Qwest Communications $788 Million Investment Plan And Rate Settlement Proposal Approved In New Mexico

ALBUQUERQUE, March 9, 2001 ? Qwest Communications International Inc. (NYSE:Q), the broadband Internet communications company, said today that it is pleased with the unanimous decision by the New Mexico Public Regulation Commission (PRC) to approve a $788 million investment plan and rate settlement proposal.

?This is a great day for New Mexico and for our customers,? said John Badal, Qwest vice president for New Mexico. ?The commission?s order recognizes the substantial commitments Qwest is making to consumers in New Mexico. They are giving us a chance to succeed with our customers. We intend to do just that, and welcome the opportunity to demonstrate our commitment to the state with our actions on behalf of consumers.?

The agreement approved by the PRC was supported by Commission staff, AT&T, WorldCom, independent Internet Service Providers, the New Mexico Association of Commerce and Industry as well as chambers of commerce from around the state. The agreement sets forth a new Alternative Form of Regulation (AFOR). State law requires the PRC to eliminate rate of return regulation for Qwest by April 1, and instead impose an alternative form of price cap regulation.

The new regulation plan includes specific provisions for service quality standards while still ensuring lower prices for certain services. It completely eliminates long-distance charges between several communities, reduces rates for Qwest?s intrastate long-distance service statewide, and provides for deployment of high-speed Internet access to several new areas of the state, ultimately making the services available to more than 700,000 customers by the end of 2002. Additionally, several other service charges are to be reduced or eliminated, including a $3.30 monthly charge now assessed to more than 140,000 rural customers.

In the area of basic telephone service rates, the agreement makes permanent the interim rate decrease of $29 million, and it caps basic business service rates. The agreement allows the current cap on residence basic service rates to gradually increase ? up to a maximum of $13.50 by 2003 ? but only if Qwest meets a series of investment, service deployment and service quality commitments. The maximum rate allowable under the five-year plan is still below the basic rate in effect two years ago.

The details of the agreement follow:

Investments: Qwest will invest $788 million over 5-years in the following areas:

  • Digital Switches: Upgrading digital switching equipment that routes data and voice traffic to address network congestion, accommodate growth, and support the offering of new features.
  • Distribution Plant: Upgrade the local network to relieve congestion, enhance the quality of traditional telephone service, and facilitate the introduction of advanced services like Digital Subscriber Lines (DSL), a high-speed broadband Internet service.
  • Fiber Transport: Upgrade fiber optic transport facilities and deploy equipment to relieve congestion and improve service.
  • Advanced Services: Invest in service-specific equipment to support advanced services, including:
    • Integrated Services Digital Network (ISDN): Qwest will deploy this high-speed transport service to support advanced data and voice communications to qualified access lines in Tucumcari, Artesia, Belen, Los Lunas, Las Vegas, Las Cruces-Amber Mesa, Aztec Main, Santa Teresa, Aztec South and Gallup East.
    • DSL: Qwest will deploy DSL in Taos, Farmington Main, Roswell Main and Alamogordo, in addition to deployments in Albuquerque, Santa Fe, Los Alamos, Las Cruces and Gallup main.

Service Quality: Under the agreement, Qwest commits to the following service quality standards:

  • Installation: For basic and regular services, provision service within 5 working days where facilities are available. For specialized and engineered services, provision service within 15 days where facilities are available and 45 days where facilities are not available.
  • Delayed or held orders: Qwest will clear all existing held orders as of March 1, 2001 within 18 months of the effective date of the agreement.
  • Repair Service Standards: Establishes a specific standard for repair and limits the amount of repair problems that will be accepted. Qwest agrees that it will not exceed a specific number of trouble reports on a wire center basis.
  • Out-of-Service Reports: Establishes a specific standard under which Qwest will restore service within 24 hours.
  • Service Quality Monitoring: Qwest will establish tracking programs to compile statistics necessary to determine its compliance with the quality of service commitments, including monthly held order reports, quarterly and annual service quality compliance reports.
  • Credits to Customers: Qwest will be required to issue credits to customers for missed service calls, held orders and unfilled orders. If Qwest does not meet specific service standards, the company is liable to pay up to $17 Million annually in additional investment incentives.

Price Reductions: Qwest will reduce rates to wholesale and retail customers in the following areas:

  • Carrier access charges assessed long distance companies: Qwest will reduce the fees it charges long-distance companies for using the local network ? or access charges ? by $14 million over 3 years.
  • Elimination of Outside Base Rate Area (OBRA) Charges: In 2002, customers who live outside of a base rate area will have their monthly rates reduced by $3.30 per month.
  • Specified Monthly Charges: Qwest will reduce monthly rates for non-listed numbers, non-published numbers and toll restricted service by $3 million.

Price Caps: Qwest will move from rate of return regulation to price cap regulation.

  • Basic Business Service: Rates for basic business service will be capped at $34.37 for 5 years.
  • Basic Residence Service: Rates for basic residence service will increase according to the following schedule:
    • 8/1/02 from $10.66 to $12.25 if Qwest satisfies investment, DSL, ISDN and held order commitments.
    • 8/1/03 to $13.50 if Qwest satisfies investment, DSL, ISDN and held order commitments.

Extended Area Service: Customers in the following service areas will no longer incur long-distance charges when placing calls between communities of interest:

  • Angel Fire, Penasco, Questa, Red River and Taos; Hatch and Las Cruces
  • Artesia and Roswell; Cimarron, Springer and Raton.

Badal said that even as the AFOR plan was being debated over the past several months, Qwest pushed forward with new investments throughout the state, including opening a new operator center in Albuquerque that will employ more than 250 operators to assist long-distance callers world wide.

Badal said, ?It means that Qwest can continue moving forward with its investment projects in the state, upgrading the network to improve service quality, and extending the reach of technology all across New Mexico, including the rural areas. Our customers should be proud of the Public Regulation Commission, the commission staff, Governor Gary Johnson, and a number of state legislators who have been working toward this day for a long time.?

About Qwest

Qwest Communications International Inc. (NYSE: Q) is a leader in reliable, scalable and secure broadband Internet-based data, voice and image communications for businesses and consumers. The Qwest Macro Capacity® Fiber Network, designed with the newest optical networking equipment for speed and efficiency, spans more than 106,000 miles globally. 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 Qwest 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 potential fluctuations in quarterly results, volatility of Qwest's stock price, intense competition in the communications services market, changes in demand for Qwest's products and services, dependence on new product development and 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, rapid and significant changes in technology and markets, adverse changes in the regulatory or legislative environment affecting Qwest's business and delays in Qwest's ability to provide interLATA services within its 14-state local service territory, failure to maintain rights of way, and failure to achieve the projected synergies and financial results expected to result from the acquisition of U S WEST timely or at all and difficulties in combining the operations of Qwest and U S WEST. 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.

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