One good stroke deserves another. So by vowing not to oppose US West Inc.'s (www.uswest.com) merger with Qwest Communications International Inc. (www.qwest.com), Rhythms NetConnections Inc. (www.rhythms.com) gets to pay nothing to the ILEC for sharing its lines.
"Some CLECs were willing to take an above-zero line sharing rate. We were not," said Eric Geis, senior vice president of regulatory affairs and deployment for Rhythms, during press conference yesterday announcing the deal.
The agreement means Rhythms will pay no monthly charge to use the incumbent's existing voice lines for providing DSL services throughout US West's 14-state region. In return, US West promises to make several improvements in operational performance, including collocation, unbundled loops, cooperative testing, circuit installations, and line conditioning.
The ILEC also will immediately pay performance credits to Rhythms for any substandard performance, Rhythms' attorney said yesterday. Jeff Blumenfeld, chief legal officer for Rhythms, said the CLEC plans to be vigilant in monitoring and measuring US West's performance.
The FCC (www.fcc.gov) in November 1999 ordered ILECs to allow CLECs to offer DSL services on the same telephone lines that already carry voice services by June 2000. The FCC ruling gives customers the ability to order DSL services without losing their voice carrier or having to install a second line. Minnesota, in the US West region, ordered line sharing as a matter of state law several weeks prior to the FCC's decision.
In its order, the FCC seemed to like the idea of setting a zero line sharing charge, but instead opted to leave the actual pricing to the states. Over the next several months, the state commissions will determine those permanent, cost-based line-sharing rates. Blumenfeld said that Rhythms' new agreement with US West "gets us the pricing that will prevail for us until the states set cost-based prices."
"This is a significant step forward in actually getting what we're entitled to in US West's 14 states," he added. "This agreement advances the specifics of what we'll get without having 14 states' checklists and approvals to go through."
On its end, US West is required to get its merger with Qwest approved by state regulators throughout its entire service territory. Rhythms and several other CLECs were participating in some of these proceedings, and up until this point, Rhythms opposed the merger.
But now, in return for US West's commitments on the no-charge line-sharing rate and process improvements, Rhythms has withdrawn its active opposition to the merger before state regulators in the remaining states involved in the merger review process, namely Arizona, Colorado, Minnesota, Nebraska, Utah and Washington. The merger remains pending before the FCC.
The no-charge line-sharing rate is effective immediately through the end of 2000 and may be extended until June 1, 2001 if certain contingencies are met. Rhythms plans to participate in those proceedings, according to company attorneys.
"We believe that these improvements will provide long-term benefits to our business and enhance our ability to make Rhythms' DSL services easy to buy, easy to get and easy to use in US West's 14-state region," Geis said. "Of course, the proof will be US West's actual performance, and we will be watching closely to be sure we receive that performance."
