Covad: We’re not out of the ball game

Declaring that yesterday’s triennial review decision to eliminate line sharing “does not take us out of the ball game,” Covad Communications’ CEO Charlie Hoffman tried to stop further damage today with a conference call assure investors that the company will survive.

Covad was among the stocks that were hardest hit by the decision, falling about 43% after the decision was announced. But Hoffman said that with the details of the FCC’s decision being unknown until the official ruling is released, the market’s reaction was unwarranted. “We believe the market does not yet have the ability to assess the potential impact on our business.”

What is known though, is that the ruling, with new TELRIC pricing guidelines, will require Covad renegotiate its line sharing contracts with the ILECs, said Hoffman.

The outcome of these negotiations will most affect the company’s consumer customers, who are predominantly served via line sharing arraignments.

“The ultimate effect of this change on our consumer market will depend on our ability to negotiate fair and reasonable prices,” for line sharing under the new rules Hofmann said.

Questions were raised during the call regarding the possibility of the line-sharing rule being challenged in court. Covad’s assistant general counsel, Jason Oxman, said some companies might successfully pursue a stay of the decision or have the decision outright blocked in court.

“It appears to us to be almost exclusively, if not exclusively, a political compromise that was worked out late in the night before, if not the morning of, the decision,” said Oxman.

Still, he said, the company is not banking on the courts to resolve this situation, and it will begin to renegotiate its line sharing contracts shortly.