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Qwest on cusp of city cable
Television - The telephone company could compete with Comcast, and some Portlanders could see lower rates

Monday, September 17, 2007
MIKE ROGOWAY
The Oregonian

Cable TV competition may finally be coming to Portland.

To some of it, anyway.

The Mt. Hood Cable Regulatory Commission plans to vote tonight on a deal that would open the door for regional phone company Qwest to offer cable television in parts of Portland as early as this time next year. The company would compete directly with Comcast, which currently holds a monopoly on cable service in the whole metro area.

Attracting an alternative cable operator, and with it the prospect of more competitive rates and service, has been a priority in Portland for nearly a decade. Verizon Communications Inc. is on a similar track in Washington County, and preliminary talks are under way throughout the metro area.

But the franchise agreement wouldn't require Qwest to serve the whole city. The proposal would require the phone company to offer cable TV in only half of Portland by 2018, potentially leaving out thousands of homes.

Comcast warns that a selective buildout by Qwest could create economic discrimination because there's no specific guarantee that poorer neighborhoods would get service.

Jurisdictions elsewhere in the West, offered similar deals by Qwest, have turned them down. They want greater assurances that Qwest would work aggressively to build cable service to entire regions. Qwest has resisted such pressure because of the high costs of building a brand-new cable network.

Qwest and Portland regulators defend their proposal as the best possible given the huge investment necessary to bring Qwest fiber-optic cables into neighborhoods around the city. And regulators expect that even neighborhoods that don't have Qwest TV service might benefit from the price competition the company could bring to the city.

Above all, Portland regulators point to protections in the agreement that would penalize Qwest if it discriminated and would yank the cable franchise within a few years if the buildout didn't meet minimum standards.

"The whole penalty here is losing the license," said David Olson, director of the Mt. Hood Cable Regulatory Commission.

The cable commission hopes that competition could help put a break on soaring cable rates, which are unregulated and have already climbed more than 60 percent this decade.

Qwest hasn't said just when it would start offering cable TV in Portland. The answer depends in part on new technology, still being tested, that would carry TV signals over copper phone lines.

Qwest says service would probably be available first in places where the phone company is upgrading its network. Those areas include Northeast Portland between 112th and 162nd avenues and between 15th and 33rd avenues, and parts of Southwest Portland.

No prices yet

Qwest hasn't set prices for Portland either, or said which channels it would carry. But it said rates probably would be around $48 a month for a 130-cable channel package, similar to what it charges in places where it is already experimenting with cable coverage. In Portland, Comcast subscribers pay $50.89 for a comparable package of 70 channels.

Qwest, emerging from years of financial trouble, is the last of the nation's major phone companies to pursue cable TV. Under increasing pressure from rivals, Qwest may no longer have a choice.

Comcast and cable operators elsewhere are treading on Qwest's traditional local phone turf. By offering discounted bundles of phone, Internet and cable TV service, Comcast can maximize its share of each customer's wallet and take customers away from Qwest.

A similar battle is playing out in Washington County, where Verizon is the local phone company. Verizon is building a more robust fiber-optic network than Qwest plans, stringing cable directly to customers' homes in much of the area.

Verizon plans to start offering cable TV service late this year or early in 2008, under a franchise agreement that requires it to serve entire cities within four years.

Qwest has said it's not interested in similar commitments. The company's leadership is less optimistic about the cable TV market than Verizon executives are, and talks have broken down elsewhere when regulators insisted on fuller buildout requirements.

That's what happened in Denver, Qwest's hometown.

When the city's cable regulators tried to negotiate a franchise agreement with Qwest, telecommunications director Darryn Zuehlke said, Denver sought "creative" ways to encourage the phone company toward a long-term goal of serving the whole city. But the negotiators couldn't find middle ground, and talks broke off.

"It's understandable that some competition is better than no competition," Zuehlke said. "That works unless you're in an area that won't get the competition."

Comcast complains that Qwest's proposed deal in Portland, which needs approval from the Portland City Council as well as the cable commission, gives the phone company special treatment. In a letter to Mayor Tom Potter last month, Comcast Vice President Sanford Inouye wrote that the proposed Qwest franchise gives the phone company preferential treatment and fails to ensure "a reasonable nondiscriminatory deployment of cable services."

Redlining prohibited

The franchise agreement specifically prohibits redlining, the practice of passing over poorer neighborhoods, said Olson, the cable commission director. He said the language in the franchise agreement is as strong as the law allows.

"If there's any hint of redlining, it's something we would aggressively pursue," he said.

And Olson said the franchise agreement is designed to give Qwest a strong incentive to keep building by curtailing the length of the franchise unless its service continually expands to at least half the city over the next six years.

A decade from now, when Qwest must negotiate a new deal, Olson said, Portland will be in a strong position to compel the company to offer service in the rest of the city or risk losing its franchise and its entire investment in Portland video.

"If Qwest does not provide the buildout that they promise," he said, "they lose the franchise in pretty short order."

Mike Rogoway: 503-294-7699, mikerogoway@news.oregonian.com