FCC (Again) Dashes Qwest Phoenix-Forbearance Hopes

The FCC late Tuesday said it has denied Qwest Communications International Inc.s request for regulatory relief in Phoenix. The agency used a new market power wholesale and retail test to make its decision something Qwest is unhappy about and now wants public comment on the method, which could serve as the foundation for two pending, and all future, entreaties.

Commissioners had until midnight tonight to make a decision. Apparently, though, they voted unanimously on June 15, but did not reveal the action until late today, after the stock markets were closed.

In turning down Qwest, the FCC said the Denver-based carrier failed to make the case that it has lost market power in the Phoenix area. Yes, cable and wireless competition has gained ground, commissioners said, but not enough to merit deregulation for Qwest.

Steve Davis, Qwests public policy head, disagreed. The Phoenix telecom market is highly competitive, he said. Plus, he added, the FCC deregulated AT&Ts long-distance services 15 years ago in a similar situation, and AT&T held even more market power than Qwest.

We believe this decision by the commission fails to recognize these market facts and is inconsistent with the forbearance statute, Davis said in a prepared statement.

Qwest had wanted the FCC to use the same criteria in judging the Phoenix market as were applied five years during the Omaha, Neb. forbearance proceedings. That was the case that set off a frenzy of me-too forbearance filings from incumbents. This time around, CLECs and their supporters persuaded the Julius Genachowski-led FCC to use new statistical standards when judging forbearance requests. Qwests Davis said that was unfair.

Qwest fully met the rules that applied when this petition was filed. It is disappointing that, at the conclusion of this case, the commission would change those rules and then apply them retroactively, he said, adding, Ultimately, the FCC’s decision will undermine competition in Phoenix instead of promoting it.”

CLECs, of course, praised the FCCs change of heart. The providers that pushed for the market power test   One Communications, Integra Telecom, tw telecom inc. and Cbeyond Inc. all said the FCC made the right call.

The result will be more investment in services for small and medium businesses and more job creation in the competitive telecommunications sector, said Integra Telecom DEO Dudley Slater.

And, unlike past rulings, as Cbeyonds CEO Jim Geiger pointed out, the commission this time distinguished between the consumer product market, where there is a little competition in the provisioning of last mile services, and the commercial one, where there is virtually none.

Geiger and other CLEC executives said that proves Genachowskis FCC does not believe duopolies create competition.

Qwests petition had been pending since a similar agency denial in 2008. Two years ago, commissioners turned down a plea by Qwest to remove dominant carrier and UNE pricing requirements in four major cities. After than rejection, Qwest again filed for relief, but just in Phoenix.

Qwest has forbearance requests pending in three other markets; rival Verizon Communications Inc. also wants lighter government oversight in six of its markets. The FCC stands to apply its new market power tests to those appeals as well.

Its unknown whether Qwest will ask, for a third time, for deregulation in Phoenix. Such action seems unlikely since Qwest has agreed to be acquired by CenturyLink and further attempts at deregulation could hold up FCC approvals of the $22.4 billion — a number that includes Qwest’s debt — deal.

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