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Business Customers and Competitive Providers Unite on Crucial Special Access Merger Conditions For SBC/AT&T and Verizon/MCI

Posted on: Tuesday, 18 October 2005, 09:00 CDT

Ad Hoc, BT Americas, Broadwing, Level 3, Qwest, SAVVIS and XO Join Forces to Urge FCC to Adopt Safeguards on Special Access Services

Telecommunications companies, IT service providers and enterprise customers have joined together to urge the Federal Communications Commission (FCC) to implement "crucial conditions" on the proposed SBC/AT&T and Verizon/MCI mergers.

Six leading communications companies and the Ad Hoc Telecommunications Users Committee, which represents high-volume business customers, filed an ex parte with the FCC outlining safeguards to ensure competitive pricing of special access services after the mergers of AT&T and MCI with SBC and Verizon and prevent SBC and Verizon from discriminating in favor of their respective AT&T and MCI affiliates and against third parties in the pricing and provisioning of special access services. Submitting the ex parte were Ad Hoc, BT Americas, Broadwing Communications, Level 3 Communications, Qwest Communications International, SAVVIS, Inc., and XO Communications.

The conditions seek to ensure that the mergers do not substantially increase the cost of telecommunications services by recommending a corrective adjustment for legacy special access rates, requiring the applicants to honor their existing contracts for five years, giving businesses a "fresh look" opportunity to opt into service contracts based on the corrected rates, and establishing safeguards that prevent SBC and Verizon from blocking access to competitors' services or engaging in anticompetitive discrimination and collusion.

"The mergers of SBC with AT&T and of Verizon with MCI will be industry-transforming events resulting in a tremendous increase in market concentration through the absorption of the two most important competitive telecom operators by the two largest local exchange carriers," said Melissa Newman, Vice President-Federal Regulatory at Qwest. "The removal of AT&T and MCI as independent competitors will severely disrupt the wholesale market for local termination services within SBC's and Verizon's territories, with significant harms to end users."

"We've come together out of common concern that the mergers, if approved as proposed, will substantially increase the cost of telecommunications in this country, particularly for business customers," said Heather Gold, Senior Vice President, Government Relations for XO Communications. "Strict merger conditions addressing special access competition are required to protect businesses against the anticompetitive effects of the proposed mergers."

"Special access services are the building blocks of enterprise customer networks. The FCC must ensure that these services are priced competitively in a post-merger environment," said Colleen Boothby, Partner - Levine, Blaszak, Block & Boothby, representing Ad Hoc.

The specific safeguards outlined to the FCC target three areas:

Safeguards on Special Access Price Competition Lost from the Elimination of AT&T and MCI

-- Corrective Pricing Adjustment. Post-merger, SBC and Verizon must be required to reduce their base DS1 and DS3 special access rate elements by 50 percent - bringing their prices in line with what AT&T and MCI today charge. This adjustment would apply to all rate elements in both the price caps and pricing flexibility rate schedules. To protect against "backsliding," SBC and Verizon would not be permitted to increase DS1 and DS3 rates above this corrected level, and would be required to honor existing contracts for new and existing service orders.

-- Fresh Look. To preserve the impact of the corrective pricing adjustment on the downstream retail market, AT&T and MCI customers would be allowed, within the first 12 months following the effective date of the merger, to terminate their contracts without paying a penalty. Customers choosing to terminate these agreements would have a six-month transition period to migrate off of the AT&T and MCI networks.

Safeguards Against Anticompetitive Leveraging of Special Access Services to Restrict Customers' Ability to Use Competitors' Services

-- No Restrictive Bundling. SBC and Verizon should not be allowed to bundle channel terminations or other non-competitive special access services with competitive services in any way that would deter customers from using competitors' alternate facilities.

-- No Conditions on Customers. SBC and Verizon may not place conditions on a customer's ability to receive corrected special access pricing, such as requiring the customer to waive their rights to Unbundled Network Elements (UNEs) or to give up the right to commingle UNEs with special access services. SBC and Verizon would also be forbidden to engage in any conduct, such as unreasonable grooming conditions, that interferes with a customer's ability to switch to a competitor, or to use more cost-efficient services offered by SBC or Verizon.

-- Termination of Special Access Contracts. As with "Fresh Look," customers of SBC or Verizon special access services would for 12 months be able to terminate their agreements after the mergers, without penalty.

Safeguards Against Anticompetitive Discrimination and Collusion

-- No Favoritism. SBC and Verizon may not give their respective AT&T and MCI affiliates any special access rates or conditions that are not also available to third parties, and may not favor themselves in the provisioning, maintenance and customer care of special access.

-- Regional Symmetry of Special Access. SBC and Verizon must offer in-region customers the same special access services that they - or AT&T and MCI - purchase from other carriers outside the region.

-- Enforcement. The safeguards will be enforced through public informational postings required of SBC and Verizon. Audits, penalties and/or customer credits for violations will be required to help ensure compliance.

About Broadwing Corporation

Broadwing Corporation (NASDAQ:BWNG), through its consolidated subsidiary Broadwing Communications, LLC (Broadwing) delivers innovative data, voice, and media solutions to enterprises, service providers, and government entities. Enabled by its one-of-a-kind, all-optical network and award-winning products and services, Broadwing Communications provides communications solutions with unparalleled customer focus and speed. For more information, visit www.broadwing.com.

About Qwest

Qwest Communications International Inc. (NYSE:Q) is a leading provider of high-speed Internet, data, video and voice services. With approximately 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, please visit the Qwest Web site at www.qwest.com.

About SAVVIS

SAVVIS, Inc. (NASDAQ:SVVS) is a global IT utility services provider that focuses exclusively on IT solutions for businesses. With an IT services platform that extends to 47 countries, SAVVIS has over 5,000 enterprise customers and leads the industry in delivering secure, reliable, and scalable hosting, network, and application services. These solutions enable customers to focus on their core business while SAVVIS ensures the quality of their IT systems and operations. SAVVIS' strategic approach combines virtualization technology, a global network and 24 data centers, and automated management and provisioning systems. For more information about SAVVIS, visit: www.savvis.net

About XO Communications

XO Communications is a leading provider of national and local telecommunications services to businesses, large enterprises and telecommunications companies. XO offers a complete portfolio of services, including local and long distance voice, dedicated Internet access, private networking, data transport, and Web hosting services as well as bundled voice and Internet solutions. XO provides these services over an advanced, national facilities-based IP network and serves more than 70 metropolitan markets across the United States. For more information, visit www.xo.com.

Source: Business Wire

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