Annual Wireline Expenditure Increase Resulting from Qwest Forbearance Market Denver Minneapolis Phoenix Seattle Overall Increase $241.7 M $242.2M $503.4M $153M Per Household $100 $117 $131 $96 % Increase 21% 26% 28% 20%Heather B. Gold, Senior Vice President of External Affairs at XO Communications, said, "Customers in these markets rely on competitors for choice, savings and innovation. The FCC needs to do the right thing and reject these petitions." Gold continued, "If Qwest wins approval of its forbearance petitions, it will do what monopolies always do -- exert massive market power to squeeze out competition and raise rates. Qwest has already established a pattern of raising rates when it wins forbearance." The Commission's approval of an earlier Qwest forbearance petition in Omaha triggered a chain reaction leading to less competition and higher prices. If the Commission grants Qwest's new forbearance petitions, competitors and customers in the four new markets can expect an encore of the Omaha scenario:
-- Wholesale Rates Rise to Access Tariff Levels. Forbearance will immediately induce upward pressure on wholesale prices. Qwest, like other Bell monopolies, has repeatedly advocated that competitors obtain local loops and transport services out of the incumbent's much higher-priced special access tariff. With its forbearance petitions granted, Qwest will be incented to raise prices for local loops and transport to special access price levels. -- Competitors Have No Alternatives. Competitors use Qwest's wholesale facilities extensively because no economically viable alternative is available. For example, cable companies' networks are not designed to provide wholesale loop and transport services, and reach mainly residential customers, not competitive providers' core market -- business customers. Further, wireless services are not yet a viable wholesale alternative because they lack the bandwidth, functionality, and reliability that competitive wireline telcos require. -- Competitors Leave or Stay Away. The rise in wholesale prices will force competitive telcos to raise their retail rates or leave the market. In Omaha, Qwest's successful forbearance bid made it uneconomic for one competitor to continue offering service to residential and small business customers, and forced another to abandon plans to enter the market.Gigi B. Sohn, president and co-founder of Public Knowledge, said, "The FCC made the right call late last year when it turned down Verizon's petitions for forbearance. It should do the same with Qwest's. This study shows, as did a previous one analyzing the Verizon markets, that the result of Qwest's petitions would be less competition and higher prices for consumers. Rather than deal with the forbearance issue on a market-by-market basis, the FCC should look instead for ways to increase competition, which would result in lower prices and more choices for consumers." The QSI Model Using publicly available demand data, the QSI Study focused on the impact of a grant of forbearance in the following three markets:
1. Mass market (measured by residential and single line business switched access lines; 2. Enterprise market (measured by multi-line switched access lines; and 3. High-speed broadband Internet market.QSI collected Qwest's current UNE and special access recurring rates for key network elements, such as local loop and transport. QSI then calculated the difference between UNE-based and special-access-based rates for various network element combinations under which end-user markets in the study are typically served. The QSI Study is available at www.freetocompete.com
Contact Information: Contact: Jim Crawford Crawford Public Relations T: 703-753-4480 M: 703-498-7315