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Lawmakers gird for Qwest

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A bill that proponents say will lead to true local phone service competition is expected to elicit strong feelings from all sides, according to its sponsor.

House Majority Leader Kevin Garn, R-Layton, has unveiled HB140, designed to force Qwest Communications International Inc. to allow local competition or face possible separation of its retail and wholesale operations.

But approval, if it comes, won't be easy.

"This will be the bloodiest battle we fight up here this year," Garn said Tuesday. "Qwest will pull out all the stops, bring in big-gun lobbyists and do all they can to protect an unregulated monopoly. It's time that we broke that down and we let competition flourish.

"If we pass this bill, it will be a new day for telecommunications in Utah. We will have competition and choice for consumers, which are long overdue."

HB140 allows for the Division of Public Utilities or a Qwest local-service competitor to file complaints for anti-competitive conduct against Qwest.

Examples of anti-competitive conduct include predatory pricing and preferential treatment in pricing or provisioning of "an essential facility or service."

The state Public Service Commission could penalize Qwest for that conduct — up to $300,000 per day for the first violation, double for the second and triple for the third.

After a third violation, the commission would develop a plan for separating Qwest's retail and wholesale operations.

The retail side serves residential and business customers directly. The wholesale business serves other telephone companies, who have said Qwest makes it too costly for them to use the Qwest network to offer local phone service.

Before implementing separation, the commission would have to allow the governor and the Public Utilities and Technology Interim Committee to comment on the situation.

The bill includes language that says the state Telecommunications Reform Act of 1995 and the Federal Telecommunications Act of 1996 have failed to provide a framework for local-service competition.

"There is no competition," Garn said. "The people in my district, if they want to change local service, they have no choice, no alternative. As a result, they are paying high prices and the service quality is less than what it ought to be.

"Qwest's argument is that there is competition, in spite of the fact they have a 90 percent market share. The majority of Utahns don't have choice."

A recent Public Service Commission report on the state's telecom industry said Denver-based Qwest serves 84 percent of the local phone market in its service territory, down from 92 percent in 2000. It has 94 percent of the residential market and 68 percent of the business market. Still, it said competitors "remain far behind" Qwest in revenues and customers.

AT&T has pitched a variety of bills in other states, but none calling for structural separation have been approved. The company says competition ultimately will give customers better options, service and rates.

Robin Riggs, Qwest's vice president for Utah, said Qwest opposes structural separation, citing what he said would be immediate and long-term higher costs for customers.

"We believe the costs of structural separation will be very, very high — in the hundreds of millions of dollars — and probably most of that cost will be borne by ratepayers in the future," Riggs said.

"This (structural separation) concept is not new. We know AT&T has been trying to push this concept in several other states, and in every state so far where it's been investigated or pursued, it's been defeated, either at the PSC (Public Service Commission) level or the legislative level."

Riggs noted that Qwest already has a strong incentive to open up its local markets. If it can prove its network is open to competitors, it will gain re-entry into the interstate long-distance market.

L.J. Godfrey, vice president of government affairs for AT&T's Western region, said the penalties and possible structural separation in the bill "is more than adequate" to address the current lack of competition.

"We think structural separation would be a good thing, and the bill is a good step in that direction," he said.

"If Qwest's activities are as clean as they say they are and if they play by the rules, the structural-separation component never goes into effect. Right now, we're still in virtually a local-service monopoly situation. People do not have the ability to change their local service the way they can change their long-distance or wireless services, and monopolies never innovate."

Like Garn, he expects HB140 to create a lot of debate.

"It's been a huge issue because the stakes are larger, for customers and telecoms," Godfrey said. "You can expect the usual disputes that go along with telecom. I think it will be a big deal."

Consumer activist Claire Geddes said she was unfamiliar with HB140's details but said she favors any bill whose concept involves change.

"The worst thing we could do is nothing," she said. "Qwest will argue that it will cost more money, but I have to argue about what it will cost us when they are the only one in the market and we've moved away from regulation. The 1995 act has not worked as intended.

"We need to have true competition, which will lead to better prices, or go back to a regulated monopoly."

E-mail: bwallace@desnews.com