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Technology Stocks : Qwest Communications (Q) (formerly QWST) -- Ignore unavailable to you. Want to Upgrade?

To: Curtis E. Bemis who wrote (6410)	7/8/2000 10:00:26 PM
From: John Erb	Respond to of 6846

Qwest-U S West Deal Alters Telecom Landscape (07/07/00, 4:20 p.m. ET) By Loring Wirbel, EE Times The completion of Qwest Communications International's $48 billion acquisition of U S West Communications last week set the tone for a telecom world populated by a new class of carrier that will look less like the Baby Bells of old and more like a new generation of international bandwidth brokers. The merger, together with other moves in the sector this week, raises questions about the impact such carriers will have on everything from the regulatory environment to the deployment of broadband networks. The Qwest-U S West merger represents the first true melding of an interexchange carrier and an incumbent local exchange carrier. The official move came just one week after the U.S. Justice Department and the European Union issued joint thumbs-down decisions on the proposed merger of WorldCom (stock: WCOM) and Sprint (stock: FON), saying the combination of two of the largest interexchange carriers would be anticompetitive. That failure and the Qwest (stock: Q) success sparked talk of more super-carrier mergers, mostly surrounding Germany's Deutsche Telekom (stock: DT), variously rumored as a suitor for either Qwest or the U.K.'s Cable & Wireless (stock: CWP). The mad scramble for long-haul carriers indicates that, as Rep. Billy Tauzin (R-La.) told an IEEE communications conference in mid-June, "distance is no longer relevant." This leads to a new regulatory atmosphere, one in which the federal government and the EU can play a role if one carrier corners a market in circuit-switched voice, as WorldCom-Sprint threatened to do. But governments may find the merged hybrid providers of broadband packet switching and localized voice service harder to control. Qwest, for example, had to halt its marketing of long distance telephone services on June 30 in the 14 states served by U S West (stock: USW) as a condition of seeing its merger approved. For now, residential and business customers alike will be referred to Touch America for long distance services. But analysts said the arrival of packet voice services over the next few years may make it more difficult for regulators, and for Qwest itself, to determine what "long distance" really means. Business is expected to continue to be brisk for telecom OEMs and semiconductor suppliers as new carriers build out their networks. But like the regulators, system and chip makers also face uncertainty from the emergence of new carrier types like Qwest. For example, optoelectronic component vendors like Lucent Technologies (stock: LU) and ADC (stock: ADCT) complain that it's increasingly difficult to gauge their business when scores of system start-ups are serving dozens of new service providers. As long-haul service providers snap up local carriers, the uncertainty could increase exponentially. DSL modem suppliers share the uncertainty. U S West promoted four types of DSL -- one of the most confusing array of DSL services in existence, according to Claudia Bacco, vice president of consulting at TeleChoice. But Qwest's attention to the bottom line may lead to some pruning. The U S West DSL roster involves two types of symmetric DSL: the Megabit Modem service originally developed by PairGain Technologies (stock: PAIR), and a service that requires a dial-up circuit connection to complete. U S West has just begun to roll out asymmetric DSL in several large cities, and it ran early trials of very-high-bit-rate DSL in Scottsdale, Ariz. Qwest is reportedly looking at the Arizona VDSL service as one of the first to eliminate in a combined company. "In some fields, like opto, component shortages are legitimate, since everyone is unable to meet carrier demands," said one former marketing executive from PairGain Technologies. "But in fields like analog and DSP support chips for DSL, the fabless companies can run into trouble because they don't have the slightest idea what to tell their foundries for growth projections. And it's only going to get worse." "A sober cost-benefit analysis might not be a bad thing," a recently retired US West executive said in an early July interview. "Keep in mind that [former US West CEO] Sol Trujillo had a base of emotional support in the Denver area that made many people unwilling to look at where his leadership of US West really was taking the company. "Now, no one should paint angel wings on Qwest executives, and it's still an open question how a brand-new packet carrier will handle a century-old RBOC like U S West. But few people were happy with US West's service, or had a good feeling of how the company was transitioning from circuit to packet. "If I had to pick an executive staff that really grasped the new packet backbone, I'd pick Qwest, which might mean it's a good thing so many U S West executives are leaving this summer." Qwest pledged July 1 to improve U S West's service reputation in the former incumbent' s 14-state region. As the deal officially concluded June 30, Qwest CEO Joseph Nacchio issued a statement saying the company will "improve communication with elected and appointed state and federal officials...[and] be faster in responding to customer service concerns." In a speech to employees this week, Nacchio warned that improvements to the U S West network would not happen overnight. For local services, Qwest's primary focus will be on dependable maintenance of existing customers and existing physical plant. This might mean that those needing new standard phone service, or those wanting additional broadband service, might have to wait a little longer until core services can be maintained in a better way, Nacchio said. He said layoffs will be limited to the 1,000 or so redundancies identified in the early days of Qwest-U S West discussions, but he refused to speculate on whether those layoffs might include teams from DSL groups at U S West or at the former incumbent's advanced-technologies research center in Boulder, Colo.