Tag Archives: centurylink

CenturyLink-Level 3 deal moving ahead in California, but not until October

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CenturyLink will be allowed to buy Level 3 Communications, under the terms of a settlement reached in June with some of the organisations that challenged the deal, if the California Public Utilities Commission endorses a proposed decision posted this morning by a CPUC administrative law judge.

If the usual process is followed, commissioners will make the final decision at their 12 October 2017 meeting, or a later meeting if there’s significant disagreement amongst them. It’s theoretically possible that a vote could be taken at their 28 September 2017 meeting, but only in the sense that it’s theoretically possible for a tornado to blow through a junkyard and produce a fully functional iPhone. And even if it did, Apple’s lawyers would crush it, claiming patent infringement by the tornado. So expect a final decision in October, not September.

The proposed decision also throws out a challenge to the settlement by the California Emerging Technology Fund (CETF)…

This Settlement involves compromises of parties’ preferred outcomes. The fact that multiple parties, with divergent interests, reached a mutually acceptable compromise, however, provides evidence that the Settlement is reasonable in light of the record. Even though CETF does not join in the Settlement, the Settling Parties still include the Joint Consumer Groups representing consumer interests. The Settlement addresses the Joint Consumer Groups’’ concerns by providing discrete benefits to California consumers including,, among other things, improved service quality, funding for facility expansion and certainty for enterprise and wholesale customers with existing contracts.

There’s no mention of Telnyx LLC in the proposed decision. Telnyx jumped into the CPUC’s review of the deal at the last minute, claiming that Level 3 was cutting off wholesale VoIP services to independent service providers. Although ALJ Regina DeAngelis gave Telnyx permission to participate in the proceeding, she threw out their protest, because it wasn’t properly filed. Although Telnyx can continue to participate, it has nothing of substance on the table.

Proposed decision approving CenturyLink-Level 3 transaction, 8 September 2017

Bad telecoms regulatory decisions won’t be saved by non-existent good will

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The game isn’t over when the California Public Utilities Commission votes to impose conditions on big mergers. Telecoms companies will immediately challenge decisions, administratively and in court, and try to wriggle out of obligations by any means possible.

Comcast is doing that now in Vermont, where that state’s public utilities commission required it to build out 550 miles of line extensions into rural areas. According to an article by Jon Brodkin in Ars Technica

The company’s court complaint says that Vermont is exceeding its authority under the federal Cable Act while also violating state law and Comcast’s constitutional rights…

Comcast’s complaint also objected to several other requirements in the permit, including “unreasonable demands” for upgrades to local public, educational, and governmental (PEG) access channels and the building of “institutional networks (“I-Nets”) to local governmental and educational entities upon request and on non-market based terms”…

Comcast often refuses to extend its network to customers outside its existing service area unless the customers pay for Comcast’s construction costs, which can be tens of thousands of dollars.

When faced with demands for conditions or concessions, Comcast is particularly stroppy – rather than negotiate, it mounted a smash mouth campaign against opposition to its failed bid to do a massive three-way merger/market swap deal with Charter and Time Warner in 2015.

Other companies, that are all sweetness and light while trying to convince regulators to okay their deals, can also turn nasty once the ink has dried. For example, Frontier Communications was represented by friendly, knowledgable telecoms professionals while it sought, and received, CPUC permission to buy Verizon’s wireline telephone systems in California. But within a few months of the sale closing, those key frontline people disappeared from public view, either fired as the company downsized or relegated to back rooms. They were replaced by litigious lobbyists who engage in scorched earth opposition to any project, program or requirement that doesn’t suit their business model.

Likewise, CenturyLink is spinning a handful of feeble promises into epic concessions as it seeks CPUC permission to buy Level 3 Communications. But the actual agreement is stuffed with weasel words and CenturyLink has consistently played hardball with both opponents and the commission. There’s no reason to think it’ll be any less aggressive in pursuing its interests if and when it’s a done deal. That’s a fact of life that the CPUC would do well to consider as it grinds its way through its review.

CenturyLink-Level 3 deal blows past key California deadline

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Too late.

The already poor chance that CenturyLink would get permission from the California Public Utilities Commission to buy Level 3 Communications before the end of September took another steep nosedive yesterday. A 5:00 p.m. deadline came and went without a draft decision – yes or no – being released by the CPUC administrative law judge (ALJ) and commissioner handling the case.

In the normal course of business, proposed decisions have to go through a 30 day public review and comment process before being voted on by commissioners. To get on the commission’s 28 September 2017 agenda, a draft decision had to be posted by close of business yesterday. That didn’t happen and that means CenturyLink and Level 3 won’t get California’s blessing before their 30 September 2017 target date for closing the deal.

Unless.

Unless the commission grants a Hail Mary motion for an emergency exception to the 30-day rule that CenturyLink filed one minute after yesterday’s deadline passed.

The odds of that happening are, to be generous, exceedingly slim. For three reasons.

First, it’s – let’s say unusual – to ask to shorten the review period for a proposed decision that hasn’t been issued yet. According to the rough schedule set by the commissioner in charge of the case – Martha Guzman Aceves – a draft decision isn’t even due until mid-October.

Second, the assigned ALJ, Regina DeAngelis, was very clear at a pre-hearing conference earlier this month that she thinks the 30 day review period is mandatory and rebuffed oral arguments to the contrary. It wasn’t a reach on her part, it was just conventional wisdom, particularly when a Californian proceeding continues to be challenged by officially recognised parties, as this one is.

Finally, the standard for shortening the 30 day review period is not whether it’s a matter of corporate convenience but rather if it’s a matter of public interest and it’s “an unforeseen emergency situation”. It’s hard to see how short circuiting the normal debate over a contested transaction – particularly one as bad for California’s telecoms market as the proposed CenturyLink-Level 3 hookup – is in the public interest, and even harder to believe there’s anything unforeseen happening. It’s common for fraught proceedings to run a year or more at the CPUC and it was CenturyLink’s choice to wait almost five months before formally beginning this one.

DeAngelis’ pre-hearing conference warning to CenturyLink and Level 3 is worth repeating: “I’m hoping there’s something more that the parties can do to prepare for a decision at a later date”.

No Halloween treat for CenturyLink-Level 3 deal in California

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CenturyLink’s proposed purchase of Level 3 Communications appears likelier than not to be delayed for months. Yesterday, the California Public Utilities Commission set a tentative schedule for completing its review of the deal, with a target date of mid-November. That would mean the two companies will have to agree to extend their self-imposed deadline of 31 October 2017 if they still want to complete the transaction.

That won’t necessarily be the case. The ruling issued by commissioner Martha Guzman Aceves yesterday is vague – in many respects – and leaves room for a faster decision. On the other hand, there’s nothing in it that would keep the process from dragging on longer.

The CPUC has to decide if allowing CenturyLink to buy Level 3 is in the public interest. Yesterday’s ruling appears to take a narrow approach to answering that question. The real problem with the deal – the damage it would do to telecoms competition in California – isn’t explicitly mentioned. Rather than taking a top to bottom look at all the issues involved, the scope of the enquiry is, for now, limited to the settlement that CenturyLink reached with some of the organisations that objected to the deal.

But not all of them. The California Emerging Technology Fund is actively opposing the settlement, arguing it doesn’t go far enough, and a VoIP company – Telnyx – jumped in at the last minute and could yet make its presence felt. So long as the transaction is being actively contested, it is difficult, if not impossible, to short cut the CPUC’s review.

There is virtually no chance that the CPUC will approve the deal before the end of September, an outcome that a CenturyLink lawyer, Norm Curtwright, last week called “almost too awful to contemplate”. The horror of blowing past Halloween must be beyond human imagination, but that’s the reality now facing CenturyLink and Level 3.

No express lane offered for CenturyLink, Level 3 review at CPUC

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“I’m hoping there’s something more that the parties can do to prepare for a decision at a later date”, Regina DeAngelis, an administrative law judge with the California Public Utilities Commission, told lawyers for CenturyLink, Level 3 and a handful of organisations that have involved themselves in the regulatory review of the two companies’ plan to combine into one. She presided over yesterday’s pre-hearing conference at the CPUC’s San Francisco headquarters – the opening event of what could be an enquiry lasting several months.

Which is exactly what CenturyLink and Level 3 are trying to avoid. And what DeAngelis was warning might happen.

The deal they struck last October has CenturyLink buying Level 3 for $34 billion. In order for that to happen, they need to get approval from two federal agencies – the Federal Communications Commission and the justice department – and a couple dozen or so states that have chosen to play an active role in telecoms oversight. They gave themselves a year to finish those reviews and close the sale, but left the door open for extending it by mutual agreement. They also set 30 September 2017 – eleven months – as a benchmark date, when transaction costs begin to creep up.

So they’re trying to push the pace of the CPUC’s review. They started out by asking for commission approval by mid-September, but given mandatory public notice requirements – 30 days before commissioners vote on a proposed decision – DeAngelis threw cold water on that idea, saying “I can tell you that won’t happen”.

It doesn’t seem like two extra weeks will help much, either. That would require turbo-charging standard operating procedures and, as DeAngelis wryly noted, “this commission isn’t often known for moving that quickly”.

That’s particularly true when a merger or other major transaction involving regulated companies attracts formal protests. In this case, five organisations formally challenged it. Three settled their differences with CenturyLink – the CPUC’s independent office of ratepayer advocates (ORA) and two consumer groups, the Greenlining Institute and TURN. Lawyers for Greenlining and ORA were at yesterday’s conference, and endorsed CenturyLink’s push for a fast decision.

Two others are still in the fight, though. The California Emerging Technology Fund wants CenturyLink to spend more money in California, with its guidance, and VoIP provider Telnyx objects to what it says are plans to shut down Level 3’s independent wholesale business after the sale closes. With active third party opposition added to the CPUC’s responsibility to do its own due diligence, an expedited decision is not the way to bet.

The next step is for DeAngelis to issue a scoping memo, which be the roadmap and schedule for the rest of the proceeding.

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.

CenturyLink puts the joint back into its venture with Level 3

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Someone at CenturyLink – or maybe Level 3 Communications – finally inhaled deeply, exhaled fully and chanted California’s national mantra: go with the flow, go with the flow. In its latest filing with the California Public Utilities Commission, CenturyLink finally admitted that the September deadline for closing its deal to buy Level 3 that it’s been puffing and huffing about, I’m sorry, huffing and puffing about isn’t a deadline at all.

Since the purchase agreement was announced last October, CenturyLink has been trying to jam it through the necessary regulatory reviews by wailing about a phoney, self-imposed deadline and falsely claiming that the deal won’t hurt competition in what passes for a broadband market in California.

A brief and pleasant walk along railroad right of ways in the Sierra Nevada, the Salinas Valley or other key Californian telecoms corridors is all it takes to put the lie to that nonsense. Typically, you’ll find four fiber optic lines in the ground owned by Level 3, CenturyLink, AT&T and Verizon. Only one of those companies – Level 3 – will lease dark fiber or sell basic wholesale connectivity services to competitive retail broadband providers or private network operators in the normal course of business. The other three are legacy incumbent telcos – the biggest three in the U.S. – with a monopoly business model that’s pretty much limited to selling bandwidth by the bit, the most profitable and expensive way possible.

If you roll Level 3 into CenturyLink, you lose the only competitive, market-based barrier to unlimited rent extraction by incumbent telcos in California’s middle mile broadband sector. That has a direct effect on retail prices and service availability, since competitive last mile providers will either have to jack up their own subscription rates or exit the business altogether.

Heading into a key hearing this week, CenturyLink clearly and honestly conceded, without its customary back pedalling and quibbling footnotes, that 30 September 2017 is no deadline at all, 31 October 2017 is only a deadline if they want it to be and the whole thing could actually wait until next year.

The CPUC has no justification for abdicating its due diligence obligations simply for the pleasure of being “extremely helpful” to a major monopolist. Its responsibility is to Californians, who rightfully expect a competitive broadband market.

CenturyLink tones down deadline threat to CPUC

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Okay, maybe not high noon. But can we say twelve-ish?

When CenturyLink and Level 3 Communications signed their marriage license, they set an 11 month time limit to take their vows. That’s common enough in major transactions – setting closing dates makes it easier to structure financial packages and it keeps everyone focused on getting it done. But blowing past such deadlines is not uncommon either, and coming to agreement on extensions is a relatively straightforward process, if the companies involved still want to make it happen.

Nevertheless, CenturyLink has insisted that unless the California Public Utilities Commission approves its purchase of Level 3 no later than its 14 September 2017 meeting, the entire transaction will be in peril and the meaningless concessions it’s made in response to protests by consumer groups will disappear. That claim has always been nonsense, and CenturyLink has begun to slowly back off from it. In a footnote to its latest plea to the CPUC, CenturyLink and Level 3…

…respectfully note that it would be extremely helpful if Commission approval occurred at the September 14, 2017. They note that the Commission’s second September meeting falls on September 28, 2017, only one business day prior to the anticipated Transaction closing date.

An express lane through the CPUC’s normal public review process has gone being an imperative to merely “extremely helpful” to the U.S.’s third largest telco, and the 30 September 2017 brick wall has dissolved into an “anticipated” date.

Even so, CenturyLink couldn’t resist one little head fake away from the truth: yeah, the meeting is one business day before the deadline, but it’s two actual days. And when $34 billion is on the table, no one will mind showing up for work on a Saturday. Not that it’ll be necessary though. Last year, when Charter Communications bought Time Warner Cable – a much bigger deal, as CenturyLink helpfully points out – it closed the day after the CPUC gave its blessing.

It is probably true that pushing the closing date into October or later will cause CenturyLink some grief. But it only has itself to blame. It waited more than two months before it filed its first request for permission, and then dawdled three more months as it tried to slip the deal through administratively. CenturyLink wasted five months between the time it announced the Level 3 purchase and its request for formal approval from the CPUC.

Few would argue that the CPUC’s process moves quickly enough – I sure wouldn’t – but it is what it is. When a deal stinks as badly as this one does, there’s no excuse for the CPUC to abandon its due diligence responsibilities in order to be extremely helpful to a major incumbent telecoms company.

Legacy telcos chalk up historically bad financial results

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Forward looking statement.

It’s hard times for legacy telephone companies, at least the sort that have to rely on wireline – mostly copper – systems to serve customers. The plummeting share prices of Frontier Communications, CenturyLink and Windstream have gone where no telco has gone before. According to a story by Sean Buckley in FierceTelecom, that’s the conclusion of financial analysts at Cowen…

“Shares in the wireline [incumbent/rural carrier] space (CenturyLink, Frontier, Windstream) have endured the worst three consecutive quarters in industry history, with shares plummeting an average of -20% in 4Q16, -21% in 1Q17, and -24% in 2Q17 (we note another -5% in 3Q17 thus far), mostly from Frontier and Windstream as CenturyLink shares are being supported by the Level 3 acquisition,” Cowen said in a research note…

Overall, the three companies face the industry-wide challenge of balancing strategic service growth with ongoing legacy service declines and losing market share to cable operators.

Additionally, each of these companies has been dealing with specific headwinds in their businesses. Frontier has been challenged by integrating the properties it purchased from Verizon in California, Texas and Florida, while CenturyLink is dealing with a raft of lawsuits over alleged consumer fraud issues.

Windstream isn’t a factor in California, but Frontier and CenturyLink are, and both companies are showing increasing signs of desperation as they try to bend regulators and lawmakers to their will.

CenturyLink wants permission – quickly – to buy Level 3 and consolidate ownership of key long haul fiber routes in California into a cozy club of three monopoly-centric telcos. It needs a fast yes from the California Public Utilities Commission in order to close the deal by its self imposed end-of-September deadline, and its arguments and pleadings have taken on a shrill, incoherent tone.

Frontier is fighting on two fronts. Its attempts at the CPUC to derail competitive fiber builds in rural areas where it hoped to milk monopoly profits from decaying copper have pushed past the boundaries of truth, and its lobbyists are trying to get the California legislature to stop the bleeding by building a statutory wall.

Radical innovation is needed. Allowing Frontier and CenturyLink to hold businesses and consumers hostage will only be short term help, at a high long term price that Californians should not have to pay.

CenturyLink defends Level 3 deal with Trumpian flourish

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They could have just tweeted it.

Sean Spicer has a new gig, ghostwriting legal briefs for CenturyLink. There’s no other way to read CenturyLink’s latest filing with the California Public Utilities Commission. It’s a whingeing, self-contradictory and occasionally bitter reply to the California Emerging Technology Fund’s (CETF) continued opposition to CenturyLink’s proposed purchase of Level 3 Communications.

CETF’s objections weren’t particularly on point – they were more concerned with spending CenturyLink’s money than maintaining a competitive fiber market in California – so it’s no surprise that the rebuttal skids and spins like a Lada sedan in a Moscow ice storm. It collides with itself, jabbing a finger toward a woolly promise to spend big on California infrastructure and work with CETF and others to “identify projects for such investment”, but quibbling in the fine print of a footnote that those are merely “possible locations”.

On the central question before the CPUCwill the transaction cripple wholesale fiber competition in California? – CenturyLink offers facts and alternative facts. It first says, okay, so we’re taking out a competitor

The instant transaction involves the transfer of control at the parent level of the Level 3 Operating Entities that provide services to a (limited) number of wholesale and enterprise customers only. The transfer is to CenturyLink, the parent company of a non- dominant carrier in California that also provides competitive services to wholesale and enterprise customers.

But, it continues, fewer competitors doesn’t mean less competition

By any measure, the Level 3 Operating Entities, even when combined with the CenturyLink Operating Entities, will remain a non-dominant competitive provider without any particular market power in any relevant telecommunications market (e.g., backhaul, long haul, enterprise, etc.).

Nonsense.

Both have considerable market power now, as two of the four major long haul fiber owners on key California routes, and Level 3 is the only independent operator. Rolling it into the monopoly business model embraced by AT&T and Verizon – the other two – and by CenturyLink will only add to the wholesale fiber crunch identified by the CPUC as a root cause of California’s “highly concentrated” residential broadband market.

The CPUC needs to separate truth from fiction, and base its decision on broadband market realities and not on corporate bluster or well-meaning wishful thinking.

CenturyLink and Level 3 joint reply to CETF comments, 25 July 2017
CETF comments on CenturyLink purchase of Level 3, 21 July 2017