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US West's Line-Sharing Concessions Boost Merger Prospects

Strategic Insights

— 1 min read

US West's push to merge with Qwest Communications has seen the company offer concessions to proponents of rapid broadband deployment, including agreements with Rhythms NetConnections and other critics. In exchange for easing regulatory approval, US West has promised to invest in digital subscriber line (DSL) infrastructure and reduce line-sharing charges for Rhythms, a Colorado-based provider of DSL-based broadband connection services. This deal has set a precedent for other competitive local exchange carriers (CLECs), but its impact remains uncertain.

Key Takeaways:

  • US West reached an agreement with Rhythms NetConnections, a DSL provider, to reduce line-sharing charges from $20 to $22 per line to $0 per line in US West's 14-state region, effective until June 2001.
  • The deal includes improvements in US West's loop-provisioning process and requires Rhythms to drop its opposition to the merger before individual state commissions.
  • The agreement may serve as a model for other CLECs to negotiate similar line-sharing deals with incumbent local exchange carriers (ILECs).
  • Analysts caution that Rhythms' concessions may be conditional on the Qwest merger and may not be replicable in other ILECs without similar leverage.
  • Rhythms currently serves 46 markets and 83 metropolitan statistical areas (MSAs) and expects to expand its service to 70 markets and over 100 MSAs by year-end.
  • The company's chief legal officer, Jeff Blumenfeld, believes that the agreement sets a precedent for other CLECs and could lead to similar deals with ILECs.

Statistics:

  • Rhythms NetConnections will pay $0 per line in US West's 14-state region until June 2001, when the rate will increase to $8.25 per line ($6.50/line in Minnesota).
  • The company had been paying between $20 and $22 per line, with an average cost of $21.50 per line.
  • Rhythms serves 46 markets and 83 metropolitan statistical areas (MSAs) and expects to expand its service to 70 markets and over 100 MSAs by year-end.

Sources:

  • Rhythms NetConnections
  • US West
  • Current Analysis (Carl Garland)
  • FCC (Federal Communications Commission)
  • "Minnesota Concessions" (article citing names and dates not provided in the current extract)

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