News

Qwest Plows Millions Into Startup ZillionTV

3/23/2010 10:10 AM Eastern

Qwest Communications has
invested $10 million in startup ZillionTV
in return for exclusive rights
to offer the IP-delivered video-ondemand
service in the telco’s footprint,
according to legal documents.

ZillionTV is currently expecting to
launch commercially in the second
half of 2010 with Qwest and other telco
partners — who would deliver the
content over digital-subscriber-line
broadband connections — while the
startup also pursues a direct-to-consumer
strategy to expand the reach
of its advertising-supported service.

ZillionTV is aiming to deliver 15,000
movies, TV shows and other video selections
by the time it launches, and
has distribution agreements with several studios including The Walt
Disney Co., 20th Century Fox Television,
NBC Universal, Sony and
Warner Bros. The Sunnyvale, Calif.-
based firm, founded in 2007,
laid off more than one-third of its
employees last year and currently
has a staff of about 56.

Qwest’s investment in ZillionTV
was referenced in a lawsuit filed in
January against the startup by Albert
Sandoval, a contractor who alleges
ZillionTV cut him off after he questioned
the company’s claims and
forecasts in investor presentations.
The suit, filed in California Superior
Court, seeks what Sandoval claimed
is $135,521.77 in unpaid wages, plus
additional monetary damages.

ZillionTV director of public relations
Ellen Davidson declined to
comment, citing the ongoing legal
matter.

Qwest, in a statement, confirmed
that in 2009 the company “made a
very small, or immaterial, investment
in Zillion, which was developing a new
approach to video technology. Like
other companies, of course, Qwest always
is looking into new technology
and innovation to enhance its product
portfolio — both inside and outside
the company.”

According to Sandoval’s lawsuit,
Verizon Communications last fall
agreed to conduct a 500-home trial
of the ZillionTV service, while Frontier
Communications and other telcos
were said to be testing it.

In December 2007, Qwest pulled
the plug on the IPTV service it was
developing — which would have
been akin to AT&T’s U-verse TV —
with CEO Ed Mueller telling investors
that building out such a service
was too expensive. Since then, Qwest
executives have extolled the potential
for over-the-top content delivery
models and last year distributed free
Roku set-top boxes to new DSL customers
as part of a trial.

Qwest, the third-biggest telco in
the U.S., had 2.97 million DSL subscribers
and 6.84 million residential
and small business phone lines in
service as of Dec. 31, 2009. The Denver-
based telco off ers residential services
in parts of 14 states, including
Arizona, Colorado, Iowa, Minnesota,
Nebraska and New Mexico.

March