As noted this morning, cable Wall Street analyst Craig Moffett traditionally loves him some cable while slamming FiOS wherever possible. This morning, he ignited a geek firestorm by stating Verizon’s investment returns in FiOS won’t be justified, and by his estimate, the telco will be headed for a billion hangover from a project he thinks isn’t worth the trouble. The author of the NY Times piece, Saul Hansell, offers more criticism from Moffett in his NY Times blog. Moffett takes a moment to wax poetic on the superiority of cable plant before even calling the cable industry’s network upgrades “wasted”:

Lest he be criticized for having a soft spot in his heart for cable companies, Mr. Moffett argues that the cable industry collectively wasted the 0 billion it spent on upgrading its networks.

Who does Moffett think is doing the best next-generation ROI job of all the telcos? Qwest.

Qwest, which doesn t have a cellphone business to fund any capital expenditures, is the only phone company that has come up with what Mr. Moffett defines as the right answer: do nothing. “Qwest decided there is no return to any of this stuff, so let s run the business for cash,” he said.

While Verizon shells out billion to run FiOS to nearly half their footprint, Qwest is only spending 0 million to run copper-based ADSL2+ service to two million customers by the end of this year. Qwest now offers their Qwest Connect Quantum (20Mbps/896kbps) and Qwest Connect Titanium (12Mbps/896kbps) tiers to one million living units in eighteen different markets. It’s not an ambitious project by any stretch of the imagination, upstream speeds are paltry, and the meager investment reflects Qwest’s desire to stay lean for a potential sale.

As you might expect, the folks at Verizon don’t much care for Moffett’s analysis. In a blog post, Verizon’s Peter Thonis insists the company’s return on FiOS will exceed their cost of capital, but concedes you need to take the long view to see the real benefit of the project (which is obvious to most). He notes they’re on pace for the costs per home connected to be 0 by 2010, and their average revenue per subscriber is 0. According to Thonis, Moffett’s viewpoint is “myopic” and doesn’t reflect future vision:

When we looked at FiOS, we looked not only at what was financially prudent today, but also where communications and entertainment technology was headed tomorrow — and 10 years from now. We looked at how customer demands would change and grow. We even considered how regulators and policymakers might come to value the great potential of broadband to provide an economic stimulus to the U.S. economy, and perhaps even some solutions to our health care and environmental concerns.

Granted, returns on Verizon’s investment are going to take short term patience, but is there really any question whether Qwest or Verizon is going to be in a better competitive position over the next decade? During the next five years DOCSIS 3.0 cable upgrades are going to start eating Qwest for dinner (assuming Verizon doesn’t gobble up Qwest first), driving cable stock upward in Qwest markets. Think maybe that’s what Moffett’s interested in?
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