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Qwest Accused of Deals-For-Access Scheme
By Kevin O'Hanlon, AP
Tuesday, October 3, 2006

LINCOLN, Neb. (AP) - Qwest Communications is being accused of making secret deals that prevented some phone companies from having fair access to lease its phone lines in Nebraska.

In a lawsuit filed in U.S. District Court for Nebraska, AT&T  Communications of the Midwest Inc., and TCG Omaha, Inc. accuse Qwest of hampering competition required under federal law.

The 1996 Federal Telecommunications Act sought to break apart the local phone monopoly held by regional carriers such as Qwest, BellSouth  Corp., and Verizon Communications  by making their networks available to rivals at discounted rates to foster competition.

To do that, Qwest and the other regional carriers are supposed to reach agreements with local phone companies to handle telephone calls to their customers.

Once such agreements are reached, the so-called incumbent carriers are required to notify the state Public Service Commission and offer similar rates to other carriers, according to the lawsuit.

"Notwithstanding these legal requirements and prohibitions, Qwest entered into secret interconnection agreements with two telecommunications providers in Nebraska," according to the lawsuit, which was filed by attorneys Loel Brooks and Dennis Friedman. "The secret agreements permitted those providers to purchase certain products and services at discounts of up to 10 percent off the rates that other carriers, including AT&T and TCG, were paying Qwest for the same services."

The lawsuit identified the carriers that got the so-called secret rates, starting in 2000, as Eschelon and McLeodUSA Telecommunications Services, Inc.

AT&T and TCG suffered damages in excess of $900,000, according to the lawsuit.

"Qwest intentionally failed to apprise AT&T and TCG of the existence of the secret agreements in order to induce AT&T and TCG to continue to pay the higher rates in their interconnection agreements rather than to avail themselves of the discounts in the secret agreements," according to the lawsuit.

Qwest spokeswoman Kara Rovere said she would not comment on pending litigation.

In 2002, the Nebraska PSC finalized the terms under which Qwest would lease its line to competitors, ending a long-running battle over the rates Qwest could charge.

Qwest is the state's largest provider of local telephone service, supplying 274,000 of the state's 1 million local phone lines.

There are 145 carriers who have received approval to provide competitive local exchange phone service in Nebraska. However, not all carriers are currently offering local service.

The former Bell companies argued earlier that federal regulators were cheating them out of their sizable investment by limiting what they can charge companies for using their phone lines.

Shares of Qwest edged down 2 cents in aftermarket electronic trading, from their New York Stock Exchange close at $8.52. AT&T shares closed at $32.23 on the NYSE.