Qwest CEO Ed Mueller isn’t interested in gambling on IPTV. The going IPTV ante for a company of Qwest’s size is in the billions – a little too rich for Mueller’s blood. Rather than Qwest learning the video business on the fly and paying handsomely for it, Mueller prefers to partner with companies who know it best and have already invested those necessary billions. Mueller is already taking some heat for this decision, but I think it’s too early to judge this fiscally conservative move. Arguments can be made on both sides of this “should we launch IPTV” equation (I would argue that Qwest’s real long term concern is wireless, not IPTV – but that’s the subject of another post). Anyone who plays poker knows that a fold can either be the smartest or the dumbest move you can make. It all depends on how the subsequent cards fall.
Mueller argues that their partnership with DirecTV still affords them a competitive triple play offering. You can’t really argue with that. They’ve announced a FTTN initiative that will provide 20 Mbps to select markets. They’ll spend less than 1/10th of what AT&T is spending on U-verse, and less than 1/60th of what Verizon is spending on FiOS. Maybe Mueller will get the last laugh. He can still extract some margin from the DirecTV partnership and not risk substantial investments in an IPTV network. I’ve seen some financial analysts scratch their heads at most telcoTV business plans that have five to seven year payback periods, while DBS partnerships can extract positive cash flow on day one. Maybe these moves will put Qwest in a better financial position than their competitors and peers – a position they may be able to leverage for competitive advantage. Or maybe this strategy will handcuff Qwest and not allow them to leverage a true triple play experience. Which strategy puts a company in a better competitive shape? Hard to say. But thanks to Qwest, we’ll have a better barometer to measure telecom’s long term competitive health. Bet the bank on a facilities based telcoTV network, or go it safe (fiscally anyway) and let your video expert partners do the video heavy lifting for you. Who will be able to extract the most value and exploit their competitor’s weaknesses? Stay tuned.