Z-TEL DROPS OUT OF CONSUMER MARKETS IN 8 STATES
Z-Tel, a CLEC with the one of the biggest national footprints, said Tues. it was suspending retail operations in 8 states as a result of the decision of the Administration not to pursue an appeal of the Triennial Review Order. Sources said other CLECs may be poised to take similar steps in the coming weeks, as they reassess their business plans as the unbundled network element platform (UNE-P) is eventually phased out. MCI, in particular, is rumored to be prepared to drop out of the consumer market, though sources said no decisions have been made.
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Z-Tel sent regulators a letter on Mon. explaining its withdrawal. “Without rules in place that support vibrant competition in the telecommunications marketplace, competitive carriers and consumers are now unfortunately faced with great uncertainty,” it said. “The victims of this dramatic shift in federal policy and the resulting uncertainty will be the consumers.”
Z-Tel said it won’t officially stop signing up customers until Oct. 5. Tom Koutsky, Z-Tel’s Washington representative, said Z-Tel won’t do any more marketing in the states and doesn’t expect to add to its rolls. “We're going to redouble our efforts to become more focused on [VoIP] and business customers, but that has the unfortunate downside of leaving some of these residential customers without a choice,” he said.
State regulators from 3 of the states disagreed Tues. on the significance of the announcement, during interviews. The states affected are W.Va., N.M., Me., Ark., Ia., Neb., Mont. and Ida. Z-Tel has about 250,000 residential lines in 48 states and about as many business lines. Paul Kjellander, pres. of the Ida. PUC, told us he was disappointed that Z- Tel, though not a major player at this point in the state, wouldn’t pursue additional residential customers. “It’s to be expected,” he said: “We had heard from a lot of companies that if this order went a different way they would be out of business. This is a sign that some at least weren’t crying wolf.” Kjellander said of his mostly rural state: “As far as this being a hotbed of retail competition, it isn’t. That’s not to say it won’t be or couldn’t be. It’s not.”
Anne Boyle, chmn. of the Neb. PSC, said she was disappointed that the Administration made its decision not to appeal the Triennial Review Order based on what she viewed as an election year calculation. She saw the Z-Tel announcement as part of a trend of CLECs choosing not to serve rural America.
“It is bothersome to see that promises are being made to say we'll keep rates where they are until January, which is after the election,” he said. “We have spent nearly 8 long years trying to implement what Congress asked us to do to bring about competition… I'm from a rural state. It’s more difficult here. This decision [not to appeal] was very premature.”
Tom Welch, chmn, of the Me. PUC, said he views the departure of Z-Tel as part of a market shakeout: “I can’t say I'm surprised. You're always disappointed to see competitors leaving the market, but sometimes when some people leave others come in.” Welch added: “I have never been a fan of UNE-P. From the very beginning it seemed at best a transition strategy.”
One telecom analyst said both CLECs and ILECs would use announcements to show the Administration the effect the Appeals Court, D.C., decision had on the industry. “I would think there is a desire of these companies to punish or reward the Administration politically,” he said. The analyst said while it was “perfectly plausible” the CLECs would announce lay-offs, the Bells had started announcing investments.
Also, BellSouth announced Mon. it would lay off 300 people in its wholesale division in Ga., prompting one CLEC industry source to speculate the Bell expects to process fewer CLEC orders.