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Qwest merger has telecoms on edge

Vancouver-area providers concerned about effects on customers

Published: October 8, 2010, 12:00am

A pending merger between Qwest Communications and CenturyLink has some smaller Vancouver-area telecoms worried about their businesses. State regulators have also expressed concerns.

Integra Telecom is one of several local telecom providers that buy access to Qwest or CenturyLink lines at wholesale prices and resell phone and Internet services. The Portland-based company, which employs 50 workers in Vancouver and counts one in every five Vancouver businesses as a customer, says service issues associated with the merger could also lead to problems for local businesses that depend on their Internet service to survive.

“We’re not against the merger … they’re a fact of life in telecoms,” said John Nee, vice president of corporate communications for Integra. “But the details and characteristics of this merger raise our eyebrows and we have some concerns.”

Denver-based Qwest, the largest telecommunications provider in Washington, in April announced its plans to merge with Monroe, La.-based CenturyLink, formerly known as CenturyTel. Under the terms of the stock-only deal, Qwest will be a wholly-owned subsidiary of CenturyLink, forming the third largest telecommunications company in the U.S., with $19.8 billion in revenues, according to CenturyLink.

The merger will create a combined company with more financial resources, a bigger network and more access to capital, said Bob Gravely, a spokesman for Qwest. The larger company will be better able to invest in new technologies and services that will allow it to compete with cable companies, he said.

It could also negatively affect customers here who depend on these companies for their phone, Internet, DirectTV and wireless services, according to the Washington Utility and Transportation Commission.

The WUTC, along with regulators in 21 other states and the U.S. Securities and Exchange Commission, must all approve the merger before Qwest and CenturyTel can combine. The deal has been approved in 11 without conditions, leaving 10 states scheduled for review.

Customers will see the same service, rates, taxes, terms and conditions immediately following the merger. But the process of two large companies combining their systems could cause technical glitches that lead to billing and service errors, among other problems.

Chief among the concerns raised by WUTC staff is CenturyLink’s plan to save $50 million in the first two years, which a WUTC staff report speculated could result in a reduction in its work force. Layoffs could cut skilled workers who will be needed to integrate both companies’ support systems — the hardware and software that manage ordering, inventory, planning, repair and billing. A CenturyLink spokeswoman said the company does not have plans to layoff employees. The company also said it will continue to support operations for its wholesale customers after the merger.

“They don’t have a plan yet (for integration). It’s one of the things that has bothered us,” said Bob Williamson, author of the WUTC’s staff recommendations. “But they’re beginning to get closer to that.”

WUTC staff last week recommended several measures to protect Qwest and CenturyLink’s current customers and telecom intermediaries like Integra The staff proposed 45 conditions before the commission approves the merger including freezing residential and business local telephone rates for three years, expanding high-speed Internet access in Washington and requiring stockholders, not ratepayers, to pay for branding and transition costs. The staff also proposes waiting three years to integrate the two systems and requiring a detailed plan six months before the integration, in order to protect wholesale customers such as Integra.

According to Integra, these measures don’t go far enough to protect local telecom providers’ customers.

“CenturyLink’s retail performance could suffer; that means that wholesale could get worse, too,” said Jeff Oxley, general counsel for Integra.

Integra proposes three additional measures to help protect local telecom providers and their business customers:

• Require a third-party inspection of the integration.

• Develop a plan to compare CenturyLink’s service quality after the merger with Qwest’s performance before the merger.

• And allow local telecom companies to contribute to the planning process for the integration.

All customer contracts and agreements remain in place at the time the transaction is closed.

When asked out it will address wholesale telecom companies’ concerns, CenturyLink issued the following statement: “There will be no interruption in service. In addition, the combined company will continue to employ highly skilled and experienced personnel in its wholesale operations group to meet wholesale customer needs.”

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Editor’s note: An earlier version of this story included incorrect information about CenturyLink’s plans and the process by which it will merge with Qwest. It must gain regulatory approval in 21 states; 11 have already approved the deal. Also, a CenturyLink official said the company does not plan to layoff employees as a result of the merger, despite concerns raised by a Washington Utility and Transportation Commission staff report. The company also said it will continue to support operations for its wholesale customers after the merger.