabits downstream or higher. (FTTN/DSL) The budget is $466M. While that's about 3 times the cost of AT&T's FTTN build with similar equipment, these are spread out much more widely and the cost is appropriate. That's particularly true because according to Tom McMahon of Qwest 173K of these homes are completely unserved, without either cable or DSL.
      Running fiber costs something like $20K/mile and Qwest will need a lot of fiber for these remote terminals. I've reviewed some of the maps Qwest submitted and the budget they are proposing is not unreasonable for the territories they want to cover. Many of those "unserved" homes are so remote they will cost $2-5,000 to reach. McMahon also tells me that he knows of no overbuild of other carriers in their deployment, contrary to complaints I've been hearing from some rural carriers. The boundaries of some territories may overlap, but unless proven otherwise I'll believe those are exceptions.
       Whether Qwest needs a 75% subsidy, as they request, or the build makes sense at a lower subsidy rate I'll leave to Jonathan Adelstein to negotiate. Remote territories are expensive to serve, so some subsidy is appropriate. I did some rough calculations of the NPV and it comes to $300-400M, or about two thirds of the investment. My instinct is that a 75% subsidy is too high, but I don't have all the details.
      Probably more than half the homes have cable alternatives and Qwest is probably losing over 13% of their lines/year in cable areas. They've been upgrading similar homes as rapidly as they can within the capital constraints they've faced. Qwest nearly went bankrupt a few years ago according to CFO Oren Schaffer and their capital budget has long been far under depreciation. Despite that, they've emphasized the upgrades, which have often returned their cost in less than a year.
      It's been a long road to get a reasonable proposal from Qwest. Last year's original proposal asked nearly twice as much government money for far slower service. Qwest provided no reliable data on jobs directly created, the main stimulus goal, but neither have most other applicants.