XO Communications and Eschelon Telecom Outline Comprehensive Telecom Merger Conditions to Reduce Harms to Competition and Custom
September 22 2005 - 11:00AM
PR Newswire (US)
To Contain Damage by SBC/AT&T and Verizon/MCI, Conditions Must
Focus on Crucial Behavioral Remedies That Replicate the Pre-Merger
Local Wholesale Market WASHINGTON, Sept. 22 /PRNewswire-FirstCall/
-- Eight competitive telecom service providers today submitted to
the Federal Communications Commission a comprehensive set of
conditions essential to help minimize the well-documented harms to
business customers arising from the proposed SBC/AT&T and
Verizon/MCI mergers. Companies endorsing the comprehensive remedies
were Broadview, BridgeCom, Conversent, Eschelon Telecom, NuVox, TDS
Metrocom, Xspedius and XO Communications. XO and Eschelon outlined
the proposed merger remedies in a press briefing in Washington,
D.C. today. Doug Kinkoph, XO Communications Vice President of
Regulatory Affairs, said, "Because the harms of the proposed
mergers are severe, the conditions on these mergers must be
comprehensive and ensure that all customers of AT&T and MCI are
no worse off should the government approve them." The companies
proposed the following pricing, performance and other remedies: -
Require Local Wholesale Prices to Reflect Pre-Merger Conditions. A
Merger Order must ensure that local wholesale circuits are priced
at the lowest pre-merger rates and include the same terms and
conditions. For telecom providers, special access rates should be
reinitialized at 11.25%, or determined by commercial negotiations
with a requirement that "baseball arbitration" be used if the
negotiations fail- with winners determined by bids that most
closely approximate the lowest pre-merger rate. - Ensure Unbundled
Network Elements (UNEs) and Freeze Rates. UNEs are the other
alternative means of access for facilities-based competitive
providers. Current access to UNEs and rates must be continued. Any
Merger Order should prohibit any further delisting of UNEs and
freeze the associated rates of such UNEs for a period of five
years. - Recalculate the Triennial Review Wire Center Test by
Eliminating AT&T and MCI as Fiber-Based Collocators. The
current collocation requirement in the Wire Center List is based on
the presence of actual competition, which will disappear when
AT&T and MCI cease to be independent competitors. Because the
FCC's TRRO earlier this year took into account AT&T and MCI as
independent companies, Merger Orders must require a recalculation
of the Wire Center List for de-listed UNEs, removing AT&T and
MCI. - "Fresh Look" - Give AT&T and MCI Customers the Right to
Exit Contracts. A recent University of Connecticut survey of
Fortune 1000 businesses concluded that by a 2 to 1 margin, the
telecom managers in these companies believe they will be harmed by
these mergers. Therefore, these business customers that are losing
AT&T and MCI as their longstanding providers should be allowed
to cancel contracts that carry over to the merged companies without
incurring termination penalties. - Eliminate the DS1 Loop and
Transport Caps. When establishing these caps, the FCC relied on the
availability of competitive facilities, something that will be
greatly reduced when AT&T and MCI cease to be independent
competitors. Divestiture of AT&T's and MCI's Local Network
Assets Alone Will Not Work "Divestiture alone will not alleviate
the harms to the local wholesale market," said Russ Merbeth,
Federal Counsel for Eschelon. "The competitive local presence of
AT&T and MCI comprises much more than their local network
assets and customers, and divestiture would not address the loss of
those critical resources and capabilities." XO's Kinkoph said, "We
know from experience that any acquisition and integration of assets
is challenging, but the logistics of acquiring assets from an
unwilling seller via divestiture could easily turn into a nightmare
for any buyer." Other issues make divestiture of local network
assets economically unattractive and unfeasible: - King Solomon's
Decision, Revisited. Enterprise and large business customers use
AT&T and MCI for a variety of services, not just local.
Further, such services are purchased in bundles tied to special
discounts. Separating local services from integrated bundles is
equivalent to trying to divide one child between multiple mothers.
- "Empty Networks" are a Poor Bargain. The value of local network
assets without customers is very low, and may even be a burden.
Even if a qualified buyer came forward, a buyer would face a strong
disincentive to purchase a network without users. - Key Agreements
Don't Transfer. Software that is used to operate networks does not
transfer and would need to be re-licensed. AT&T's and MCI's
numerous agreements with other carriers, franchising authorities
and building owners all might require renegotiation. - Cooperation
from AT&T and MCI is Essential - But Unlikely. For the
divestiture of AT&T's and MCI's local network assets to work,
the purchaser would be relying on reluctant sellers to assist in a
complex transaction. "There is no palliative for a regulatory
decision that eliminates the two largest competitors from the
marketplace," said Kinkoph. "However, we can control the damage of
these mergers by looking at comprehensive remedies that strive to
re-create and maintain the economic environment of today's
marketplace." About XO Communications XO Communications is a
leading provider of national and local telecommunications services
to businesses, large enterprises and telecommunications companies.
XO offers a complete portfolio of services, including local and
long distance voice, dedicated Internet access, private networking,
data transport, and Web hosting services as well as bundled voice
and Internet solutions. XO provides these services over an
advanced, national facilities-based IP network and serves more than
70 metropolitan markets across the United States. For more
information, visit http://www.xo.com/. About Eschelon Telecom
Eschelon Telecom, Inc. is a facilities-based competitive
communications services provider of voice and data services and
business telephone systems in 19 markets in the western United
States. Headquartered in Minneapolis, Minnesota, the company offers
small and medium-sized businesses a comprehensive line of
telecommunications and Internet products. Eschelon currently
employs approximately 1,130 telecommunications/Internet
professionals, serves over 50,000 business customers and has
approximately 380,000 access lines in service throughout its
markets in Minnesota, Arizona, Utah, Washington, Oregon, Colorado,
Nevada and California. DATASOURCE: XO Communications CONTACT: Chad
Couser of XO Communications, +1-703-547-2746, M: +1-202-744-5815, ;
or Jim Crawford of Crawford PR, +1-703-753-4480, M:
+1-703-568-7101, Web site: http://www.xo.com/
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