Qwest Now a One-Stop Shop

Qwest Communications International Inc. has become the first Bell under the 1996 Telecom Act allowed to combine local and long-distance operations in its territory. Qwest says the relief granted by the FCC means it will save money and improve customer service. Critics fear the company will use its new status to raise prices.

The FCC in late February eased regulations on Qwest, agreeing that it no longer is the dominant carrier in its 14-state footprint. Qwest had argued for nearly two years that it needed to reduce costs to compete more ably against cable, VoIP and wireless providers. It appealed for forbearance from regulation contained in Section 272 of the telecom act.

The FCC is expected to rule on similar petitions from Verizon Communications Inc. and AT&T Inc. early this summer.

Qwest says the FCCs decision permits it to reduce expenses. Under Section 272, Bells must provide long-distance service in their own regions through separate corporate affiliates the clause stipulates that the Bells and their affiliates cant jointly own transmission and switching equipment. That translates into duplicate operations. Qwest Communications Corp. and Qwest Communications Long Distance functioned as Qwests nondominant long-distance affiliates.

Now, Qwest can consolidate facilities. Gary Lytle, senior vice president of policy and law, could not say at press time when Qwest will start merging operations. The carrier further can cut expenditures by training employees once rather than twice and filing one set of reports, instead of two, with federal and state regulators. Best of all, business clients wont have to sign separate contracts and pay separate bills for their local and long-distance services, says Lytle. Were now a one-stop shop, he says.

Critics such as COMPTEL, however, wonder if the FCC has imposed enough safeguards for competitors. The agencys order had not been published at press time, so lawyers remained in the dark on specifics. But Karen Reidy, vice president of regulatory affairs for COMPTEL, says the association hopes Qwest doesnt take unfair advantage of its position. We want to make sure they treat other carriers as they treat themselves, she says.

Qwest refutes speculation that it is likely to raise rates. Given the rivalry it faces, prices are more likely to go down, Lytle says. I dont see any threat whatsoever, he says.

In talks with the FCC, Qwest did consent to certain conditions, including freezing per-minute rates and offering certain calling plans to residential consumers who make few long-distance calls. The FCC also said Qwest cannot make certain tariff and price-cap filings. For instance, the company is barred from collecting money for tariffs under its in-region, interstate, interLATA telecom services. Thats because the FCC is agreeing to treat Qwest as nondominant, and nondominant providers do not file certain tariffs.

The countrys third-largest RBOC filed its forbearance petition with the FCC in November 2005; Feb. 20 was the deadline for a decision by the commission. Section 272 expired in all states last year, but Qwest and other Bells must ask the FCC to deem them nondominant. The FCC presumes a Bell company to be a dominant carrier unless the agency decides otherwise. The FCC strictly regulates dominant providers because they can raise market prices.

Only four of the five FCC commissioners voted on the Qwest petition. Republican Robert McDowell abstained from the vote because, prior to his appointment to the FCC, he was a lawyer for COMPTEL.

Democrats Jonathan Adelstein and Michael Copps said they were persuaded by Qwests argument that the carrier was having difficulty competing in its own territory.

Verizon and AT&T have petitioned the FCC for the same relief given to Qwest. They say deregulation wont hurt the public because of the range of available communications choices. They also say there is precedent for declaring them nondominant, going back to 1995 when the FCC agreed to classify AT&T as such. That put AT&T on par with rivals MCI and Sprint. Notably, the company then could change its rates within one day of telling the FCC about that adjustment, instead of having to wait 45 days.