QWEST WINS FCC LONG DISTANCE APPROVAL IN 9 STATES

While Comr. Copps said Commission found no evidence of violations of Qwest’s local market-opening commitments, in separate statement he listed allegations that had surfaced in proceeding and said: “This is not the end of the matter.” He said his decision to vote for multistate application was “not an easy one” and petition was “one of the most difficult” long distance entry bids FCC had faced.

Qwest filed new petition Sept. 30 for interLATA long distance entry in those states after regulators raised questions about its accounting, compelling company to withdraw 2 earlier applications that covered same states. Dept. of Justice informed Commission in Oct. that Qwest’s Sec. 271 petition showed progress but it highlighted 2 issues for FCC to assess: (1) Company’s prices for unbundled network elements (UNEs). (2) Allegations, which DoJ called “disturbing,” that Qwest had tried to deceive FCC personnel about part of its testing process. DoJ said record improved on several issues that it had flagged earlier for consideration, including manual order processing and testing of line-sharing orders. But Justice said it still had reservations whether carrier’s UNE prices were cost-based, indicating it would defer to FCC’s ultimate judgment on that issue. DoJ also cited as “troubling” Qwest memo submitted by AT&T that indicated Qwest might have misled regulators about testing process during their visit to company’s facilities.

“Approval of Qwest’s multistate application promises benefits to consumers by making increased competition in all markets for telecommunications services possible,” FCC said. Sec. 271 approval covers 9 of Qwest’s 14 states.

Copps said “troubling allegations” that surfaced in proceeding included confidential unfiled agreements, accounting issues, withholding of information and provision of in-region long distance services without authority. That meant Qwest’s application faced “especially close scrutiny,” he said, noting Qwest had withdrawn earlier versions to address those concerns.

For past violations, Copps said, FCC must address “these serious allegations” expeditiously through investigations, adjudications of complaints and potential enforcement actions and penalties that may be warranted. “I am further troubled by accounting irregularities at Qwest,” he said. “These accounting depredations, and those at other companies as well, should inform -- or perhaps even serve as a case study -- for the Joint Conference on Accounting as we consider the accounting and auditing requirements the Commission and the state commissions need to carry our their statutory responsibilities.” If evidence were to surface of continuing violations of Sec. 271 requirements, FCC should use all of its enforcement abilities, “up to and including revocation of long distance authority,” he said.

Qwest said Mon. it planned to file joint Sec. 271 application for N.M., Ore. and S.D. next month, and for final 2 states -- Ariz. and Minn. -- early next year. “We're going to offer our customers simplified long distance service,” said Steve Davis, Qwest senior vp-policy & law. Company said it provided service to more than 9 million customer lines in 9 states covered by Sec. 271 order. Qwest also said it soon would announce details of its long distance plans and would begin taking customer orders by mid-Jan.

FCC order, approved Fri. and released Mon., drew sharp rebuke from AT&T. “The FCC’s practice of looking the other way in Section 271 proceedings reaches new heights in today’s decision,” said Len Cali, AT&T vp-law & dir.-federal govt. affairs. “Qwest’s application showed utter disdain for the FCC and the rule of law,” he said, citing “unlawful secret deals and accounting irregularities” that he said dogged petition. Agency’s threat of enforcement proceedings for possible Qwest violations “is no excuse for overlooking statutory failings and in all events will work only if the agency has a proven record of prosecuting and deterring misconduct,” Cali said. He said order shows extent to which FCC had been “reluctant or slow to act against Bell misconduct.”

WorldCom spokeswoman said company had “grave concerns about Qwest’s ability to hold up its end of the bargain and open its local markets as the law requires.” It pointed to “constant stream of revelations,” including allegations of secret deals that gave favorable treatment to certain CLECs in return for support in state proceedings.

Qwest had said when it withdrew its earlier Sec. 271 petition that new filing would address questions about accounting and unfiled CLEC agreements. In 556-page order, FCC said “the accounting concerns in Qwest’s prior section 271 applications are not present here.” In earlier applications, it said Qwest had indicated certain transactions involving its Sec. 272 long distance affiliate were subject to restatement. Besides controls such as those created by new long distance subsidiary, order said “there is no evidence in the record” suggesting that long distance affiliate’s financial statements were “subject to accounting irregularities.”

When refiling for Sec. 271 approval in fall, Qwest set up new long distance subsidiary, Qwest Long Distance Corp., to address questions about its accounting when original petitions were withdrawn (CD Sept 11 p1). At that time, FCC Chmn. Powell had said company was “razor” close to approval, but that other issues also were important. FCC order came several days in advance of Dec. 27 deadline for acting on application. Approval also came days after Commission gave nod to 2 key Bell applications for Sec. 271 authority, including BellSouth’s application for Fla. and Tenn. and SBC’s for Cal. (CD Dec 20 p3).

Separately, Legg Mason said in research note Mon. that SBC indicated in conference call with analysts that it hoped to file for interLATA long distance entry in Ill. at FCC in April. Legg Mason said SBC/Ameritech Ill. Pres. Carrie Hightman disclosed her company hoped to win state backing for long distance application, meaning company could receive FCC approval by July for that state. She said in call that operating support system test and report showed company had cleared up 94.9% of operational issues, Legg Mason said. Hightman said in call that Ind. and Wis. Sec. 271 filings were on same timetable as that for Ill.