MCI, Qwest Reach Commercial Agreement

The agreement marks the first time that an incumbent local exchange carrier (ILEC) and a major competitive local exchange carrier (CLEC) have reached a commercially negotiated pact for local network access. According to Richard Notebaert, Qwest's chairman and CEO, it also signals a "historic day" for the telecommunications industry as a whole.

"Qwest and MCI proved that two companies that are direct competitors can embrace the principals of a free-market economy and reach a commercial services agreement that will allow them, together, to serve customers well," Notebaert said in a prepared statement.

At MCI, President and CEO Michael Capellas agreed.

"It has been MCI's position that good faith commercial negotiations can result in agreements that reflect the changing industry landscape and avoid complex regulatory proceedings and litigation," he said. "This agreement proves that a negotiated outcome is not only possible, but mutually beneficial."

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For channel partners of both carriers, the agreement means subtle changes across the board. Under formal terms agreed upon by MCI and Qwest, the deal maintains existing prices through December 31, 2004; creates a reasonable transition period through January 2007; provides for incremental price adjustments at scheduled points within the transition period; and eases MCI's transition to facilities-based service offerings.

To better reflect market conditions, the deal also includes a residential and business price split to address the unique market needs of each customer, and results in smaller rate increases for other CLECs that serve residential customers in Qwest's territory. Additionally, rates are geographically sensitive, meaning they can differ according to localized factors such as demographics, cost of living, and so on.

What's more, the Qwest Platform Plus (QPP) plan will replace the unbundled network element (UNE) platform that MCI currently buys under regulatory rules, and rates will increase an average of less than $5 by the end of the transition period. Certain non-recurring charges that MCI incurs to move its customers to its own facilities will decrease, but officials at both companies did not have an estimation of by how much.

Finally, the agreement includes Qwest DSL services, as well as other services not previously available with a combined wholesale service, providing MCI with the opportunity to access new features and functionality at a discount. MCI officials indicated that some of these new features might include Advanced Intelligent Network (AIN) services and Qwest Voice Messaging services.

The deal was reached after five weeks of mediated negotiations between the carriers, and comes less than 90 days after the Washington D.C. Circuit Court issued a decision vacating Federal Communications Commission (FCC) wholesale pricing rules. To navigate negotiations, the companies had worked together closely to select a mutually acceptable mediator, Cheryl Parrino, former president of the National Association of Regulatory Utility Commissioners.

On the eve of the agreement, Parrino said she was wowed by the way the two companies worked together to iron out a deal.

"The mediation process worked well because MCI and Qwest came to the negotiations with a desire to find a solution that would work for both parties," she said. "I was very impressed both with the desire of the participants to understand and address each others' business needs and their ability to find creative solutions to some of the most difficult issues."