CenturyLink will kill telecoms competition if it buys Level 3, VoIP company says

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CenturyLink plans to apply its closed, monopoly-centric business model to wholesale services that Level 3 Communications now sells on the open market, if the two companies are allowed to combine. That’s the gist of an objection filed yesterday to CenturyLink’s planned purchase of Level 3 by a VoIP service provider, Telnyx LLC.

VoIP providers like Telnyx buy wholesale connectivity services that allow subscribers to make calls to the rest of the world via the public switched telephone network (PSTN). That’s the system that makes it possible for you dial a few numbers and reach pretty much any other phone in the world.

Telnyx claims that Level 3 is one of only three companies that sell this service on an unbundled basis to VoIP providers, and one of those – Inteliquent – is pulling out of the market. That meant that Telnyx had to scramble to find a replacement…

In searching for other suppliers, Telnyx contacted Level 3 regarding its competing PSTN Interoperability Services, which Level 3 presently sells to IP service providers including Vonage. Members of Level 3’s sales team informed Telnyx that Level 3 will not sell the product to Telnyx, because after the merger the combined CenturyLink will not offer the product to competing service providers.

That’ll leave Peerless as the only vendor in California, and it doesn’t serve the entire state. Many rural areas, according to the Telnyx filing, are reachable only via Level 3. And, if CenturyLink takes over and runs Level 3 like the monopoly-centric telco that it is, telecoms competition will be seriously damaged in California…

The truth is that the Proposed Transaction will eliminate Level 3 as an aggressive independent competitor in the wholesale space both nationally and in California. In addition to PSTN Interoperability Services, the Joint Applicants provide wholesale intemet access and backhaul services that provide essential middle mile connections that enable other providers to connect California residential and mobile customers to the internet. If the Commission does not take action to prevent Level 3 from removing itself as a potential competitor in the market for any or all of these wholesale services, the Commission may indirectly increase rates for wholesale services and place additional barriers on competitors that will remain in the marketplace.

Telnyx is jumping into the fight late, but that’s not unusual when the California Public Utilities Commission reviews major transactions. CenturyLink’s occasionally hyperbolic pleadings notwithstanding, the CPUC’s consideration of the Level 3 deal is still in an early stage – the scope of the review has not been established yet. It’ll be up to the administrative law judge in charge of the proceeding to decide whether to let Telnyx make its case.