[1st-mile-nm] Qwest promotion ignites regulatory battle

[Richard Lowenberg]

http://albuquerque.bizjournals.com/albuquerque/stories/2008/10/20/story1.htm
l?b=1224475200^1718194

Friday, October 17, 2008

Qwest promotion ignites regulatory battle

New Mexico Business Weekly - by Kevin Robinson-Avila   NMBW Staff

In the old days, when
<http://albuquerque.bizjournals.com/albuquerque/gen/Qwest_Communications%20I
nternational_342CE7822A42443C8030C2DBC9D77CD5.html> Qwest Communications
International enjoyed a near monopoly on phone service in New Mexico, the
company had to fight state regulators when it wanted to increase prices.

But now, with Qwest struggling to retain market share against growing
competition from wireless and Internet phone companies, the aging Baby Bell
is fighting with regulators over the right to lower prices.

The battle began in early September, when the New Mexico Public Regulation
Commission suspended a 90-day promotion by Qwest based on objections from
Santa Fe's Cyber
<http://albuquerque.bizjournals.com/albuquerque/related_content.html?topic=C
yber%20Mesa%20Telecom>  Mesa Telecom.

Qwest wanted to offer three months of free service to new customers, and one
month of free service for current Qwest customers who reject offers to
switch to another phone company.

Cyber Mesa, however, said Qwest was using its economic might to sell at
below cost, and it accused Qwest of unfairly using its network control to
learn about customers who want to switch phone companies and then entice
them to retain their service with Qwest.

Cyber Mesa President Jane Hill said such practices constitute unfair
competition for her small company, which began offering phone service in
Albuquerque, Santa Fe and some other cities after the 1996
Telecommunications Act opened the local market to competitors.

"Under anti-trust laws, they can't just go in and undercut competition to
get their monopoly back," Hill said. "Qwest is prohibited from selling
regulated services at below cost."

Hill said use of proprietary information to retain customers is also
blatantly unfair.

"If a customer decides to go with Cyber Mesa and we put in a request to
switch the service, it's not fair for Qwest to then take that information to
try to retain the customer," she said.

Qwest adamantly denies it's selling at below cost, much less using its
network control to unfair advantage.

Mike Horcasitas, Qwest's local director for public policy, said Qwest
customers who accept the offers for free service must sign a one-year
contract with Qwest, which allows the company to recover its promotional
costs.

In addition, Qwest prohibits its wholesale managers in charge of phone
switches from communicating with its sales reps about customers.

"We use the same marketing lists that everybody else uses for our
promotions," Horcasitas said. "The idea that when the wholesale group gets
an order to disconnect and then we run to our sales reps to call the
customer - that absolutely does not happen and we can prove it to the PRC."

In fact, Horcasitas said Qwest has no objections to a PRC hearing, but it
strongly objects to suspension of the 90-day promotion.

The promotion should be allowed to take effect even as the investigation
occurs," he said. "Cyber Mesa should have to demonstrate that harm has been
done to get an immediate injunction."

Qwest New Mexico President Loretta Armenta said the suspension is doing
immense damage because the company loses thousands of customers every month
to competitors like
<http://albuquerque.bizjournals.com/albuquerque/gen/Comcast_Corp_79BCC71D8F1
0439F935C37A5844B86B1.html> Comcast Corp., which began offering Internet
phone service in Albuquerque last year. Qwest estimates it lost about 30,000
phone lines just in the first half of 2008, or about 5,000 per month.

"We're losing customers every day, all day, because competitors are
under-pricing us," Armenta said. "We don't begrudge consumers making smart
decisions, but we're asking the PRC to let us make promotional offers like
our competitors."

PRC Chairman Jason Marks, however, said the Commission suspended the
promotion because it came on the heels of a similar offer run by Qwest from
June to September.

Cyber Mesa already had objected to the first promotion without the PRC
suspending it.

Under current regulations, any adjustments to Qwest tariffs must be approved
by the Commission, although the company can launch temporary promotions to
compete with other businesses.

But Marks said that running back-to-back promotions brings the "temporary"
aspect into question.

"It's becoming like glossed-over tariff reductions," Marks said.

The PRC has appointed an examiner to investigate the issues and a public
hearing is scheduled for Jan. 7.

Marks said the hearing is critical to examine Cyber Mesa's objections, but
it is also good for Qwest to establish greater clarity for future
promotions.

"We will resolve this in a way that's fair to everybody," Marks said. "We
need to figure out what is the lowest price Qwest can offer in its efforts
to retain customers. Once we have a floor established that is above cost,
Qwest can freely move between the established floor and price ceilings."


-- 
Richard Lowenberg
1st-Mile Institute
P.O. Box 8001, Santa Fe, NM 87504
505-989-9110;   505-603-5200 cell
rl at 1st-mile.com  www.1st-mile.com

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