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MCI-Qwest deal: one-of-a-kind

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NEW YORK — Few in the telecommunications industry expect a flurry of similar agreements to follow the first wholesale line-leasing pact involving two major players — MCI Inc.'s deal with Qwest Communications International Inc.

The agreement, announced Monday, capped five weeks of negotiations. By contrast, the battered industry's other major actors have barely begun haggling.

"This is the only deal with major companies you're going to see," said Russell Frisby, CEO of CompTel, a trade organization representing carriers that compete with Denver-based Qwest and the other regional Bell companies. "The next stop is the Supreme Court."

Scott Cleland, CEO of the Precursor Group, a consulting firm, predicted last month that MCI and Qwest were the most likely companies to strike a deal. The reason: Both have pragmatic CEOs working on shaking off past scandals.

"They've already bottomed out," he said at the time. "They don't have the downside of cutting a deal."

The largest companies all sent executives to talks convened at FCC headquarters on Friday at the urging of FCC Chairman Michael K. Powell. The talks ended Monday and led to more backbiting in a bitter eight-year battle.

At issue are the rates that competitors, such as AT&T Corp., pay to rent equipment they need to provide local service.

The equipment, including the copper wires into homes, is owned by the regional Bells: Qwest, Verizon Communications Inc., SBC Communications Inc. and BellSouth Corp.

The rates were set by the states using FCC rules until a March decision by a Washington, D.C., federal appeals court threw out those rules. The Bell companies say the rates are too low. They also maintain that the reason they were implemented — a lack of competition for local phone service — is no longer valid, thanks to wireless phones and voice over Internet calling.

Competitors say the rates are too high. They say the Bell companies are fighting them to keep a lock on local telecom service, which they say lacks competition.

The appeals court is keeping the rules in place until June 15, at the request of the FCC, while industry talks continue. The Supreme Court last month gave the government until June 30 to appeal the circuit court's decision.

Powell on Thursday asked the carriers to send representatives to Washington for more intensive negotiations. By Monday, all the carriers had sent their CEOs.

"The (FCC) chairman's office called and said, 'We need to get this thing done, we have court deadlines coming up and no one has a deal yet,' " Steve Davis, senior vice president for public policy at Qwest, said in an interview.

Under the terms of the MCI-Qwest deal, the rental rates for equipment, which vary by state and region, will increase slightly. But the fees Qwest charges to switch a line to MCI's local service, a task that must be done manually by a technician working on Qwest's equipment, will be done in large batches instead of one at a time, so the fees will decrease.

MCI won't see price hikes until Dec. 31, the companies said.