Qwest Plows Millions Into ZillionTV

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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 DSL 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 Walt Disney Co., 20th Century Fox Television, NBC Universal, Sony and Warner Bros. The Sunnyvale, Calif.-based, founded in 2007, laid off more than one-third of its employees last year and currently has a staff of about 56.

Zillion set-top box and remote

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 the service.

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, New Mexico, Oregon, Utah and Washington.

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