Qwest holds back on TV spending

AT&T Inc. is spending $5.1 billion over five years to ready its network for TV service. Verizon Communications Inc. has earmarked $23 billion over seven years. At Qwest Communications International Inc., Chief Executive Officer Richard Notebaert waits for proof that people want television from their phone company.

"Is it possible that our model is OK?" Notebaert, 59, said in an interview. "We don't have to knee-jerk. The only reason you think I should spend more is because someone else is spending more."

Notebaert, who joined Denver-based Qwest in 2002 after it spent $18 billion on network upgrades in a premature bet on Internet traffic by former CEO Joseph Nacchio, is a holdout among his peers in the telecommunications industry. Qwest shareholders don't want him to commit to a major spending project until demand for video services becomes clear, he said.

"The owners, the people who own the company, they look at it and say, 'You're doing exactly what we want,"' he said.

While rival phone companies start major TV operations, Qwest plans to keep selling satellite video with its partner, DirecTV Group Inc., and operating a small television network in parts of Phoenix and Denver. Notebaert hasn't forecast spending on network enhancements beyond this year.

Qwest's network spending under Nacchio gave the company capacity to transmit large amounts of corporate data across the country. The company has been slower to accelerate home connections to broadband speed, a project Notebaert pushed to the forefront.

Investors say Notebaert can hold off on video as he focuses on lowering costs and boosting customer service. Building a new television service is risky, and it's worth waiting to see whether the investment pays off for AT&T and Verizon, they said.

"There's no need to be the aggressive leader in the space," said Reed Deupree, an analyst in Baltimore with Legg Mason Capital Management Inc., Qwest's second-largest investor. "They have an option on video if AT&T gets it to work."

Cable companies such as Cox Communications Inc. are luring customers with a package of TV, phone and Internet service. Cox had more than 2 million phone subscribers at the end of 2006.

Verizon and AT&T announced TV projects three years ago. By the end of March, Verizon had made TV service available through its lines to 3.1 million homes. About 348,000 customers subscribed. The company had about 618,000 satellite TV customers.