Level 3 Urges Approval of Deal to Buy tw telecom Amid Opposition
Level 3’s proposed acquisition of tw telecom (CD June 17 p7) should be approved, and the “few” comments submitted to the FCC seeking conditions or delays “misuse” the approval process to “seek leverage in existing commercial disputes,” said the firms at the end of the period to file objections or replies. A Level 3 spokeswoman said Wednesday that the company anticipates completing the deal, initially pegged as worth about $7.3 billion, in Q4.
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The acquisition would promote competition by creating “a more robust competitor” and serve the public interest by “joining the complementary assets and service offerings” of the companies, Level 3 and tw telecom said in a joint filing (http://bit.ly/1qckO5z) posted in docket 14-104 Wednesday. Tw Telecom’s “metropolitan footprint and network-connected buildings” would give Level 3’s customers a “higher-quality and more reliable” experience,” the companies said. It would be able to compete more effectively with larger incumbent carriers, like AT&T, CenturyLink and Verizon, the companies said.
Four companies raised questions before the end of the comment period Tuesday. CenturyLink and FairPoint Communications criticized what they termed Level 3’s practice of withholding payments during billing disputes. For example, CenturyLink said (http://bit.ly/1roHTC2) if Level 3 believes it has been overcharged, it will withhold that amount from its payments. Instead of following the dispute resolution process, “Level 3 effectively awards itself the entire credit it claims to be owed,” CenturyLink said. It said if dispute resolution finds the charges proper, CenturyLink is faced “with the long and arduous task of collecting money withheld by Level 3, or negotiating some form of settlement.” Saying it feared the deal would mean tw telecom would begin following the same practice, CenturyLink said the FCC should direct Level 3 to cease the practice as a condition of approving the deal.
FairPoint also criticized the practice (http://bit.ly/1rMNV1O), saying its Northern New England operation suspended providing Level 3 new exchange access services because of the company’s failure to pay. Approval of the deal should be conditioned on Level 3 paying undisputed charges, regular reporting by Level 3 of disputed charges, and enforcement action by the commission if Level 3 continues the practice, FairPoint said.
CenturyLink also said the commission’s conduit-sharing rules would require it, as an ILEC, to give the combined company access to its entrance conduit to multi-tenant buildings at regulated rates. That would be true, even though the deal would make Level 3 a larger provider of ethernet services than CenturyLink, the filing said. It said the deal should be conditioned on a requirement that Level 3 provide access to its entrance conduit on commercially reasonable rates, terms and conditions.
Several analysts we contacted, including Recon Analytics analyst Roger Entner, said they haven’t followed the filings closely enough to predict whether they could affect the deal, but echoed past statements that the acquisition did not seem to raise major competitive issues. The Level 3 spokeswoman Wednesday referred an inquiry about the comments to the company’s filing, which said none of the concerns are specific to the proposed transaction.
The Department of Justice evaluated the deal to see if it raised any national security, law enforcement or public safety issues. DOJ, with the Department of Homeland Security, asked the FCC in an Aug. 18 letter (http://bit.ly/1u0QGeu) to defer action until the agencies finish the review. DOJ did not give a time frame, nor did it not respond to our inquiries. An FCC official and the Level 3 spokeswoman said such reviews are standard when deals involve a company with foreign ownership like Level 3.
Proximiti Technologies also opposed the deal as not being in the public interest (http://bit.ly/1r1YPKE), saying that since December, Level 3’s network performance has undergone a “marked deterioration.” Nine significant outages affected Proximiti during that time, the company’s filing said. It would “not be prudent” to subject tw telecom customers to Level 3’s operating methods and procedures, Proximiti said. Georgia architectural firm Foreman Seeley Fountain also opposed the deal because of a billing dispute with Level 3 over international tolls (http://bit.ly/1r20b8j).