Covad Gains Confidence From Court Ruling

U.S. ILEC SBC Communications had filed suit to get out of signed contracts, but Covad is safe for now as it announces that SBC will honor all current line-sharing agreements.

by Gretchen Hyman of internetnews.com [June 20, 2002]

Santa Clara, Calif.-based Covad Communications announced Wednesday that SBC Communications will honor all previous line-sharing agreements with Covad.

On the rebound from bankruptcy last year, Covad is SBC's largest wholesale customer and farms out broadband services to WorldCom, NewEdge. DSL.net, Speakeasy, and Earthlink, among others. Covad also maintains line-sharing contracts with the three other primary ILECs: Verizon, Bellsouth Corp., and Qwest Communications.

Today's announcement follows a federal appeals court decision earlier this week to uphold the "line sharing" rule that requires local telephone giants like SBC, Verizon, Qwest, and BellSouth to share facilities with rivals who want to use their phone networks based on terms of the 1996 Telecommunications Act. The Telecom Act requires dominant carriers to provide the space and access to rivals at fair rates, terms, and conditions in an effort to encourage competition.

The "line sharing" rule, which enables competitive providers of high-speed digital subscriber line and Internet service to connect customers without forcing them to buy a second phone line from the local phone company, was challenged by Verizon, as being too broad and created some fear, uncertainty, and doubt (FUD) about whether Covad and other small and medium sized broadband providers would continue to have access to the Internet through the network facilities of the incumbent phone companies.

But the court rejected the appeal and handed it over to the Federal Communications Commission (FCC) for review and reissue. In the meantime, SBC's commitment to Covad and other providers will remain status quo with respect to line sharing while the FCC finalizes the ruling over the course of the next year.

"This is fantastic news for Covad and for current and future broadband users," said Jason Oxman, assistant general counsel for Covad. "Having seen what SBC did yesterday, we're hoping that the others will comply immediately."

In effect, SBC's announcement provides certainty for Covad that it will meet its legal obligations and continue to service its broadband customers, in addition to maintaining that the broadband market is more stable than many consumers and industry analysts originally thought.

"We support SBC in opening up their networks in a non-discriminatory way, and we hope that they continue to follow the spirit and law of the Telecommunications Act of 1996," said Mike Jackman of the California ISP Association.

In addition to its agreement with SBC Communications, Covad's contractual agreements with the other Bell companies will provide the broadband provider with ongoing access to line-shared loops.

"Today SBC Communications provided a much needed measure of assurance to hundreds of thousands of high-speed Internet customers who depend on their Internet access for work, play, or school," said Charles Hoffman, CEO and president of Covad.

Covad also made moves this week to entice current dial-up consumers to test out broadband access with a low-fee, four-month introductory offer intended to rope in new customers who so far have steered clear of making the switchover from dial-up to broadband because of the costs.

The new service will not tie up existing phone lines and will provide speeds of up to 200 kbps (four times faster than 56k dial-up), with an upload speed of up to 64 kbps.

Covad's participating ISP Speakeasy will maintain the service, with Covad's TeleSurfer Link providing the connection and the TeleSurfer self-install kit.

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