Qwest Sells off Business in U.S. West Territory

FRAMINGHAM (03/17/2000) - Soon, you won't be able to get Qwest frame relay, ATM, private line or voice services in 14 Western states - but Qwest will probably get its merger with US West.

Qwest, the fast-growing national broadband carrier, announced Thursday that it is selling almost its entire long-distance business in US West's territory to Touch America, a budding regional carrier.

Such a move is required by Federal Communications Commission rules in order for the pending Qwest/US West merger to go through. US West has not yet won long-distance authority for any of its states. And under federal rules, any company that buys a regional Bell operating company becomes an RBOC itself and must follow the same rules.

Touch America is a subsidiary of Montana Power, and it is one of the few electric-utility-based telecom carriers to have taken advantage of their rights-of-way to offer services directly to end users - instead of just on a wholesale basis to other carriers.

Qwest officials say they will try to ease the transition by keeping customers on the same platforms as much as possible. For example, Qwest actually will sell its Lucent ATM/frame relay switches in US West's 14-state region to Touch America, according to John Scarborough, Qwest's vice president of marketing for business markets. Qwest will also lease Touch America its Nortel DMS 250 central-office telephony switches.

Nevertheless, current Qwest customers will have to get used to dealing with two companies - Touch America for the US West territory and Qwest for the rest of the country.

And the move could make it harder for Qwest to sell frame, ATM and voice services in the future to users with sites in the US West territory who are reluctant to split their networks.

"Will we miss some of those opportunities? Yeah," conceded Stephen Jacobsen, Qwest's executive vice president of global business and government markets.

"But when you only have 2% or 3% market share, you don't need to win every customer."

One consolation for Qwest: It will keep the bulk of its Internet-related business nationwide. Qwest officials say their dedicated Internet access service is essentially a local service and doesn't infringe on FCC long-distance regulations. And their Web hosting service isn't inherently a transport offering, they add. Nevertheless, Scarborough conceded that Touch America might have to be called upon to carry IP virtual private network traffic.

In any case, the FCC must review the deal with Touch America to make sure it passes muster. The FCC last week approved the Qwest/US West merger with the condition that Qwest complete an acceptable long-distance divestiture.

Qwest is also still awaiting final approval from regulators in six of the 14 US West states. Officials say they hope to close the merger toward the end of the second quarter.

More information about Touch America is available at www.in-tch.com.

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