ASHBURN, VA, and DENVER, May 31, 2004 ? MCI, Inc. (MCIA.PK) and Qwest Communications International Inc. (NYSE: Q) today announced a landmark agreement on wholesale pricing and services that provides both carriers with certainty and stability at a time when the regulatory landscape is changing. 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.
The MCI-Qwest agreement ? reached after five weeks of mediated negotiations between the carriers ? comes less than 90 days after the D.C. Circuit Court issued a decision vacating Federal Communications Commission (FCC) wholesale pricing rules. Today's agreement provides for both wholesale pricing continuity for MCI and a guarantee that such services will continue to be available.
?This is a historic day for our industry. 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,? said Richard C. Notebaert, Qwest chairman and chief executive officer. ?While this agreement was forged without any regulatory assistance, we would like to thank FCC Chairman Michael Powell, for his continued support and encouragement to identify a solution to this complex industry issue.?
?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,? said Michael D. Capellas, president and chief executive officer of MCI. ?This agreement proves that a negotiated outcome is not only possible, but mutually beneficial.?
Good Faith Negotiations
Both companies expressed their commitment to good faith negotiations early in the process. In an April 1, 2004, letter to the FCC, MCI's Capellas endorsed carrier-to-carrier negotiations and the concept of a suitable mediator, as long as negotiations were conducted openly and transparently. On April 15, 2004, Qwest invited all of its wholesale customers to participate in mediated negotiations, and, together with MCI, jointly hosted industry negotiations. At that time, Qwest was the only ILEC to agree to mediated, as well as group, negotiations.
The companies worked together closely to select a mutually acceptable mediator, with both agreeing on Cheryl Parrino, former chairman of the Public Service Commission of Wisconsin and president of the National Association of Regulatory Utility Commissioners. MCI has participated in both mediated group forums and one-on-one mediated negotiations with Qwest. This deal is a product of those negotiations.
"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," said Parrino. "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."
The agreement, which is unique within the industry, 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 includes a residential and business price split which addresses the unique market needs of these very different customers and results in a smaller rate increase for CLECs that serve residential customers in Qwest?s territory. Additionally, rates are geographically sensitive. In total, rates for Qwest's "Qwest Platform Plus" (QPP) -- which will replace the unbundled network element (UNE) platform that MCI currently buys under regulatory rules -- will increase an average of less than $5 ? including both residential and business customers -- by the end of the transition period. Certain non-recurring charges that MCI incurs to move its customers to its own facilities will decrease.
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 - specifically, Advanced Intelligent Network (AIN) services and Qwest Voice Messaging services.
Provisions aimed at enabling MCI to transition customers to its own facilities include mutually agreed upon pricing for batch hot cuts ? the process through which multiple customer lines are moved from a Qwest switch to a competitor's switch. The batch hot cut prices may be discounted based on the total number of lines in service. The deal also includes new electronic scheduling and online status tools to make the batch hot cut process more efficient and cost effective for both parties. Additionally, the agreement includes commercial-quality-assurance measures to ensure MCI continues to receive the highest-quality wholesale service.
MCI, Inc. (MCIA.PK) is a leading global communications provider, delivering innovative, cost-effective advanced communications connectivity to businesses, governments and consumers. With the industry's most expansive global IP backbone, based on the number of company-owned points-of-presence, and wholly-owned data networks, MCI develops the converged communications products and services that are the foundation for commerce and communications in today's markets. For more information, go to www.mci.com.
Qwest Communications International Inc. (NYSE: Q) is a leading provider of voice, video and data services to more than 25 million customers. The company?s 46,000 employees are committed to the ?Spirit of Service? and providing world-class services that exceed customers? expectations for quality, value and reliability. For more information, please visit the Qwest Web site at www.qwest.com.
This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to: the duration and extent of the current economic downturn in our 14-state local service area, including its effect on our customers and suppliers; access line losses due to increased competition, including from technology substitution of our access lines with wireless and cable alternatives; our substantial indebtedness, and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the SEC's current investigation into our accounting policies, practices and procedures and certain transactions; any adverse outcome of the current investigation by the U.S. Attorney's office in Denver into certain matters relating to us; adverse results of increased review and scrutiny by Congress, regulatory authorities, media and others (including any internal analyses) of financial reporting issues and practices or otherwise; further delays in making required public filings with the SEC; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings, including any adverse outcome of current or future legal proceedings related to matters that are the subject of governmental investigations, and, to the extent not covered by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; potential fluctuations in quarterly results; volatility of our stock price; intense competition in the markets in which we compete including the likelihood of certain of our competitors emerging from bankruptcy court protection or otherwise reorganizing their capital structure and competing effectively against us; changes in demand for our products and services; acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels; higher than anticipated employee levels, capital expenditures and operating expenses; adverse changes in the regulatory or legislative environment affecting our business; and changes in the outcome of future events from the assumed outcome included in our significant accounting policies.
The information contained in this release is a statement of Qwest's present intention, belief or expectation and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and Qwest's assumptions. Qwest may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. The cautionary statements contained or referred to in this release should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This release may include analysts' estimates and other information prepared by third parties for which Qwest assumes no responsibility.
Qwest undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
By including any information in this release, Qwest does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material.
The Qwest logo is a registered trademark of Qwest Communications International Inc. in the U.S. and certain other countries.