Qwest dumps out-of-region DSL

Qwest is pulling the plug on its out-of-territory DSL business, selling off 23,000 business customers to Covad Communications in deal worth potentially $5 million.

Qwest will continue to offer dedicated Internet access, frame relay, ATM, private line and virtual private network services outside of its region, but will focus its DSL efforts entirely in-region. A spokeswoman for Qwest said the move fits with Qwest’s new strategy to scale back unprofitable and non-core businesses and focus on its most profitable access technologies. And while Qwest has no plans to resume out-of-territory DSL services, the spokeswoman said, if the economics of the business became more profitable in the future, Qwest will reconsider.

The Covad deal takes care of all of Qwest’s out-of-region DSL commitments in one swoop. In addition to buying out the 23,000 SDSL customers, Covad is canceling a contract with Qwest for out-of-state wholesale service worth $8.8 million. Qwest and Covad’s biggest priority is migrating the 23,000 SDSL customers to Covad’s network without losing them. Covad has made an initial payment of $3.75 million, and though Qwest gave no specifics, if the migration is successful with minimal customer loss, Covad would pay Qwest and additional $1.25 million.

“This is certainly a great opportunity for Covad,” said Pat Bennett, Covad executive vice president of broadband solutions. “We’re bringing in truly business class customers for much less than it would cost to acquire them on our own.”

Currently Covad has about 40,000 direct business customers out of its 450,000 direct and wholesale subscriber base. The deal will add half that much more to Covad’s subscriber base. The companies have set an 105-day transition period to reconnect Qwest’s customers in 24 states to Covad DSLAMs. Bennett said every possible precaution will be taken to minimize service interruption in an effort to keep as many of the customers as possible. In addition, Covad will also take over 250 customer contracts in Qwest territory. Those customers are customers Qwest acquired before its merger with U.S. West. Those customers use SDSL equipment, which Qwest plans to purge from its network, offering ADSL and VDSL exclusively.