IRVINE, Calif. (BUSINESS WIRE) Quest Foglight and Quest PerformaSure Selected Over Competitive Offerings

Quest Software Inc. (Nasdaq:QSFT), a leading provider of application, database and Windows management solutions, today announced that Cbeyond Communications has chosen Quest Foglight(R) and Quest PerformaSure™ to manage the performance and uptime of its most business-critical J2EE applications. Cbeyond, a leading provider of Voice over IP (VoIP) and broadband Internet services to small businesses, selected these Quest application management solutions for J2EE to accelerate the diagnosis and resolution of performance issues in production before end-user experience is impacted.

Cbeyond’s WebLogic-based J2EE systems are the backbone of its operation and are relied upon by both employees and customers alike. While searching for a best-of-breed J2EE application management solution, Cbeyond conducted a head-to-head comparison between Quest Software and another leading vendor. When making their selection, Cbeyond cited easier installation, more powerful J2EE diagnostics tools, and integrated production monitoring and diagnostics as their deciding factors in choosing Quest’s solutions.

«Quest had a solution that covered our entire environment throughout the application lifecycle, and that solution worked better than anything else we saw,» said Minaz Vastani, senior director of information systems, Cbeyond Communications. «We needed top-notch visibility into our J2EE system, coupled with fast diagnostics capabilities, so that when issues arise we can detect and resolve them as quickly as possible.»

Quest solutions for managing custom Web applications enable IT teams — including developers, QA personnel and application administrators — to detect, diagnose and resolve performance problems in any stage of development, testing and production. Quest application management solutions for the J2EE platform improve productivity, quality and efficiency by isolating performance problems early in the development cycle and when they appear in production. By combining powerful, domain-centric tools such as Quest Foglight, Quest PerformaSure and Quest JProbe(R), customers may identify issues across the application stack and down to the line-of-code level.

«We are pleased that our strategy of integrating our J2EE application management tools is proving to be valuable to customers like Cbeyond Communications,» said Larry Humphries, vice president, application and database management products, Quest Software. «Quest solutions for Web application management, including Foglight and PerformaSure, provide the right tools to the right people at the right time to manage application performance, from development through testing and into live production. This enables businesses to realize significant productivity gains in their key J2EE-based applications.»

About Quest Web Application Management Solutions

Quest Software’s Web application management solutions enable companies to optimize the cost and resources involved in implementing and managing Web applications, so that Web applications may be deployed faster, with a higher degree of reliability. Quest does this by managing quality, performance and availability throughout the entire Web application lifecycle. Quest-managed Web applications are of higher quality and performance prior to being released into production. Once in production, Quest helps diagnose performance issues and resolve them efficiently thereby maintaining high customer satisfaction.

About Quest Software Inc.

Quest Software Inc. provides software to simplify IT management for 18,000 customers worldwide, including 75 percent of the Fortune 500. Quest products for application, database and Windows management help customers develop, deploy, manage and maintain the IT enterprise without expensive downtime or business interruption. With headquarters in Irvine, Quest Software can be found in offices around the globe and at www.quest.com.

About Cbeyond Communications

Cbeyond Communications, a privately held, Atlanta-based carrier, is the leader in the emerging local voice and broadband services market and the world’s first 100% Voice over Internet Protocol (VoIP) local phone network. Using Voice over Internet Protocol (VoIP) and a 100% Cisco network, Cbeyond delivers to small business customers in Atlanta, Dallas-Ft. Worth, Denver and Houston an integrated package of high-quality local and long distance telephony services, high-speed Internet access and Internet-based applications for about the same price that small businesses typically pay for local and long distance service alone. Cbeyond is slated to open their fifth market in Chicago in Q1 2005. For more information on Cbeyond Communications, visit www.cbeyond.net.

Note to Editors: Quest, Quest Software, Foglight and JProbe are registered trademarks of Quest Software Inc. The Quest Software logo, PerformaSure and all other Quest Software product or service names and slogans are registered trademarks or trademarks of Quest Software Inc. WebLogic is a registered trademark of BEA Systems Inc. All other trademarks and registered trademarks are property of their respective owners.

SEATTLE (BUSINESS WIRE) Qwest Communications International Inc. (NYSE: Q) today announced the opening of a new company retail store in Bellingham. The company has opened 11 new Qwest locations in the state since June as part of a region-wide retail expansion. Qwest now has 66 retail stores in 12 states.

Qwest is the only communications provider to offer a full-service retail environment with personal, face-to-face assistance for a complete spectrum of communications choices. Customers can get expert advice and purchase wireless, high-speed Internet service, home-phone packages and long-distance service. Additionally, each Qwest store has a convenient bill drop, and all Qwest retail associates can assist with feature changes, answer billing inquiries, offer technical assistance and make minor repairs on wireless handsets.

«Qwest Solution Centers have been very well received by customers,» said Kirk Nelson, Qwest state president for Washington. «Since our first stores opened in June, customers have repeatedly commended Qwest for fast and efficient customer service in this face-to-face setting.»

Qwest’s new location is at the Bellis Fair Mall in Bellingham. Existing locations are at Valley Mall in Union Gap; Westfield Shoppingtown Southcenter in Tukwila; Westfield Shoppingtown Vancouver; Westfield Shoppingtown Capital in Olympia; SuperMall in Auburn; South Hill Mall in Puyallup; Columbia Center in Kennewick; Westlake Center in Seattle; and North Town Mall and Spokane Valley Mall in Spokane. The company continues to offer customers new ways to learn about and choose Qwest services. In addition to these new Qwest retail locations, customers can work with Qwest over the phone by calling 800–244–1111, and on the Web at www.qwest.com.

About Qwest

Qwest Communications International Inc. (NYSE: Q) is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the «Spirit of Service» and providing world-class services that exceed customers’ expectations for quality, value and reliability. For more information, please visit the Qwest Web site at www.qwest.com.

Forward-Looking Statement Note

This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to: access line losses due to increased competition, including from technology substitution of our access lines with wireless and cable alternatives; our substantial indebtedness, and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the SEC’s current investigation into our accounting policies, practices and procedures and certain transactions; any adverse outcome of the current investigation by the U. S. Attorney’s office in Denver into certain matters relating to us; adverse results of increased review and scrutiny by Congress, regulatory authorities, media and others (including any internal analyses) of financial reporting issues and practices or otherwise; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings, including any adverse outcome of current or future legal proceedings related to matters that are the subject of governmental investigations, and, to the extent not covered by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; potential fluctuations in quarterly results; volatility of our stock price; intense competition in the markets in which we compete including the likelihood of certain of our competitors emerging from bankruptcy court protection or otherwise reorganizing their capital structure and competing effectively against us; changes in demand for our products and services; acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels; higher than anticipated employee levels, capital expenditures and operating expenses; adverse changes in the regulatory or legislative environment affecting our business; and changes in the outcome of future events from the assumed outcome included in our significant accounting policies.

The information contained in this release is a statement of Qwest’s present intention, belief or expectation and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and Qwest’s assumptions. Qwest may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest’s assumptions or otherwise. The cautionary statements contained or referred to in this release should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This release may include analysts’ estimates and other information prepared by third parties for which Qwest assumes no responsibility.

Qwest undertakes no obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

By including any information in this release, Qwest does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material.

The Qwest logo is a registered trademark of Qwest Communications International Inc. in the U.S. and certain other countries.

Max Jarman
The Arizona Republic

Qwest customers who signed up for its «no-fee» 5 cents-per-minute long-distance plan between July 15 and Sept. 21 can cancel the service until Dec. 31 without paying a $10 cancellation fee.

The company said this week that it would waive the fee after consumers and regulators complained that the company’s marketing was misleading. Qwest Communications International Inc. began promoting the plan in early 2004 as having no minimums or service charges, but in September announced it would add $2.99 in monthly fees starting Oct. 1.

«No monthly fees. That’s what I bought,» said Peoria resident Nancy Siebert, who added she left AT&T for Qwest after 28 years. «Two months later, they put the charge on.» advertisement

Company officials say as many as 1 million Arizona accounts have switched to Qwest long-distance service and acknowledged they began discussing the charge in April.

Many customers tried to cancel the service and were angered to learn of a $10 cancellation fee.

Arizona Corporation Commissioner Kris Mayes protested with a letter to Pat Quinn, Qwest’s Arizona president. Regulators believe the $2.99 monthly charge was essentially a rate increase and should have come before them for approval. The $10 cancellation fee was just rubbing salt into consumers’ wounds, Mayes said.

Qwest asserts that long-distance is an interstate service and not within the commission’s jurisdiction.

The commissioners see Qwest’s decision to waive the cancellation fee as a partial victory. Mayes said the waiver should not be limited to purchases from July to September.

Qwest spokesman Jeff Mirasola said the company had decided to implement the charge by July 15 and consumers who bought the plan after Sept. 21 should have known.

There’s a place for intelligent speculation in the market but no place for guessing. One of the toughest things to do in investing is to call a money-earning guess a mistake. But Fool contributor David Meier does just that and spills the beans on what he should’ve been paying attention to in the first place.

By David Meier

I am a bona fide telecom junkie. Nothing fascinates me more than trying to find the best telecom investment, especially since prices have been beaten down since 2000. Despite its gyrations, it’s a vital industry to our country and to the world, and my hunch tells me some company has to come out a winner eventually. And I have always wanted to figure out which one that was going to be.

Level 3 (Nasdaq: LVLT) was going to revolutionize the wholesale data transmission industry by building the best fiber optic network. With so much pent-up demand that could materialize because of projected price elasticity, Level 3 was supposed to be one of the most influential and successful businesses in telecom. But I just couldn’t pull the trigger. While the story was compelling, I kept reminding myself that it was just a story.

Qwest (NYSE: Q) was going to be a be-everything-to-everybody telecom company. It would offer local, long-distance, data, and wireless service to consumers and businesses, and via wholesale channels as well. Qwest would have a diverse group of revenue streams to help cover the fixed costs of its network. And in June 2002 I bought in at $1.62 per share. The reason -- the only reason -- I bought the shares was that I thought «$1.62 just seems way too low for this company.»

Six months, six dollars
Six months later, the stock was up to $6 per share. Clearly, my hunch was correct, I thought. It was too low, and the market responded. I kept thinking that I should probably do some deeper analysis. But with my return approaching 300%, I got complacent and just let it ride. And ride it did -- right down from four-bagger status to below two-bagger territory. Easy come, easy go.

I made a mistake
Last month, I revisited my Qwest purchase. Although I hadn’t spent a ton of money originally (it was only some money left over from nonreinvested dividends), I couldn’t help but feel foolish about why I’d bought the stock -- I’d been so enamored by Qwest’s potential that I hadn’t taken an emotionally honest inventory of all the criteria afloat in its seas. And ultimately, I’d bought on a hunch -- one that didn’t have much analytical buoyancy at that.

Sunlight is the best disinfectant
And speaking of aphorisms, we all know a mistake is only one if we fail to learn from it. My little hunch captured some good things -- that sent the stock up -- along with some bad things -- that sent it back down again.

The good
Like any responsible CEO, Qwest’s Richard Notebaert has been working on his plan for his company’s future.

He’s wanted to reduce interest expense, and he’s done so by restructuring and retiring debt. He sold Qwest’s directory business, QwestDex, in August 2002 to help get the cash situation under control. Since then, Qwest has also sold its wireless assets to Verizon (NYSE: VZ).

Notebaert also recognized that voice over Internet protocol (VoIP) is the wave of the future and has aggressively rolled out the service.

The bad and the ugly
Qwest still can’t raise wholesale prices associated with competitors using its network. That means a competitor such as MCI (Nasdaq: MCIP), which recently emerged from bankruptcy and is a Motley Fool Inside Value pick, continues to have low-cost access to local area networks that it uses to sell long-distance service.

Second, Qwest is losing customers. An August 25, 2004, article in The Wall Street Journal mentioned that Qwest has lost about 3 million lines since 2000, including 200,000 last quarter.

Third, there is intense price competition. Everyone wants traffic to go through their network because the networks have huge fixed costs. In addition, networks are non-redeployable assets -- meaning they can only be used as a network. At least with a factory you can retool if you must. So, rather than close up shop, companies drop prices, which in turn makes generating profits more difficult.

Fourth, everyone with a network or access to one is offering VoIP. Cable companies such as Comcast (Nasdaq: CMCSA) now offer phone services across their network and bundle it with cable and broadband. Vonage just uses the public Internet to send voice. Barriers to entry are practically gone now that the disruptive technology of VoIP is a reality.

Fifth, Qwest still has huge network maintenance expenditures to deal with month after month. And if you add the fixed cost of debt to the fixed cost of maintenance, that spells trouble if revenues decline. Remember what happened when US Airways took on too much debt, passenger seat miles dropped, and they couldn’t raise prices?

Finally, Qwest has legal and settlement fees to deal with because of past issues like improper accounting. In its second-quarter 10-Q (see Note 12), Qwest increased its legal reserve fund to $500 million by adding an additional $300 million (note that the company expects to recoup most of these funds by hitting up its insurance companies).

I’m selling
The competitive environment stinks. No one can create a competitive advantage because everyone essentially competes the same way. Without any differentiation, the winner will be the lowest cost producer. But even then, the competition will likely erode the business value to the point that the only eventual winner ends up being the customer.

So just as I’m going back on my once-coveted hunch that a real winner will emerge in telecom, I’m correcting the mistake I made when I bought Qwest on a hunch in the first place. I’m selling because I can’t make a reasonable valuation. I’m selling because customers are leaving. And revenues are declining. And legal fees are growing.

When you can’t make heads or tails of the business environment nor a reasonable valuation, you can’t make a stock purchase. And since I wouldn’t buy Qwest today, I can’t justify holding it either. That’s really all there is to it.

Do as I say, not as I did
From all of this, please remember three things:

1. Be critical when you read about a «good story.»
2. Know the reasons why you are buying.
3. If you’ve got the experience, try to make at least a rudimentary estimate of the company’s value.

This last point is admittedly the hardest, but I’d encourage you to, over time, learn a little bit about the forces traditionally at play in valuation. You don’t have to be an expert to see that, for example, a stock whose current price seems predicated on triple-digit earnings growth for the next 20 years is going to have a tough time filling its shoes.

Just because you buy a stock and it goes up doesn’t mean you’re doing anything right. I made a guess and got lucky. Over the long run, that’s not the Foolish way.

The Motley Fool is committed to bringing you the best investment ideas. With investment newsletters like Income Investor, Hidden Gems, and Inside Value, you get solid analysis, not pie-in-the-sky wishes. So take a free trial of any of them today.

Fool contributor David Meier owns shares of Qwest, even though he is not proud of it. He will be selling his shares under the guidelines of the Fool’s disclosure policy. He does not own shares in any of the other companies mentioned.

The Arizona Republic via NewsEdge Corporation: Nearly one million Arizona consumers who switched to Qwest long-distance telephone service in the past year are being notified of a $2.99 per month surcharge that will be added to their bills starting Oct. 1.

The move came as a surprise to customers who abandoned their traditional long-distance carriers in favor of Qwest’s offer of 5 cents a minute with no minimums or surcharges.

Officials at Denver-based Qwest said the company imposed the surcharge to bolster its financials.

Qwest Communications International Inc. lost $776 million in the second quarter of 2004 and saw revenue slip $154 million, or 4.3 percent, from the second quarter of 2003.

«We’re working to offer a competitive long-distance rate and manage our long-term business strategy and viability,» said Michael Dunne, a Qwest spokesman. Qwest has an estimated 2.5 million long-distance customers systemwide, and about 1 million in Arizona, Qwest’s largest market.

A Qwest letter mailed this week suggests that consumers who use few long-distance minutes could pay 15 cents per minute and be charged a 99-cent monthly fee.

The long-distance bills will continue to be capped at $20 per month and the $2.99 charge will count toward reaching that ceiling. A $25 cap for long-distance customers who are not Qwest telephone subscribers has been lowered to $20.

Susan Shepherd, of Phoenix said she has decided to switch to Cox as a result of the fee.

«I was considering it, and that made my mind up,» she said.

Cox Communications Inc. has a no-monthly-charge plan for 10 cents per minute and a 7 cents per minute plan with a $3.95 monthly fee.

The Qwest charge has angered more than customers. Arizona Corporation Commission Chairman Marc Spitzer was upset because such charges are often construed by consumers to be a government-imposed fee. Spitzer said the commission needs to develop truth-in-billing rules to prevent consumers from being misled.

Corporation Commissioner Kris Mayes said she is concerned that people might feel as if they have been victims of a bait-and-switch scam.

Qwest’s no-fees offer was recently promoted to AT&T customers after the company announced that it would no longer seek new residential long-distance customers.

Because long-distance is thought to be a competitive service, the commission allows Qwest to set its own rates for the service. But Spitzer and other commissioners are growing concerned about the numerous charges and fees that are popping up on long-distance and wireless phone bills.

Spitzer and Commissioner Bill Mundell have proposed investigating the charges to come up with truth-in-billing rules that would require better disclosure of fees.

«It’s a deeply troubling phenomenon of blatantly false regulatory charges,» Spitzer said.

The commission is not alone in its concern over the fees. Regulators and consumer advocates are petitioning the Federal Communications Commission to ban the line-item fees phone companies add to bills.

A petition before the FCC, filed by the National Association of State Utility Consumer Advocates and supported by the National Association of Regulatory Utility Commissioners, maintains that surcharges should be built into companies’ rates. The FCC is accepting individual comments on the petition through its electronic filing system, under docket number 04–208.

Possible $250 million penalty would settle fraud charges with SEC

By Roger Fillion, Rocky Mountain News
September 11, 2004

Qwest Communications has tentatively agreed to pay $250 million to settle fraud charges with federal regulators, sources told the Rocky Mountain News, in a deal that would sweep away a major stumbling block for the company in its bid to survive.

John Thompson, a Communications Workers of America vice president, on Friday told the News a Qwest official had notified him of the preliminary agreement involving the Securities and Exchange Commission.

Another source familiar with Qwest said details of the deal are expected to be spelled out in federal court within weeks.

The source, speaking to the News, said Qwest wouldn’t admit or deny any wrongdoing under the preliminary accord.

But the current document refers to «pervasive, fraudulent behavior going back several years,» according to the source.

The accord also singles out Qwest’s «hyping of its own stock in press releases citing progress in certain areas of technology» that later proved overblown, the source said.

Wall Street liked the news, pushing Qwest’s stock up more than 5 percent on Friday.

Qwest’s accounting practices have been under federal and state investigation for three years.

«This is a big milestone. It’s very important for Qwest to put this behind it,» said Scott Cleland, chief executive of Precursor, a Washington-based research firm.

Cleland added that the prospect of an SEC settlement raises the possibility that Qwest also will strike a deal with the Justice Department, which has been pursuing a criminal probe.

«It would be surprising if there isn’t a government settlement for the company,» said Cleland. «The SEC and Justice normally work hand in glove.»

It was the second piece of big legal news for a Denver company this week. Tuesday, state and federal regulators announced that Invesco Funds Group had agreed to pay $451.5 million in penalties and reduced fees as part of the «market timing» scandal rocking the mutual fund industry.

Qwest, the No. 4 telecom carrier in the nation, still faces a class-action lawsuit from shareholders in addition to the Justice Department’s probe.

Qwest spokesman Steve Hammack declined to comment on the tentative SEC agreement. «We continue in our efforts to cooperate with the SEC and the Department of Justice in their investigations,» he said.

An SEC attorney in Denver, Fred Chavez, also declined to comment.

A spokesman for the U.S. attorney’s office in Denver, Jeff Dorschner, said his department hadn’t been contacted about any kind of a settlement. He said any settlement would not affect the Justice Department investigation.

A settlement would permit Qwest Chief Executive Dick Notebaert to focus more attention on reducing the company’s $17 billion debt load and boosting sales.

But it doesn’t end the company’s financial woes. «It doesn’t mean that Qwest has a bright future. It means that it’s back from the brink,» said Cleland of Precursor.

For months now, federal investigators have been combing over Qwest’s books and focusing on questionable swaps of communications capacity, stock allocations by vendors to executives and accounting practices by the $14 billion company.

In all, a dozen former Qwest executives are either the subject of civil or criminal charges, or have settled allegations. Former President Afshin Mohebbi was notified by the SEC in January that he could face civil charges.

Qwest took a crucial step last fall toward striking a deal with the SEC when it cleansed its books of $2.5 billion worth of inflated revenues for 2000 and 2001. That included almost $1 billion of revenues from swaps of network capacity with the likes of Global Crossing and Enron.

The inflated sales were recorded under Qwest’s prior CEO, Joe Nacchio. Nacchio, who has denied any wrongdoing, hasn’t been charged criminally or sued by the SEC.

Qwest — which employs some 45,000, including about 11,900 in Colorado — has built up a $500 million reserve to pay for its legal woes.

«I don’t think the significance of a final settlement with the SEC can be understated,» said Bruce Allen, president of Bruce G. Allen Investments, a Denver investment advisory firm.

He stressed the significance of Qwest remaining in Denver as an ongoing concern, saying the company’s survival «can’t be understated» because it is such a large employer here.

Some investors had speculated that Qwest would be forced to pay an SEC settlement of between $300 million to $500 million.

A $250 million pact would nevertheless be the second-largest penalty ever meted out by the SEC outside the financial services industry. It would amount to a third of the $750 million that WorldCom, now MCI, agreed to pay last year after an $11 billion accounting scandal landed the telecom company in bankruptcy.

Legal developments aside, Qwest remains on shaky financial ground in an industry beset by fierce competition and tumbling prices for corporate long- distance service.

«They’ve had three quarters of disappointing results and the telecom sector remains increasingly competitive,» said Banc of America Securities analyst Ana Goshko.

In the second quarter, for example, Qwest reported a much larger-than-expected $776 million loss. The company’s sales were down 4.3 percent from the previous year. The number of phone lines that Qwest operates has been declining as more customers switch to wireless phone service.

Qwest was launched in 1988 by billionaire investor Phil Anschutz as a fiber-optic network company. In 2000, it got into the local phone business with the takeover of U. S. West, the main carrier in 14 Western and Midwestern states since the 1984 breakup of AT&T.

Tom Friedberg, an independent telecom consultant, believes that Qwest’s settlement of its legal problems with the SEC could be the first step toward the sale or merger of the company.

He said Qwest can’t operate independently because it lacks its own wireless network and it doesn’t have the scale or scope of larger telecom companies such as SBC Communications or Verizon. That makes a settlement all the more important.

«Nobody is going to want to buy the equity of a company where there’s undetermined liability,» said Friedberg. «Qwest wanted to settle this to begin the end game.»

SEC settlements

The news of Qwest’s settlement with the Securities and Exchange Commission is the latest in settlements reached between U.S. companies and federal regulators:

• Tuesday: Denver-based Invesco Funds Group and its sister company, AIM Investments of Houston, agree to pay $451.5 million in penalties and reduced fees for improper trading of mutual funds.

• Aug. 18: Denver-based Janus Capital Group agrees to pay $226 million in penalties in another improper trading case.

• Aug. 4: Bristol-Myers Squibb agrees to pay $150 million to end an SEC investigation into whether the company improperly recognized $1.5 billion in revenue.

• Aug. 3: Halliburton Co. says it will pay $7.5 million to settle a probe that it failed to disclose a change in its accounting procedures in 1998.

• May 17: Lucent Technologies Inc. is told to pay $25 million to settle civil fraud allegations after the company failed to fully cooperate in an investigation of its accounting.

• May 2004: The SEC says it has collected $430 million in settlements with investment banks and former employees of Enron, the Houston energy company, since the Enron accounting scandal broke in November 2001.

• May 2003: WorldCom agrees to pay $750 million to settle SEC fraud allegations.

Compiled By News Librarian Carol Kasel.

fillionr@RockyMountainNews.com or 303–892–2467. Bloomberg News and The Associated Press contributed to this report.

The Associated Press

DENVER -- Qwest Communications has seen significant drop in the number of lines it leases to competitors since AT&T Corp. decided to leave the residential phone market business.

New line leases were 50 percent lower in August than June, chief executive officer Richard Notebaert said.

He declined to provide specific members but attributed the loss to decisions by competitors to pull back on aggressive marketing campaigns.

«We are seeing improvement month over month,» Notebaert said. «August was a quite a bit better than July. July was better than June.»

Notebaert made comments Thursday during the Morgan Stanley ninth annual Media and Communications Conference in Washington, D.C.

Telecommunications companies lease Qwest’s lines and switches to serve their customers.

AT&T, based in Bedminster, N.J., announced in July that it will stop seeking new customers for its traditional consumer long-distance service but is continuing to serve existing residential customers.

The announcement follows a regulatory decision that increases AT&T’s costs to provide local service and compete with the regional Bells, which have been courting AT&T’s local and long-distance customers.

Telecommunications analyst Tom Friedberg said it is good that the loss of lines has dwindled but noted Qwest is still losing lines.

Qwest, which provides service in Idaho and 13 other Western states, and other phone companies have been losing customers to wireless and cable providers and other land-line companies.

Friedberg said Qwest also is at a disadvantage because it does not have its own wireless service, opting instead to resell Sprint cellular telephone service.

«Qwest, like any other phone company without wireless, is in decline. This may be less bad, but it is still bad,» he said.

Max Jarman
The Arizona Republic

Nearly one million Arizona consumers who switched to Qwest long-distance telephone service in the past year are being notified of a $2.99 per month surcharge that will be added to their bills starting Oct. 1.

The move came as a surprise to customers who abandoned their traditional long-distance carriers in favor of Qwest’s offer of 5 cents a minute with no minimums or surcharges.

Officials at Denver-based Qwest said the company imposed the surcharge to bolster its financials.

Qwest Communications International Inc. lost $776 million in the second quarter of 2004 and saw revenue slip $154 million, or 4.3 percent, from the second quarter of 2003.

«We’re working to offer a competitive long-distance rate and manage our long-term business strategy and viability,» said Michael Dunne, a Qwest spokesman. Qwest has an estimated 2.5 million long-distance customers systemwide, and and about 1 million in Arizona, Qwest’s largest market.

A Qwest letter mailed this week suggests that consumers who use few long-distance minutes could pay 15 cents per minute and be charged a 99-cent monthly fee.

The long-distance bills will continue to be capped at $20 per month and the $2.99 charge will count toward reaching that ceiling. A $25 cap for long-distance customers who are not Qwest telephone subscribers has been lowered to $20.

Susan Shepherd, of Phoenix said she has decided to switch to Cox as a result of the fee.

«I was considering it, and that made my mind up,» she said.

Cox Communications Inc. has a no-monthly-charge plan for 10 cents per minute and a 7 cent per minute plan with a $3.95 monthly fee.

The Qwest charge has angered more than customers. Arizona Corporation Commission Chairman Marc Spitzer was upset because such charges are often construed by consumers to be a government-imposed fee. Spitzer said the commission needs to develop truth-in-billing rules to prevent consumers from being misled.

Corporation Commissioner Kris Mayes said she is concerned that people might feel as if they have been victims of a bait-and-switch scam.

Qwest’s no-fees offer was recently promoted to AT&T customers after the company announced that it would no longer seek new residential long-distance customers.

Because long-distance is thought to be a competitive service, the commission allows Qwest to set its own rates for the service. But Spitzer and other commissioners are growing concerned about the numerous charges and fees that are popping up on long-distance and wireless phone bills.

Spitzer and Commissioner Bill Mundell have proposed investigating the charges to come up with truth-in-billing rules that would require better disclosure of fees.

«It’s a deeply troubling phenomenon of blatantly false regulatory charges,» Spitzer said.

The commission is not alone in its concern over the fees. Regulators and consumer advocates are petitioning the Federal Communications Commission to ban the line-item fees phone companies add to bills.

A petition before the FCC, filed by the National Association of State Utility Consumer Advocates and supported by the National Association of Regulatory Utility Commissioners, maintains that surcharges should be built into companies’ rates. The FCC is accepting individual comments on the petition through its electronic filing system, under docket number 04–208.

Qwest Communications International Inc. Monday announced that it received a three-year contract from Krispy Kreme Doughnut Corp. for data and voice services.

Financial terms weren’t disclosed.

Qwest will deliver a variety of services under its iQ Networking portfolio, including private routed network and network management services to assist in data communications between different office locations. Qwest also will provide Krispy Kreme a national [ long-distance>>>> ] voice service that includes calling cards for employees to use while they are traveling.

Qwest Communications provides voice, video and data services. It is the primary local telephone service provider in 14 western states, including Arizona, as the result of its 2000 acquisition of US West.

Krispy Kreme, with headquarters in Winston-Salem, N.C., currently operates 389 doughnut stores in 44 states, Australia, Canada, Mexico and the United Kingdom.

Qwest Communications International Inc. and Bell Canada say they have signed a multi-year interconnection agreement to enhance the quality and reliability of telephone services to residential and business customers making international long-distance calls between Canada and the United States.

International voice traffic between Canada and the U.S. represents the largest volume of international long-distance traffic in the world, the companies say, with telephone traffic between the two countries estimated to represent more than 12 billion minutes of use per year.

The companies say Qwest and Bell Canada customers will experience transparent use and termination of long-distance services between their two countries.