Covad Acquires 23,000 Qwest DSL Customers

Covad Communications Wednesday acquired 23,000 Qwest business class DSL customers for $3.75 million in cash.

Covad is also releasing Qwest from a contract that required Qwest to buy Covad services with an estimated value of $8.8 million, according to Covad.

Depending on the success of the migration, Covad may pay Qwest an additional $1.25 million. Qwest will assist Covad with the customer transition.

During a 105-day transition period, Qwest customers would be moved to Covad's TeleSoho small-office/home-office service, and TeleSpeed, which offers speeds of 144 Kbps to 1.5 Mbps, vs. TeleSoho speeds of up to 3 Mbps.

Most customers are out-of-region customers of Qwest's in the following states: California, Delaware, Illinois, Indiana, Kansas, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Texas, Connecticut, Florida, Georgia, Nevada, North Carolina, Louisiana, Wisconsin, Alabama, New Hampshire and Rhode Island. Fewer than 250 customers will be affected in Arizona, Colorado, Minnesota, New Mexico, Oregon, Utah and Washington.

In March, Covad began recruiting solution providers as part of its SMB push.

Partners stand to make $150 to $300 for each DSL line they provision, and in some cases they can snare up to $2,000 per line, said Tom Thayer, vice president and assistant general manager of Covad Broadband Solutions.

The channel push coincided with Federal Communications Commission rulings that could prove to be a blow for DSL providers. One FCC ruling banned DSL providers from using Regional Bell Operating Companies' (RBOCs) new fiber-optic networks at discounted rates.

The FCC voted to allow competitors to continue using RBOCs' existing networks at a discount. But the commission also said the RBOCs do not have to offer discounts on new high-speed fiber-optic networks, a move many industry pundits fear will drive up broadband prices.

The FCC also ruled that the RBOCs no longer have to lease high-speed portions of their copper lines to DSL providers. In an arrangement called line sharing, DSL providers use the RBOCs' local phone loop to provision services. At the time, Covad said phasing out line sharing would result in less choice and increased prices for customers should a local phone company set unreasonable prices for last-mile access.

As a result of the ruling, Covad now faces the task of transitioning its line-sharing customer base to new pricing arrangements over the next three years. This will affect mainly the consumer side of Covad's business, the company said.

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