FCC Accused of Using Qwest-CenturyLink Conditions for ‘Trick Shot’ Broadband Reclassification

In late May, the FCC required Frontier Communications to commit to providing 85 percent of its customers at least 1 Mbps upstream speed before it could take over about 4.8 million lines from Verizon (CD May 24 p1). Many industry officials and analysts expect Genachowski to work to place similar conditions on CenturyLink’s takeover of Qwest.

Genachowski has hinted in letters to Congress that he’s thinking about broadband merger conditions. “Many of the issues associated with this transaction -- investment in broadband infrastructure, extending broadband to rural areas, and job creation -- are among my highest priorities as chairman,” Genachowski wrote Oct. 25 to Sen. Jeff Bingaman, D-N.M.

As the wireline business continues to decline, consolidation will continue, Crawford told us Thursday. The mergers and acquisitions will give the FCC the chance to regulate broadband without a fight over Title II, she said. “I think the wave of consolidations in telephone services is unavoidable,” Crawford said. “The question is, what the regulatory trade-offs are as we approach natural monopoly for telephone service around the country?"

In the long run, making the combined CenturyLink-Qwest deploy high-speed broadband could also change the public debate over broadband subsidy by leaving Verizon and AT&T with the biggest unserved areas, two industry officials said. It’s one thing to argue generally that universal service funds should support broadband, it’s another to argue that the two largest U.S. phone companies should be subsidized, the officials said. One of the officials represents rural carriers. The other represents several wireline providers.

But that position was roundly rejected by Hogan Lovells lawyer Daniel Brenner, who called it too early to make any predictions. “We've just to begun to reorient USF towards broadband,” Brenner said. “And we haven’t got that far with it."

Some are curious about how the merged CenturyLink-Qwest will integrate its operations. The companies have announced that 11 Qwest state executives will be out after the merger. Among those who will survive CenturyLink’s takeover is Steve Davis, Qwest’s senior vice president for public policy, the companies have said. Davis has been with Qwest more than a decade and was with AT&T previously. He has been instrumental in crafting Qwest’s “bill and keep” approach to intercarrier compensation questions, which may conflict with CenturyLink’s “incremental” approach to intercarrier comp, an industry official said.

A CenturyLink spokeswoman declined to discuss the combined company’s Washington lobbying posture. But the combined company will implement a regional model to manage state regulatory and legislative issues, a Qwest spokesman said. The model will be similar to the regional one that CenturyLink uses to run its business, he said. The top two tiers of leadership have been selected, a CenturyLink spokeswoman said. The model ensures a local focus, she said. Key operations executives within the company’s operating regions -- the region presidents and vice president-general managers who report to them -- are responsible for revenue, customer retention, customer satisfaction and service delivery throughout their local markets, she said.

Two Qwest state presidents -- Jim Campbell of Arizona and Jerry Fenn of Utah -- will join the combined company as regional vice presidents of regulatory and legislative affairs and will report to Davis. They will divide the public policy responsibility for the legacy Qwest local service region. Three Qwest state presidents joining the combined company are Jim Schmit of Idaho, David Gibson of Montana and Lauretta Armenta of New Mexico. But they will get new responsibilities, to be announced later.