The telecommunications industry is a lot like the Phoenix Suns these days. The names keep changing.
Yep, the telecommunications landscape in Arizona is changing – again. Earlier this week, the Arizona Corporation Commission approved the merger between CenturyLink, headquartered in Monroe, LA and Arizona’s longest-standing telephone provider, Qwest Communications.
With Minnesota’s approval of the transaction today, regulatory approvals remain in only Washington and Oregon. Once the transaction is final, the Qwest name and logo will be retired in Arizona and replaced with CenturyLink.
The merger is good news for Arizona and Arizona telecommunications customers. The new, larger company will strengthen Qwest’s financial picture and bring new broadband investment to the state. Additionally, Phoenix will become one of CenturyLink’s regional centers.
The CenturyLink merger with Qwest marks the most recent corporate change for Qwest --- arguably the most beleaguered of the “Baby Bells.” Qwest’s predecessor, U.S. West (formerly Mountain Bell) emerged from the break-up of the Bell system in 1983 as the smallest Bell Operating Company in terms of customer revenue, although it served the largest geographic area.
It looked like the local telephone business was a solid monopoly cash cow, until the mid-1990s. In 1996, the Telecommunications Reform Act opened up the market for local telephone service to competition and required the Bell Operating Companies (BOCs), including U.S. West, to offer interconnection services to its competitors. In exchange for opening their networks to competitors, the BOCs could apply to regulators to offer long-distance service, from which they were precluded as a condition of divestiture. With the advent of local exchange competition and widespread evolution of wireless, U.S. West/Qwest’s market share of the traditional local telephone market in Arizona declined from near 100 percent to somewhere below 50 percent today.
But, the big financial blow to Qwest came in 2001 when the Securities and Exchange Commission brought charges against former Qwest CEO Joseph Naccio and several other Qwest officers for financial improprieties and led to restatement of Qwest financials. Qwest’s stock price immediately tumbled from the mid-sixty dollar range to three dollars per share. And Qwest has been attempting to recover its financial footing since.
Enter CenturyLink, a predominantly rural telephone company located in 33 states. Its combination with Qwest will result in the third largest local exchange carrier in the nation, serving 17 million access lines. The merged company will produce a more financially sound company with better access to capital for investment in infrastructure improvements.
Arizona will benefit from $70 million investment in broadband infrastructure that CenturyLink committed to provide as a condition of gaining approval of the transaction by the ACC. And, Arizona gets one of only six regional centers.
And, finally a shout-out goes to the ACC for its relatively swift action on the transaction.
CenturyLink and Qwest filed for approval of the merger transaction last May with the ACC. Following its filing, CenturyLink/Qwest reached agreements with the ACC Staff, RUCO and 12 other intervenors in the case. The ability to reach compromise among the parties enabled the Administrative Law Judge to efficiently prepare a recommendation to the full Commission. And, with only an hour of discussion at its March 1st Open Meeting, the Commission approved the transaction on a 5-0 vote.
While Arizona was not the first of Qwest’s states to approve the transaction, it isn’t the last. Minnesota approved the merger today. Oregon and Washington are still reviewing and are expected to act soon.
I’ve written on a couple occasions (here and here) about the need for the ACC to process filings more efficiently and reduce the time it takes to reach final decisions. In 2008, AIC published a report which outlined several ways in which the ACC could improve its administrative and ratemaking processes to reduce regulatory lag and make efficient use of its own resources – which, like other state agencies, have seen reductions in recent years. Simply put, regulatory lag creates uncertainty and kills investment.
I’m excited to see the ACC making strides in this area as evidenced by its action on the CenturyLink/Qwest merger. With numerous other cases in the pipeline, it seems the ACC is headed down the right track.
The merger is good news for Arizona and Arizona telecommunications customers. The new, larger company will strengthen Qwest’s financial picture and bring new broadband investment to the state. Additionally, Phoenix will become one of CenturyLink’s regional centers.
The CenturyLink merger with Qwest marks the most recent corporate change for Qwest --- arguably the most beleaguered of the “Baby Bells.” Qwest’s predecessor, U.S. West (formerly Mountain Bell) emerged from the break-up of the Bell system in 1983 as the smallest Bell Operating Company in terms of customer revenue, although it served the largest geographic area.
It looked like the local telephone business was a solid monopoly cash cow, until the mid-1990s. In 1996, the Telecommunications Reform Act opened up the market for local telephone service to competition and required the Bell Operating Companies (BOCs), including U.S. West, to offer interconnection services to its competitors. In exchange for opening their networks to competitors, the BOCs could apply to regulators to offer long-distance service, from which they were precluded as a condition of divestiture. With the advent of local exchange competition and widespread evolution of wireless, U.S. West/Qwest’s market share of the traditional local telephone market in Arizona declined from near 100 percent to somewhere below 50 percent today.
But, the big financial blow to Qwest came in 2001 when the Securities and Exchange Commission brought charges against former Qwest CEO Joseph Naccio and several other Qwest officers for financial improprieties and led to restatement of Qwest financials. Qwest’s stock price immediately tumbled from the mid-sixty dollar range to three dollars per share. And Qwest has been attempting to recover its financial footing since.
Enter CenturyLink, a predominantly rural telephone company located in 33 states. Its combination with Qwest will result in the third largest local exchange carrier in the nation, serving 17 million access lines. The merged company will produce a more financially sound company with better access to capital for investment in infrastructure improvements.
Arizona will benefit from $70 million investment in broadband infrastructure that CenturyLink committed to provide as a condition of gaining approval of the transaction by the ACC. And, Arizona gets one of only six regional centers.
And, finally a shout-out goes to the ACC for its relatively swift action on the transaction.
CenturyLink and Qwest filed for approval of the merger transaction last May with the ACC. Following its filing, CenturyLink/Qwest reached agreements with the ACC Staff, RUCO and 12 other intervenors in the case. The ability to reach compromise among the parties enabled the Administrative Law Judge to efficiently prepare a recommendation to the full Commission. And, with only an hour of discussion at its March 1st Open Meeting, the Commission approved the transaction on a 5-0 vote.
While Arizona was not the first of Qwest’s states to approve the transaction, it isn’t the last. Minnesota approved the merger today. Oregon and Washington are still reviewing and are expected to act soon.
I’ve written on a couple occasions (here and here) about the need for the ACC to process filings more efficiently and reduce the time it takes to reach final decisions. In 2008, AIC published a report which outlined several ways in which the ACC could improve its administrative and ratemaking processes to reduce regulatory lag and make efficient use of its own resources – which, like other state agencies, have seen reductions in recent years. Simply put, regulatory lag creates uncertainty and kills investment.
I’m excited to see the ACC making strides in this area as evidenced by its action on the CenturyLink/Qwest merger. With numerous other cases in the pipeline, it seems the ACC is headed down the right track.
