Off the Hook

Connect peopleís phones? Respond to customer complaints? Abide by state rules? Please. A brave new U S West canít be bothered with trivial details.

Will the new deal help prevent nightmares like Jeanne Barker-Nunn's? "We made mistakes," U S West spokeswoman Mary Hisley says of that particular problem. "We didn't provide the quality of service we normally do....It was a complicated situation." Overall, Hisley says, U S West strives to provide excellent service in a challenging environment: "It's fair to say that customers have become more demanding in their expectations of services they receive from their telecommunications company," she notes. "We believe the vast majority of our customers are receiving high-quality customer service from us. [But] we've seen our business become much more complex, we've seen our business grow substantially. Things have become a lot busier for us."


There were so many people in the big conference room outside the Minnesota Public Utilities Commission offices in downtown St. Paul on February 29, stragglers had to sit in folding chairs at the edge of the chamber. Never mind that on the dais sat five men in suits, that at least half the attendees were tech analysts or lawyers, and that the topic was bone-dry: The 100-plus folks there were determined to hear the state Public Utilities Commission (PUC) debate U S West's future.

Glorie Fillah

At issue was whether Minnesota should give the green light to a merger between U S West and a Denver-based telecommunications company called Qwest, which has built a high-speed, high-capacity data pipeline along railroad rights-of-way across the nation. The partners said their coupling would blend Qwest's fabulously new national fiber-optic backbone, designed for a world of data communication, with U S West's "last-mile" infrastructure--the coveted direct line into millions of homes.

But for the union to be consummated, the companies needed approval from the Federal Communications Commission (which signed off on the deal in March, with some restrictions); the U.S. Department of Justice, the Federal Trade Commission, and the Securities and Exchange Commission (which all cleared the deal last fall); both firms' shareholders (who voted in favor of the merger in November); and utility regulators in all 14 states of U S West's service region, which stretches from Washington to Minnesota, Montana to Arizona. The agenda for the February PUC meeting was to determine whether the merger would be in the best interest of the state's consumers.

As it turned out, the commissioners didn't spend all that much time discussing the merits of the deal. Instead, chairman Gregory Scott proposed that the matter be turned over to an administrative-law judge who could build a complete legal record of the case. Once that judge made a recommendation on the merger, the commission would take up the topic again.

Steve Davis, Qwest's senior vice president for government affairs, was appalled. Sending the case to a judge would delay a decision until August or September, he told the commissioners, holding up a deal the company hoped to complete by midyear. With all the other states on track to offer approvals by May, "we'll be waiting for this commission only," Davis said.

"And that's just fine with me," Scott rebutted, his voice truculent. "I'm not going to apologize to you for saying we need to take time to make a good decision. You're not going to put us in a position, with your demands on when you want to close, to make a decision that is not in the public interest."

Scott's motion passed three votes to two. And so Minnesota put the merger on hold--and plunked itself down squarely at the center of a battle over the shape of the digital universe.

The move didn't fail to rattle nerves back in Denver. In a news conference a couple of weeks after the PUC meeting, Nacchio said the delay in Minnesota was rooted in U S West's customer-service problems, and that the snag could become a threat to the merger. The comments came at a time of increasing discord between the two companies: Less than a fortnight before Nacchio's press conference, U S West CEO Trujillo had announced that because of disagreements with Qwest management, he would leave the company after the merger was completed.

Squabbling aside, however, Nacchio was on to something. While the PUC had expressed some trepidation about what kind of corporate citizen Qwest would be, most of the commission's concerns about the merger stemmed from the state's bumpy history with U S West.


Like the other local phone-service providers in the nation, U S West was spawned by the 1984 breakup of the "Ma Bell" telephone system. Cobbled together out of Mountain Bell, Northwestern Bell, and Pacific Northwest Bell, the company was at a disadvantage from the start: Its service area covered an immense territory yet contained only a tiny population compared to that of other Baby Bells.

But the firm soon distinguished itself from its peers in another area, says analyst Friedberg. "U S West has continually had the worst service record of the Baby Bells," he says. From the get-go, he maintains, management was interested in income and dividends--not customers. "They were not focused on providing quality telecommunications."

Data gathered by the California-based marketing company J.D. Power and Associates seem to bolster Friedberg's contention. Last summer the firm studied customer satisfaction with residential local telephone service. The report, based on responses from more than 12,000 households across the nation, found that among the 13 local service providers studied, U S West ranked third from the bottom, tying GTE, Ameritech, and Southwestern Bell. In addition, the study showed that 51 percent of U S West customers would switch providers if they had an alternative, substantially more than the national average of 45 percent.

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