"(FCC) has ruled against Quest Communication's"
[All, this is an expanded coverage of the same story posted two days ago. The spelling errors are not mine. <g>
Frank Coluccio]
DENVER, COLORADO, U.S.A., 1998 SEP 29 (NB) -- By Steve Gold,
Newsbytes. The Federal Communications Commission (FCC) has ruled
against Quest Communication's [NASDAQ:QWST] plans to link up with
two regional Bell operating companies (RBOCs) to sell long distance
services to their local loop customers.
According to a ruling handed down by the FCC, under the
Telecommunications Act, the actions of US West and Ameritech are
illegal.
While industry commentators say that the FCC's interpretation of the
Act is correct, the ruling could have implications for other Baby
Bells who are planning to enter into similar alliances to offer
customers one-stop billing for local and long-distance services.
US West says it is disappointed by the ruling and plans to appeal
the decision to a federal court. Ameritech, meanwhile, is still
considering its legal options.
According to the FCC, Ameritech's and US West's marketing alliances
with Qwest violates a provision in a 1996 Telecommunications Act
that bars an RBOC from providing long-distance service to its own
customers.
The Act, officials say, notes that an RBOC must open its market to
competitors and get FCC approval before it may provide long distance
service to local customers. No RBOC, Newsbytes notes, has achieved
this step.
Under the provisional agreement, Qwest was planning to pay Ameritech
and US West an undisclosed recruitment fee for each client in the
RBOC's local loop regions that chose Qwest for long distance service.
All three firms say that these arrangements are in line with the 1996
Telecommunications Act. Both the RBOCs, Newsbytes notes, started
selling Qwest's service in May of this year, but stopped within a few
weeks after the FCC said it need to make a ruling on the practice.
AT&T and MCI have told the FCC that the deal is in breach of the Act
and, unsurprisingly, have hailed the FCC's decision as good news, even
though there is still nothing on the books to stop Ameritech and US
West approach Qwest for long distance services of their own accord.
Although Ameritech is still considering its options, US West has
reacted angrily to the FCC ruling, Newsbytes notes. Mark Roellig, the
company's executive vice president, said that customers are the loser
in the FCC's decision.
"The FCC has stifled one of the first tangible consumer benefits of
the Telecommunications Act -- greater competition, better value and
no-nonsense pricing in people's long-distance service," he said,
adding that the promise of the Act is now a promise denied and
unfulfilled.
"Unfortunately, the commission has once again failed to place the
interests of consumers first. The big long-distance companies'
oligopoly has been protected, and consumers -- especially the poor and
elderly who might not qualify for AT&T's and MCI's special packages --
have been denied lower, easy-to-understand rates," he said.
According to Roellig, during the three weeks that the Qwest services
were sold through US West under the Buyer's Advantage program, around
130,000 subscribers signed up for service.
Despite US West's annoyance, Newsbytes notes that the only course of
action -- assuming an appeal is not successful -- is to present the
FCC with a complex check list of actions completed, to assure the FCC
that it has opened up its service area to third-party carriers.
The check list items, Newsbytes notes, include offering these third
party carriers access to its 911 and directory assistance services.
Jeffrey Kagan, a respected authority on telecommunications from
Atlanta, said that the FCC ruling could have gone either way, simply
because the case did not involve a traditional long distance service
or deal.
"It depended on how the FCC interpreted the Qwest deal. Was it a real
long distance service capable of eliminating the incentive of the
bells to open their markets, or was it simply a value-added service to
the consumer? It looks like the FCC thought it was a bit of both and
decided to be cautious," he said.
According to Kagan, the RBOCs want two things from long distance: "One
is to offer local and long distance service to protect their customer
base from competitors who can; and two is to generate monthly
recurring revenues."
Kagan argues that the Qwest deal only met one of those criteria. It
did not, he said, generate monthly revenue. In addition, he went on to
say, it only protected their customer base from losing customers.
"Therefore the Bells would still have had plenty of incentive to open
their markets and be approved to sell long distance that they could
make money on. The incentive would still be there, but the urgency
might have been toned down a notch or two," he said, adding that it
seems as though FCC has stuck to the letter of the law.
According to Kagan, the biggest loser is not the customer, but Qwest
"who just saw hundreds of thousands, if not millions of potential
customers sucked down the drain."
"US West signed up hundreds of thousands of customers in the first few
weeks, so obviously it was going to be popular. US West and Ameritech
are also big losers in this as they now have exposure to losing
customers to competitors who offer local and long distance services,"
he said.
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