Minnesota Ponders Qwest's Fate

October 28, 2002
The Minnesota Public Utilities Commission (PUC) is pondering what to do about Qwest, which was found by the PUC to have effectively sabotaged local telephone competition through illegal, secret deals that provided discounts and other favors to a select few competitors at the expense of others.

Qwest, the state's dominant phone company, has been seeking federal permission to enter the $10 billion long-distance market in the states where it provides local service. Last week, the U.S. Justice Department recommended that Qwest be allowed into the long-distance business in nine states, not including Minnesota, even though at least three other states have recently sued Qwest for deceptive practices.

The Minnesota PUC is considering several possible punishments for Qwest -- including breaking it up, fining it at least $50 million or even prohibiting it from doing business in Minnesota.

In testimony before the PUC, company officials said that Qwest's new CEO, Richard Notebaert, was dedicated to cleaning up the company's practices and that the state did not have to worry about Qwest once again throwing up roadblocks to some competitors while greasing the skids for others. The PUC should simply trust the company and monitor its activities, one executive testified.

Consumers, on the other hand, are calling for strong penalties.

"That sort of dishonesty, making a profit through deception, is disgusting. I'm encouraging the PUC to set an example in this case," said Erik Shetney, a Qwest customer who testified before the PUC.

PUC Chairman Gregory Scott has publicly suggested that the commission yank Qwest's certificate of authority to do business in Minnesota. That would force the company to sell its Minnesota telephone operations.

The state's Commerce Department has called for a less radical solution -- a so-called "structural separation" under which Qwest would be broken into two units, one to handle telephone service sales to the public and another that would sell network access to competing telephone companies. That would eliminate the possibility of future sweetheart deals, the department said.

An administrative law judge found that Qwest used the secret deals not only to block effective competition but also to silence those who might have spoken out again Qwest's attempt to enter the long-distance business in Minnesota.

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