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XO Communications and Eschelon Telecom Outline Comprehensive Telecom Merger Conditions to Reduce Harms to Competition and CustomersWASHINGTON, Sept. 22 /PRNewswire-FirstCall/ -- Eight competitive telecom service providers today submitted to the Federal Communications Commission a comprehensive set of conditions essential to help minimize the well-documented harms to business customers arising from the proposed SBC/AT&T and Verizon/MCI mergers. Doug Kinkoph, XO Communications Vice President of Regulatory Affairs, said, "Because the harms of the proposed mergers are severe, the conditions on these mergers must be comprehensive and ensure that all customers of AT&T and MCI are no worse off should the government approve them." The companies proposed the following pricing, performance and other remedies: - Require Local Wholesale Prices to Reflect Pre-Merger Conditions. A Merger Order must ensure that local wholesale circuits are priced at the lowest pre-merger rates and include the same terms and conditions. For telecom providers, special access rates should be reinitialized at 11.25%, or determined by commercial negotiations with a requirement that "baseball arbitration" be used if the negotiations fail- with winners determined by bids that most closely approximate the lowest pre-merger rate. - Ensure Unbundled Network Elements (UNEs) and Freeze Rates. UNEs are the other alternative means of access for facilities-based competitive providers. Current access to UNEs and rates must be continued. Any Merger Order should prohibit any further delisting of UNEs and freeze the associated rates of such UNEs for a period of five years. - Recalculate the Triennial Review Wire Center Test by Eliminating AT&T and MCI as Fiber-Based Collocators. The current collocation requirement in the Wire Center List is based on the presence of actual competition, which will disappear when AT&T and MCI cease to be independent competitors. Because the FCC's TRRO earlier this year took into account AT&T and MCI as independent companies, Merger Orders must require a recalculation of the Wire Center List for de-listed UNEs, removing AT&T and MCI. - "Fresh Look" - Give AT&T and MCI Customers the Right to Exit Contracts. A recent University of Connecticut survey of Fortune 1000 businesses concluded that by a 2 to 1 margin, the telecom managers in these companies believe they will be harmed by these mergers. Therefore, these business customers that are losing AT&T and MCI as their longstanding providers should be allowed to cancel contracts that carry over to the merged companies without incurring termination penalties. - Eliminate the DS1 Loop and Transport Caps. When establishing these caps, the FCC relied on the availability of competitive facilities, something that will be greatly reduced when AT&T and MCI cease to be independent competitors. Divestiture of AT&T's and MCI's Local Network Assets Alone Will Not Work "Divestiture alone will not alleviate the harms to the local wholesale market," said Russ Merbeth, Federal Counsel for Eschelon. "The competitive local presence of AT&T and MCI comprises much more than their local network assets and customers, and divestiture would not address the loss of those critical resources and capabilities." XO's Kinkoph said, "We know from experience that any acquisition and integration of assets is challenging, but the logistics of acquiring assets from an unwilling seller via divestiture could easily turn into a nightmare for any buyer." Other issues make divestiture of local network assets economically unattractive and unfeasible: - King Solomon's Decision, Revisited. Enterprise and large business customers use AT&T and MCI for a variety of services, not just local. Further, such services are purchased in bundles tied to special discounts. Separating local services from integrated bundles is equivalent to trying to divide one child between multiple mothers. - "Empty Networks" are a Poor Bargain. The value of local network assets without customers is very low, and may even be a burden. Even if a qualified buyer came forward, a buyer would face a strong disincentive to purchase a network without users. - Key Agreements Don't Transfer. Software that is used to operate networks does not transfer and would need to be re-licensed. AT&T's and MCI's numerous agreements with other carriers, franchising authorities and building owners all might require renegotiation. - Cooperation from AT&T and MCI is Essential - But Unlikely. For the divestiture of AT&T's and MCI's local network assets to work, the purchaser would be relying on reluctant sellers to assist in a complex transaction. "There is no palliative for a regulatory decision that eliminates the two largest competitors from the marketplace," said Kinkoph. "However, we can control the damage of these mergers by looking at comprehensive remedies that strive to re-create and maintain the economic environment of today's marketplace." 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 http://www.xo.com/. About Eschelon Telecom Eschelon Telecom, Inc. is a facilities-based competitive communications services provider of voice and data services and business telephone systems in 19 markets in the western United States. Headquartered in Minneapolis, Minnesota, the company offers small and medium-sized businesses a comprehensive line of telecommunications and Internet products. Eschelon currently employs approximately 1,130 telecommunications/Internet professionals, serves over 50,000 business customers and has approximately 380,000 access lines in service throughout its markets in Minnesota, Arizona, Utah, Washington, Oregon, Colorado, Nevada and California. XO Communications CONTACT: Chad Couser of XO Communications, +1-703-547-2746,M: +1-202-744-5815, [email protected]; or Jim Crawford of Crawford PR,+1-703-753-4480, M: +1-703-568-7101, [email protected] Web site: http://www.xo.com/ |