Ameritech uses Qwest to enter LD. That's Two... (or are they four?)
[[Steve, thanks for the packets! Got some comments on them, and will get to them later.
Charles, I will respond later in the day or this evening to your pseudo ATM scenario. It isn't a trivial discussion, and not so pseudo at all, it turns out. I think you hit it right on the head.]]
In the meantime here's the second of the 'workarounds' by a Baby Bell to enter LD through Qwest. This raises many question concerning (1) the use of VoIP, which Qwest has announced, and (2) their traditional networking capabilities, and (3) what the whole thing means in the context of access charges and universal service fund issues. Haven't had time to digest, gotta go to the canyons now.
Later, Frank C.
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By Stephanie N. Mehta
Staff Reporter of The Wall Street Journal
Ameritech Corp. has agreed to market the long-distance services of Qwest Communications International Inc., even as rivals sued to block a similar pact between Qwest and another Bell, U S West Communications Group Inc.
The Ameritech pact, which people familiar with the matter said would be announced today, calls for the Chicago-based Bell to market Qwest service in its five-state Midwest territory. Like U S West, Ameritech would get an undisclosed fee for each customer it signs up on Qwest's behalf. Qwest, in turn, would guarantee the Ameritech customer a low per-minute rate on long-distance calls. Neither Ameritech nor Qwest would comment.
While the local Bell telephone companies are prohibited from owning and operating long-distance businesses in their home territories until they open their local-phone networks to competitors, U S West has argued that federal law allows it to sell the services of an unaffiliated carrier. The Bell has noted that such an agreement would satisfy calls from its customers to receive local phone service, which U S West provides, and long-distance on one monthly billing statement.
Rivals disagree. AT&T Corp., MCI Communications Corp. and four other parties yesterday filed suit in the Seattle federal court to block the marketing deal, charging that it violates the Telecommunications Act of 1996. "U S West and Qwest are attempting to make a mockery out of the Telecom Act," said Jonathan B. Sallet, MCI's chief policy counsel. The Association for Local Telecommunications Services, a trade group, McLeodUSA Telecommunications, a unit of McLeodUSA Inc., ICG Communications Inc. and GST Telecommunications Inc. joined in the lawsuit. Qwest wasn't named as a defendant.
This has been a trying week for companies fighting the Bells. MCI, which will soon merge with WorldCom Inc., and AT&T have been trying to delay the Bells from entering their long-distance market until the Bell markets are open to full competition. First, the U S West-Qwest deal was announced a week ago. Then, on Monday, Ameritech announced that it had agreed to be sold to SBC Communications Inc., a merger that would form a 13-state telecommunications giant. Eventually, that company wants to be allowed into the long-distance business where it could garner billions of dollars in business from AT&T and other carriers.
The move underscores Ameritech's strategy to offer multiple telecommunications services on a single bill. In addition to local-telephone services, the carrier in some cities can add cellular, security-monitoring and cable-television services to a customer's monthly phone bill.
For Qwest, such arrangements bring the prospect of new customers. Joseph P. Nacchio, Qwest's chief executive officer, said last week that he expects the U S West pact to bring up to $200 million in additional revenue in the first year. U S West doesn't get a cut of the revenue other than what it gets for signing up a customer.
Nevertheless, incumbent long-distance carriers see such arrangements as a threat. If a residential customer calls the local carrier to order basic phone service, the operators might automatically steer the consumer to Qwest's service instead of offering customers a choice of long-distance carriers. "Deals like this make it impossible to assure that all long-distance carriers and their customers are being treated fairly by these monopolies," said Mark Rosenblum, an AT&T vice president for law and public policy.
Indeed, the Bells have incredible power in their local territories. Analysts say that if let into the long-distance business, the Bells could siphon 25% of long-distance revenues, or more, within five years.
U S West said it has signed up 40,000 customers for Qwest since the service was launched Monday. "By filing this suit, AT&T and MCI and others are thumbing their noses at those consumers," said Solomon D. Trujillo, president and chief executive officer of U S West Communications.
Mr. Nacchio also defended the arrangement. "Qwest and U S West have come together to provide value and choice for customers," he said. "It's sad, but not surprising, that the major carriers are acting in lockstep to block the intent of the Telcom Act to stimulate competition."
The Bells so far have failed to get into the long-distance business by conventional routes. While some state regulators have approved the carriers for long-distance entry, no Bell has satisfied the Federal Communications Commission, which must grant final approval.
U S West was the last of the Bells to apply for long-distance entry in one of its home states. Ameritech, which in January 1997 sought federal approval to offer such services in Michigan, was the first. |
