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Qwest Goes Public About Secret Deals With Rivals

Nov 21, 2002 | The Oregonian Qwest Communications International made public 17 secret agreements it struck with competitors that lease space on its network, the first step toward peacefully resolving an informal investigation into deals in Oregon.

The pricing and service deals have riled other competitors, who claim the agreements hinder competition for local-phone service. And Minnesota regulators this week said they might fine Qwest as much as $75 million because of deals in that state.

The agreements, approved by the Oregon Public Utility Commission in the past week, were with competitors including Covad Communications, Eschelon Telecom, Global Crossing, MCI WorldCom and SBC Telecom. The PUC is looking into more deals that possibly should have been reported.

Qwest spokeswoman Erin Dunn said the company voluntarily filed the 17 agreements and is complying with the commission.

"Qwest wants a robust market to take place in Oregon," she said.

The Telecommunications Act of 1996 requires dominant local-phone companies, such as Qwest, to publicly disclose prices and other provisions such as customer service. That allows other competitors to pick and choose from those terms for their own contracts.

Some competitors alleged the deals use discounts to reward companies that didn't speak out against Denver-based Qwest at public hearings on local-phone competition. Qwest claims the contracts aren't covered under the act.

Because of the contracts, Minnesota utility regulators have delayed a ruling on competitors' access to Qwest's network, a key step toward Federal Communications Commission approval of Qwest providing long-distance in the state.

The Oregon PUC in August recommended the FCC approve Qwest's long-distance bid here, ruling that the contracts don't prohibit competition. Qwest plans to apply to the FCC later this year for long-distance in Oregon and could receive approval by late March.

"Minnesota has a vendetta against Qwest," said Joan Smith, an Oregon utility commissioner. "It's just one more red herring in my opinion."

Smith said the deals Qwest filed with the PUC "are not a big deal" and probably didn't affect local-phone competition.

She said the PUC continues to examine other deals, and it's likely that the regulators will disagree with Qwest about whether about a dozen of them should have been filed.

Phil Nyegaard, administrator of the PUC's telecommunications division, said the deals still under review typically involve discounts that reimburse competitors for service problems. The PUC will continue to study those, and Qwest will consider whether any should be publicly filed.

"At some point we'll reach an impasse," Nyegaard said. "We'll never agree on everything."

The PUC could call for a formal investigation into the remaining deals, which could lead to fines.

Qwest's Dunn said that to her knowledge, Qwest is in "full compliance" with the PUC, and she was unaware of any problems with the remaining contracts.

"We're working in full cooperation with them, so whatever comes up, we're dealing with," she said.

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