Minnesota Senator Warren Limmer (R-Maple Grove) this week introduced a structural separation bill that would require Qwest Communications International Inc. (www.qwest.com) to separate the retail business that serves residential and business customers directly from the wholesale business that serves other telephone companies.
Qwest, meanwhile, says a break up of its operations isn't needed because 45 competitors currently operate in the state.
However Sen. Limmer, who announced the bill at a press conference April 24 at the Minnesota State capitol, says the move is an effort to open up the Minnesota local telephone market to competition.
"The vast majority of Minnesotans today still do not have a choice of local phone companies," said Limmer, "even though the [federal] Telecom Act was passed five years ago to allow competition. As we see the fall of more and more competitive local service competitors across the country, we must realize that consumers will not see competition any time soon unless we act. The monopolies of the Baby Bells, including Qwest, are well intact."
The goal of the proposed structural separation bill is to introduce competition to local telephone service so that prices will drop and service will improve, according to Limmer. The bill would ensure a competitive local exchange market by preventing Qwest's wholesale affiliate from discriminating in favor of its retail affiliate at the expense of other competitors for local service, the senator said.
Under the proposed bill, Qwest's retail affiliate would be required to operate as a CLEC. Its retail and wholesale arms then would maintain separate locations, books, records and accounts and have a separate leadership and employee base.
Verizon Communications Inc. (www.verizon.com) currently is under orders from Pennsylvania telecom regulators to 'functionally' structurally separate under similar, but toned-down requirements.
Qwest's wholesale unit would own and operate all network facilities and would be prohibited from providing retail service. It would not be allowed to discriminate in favor of the retail unit, and vice versa.
The Minnesota Public Utilities Commission (www.state.mn.us/ebranch/puc) would have the authority to approve transactions between the affiliates, as well as provide standards of conduct with penalties for violations of conduct, according to Limmer.
AT&T Corp. (www.att.com), a major competitor of Qwest's in Minnesota, supports the bill.
"This bill gives competition a chance," said Teresa Lynch, AT&T law and government affairs assistant vice president in Minnesota. "Qwest's wholesale and retail services cannot coexist peacefully [so] they must be separated."
She said that AT&T continues to run into roadblocks put up by Qwest. Most recently, for instance, Lynch said Qwest refused to run a test with AT&T to make sure both companies' operating systems worked together. AT&T has filed a complaint with the Minnesota PUC on this issue.
Qwest, on the other hand, calls AT&T's plan for more government regulation of Qwest's wholesale and retail operations in Minnesota a desperate attempt to keep long-distance prices high and prevent Qwest from getting approval to re-enter the long-distance business.
Since acquiring US West Inc., Qwest executives say the company has never received a complaint from AT&T about the local services it purchases in Minnesota.
"It's no surprise that as we get closer to getting into the long-distance business, AT&T is trotting out a new scheme to delay that from happening," said John Stanoch, Minnesota vice president of policy and law for Qwest. "This latest scheme is simply a diversionary tactic that ultimately hurts consumers."
AT&T, in fact, has pressed for BOC structural separation in several states across the nation. In March, regulators in Pennsylvania rejected AT&T's structural separation proposal after more than two years of studying the issue, instead opting for functional separation. AT&T has also supported failed structural separation campaigns in Maryland and Florida.
"AT&T has seen in New York and Texas how real long-distance competition impacts their business," said Stanoch. "It's obvious … that they're willing to do anything to stop that from happening here in Minnesota."
Highlights of local competition in Qwest's territory in Minnesota include:
1.) 124 interconnection agreements between Qwest and competitors are approved by the Minnesota PUC;
2.) Minnesota competitors have access to almost 1.9 million of Qwest's 2.4 million Minnesota customers via the equipment they've collocated in Qwest's central offices. In Minnesota, 37 CLECs are collocating their equipment at 571 sites in 80 COs; and
3.) Qwest has processed 130,321 Minnesota competitors' order requests in the past 12 months.
Earlier this month, Qwest announced that it had achieved two significant milestones in its efforts to reenter the long-distance business in 14 Western states. First, region-wide independent testing of Qwest's operational support systems (OSS) has begun. In addition, the company has completed three-quarters of the state workshop sessions that evaluate Qwest's compliance with rules to reenter the long-distance business.
Qwest said that it is on target to file its first application with the FCC (www.fcc.gov) this summer to reenter the long-distance business in one of the states in its local service area and to file applications for other states later this year and early next year.
In the meantime, Qwest expects to complete long-distance OSS testing of its network by the middle of this summer.
