On Thursday the Department of Commerce filed a complaint accusing Qwest Corporation of violating state and federal law by entering into secret agreements with their competitors. An investigation by the Department of Commerce uncovered that Qwest arranged anti-competitive deals with competitive local exchange carriers that included issues of interconnection, access to network elements, resale and access to rights-of-way. These arrangements, simply put, can result in higher prices and lower quality service for consumers. The Minnesota government needs to be relentless in its monitoring and penalizing of Qwest.
Qwest has a virtual monopoly and needs to be monitored by the state to protect the public. Currently the commerce department reports that Qwest owns 2 million of the 2.7 million telephone lines in Minnesota. This powerful control of the market allows Qwest to charge higher prices and provide lower quality than would be plausible in a perfectly competitive market, which is the reason Minnesota has specific laws governing Qwest’s business practices. These laws are designed to make Qwest function like a business in a competitive market. So when Qwest breaks these laws they subject their customers to unfavorable conditions.
The long distance market is a good example of how prices can be significantly higher in the absence of competition. It used to be that if a person made a long distance call they were almost surely using AT&T and paying 30 to 35 cents per minute. However, in the mid-1990s government involvement allowed upstart long-distance companies MCI and Sprint to begin challenging AT&T’s monopoly. The competition dropped costs from 30 cents per minute to 25 cents, then 15 cents, 10 cents, and now as low as 4 cents per minute. More than anything else, competition provided the impetus for the more than 83 percent reduction in long distance costs.
Lack of competition is also the primary reason a call from Minneapolis to Ely, Minn., costs more than a call from Hawaii to Ely. A call from Hawaii is using long-distance and can cost as little as 4 cents a minute, while a caller from Minneapolis is using local long distance provided by their local carrier, most often Qwest, and is charged more per minute than someone calling from thousands of miles away. These conditions exist even with the laws the government already has in place. When Qwest breaks these laws, they are able to further worsen conditions for the consumer.
Until substantial competition can move into this market, the government must continue to fight for Minnesotans’ best interests. In this case that might mean fining Qwest the Department of Commerce’s recommended $202 million.
