Qwest hiking prices during economic slump 
By Jeff Smith
Rocky Mountain News
Wednesday, May 7, 2008

Qwest Communications is raising the prices of some of its Internet services by as much as 11 percent as it struggles amid the current economic and housing slump.

The Denver telco is betting demand won't wane or, as prices of individual services go up, more customers will be spurred into subscribing to phone-Internet-television "bundles."  Qwest also hopes to attract new customers as it triples Internet speeds in key markets this year.

Price increases came up during Qwest's first-quarter conference call Tuesday.

Qwest reported earnings of $157 million, or 9 cents a share, in the quarter, while revenues slipped 1.4 percent to $3.4 billion as the company continues to experience steep losses in its traditional land-line business.  Qwest shares fell 6 percent.

An analyst on the investors' conference call noted that other telecommunications carriers are planning to hike prices of "core services."  He wondered if Qwest would do the same.

"We will do price increases;  that is our plan," Qwest CEO Ed Mueller responded.  "We believe there is room in the market for the (increases) and where we can, we're taking them."

Qwest on April 20 increased its "Price for Life" rate for new high-speed Internet service customers by $3 a month, according to spokeswoman Kate Oravez.

The slowest tier of DSL now is $29.99 a month, up 11 percent from $26.99 a month, for customers who also have a Qwest home phone package.  Customers who locked in the $26.99 "Price for Life" rate aren't affected.

Mueller said in a telephone interview that Qwest plans to target the prices of individual services, which he characterized as "cheap."  He called such services "inelastic," meaning he doesn't believe demand will change much even if prices go up.

Donna Jaegers, a telecommunications analyst at Janco Partners in Greenwood Village, noted that Qwest over the years has subtly raised prices of selected services.  "Longer term, it doesn't help them keep market share," Jaegers said.  But she said it could help push consumers into more expensive bundles of communications services.  And that, she said, "makes a stickier consumer," or one less likely to switch providers.

Qwest's average revenue per customer is up 7.8 percent from $51 a month to $55 a month because of sales of bundles.

Price hikes, though, come as Qwest's high-speed Internet growth is anemic, said Jaegers.

Qwest is trying to lure customers from cable companies by boosting Internet speeds to 12 and 20 megabits a second in key markets.  Qwest tallied 13,000 new subscribers from those efforts in the first quarter, but the faster service is still available in only a few neighborhoods in the metro area.

smithje@RockyMountainNews.com or 303-954-5155

Measure would allow bid for phone increase

State legislation passed Tuesday would allow Qwest Communications to seek a modest rate increase in basic telephone service from the Colorado Public Utilities Commission.

Qwest initially backed an amendment that would have allowed it to hike its current $14.88 a month rate by as much as 32 percent.  But the Denver telco said it supported compromise legislation by state Sen. Chris Romer, D-Denver.

Romer's amendment "gives the PUC authority over the prices of Qwest's regulated services and is consistent with almost every other state," said Chuck Ward, Qwest's Colorado president.

The PUC would be required to examine such factors as Qwest's cost of service and the national average for comparable service.  The PUC recently said the national average for basic service is $16.11 a month, about 8 percent more than Qwest's current rate.

http://www.rockymountainnews.com/news/2008/may/06/qwests-q1-profit-falls-35-percent/