Vycera Expands in Qwest Territory

Vycera Communications Inc., a telecommunications company targeting Spanish-speaking households, is expanding in the West after reaching an agreement to lease the local network of Qwest Communications International Inc.

The pact with Denver-based Qwest will allow Vycera to begin offering local and long-distance phone service next month in Arizona, Colorado, New Mexico, Oregon, Utah and Washington. Vycera also plans to market phone service to Hispanic homes by the end of June in parts of Idaho, Iowa, Nebraska and Minnesota.

The agreement between Qwest and Vycera extends through July 31, 2008.

San Diego-based Vycera provides phone service to approximately 60,000 customers in California and Texas, although the company stopped marketing in those states this month after federal regulations were eliminated.

The rules had allowed Vycera to lease at government-mandated rates the local network owned by SBC Communications Inc., the second largest local phone company. Over the last several months, Vycera sought to negotiate a commercial wholesale agreement with SBC to access its local network but no accord was reached.

They certainly didnt come back with anything that made economic sense, says Derek Gietzen, president and CEO of Vycera.

As a result, Vycera plans to install a network in select cities in California and Texas to support its existing customers and grow its business where it has achieved a relatively high level of penetration. Dallas, Los Angeles and San Antonio are among those cities.

The sooner we can get back into those markets the better, Gietzen says. I think it will take us until the fourth quarter of this year before we turn up our customers using a facilities-based approach.

Gietzen says Vycera will have some tough decisions to make in parts of California and Texas where the company does not plan to build a network. Vycera eventually might move those customers to another provider or support them under a different set of rules that does not afford the company the margins it had under the old regulations.

Clearly were going to leave much of our market behind in California and Texas, Gietzen says. The economics just arent there in a lot of markets.

Vycera is among the competitive phone companies that have one year to move millions of customers off incumbent networks under regulations the FCC eliminated earlier this month. BellSouth Corp., Qwest, SBC and Verizon Communications Inc., the four regional Bells, own the local phone networks.

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