Qwest Plows Millions Into Startup Zillion TV

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The Consumer Electronics Association -- which last month
projected more than 4 million 3DTV sets would ship this year - is now putting
the number at 1.05 million units, after narrowing the definition of what it
considers a 3D television set.

In December, the CEA had
estimated 2.2 million 3DTVs would ship in 2010. Then last month, as part of
announcing its 2010 sales forecast at the International Consumer Electronics
Show in Las Vegas, the trade group
raised projections to more than 4 million 3DTV sets for the year.

Qwest Communications has invested $10 million in startup
ZillionTV in return for exclusive rights to offer the IP-delivered
video-on-demand 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 offers residential services in parts of 14 states, including
Arizona, Colorado,
Iowa, Minnesota,
Nebraska and New
Mexico.

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