Qwest looks for turnaround

Emphasis to be on better customer service, VoIP

In the wake of a CEO resignation, federal investigation and financial restatements, Qwest says it’s looking to turn over a new leaf this year by improving customer service, unifying its Layer 2 and Layer 3 WAN offerings and getting serious about voice over IP.

While there have been signs of improvement, the carrier still has questions to answer, according to industry observers.

“The investment banks are a little more optimistic about Qwest and the stock rating has gone up,” says Lisa Pierce, an analyst with Giga Information Group. “But what’s important is that we still don’t know what Qwest plans to concentrate on. What lines of business and what kinds of services will be the focus?”

An issue Qwest officials won’t have to focus on quite as intensely is the company’s financial situation. Last fall, with the carrier teetering on bankruptcy, Qwest sold its directory business QwestDex for $7 billion, buying the company time to get its finances in order.

“I know the world thought we were going to go bankrupt last summer,” says Teresa Taylor, executive vice president of Qwest product management and pricing. “One of our biggest issues with business customers is to convince them that we’re still here and we’re not going anywhere.”

Another ray of light for Qwest is its effort to win long-distance approval in 14 Western states. After several delays, Qwest finally won regulatory approval in nine states in December.

However, Qwest still is carrying more than $22 billion in debt and reported a net loss of $214 million in its quarter ending Sept. 30.

One tactic Qwest has used to try to create stability is cost-cutting. The company reduced its workforce by about 9,000 last year. It also sliced its capital expenditures by more than 60% from 2001.

Qwest’s financial problems were a source of concern for John Brademeyer, IT manager for SEI Information Technology, a help desk firm in Fargo, N.D. SEI uses Qwest for local phone service in its two North Dakota offices and an office in Indiana. SEI also uses Qwest for Internet access in all three offices and for professional services.

“The thing I keep in mind is they have a cash cow in their local phone service operation,” Brademeyer says. And, he says, Qwest still is in better financial shape than WorldCom, the company Brademeyer uses to provide Internet redundancy for his two North Dakota offices.

Despite the cost-cutting, Taylor says Qwest still is striving to improve customer service.

“When US West and Qwest merged we were more focused on the technology and didn’t spend as much time looking at how we served customers,” she says. “Last year we made a lot of back-office investment to improve billing, provisioning and service.”

Pierce says it will take time for Qwest to iron out its customer service problems.

Qwest’s original focus under former CEO Joe Nacchio was IP. When Nacchio realized Qwest couldn’t survive on IP alone, the carrier began offering traditional services such as frame relay, but Qwest didn’t support those services well, Pierce says.

“A few of those problems will set you back a long time once word gets out,” she says.

Qwest’s main business services focus this year will be merging the company’s various WAN offerings, Taylor says.

“We’re taking our frame, ATM, VPN and dedicated Internet access networks and pulling them together technically and from a service perspective,” she says.

Qwest this year hopes to take the first steps along that path by getting Layer 2 and Layer 3 services to talk to one another, so a customer could have a multilocation network with both frame and IP VPN users communicating with each another.

“Some day we’d like to have all that traffic flowing over one backbone, but we’re not there yet,” Taylor says.

A unified backbone, which could be based on Multi-protocol Label Switching, or another technology, is probably still at least two years away, she says.

Qwest’s other big technology initiative this year will be moving forward on VoIP. Qwest already sets up customized private VoIP networks for business customers and offers integrated voice/data T-1 access for smaller clients. But the company is looking for other ways to use VoIP in its network.

“There are endless opportunities there,” Taylor says. “It could be a big cost reduction for us as we begin to change out parts of our network.”

Taylor says that once Qwest completes its five remaining long-distance approvals, the company could have a leg up on the other three regional Bell operating companies because it already has 25 out-of-region metropolitan networks in addition to its long-haul network.

However, Pierce notes that Qwest’s national network doesn’t come close to comparing with those of the pure interexchange carriers.”One of Qwest’s weaknesses is you need a widely deployed national network if you want to go against Sprint, WorldCom and AT&T,” she says. “Outside its home territory, Qwest doesn’t hit as many cities as the others.”

Ultimately, Qwest will have to compete in the enterprise market by being aggressive on pricing, Pierce says.

“They don’t have to give stuff away,” she says. “But because they have to get their foot back in the door in many cases, because of the financial situation and the government investigations, they will have to be price-competitive.”