Qwest targets Omaha "myth" in letter to FCC

Qwest Communications International Inc. officials are once again calling into question evidence from a recent forbearance approval in Omaha, Neb., which has been used by competitors to show the company has pushed out telecommunications competition in the city.

In a letter received by the Federal Communications Commission and obtained by Az Tech News, Steve Davis, Qwest senior vice president of policy and law, blamed competitors for "perpetuating the myth that McLeodUSA Inc. has been forced to exit the residential and small business market in Omaha due to the Commission's limited grant of forbearance to Qwest."

In the 12-page letter, Davis reiterates previous Qwest points that McLeod's departure had everything to do with corporate restructuring and nothing to do with Qwest's deregulation in the city. Qwest was granted forbearance in Omaha in December 2005.

"Qwest's competitors' strategy is to repeat the 'McLeod was forced from the Omaha market due to forbearance' mantra enough that it becomes viewed as fact -- even though it is untrue," Davis wrote. "The Commission should not fall for this campaign of misinformation."

Qwest is seeking relief from the 1996 Telecommunications Act in the Phoenix, Denver, Minneapolis-St. Paul and Seattle metropolitan areas because it believes competition in those service areas have reached a point where Qwest is losing money because of regulated pricing of its telephone wire infrastructure.

If forbearance is granted, Qwest would be able to charge its own rates for competitors using the company's preexisting wiring. The Arizona Corporation Commission, which is against Qwest forbearance, is the Arizona state agency that regulates the company's rates. Qwest, like Verizon Communications Inc. and AT&T Inc., are the nation's only incumbent local exchange carriers (ILECs) and must be regulated because they are telecommunications monopolies.

Davis accused one competitive local exchange carrier (CLEC) in Omaha of embellishing, misquoting and misrepresenting information about McLeod's decision to leave Omaha to the FCC. Davis also blames the CLECs for not examining the facts about how competitive the Omaha market actually was when McLeod left. Citing Cox Communication Inc.'s rise in prominence, Davis said the FCC decision was warranted and necessary.

"Qwest's competitors are simply seizing the political 'proof' that forbearance is the cause of McLeod's difficulties in Omaha," Davis wrote. "This mischaracterization is without foundation."

Davis provided evidence in his letter showing the McLeod's decision to leave Omaha was based on a change in customer focus. After filing for Chapter 11 bankruptcy, McLeod emerged with a new strategy in January 2006, according to a U.S. Securities Exchange Commission filing by McLeod. The company decided to focus on small and mid-sized business customers rather than residential customers.

What has been missing from CLEC evidence to the FCC is that McLeod is still serving customers in the Omaha market, Davis wrote.

"The claims of TDS, McLeod and other Qwest competitors that the Omaha Forbearance Order has driven McLeod out of the Omaha market are completely false," Davis wrote. "The truth is McLeod has only exited the market segment it wanted to exit, driven out not by the Omaha Forbearance Order by rather by its own refocused company-wide business plan."

As in past arguments to the FCC, Davis further points to competition in the Omaha area from wireless, cable and Internet telecommunications companies. He cited statistics from the Nebraska Public Service Commission that bolster those claims.