Qwest is charging SBC with anti-competitive practices, including strong-arming carrier business partners not to entertain acquisition offers from “restricted” SBC competitors, such as Qwest.
In a letter to the FCC last week, Qwest complained about the alleged SBC practices and encouraged the FCC to halt them. The charges come three months before the expected closing of SBC’s purchase of AT&T, and as FCC Chairman Kevin Martin is looking for the commission to approve the SBC/AT&T and Verizon/MCI mergers by next month.
“In significant commercial transactions with other carriers, SBC appears to be expressly prohibiting those carriers from entering into mergers with certain specified competitors, upon pain of SBC canceling those contracts,” wrote Qwest General Counsel Robert Connelly. “The practical result is to confine the ability of such competitors to consolidate and achieve sufficient scale to compete effectively with SBC-AT&T. It is incumbent on this Commission to remedy this situation through adequate conditions on the merger.”
Connelly requested the FCC examine contracts between SBC and WilTel, and SBC and Time Warner Telecom. He said the contracts restricted the carriers’ abilities to merge with “blacklisted” companies.
“The commission should investigate whether SBC and AT&T are using their massive marketplace clout to make it difficult or impossible for major competitors such as Qwest and others to combine in order to compete more effectively against the merged company,” Connelly wrote.
SBC responds, “This filing is a sad, desperate act by one of our competitors who is afraid of having a vigorous competitor in their own backyard. The fact of the matter is, we filed our application for merger approval at the FCC on Feb. 21 and interested parties have had all spring, and all summer, to make their points of view known. Obviously, Qwest has read recent news reports speculating about federal action on the merger and this is an 11th hour act of desperation on their part.
“Like any business that is choosing a supplier with whom it will spend hundreds of millions of dollars, we would like to choose who we want to buy certain services from, but that is hardly remarkable. On the contrary, it is a common and standard commercial practice. In fact, it is so common that Qwest itself is party to contracts that contain similar provisions – for example, Qwest and Sprint PCS agreed to a similar provision in their contract.
“We are confident that the FCC and the [Department of Justice], after an exhaustive and careful review of the facts, will determine that the merger of SBC and AT&T will benefit consumers – and many customers have gone on record in support of the merger for this reason.”
Qwest is looking to acquire smaller carriers, or certain assets of smaller carriers, to better compete with the SBC/AT&T and Verizon/MCI unions. Qwest is reportedly sizing up XO Communications, as well as Time Warner Telecom.
Qwest also alleges that SBC is limiting the ability of Qwest and other carriers that access SBC’s network to reduce their access costs through grooming and use of unbundled network elements.
“SBC is limiting the ability of customers that are AT&T competitors to leave SBC service and substitute other providers, and to replace less efficient SBC special access with more efficient and less costly SBC configurations,” Connelly’s letter states.
XO, meanwhile, this week communicated its own concerns to the FCC on what effect the mergers would have on wholesale prices of circuits acquired from the four merging carriers. XO, which says it has “significant” business with SBC, says its actions this week are not coordinated with Qwest’s.
