Qwest Communications International Inc. is awaiting an order next week on whether the Federal Communications Commission will approve its application to provide long-distance services in New Mexico.
FCC commissioners do not have an easy job in this case. Qwest has faced little competition in New Mexico in the local residential phone market, according to the New Mexico Public Regulation Commission.
Qwest’s rivals served 1,380 residential lines last year, according to an order the state regulator issued Oct. 8, citing data provided by competitive phone providers. Comm South Companies Inc., a prepaid local telephone company targeting consumers with bad credit and those disconnected by Qwest for not paying their bills, controlled all but 11 of those lines, according to the order. That leaves Qwest with approximately 600,000 lines.
“The evidence also indicates that the actual number of resellers and resold lines is decreasing rapidly,” the regulator wrote.
The New Mexico Public Regulation Commission has made no recommendation on whether Qwest has met a provision necessary to obtain long-distance approval, deferring the matter to the FCC. The provision requires that a facilities-based competitor sell phone service to more than a “de minimis” number of business and residential customers.
The state regulator found that criteria had been met in the business market, but it deferred to the FCC to determine whether a facilities-based rival is serving the residential local phone market.
The federal regulator must decide by April 15 whether Qwest has met that threshold, known as a so-called Track A requirement stipulated in the Telecommunications Act of 1996. The regulator will vote on whether to grant or deny Qwest’s long-distance application in New Mexico, Oregon and South Dakota.
In December the FCC approved Qwest’s application to provide long-distance service to residential and business customers in nine states within its 14-state territory: Colorado, Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington and Wyoming.
“All indications are we are right on schedule for approval and we got a favorable recommendation from the PRC [New Mexico regulator] there and are expecting … to get the word on the 15th,” says Qwest spokesman Jeff Mirasola.
In February the U.S. Department of Justice recommended Qwest receive long-distance approval in New Mexico, Oregon and South Dakota on the condition the FCC address whether there is competition in the New Mexico residential local phone market. The Justice Department “also suggested that Qwest clarify its position regarding certain claims made by WorldCom,” Qwest stated in a February news release.
WorldCom has asked the FCC to reject Qwest’s application.
“WorldCom has told the FCC that it should reject Qwest's long-distance application and require it to fix its systems and documentation once and for all so that CLECs can enter and stay in the Qwest region,” spokeswoman Sudie Nolan says. “WorldCom continues to experience serious problems with Qwest's operating systems. The reject rate on orders submitted to Qwest [which was 53 percent for the week ending March 22] is significantly higher than WorldCom experiences in any other region. The FCC should take this opportunity to tell Qwest to go back and get it right.”
The New Mexico Public Regulation Commission recommended that Qwest receive long-distance approval, finding it had opened its network to rivals as required by law. The only matter the regulator did not resolve is whether Qwest has met the Track A requirement.
In its order, the New Mexico Public Regulation Commission said Qwest has not provided evidence that Comm South is a direct competitor. “Although Qwest claims it serves the same body of customers as Comm South, Qwest offers no credible evidence in support of this claim,” the regulator wrote.
Qwest also argues Cricket Wireless is another competitor, serving more than 45,000 customers. A substantial number of those customers have replaced their landline phones with broadband PCS service, according to Qwest. Cricket’s parent company, Leap Wireless, said in an April Securities and Exchange Commission filing it is in talks with its creditors to reorganize. San Diego-based Leap posted a net loss of $648.5 million in 2002, though the company said the financial statements are not final.
The New Mexico Public Regulation Commission stated, “there is no single exhibit, strand of testimony or other piece of evidence that proves with any degree of reasonable certainty” that Qwest “has met its burden of showing there is an actual and significant amount of Cricket subscribers in Qwest’s New Mexico territory who have substituted broadband PCS service for Qwest wireline service.”
In a 1998 order denying BellSouth Corp’s application to provide long-distance services in Louisiana, the FCC said a Bell operator “must show that broadband PCS is being used to replace wireline service, not as a supplement to wireline,” and that the value of any study demonstrating such activity “will depend in large part on the quality of the study and statistical methodologies that are used.”
Qwest presented the New Mexico regulator a Cricket telephone survey to show that consumers were replacing their wireline phones with Cricket. But the state commission found “significant problems inherent in the design, methodology and implementation of the Cricket survey.”
The statistics the state regulator cited last fall might not be indicative of the number of residential phone lines controlled by competitors, or the degree of competition Qwest anticipates.
WorldCom’s MCI – the country’s second largest long-distance provider - introduced its local and long-distance package, The Neighborhood, March 17, in New Mexico. And local and long-distance phone provider McLeodUSA last week announced an expansion targeting consumers in eight states, including New Mexico.
