companies' mandated discounts for line-sharing end
By Leslie Brooks Suzukamo
St Paul Pioneer Press
Saturday, March 11, 2006
Today is the day Qwest Communications International and
other large incumbent phone companies no longer have to
lease all parts of their network to their competitors at
government-set discount rates.
The discount rates were a key part of the government's plan
10 years ago to jump-start competition in local phone
markets. The old Ma Bell monopoly had spent a century
building up a network made up of millions of lines and
switches. Regulators wanted the Baby Bells to give
long-distance giants like the old AT&T and MCI — as well as
a host of small start-up phone companies — the right to rent
parts of that network.
But then the U.S. Supreme Court struck down most of the
rules governing the rates and the Bells swallowed up their
So Bells like Denver-based Qwest, which is Minnesota's
dominant phone company, are looking at their old telephone
competitors as a new source of badly needed revenue.
Qwest, which has lost money since 2003, last year got more
than $3 billion of its $13.9 billion in revenue from the
wholesale part of its business, selling access to its
network to other phone companies, known in telephone jargon
as "Competitive Local Exchange Carriers," or CLECS.
"We don't even look at them as CLECS anymore," said Roland
Thornton, executive vice president of Qwest Wholesale Global
Marketing. "We look at them as customers."
Despite Qwest's embrace, many local carriers don't want to
be dependent upon incumbent phone companies. Integra
Telecom, a Portland, Ore.-based company with significant
business in the Twin Cities, for instance, is spending $243
million to buy a local carrier that has a state-of-the-art
fiber-optic network spread throughout several western
states. That network will reduce Integra's dependence on
Qwest in the same territory.
"If we had alternatives, why wouldn't we go there?" said
Carol Wirsbinski, who used to run Integra's Minnesota
operations and now is head of regulatory affairs there.
On the other hand, Minneapolis-based Eschelon Telecom had no
choice but to sign long-term contracts with Qwest for some
of its equipment. The company can serve 86 percent of its
business customers nearly by itself, but it needs to lease
Qwest's entire network for 14 percent of its 406,000 phone
Eschelon CEO Richard Smith called the Qwest contract "an
acceptable alternative," but not as good as the
government-set wholesale prices.
In fact, disputes over pricing of the network elements, as
they were called, touched off ferocious regulatory battles
between Qwest and the Minnesota Public Utilities
Commission. The PUC fined Qwest a record $26 million in
2003 for violating rules that governed competition over
those elements; Qwest is appealing the fine.
The new rules still require Qwest as the incumbent to
provide some of its elements — such as high-speed data lines
in downtown St. Paul — at low government-set prices. But in
areas like downtown Minneapolis, Qwest has been freed of
that requirement because there is enough competition for
local phone companies to get their network equipment from
someone else, said Mark Oberlander, manager of the PUC's
Leslie Brooks Suzukamo
can be reached at
firstname.lastname@example.org or 651-228-5475.