Qwest seeks more money from its competitors

For years, Qwest Communications has been known as the dominant phone company in Minnesota. But Qwest says it's not as dominant as it used to be -- and it freely admits that it's lost more than 40 percent of its Minnesota telephone lines to competitors in the past seven years.

The company has a financial interest in disclosing that. Qwest says there's healthy phone competition in the Twin Cities business market, so it's asking the federal government to let it raise the prices it charges competitors who use its phone network to serve business customers.

Qwest is asking the Federal Communications Commission to exempt it from rules -- designed to promote competition -- that require Qwest to give smaller phone carriers discounts for using parts of its network known as the "last mile" to the customer.

The price increases, estimated by some business market competitors at $200 million a year in the Twin Cities alone, could trickle down to consumer and business customers.

But Qwest's business competitors accuse the company of twisting the truth to extract money it doesn't deserve.

The smaller carriers -- telephone companies called competitive local exchange carriers, or "CLECs" -- say that Qwest is hurting in the residential market -- where it faces competition from cell phones, cable companies and Internet phone services -- but is not suffering in the business market, where it has less competition.

Denver-based Qwest won't break down its landline losses by residential and business markets to show where it lost more than 990,000 Minnesota phone lines between 2000 and 2007.

The Minnesota Public Utilities Commission (PUC) has sided with the smaller carriers, noting there is little competition in the Twin Cities business telephone market. In February, the PUC found that smaller carriers had taken away only about 3 percent of Qwest's lines in the Twin Cities, and that the cable and cell phone companies weren't significant competitors in the business market.

Comcast agreed with the PUC. The cable company is in the early stages of offering business phone services after launching the effort in October, Comcast spokeswoman Mary Beth Schubert said.

But John Stanoch, Qwest president for Minnesota, rejects the arguments of the other carriers and the PUC.

"Comcast is not only offering residential phone service, they are heavily marketing business-class service to small- and medium-sized businesses, and Internet service to larger business customers," Stanoch said. "And all the wireless players in the Twin Cities are offering wireless broadband and data services that target business customers." The argument that there is little competition in the business market, he said, "flies in the face of the facts and will not hold up."

Some carriers are expecting hefty prices increase from Qwest if the FCC rules in its favor, said Jeff Oxley, general counsel for Oregon-based Integra Telecom, widely considered the largest of about a half-dozen carriers competing with Qwest in the Twin Cities.

"What Qwest is trying to do is reclaim the entire small and medium business market by forcing our costs through the roof, which would force us to raise our prices so high that we can't effectively compete with Qwest," Oxley said.

Carriers serving the Twin Cities and three other cities affected by the Qwest proposal -- Denver, Seattle and Phoenix -- have been lobbying the FCC and Congress to turn down the Qwest plan, said Dudley Slater, Integra's CEO. They are pinning their hopes on the fact that a similar proposal last year by telephone company Verizon was turned down by the FCC.