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          Front Page

Qwest claims disadvantage against ISPs like Cyber Mesa

By Winthrop Quigley
Copyright © 2008 Albuquerque Journal
Journal Staff Writer

          It is, perhaps, not inaccurate to call a dispute between Qwest, the multistate Baby Bell telephone company, and Santa Fe-based telecom carrier Cyber Mesa a David-versus-Goliath battle — with Qwest in the role of David.
        Rather than Qwest's size offering any advantage, Qwest argues it operates at a disadvantage against the small, unregulated companies that use Qwest's own equipment to deliver telephone service that competes with Qwest's service.
        Qwest has been trying since January 2007 to offer some months of free service to former customers who drop a competitor's phone service and return to Qwest. Cyber Mesa has successfully blocked the promotion by forcing the state Public Regulation Commission to consider whether the rates are legal. The PRC is scheduled to settle the dispute next month.
        Since 1996, federal law has required companies like Qwest, which had a monopoly on local telephone service, to negotiate agreements with companies like Cyber Mesa to use Qwest facilities to deliver competing telephone services to customers.
        Cyber Mesa President Jane M. Hill said in an interview that her company pays Qwest $20 a month per phone line and purchased equipment that it needs to provide services. The equipment is installed in Qwest's central office. Qwest connects Cyber Mesa gear to the local infrastructure, called switched access lines, that delivers service over what is called "the last mile" to residential and business customers.
        Hill said Cyber Mesa's phone service costs 60 cents a month less than Qwest's, and Cyber Mesa offers free caller ID.
        In filings with the PRC, Qwest says companies like Cyber Mesa have become a serious threat. "Qwest has lost switched access lines (to competitors) at the rate of more than 3,500 per month," the company argued. "Qwest stands to lose over 88,0000 access lines in New Mexico from the time Qwest first attempted to initiate a promotional offering in January 2007 through the end of this year."
        Qwest warned that the erosion of its business will harm shareholders, cost employees their jobs and reduce Qwest's ability to invest in New Mexico. Qwest says it has to be able to compete "on equal footing with unregulated, nonunion competitors."
        Qwest said the regulatory agreement it had reached with the PRC, known as AFOR, allowed it "competitive pricing flexibility" by allowing it to offer rate reductions to customers five business days after informing the commission unless the PRC finds there is a reason to suspend the rate decrease and schedule hearings.
        Jane Hill said Cyber Mesa objected to the rate decrease because "a regulated entity (like Qwest) cannot offer a regulated service, namely telephone service, below cost." That would violate antitrust law, she said.
        "It really is kind of geared at regaining the monopoly, as far as I can see," Hill said. "If they were willing to compete, why wouldn't they lower their rates or improve their service?"
        She added, "If Qwest lowered its rates by a dollar or so on a residential basis, then we'd really be in trouble, but it would be legal and the consumer would benefit." Just moving customers from one provider to another through promotions is not competition, it's "marketplace churn," Hill said.
        "It's a business decision, not a matter of principle," she said. "I wouldn't do it if I thought there would be no consequences to my business. I think it's the beginning of a real threat."
        Qwest argues that Cyber Mesa hasn't proven either that Qwest's offer of temporary free service results in below-cost service or that the harm it might suffer from the promotion is greater than the harm Qwest will suffer by not offering the promotion. Qwest's PRC filing suggests the costs of the promotion would be recovered by providing continuing service to the returning customer.
        "Aside from generic, unspecified allegations of prejudice to rights of due process and harm to fair competition, Cyber Mesa neither alleges harm in its objections nor quantifies the harm," Qwest said.