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Tuesday, June 1, 2004

The Problem with Pick-and-Choose
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The tension between the pick-and-choose rule and the commercial negotiation process is succintly described by Anna-Maria Kovacs in her note on the wholesale deal between Qwest and MCI (reprinted with permission):

As we have indicated in several recent notes, states are likely to take the position that such agreements are subject to state review and approval and to pick-and-choose opt-in by other carriers. At some point, a court will decide whether that position is correct, but for now, the participants have to act on the assumption that they will have to live with that position. Thus, the talks are asymmetrical. The RBOCs negotiate with each CLEC (competitive telco) knowing that other CLECs may opt into all or parts of the deal, and will ultimately combine the most favored pieces of each agreement into an entirely new deal. Thus, the RBOCs negotiate knowing that multiple different deals increase the potential for arbitrage by the CLECs. That, of course, is to the CLECs' advantage. Each one can rely on the agreement cut by another CLEC to improve its own position. Thus, AT&T (T-$17) and other CLECs can use the MCI deal to try and leverage better terms, knowing that this deal is likely to act as a net under them in the Qwest Region. That, in turn, makes it easier for AT&T to walk away from the talks, knowing that it will benefit from their results anyway.

Telephony Online has posted an article which fleshes out some further details on the Qwest/MCI deal. It will not go into effect until 30 days after the DC Circuit's mandate is put into effect, which could turn on whether there is Supreme Court cert and/or another stay. Another interesting aspect of the deal is whether (I invite any thoughts by email), and how, the pick-and-choose rule might apply to certain portions of the agreement. According to the article:

[Qwest Senior VP Steve] Davis said the accord, which has not been finalized in contractual form, consists of two deals. The first addresses the costs and procedures related to batch "hot cuts" needed for MCI to make the transition from UNE-P to a facilities-based framework, or UNE-L. That deal would be filed with state commissions for their approval, he said.

Portions of the deal regarding Qwest Platform Plus will not be filed with the states for approval and would not be subject to pick-and-choose requirements, according to Davis. However, Qwest will make the deal available on its Web site and will allow any CLEC to sign the same deal, if the competitive carrier is willing to agree to all terms of the MCI agreement, he said.

posted by @ 1:26 PM | General

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