**DA 03-1438**

**Released: April 29, 2003**

**DOMESTIC SECTION 214 APPLICATION FILED FOR ACQUISITION OF ASSETS OF
QWEST COMMUNICATIONS CORPORATION, AND QWEST INTERPRISE AMERICA, INC., BY
COVAD COMMUNICATIONS COMPANY**

**STREAMLINED Pleading Cycle Established**

**WC Docket No. 03-106**

On April 15, 2003, Qwest Communications Corporation ("QCC") and Qwest
Interprise America, Inc. ("QIA") (collectively the "Transferors")
together with Covad Communications Company ("Covad") and DIECA
Communications, Inc. ("DIECA") (collectively "Covad" or the
"Transferees," and together with Transferors, the "Applicants") filed an
application, pursuant to sections 63.03 and 63.04 of the Commission's
rules,[^1] for consent to allow Covad to acquire QCC's and QIA's DSL
customer base.[^2]

This application does not fit into the presumptive streamlining
categories of section 63.03(b) of the Commission's rules because some of
the customers being transferred are in-region customers of a dominant
carrier that is a party to the transaction.[^3] Applicants request
streamlined treatment, nonetheless, stating that this transaction is
unlikely to raise the potential of any public interest harm. Applicants
state that, apart from a small number of affected customers who are
in-region (namely, some portion of QCC's 330 resale customers), the vast
majority of QCC and QIA's customers (approximately 23,000) are located
in geographic areas where neither QCC, QIA, nor any of their affiliates,
serve as the incumbent LEC. Furthermore, Applicants state that because
the proposed transaction involves the transfer of customers to Covad, a
nondominant competitor to Qwest, the fact that some portion of QCC's 330
resale customers are located in-region for Qwest works to reduce, not
increase, Qwest or its affiliates' market share in-region.

The Bureau finds that this application is appropriate for streamlined
treatment under the Commission's rules because: (1) it fails to fit into
one of the presumptive streamlining categories, 63.03(b)(2)(ii), based
only on the fact that an extremely small number of lines involved in
this transaction are in-region for a dominant carrier; and (2) those
lines are being transferred from affiliates of the dominant carrier in
its service area to a nondominant carrier.[^4]

QCC, a Delaware corporation, and QIA, a Colorado corporation, have
principal offices in Denver, Colorado. QCC and QIA are affiliate
companies that are 100 percent owned by Qwest Services Corporation,
which is 100 percent owned by Qwest Communications International Inc.
QCC provides interstate, interLATA services as a facilities-based
carrier and on a resale basis; operator services; and competitive local
exchange services out-of-region. QCC also provides bundled DSL and
internet access service as a reseller in Alabama, Arizona, California,
Colorado, Connecticut, Florida, Georgia, Illinois, Louisiana,
Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode
Island, Utah, Virginia, Washington and Wisconsin. QIA provides
out-of-region frame relay and private line services. QIA also provides
bundled DSL and internet access service to out-of-region customers in
California, Delaware, District of Columbia, Illinois, Indiana, Kansas,
Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio,
Pennsylvania, Texas and Virginia.

Covad, a California corporation, and DIECA, a Virginia corporation, have
principal offices in Santa Clara, California. Covad and DIECA are
wholly-owned subsidiaries of Covad Communications Group, Inc., a
Delaware corporation. Covad provides facilities-based high-speed data
telecommunications services to residential and business customers in
Alabama, Arizona, California, Colorado, Connecticut, the District of
Columbia, Delaware, Florida, Georgia, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota,
Missouri, North Carolina, New Hampshire, New Jersey, New Mexico, Nevada,
New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas,
Utah, Virginia, Washington, and Wisconsin.

On March 19, 2003, the Applicants entered into an Asset Purchase
Agreement by which Covad agreed to purchase QCC and QIA's DSL customer
base.[^5] The customer base, the asset being transferred, consists of
the customer contracts and customer account information. The customer
base is largely made up of small and medium-sized businesses in the
states of California, Delaware, the District of Columbia, Illinois,
Indiana, Kansas, Maryland, Massachusetts, Michigan, Missouri, New
Jersey, New York, Ohio, Pennsylvania, Texas and Virginia, who purchase a
bundled DSL internet access service from QIA. A small number of
approximately 330 business customers being transferred purchase their
bundled DSL internet access from QCC on a resale basis. QCC resells to
these customers the underlying services offered by Covad and WorldCom.
These customers are located in Alabama, Arizona, California, Colorado,
Connecticut, Florida, Georgia, Illinois, Louisiana, Massachusetts,
Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, Oregon, Pennsylvania, Rhode Island, Utah,
Virginia, Washington and Wisconsin. Some of these 330 customers are
located in states (Arizona, Colorado, Minnesota, New Mexico, Oregon,
Utah and Washington) where QCC's affiliate, Qwest Corporation, is the
incumbent LEC. Upon completion of this transaction, Covad will commence
transitioning the customer base to its own nationwide data network.

Applicants assert that granting this application will serve the public
interest, convenience, and necessity by increasing competition and
consumer choice in the long run in the provision of high-speed services.
The transaction provides the Transferors increased liquidity. The
transaction will also allow Covad to realize greater efficiencies and
economies of scale in the provision of high-speed services to customers.
As a result, Applicants state that Covad will be able to compete more
effectively to provide high-speed data services. In addition, Applicants
state that Covad has developed a special program called Covad Safety Net
to help members of the customer base transition to Covad's network and
minimize any service disruptions.

**[GENERAL INFORMATION]{.underline}**

The transfer of assets identified herein has been found, upon initial
review, to be acceptable for filing as a streamlined application. The
Commission reserves the right to return any transfer of assets
application if, upon further examination, it is determined to be
defective and not in conformance with the Commission's rules and
policies. Interested parties may file **comments within 14 days** and
**reply comments within 21 days** of this notice.[^6] Unless otherwise
notified by the Commission, an applicant is permitted to transfer
control of the domestic lines or authorization to operate on the 31^st^
day after the date of this notice.[^7] Comments may be filed using the
Commission\'s Electronic Comment Filing System (ECFS) or by filing paper
copies. *See Electronic Filing of Documents in Rulemaking Proceedings*,
63 Fed. Reg. 24121 (1998).

Comments filed through the ECFS can be sent as an electronic file via
the Internet to \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only
one copy of an electronic submission must be filed. If multiple docket
or rulemaking numbers appear in the caption of this proceeding, however,
commenters must transmit one electronic copy of the comments to each
docket or rulemaking number referenced in the caption. In completing the
transmittal screen, commenters should include their full name, U.S.
Postal Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet
e-mail. To get filing instructions for e-mail comments, commenters
should send an e-mail to ecfs@fcc.gov, and should include the following
words in the subject line \"get form \<your e-mail address\>.\" A sample
form and directions will be sent in reply.

Parties who choose to file by paper must file an original and four
copies of each filing. If more than one docket or rulemaking number
appears in the caption of this proceeding, commenters must submit two
additional copies for each additional docket or rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although we continue to experience delays in receiving U.S. Postal
Service mail). The Commission\'s contractor, Vistronix, Inc., will
receive hand-delivered or messenger-delivered paper filings for the
Commission\'s Secretary at 236 Massachusetts Avenue, N.E., Suite 110,
Washington, D.C. 20002. The filing hours at this location are 8:00 a.m.
to 7:00 p.m. All hand deliveries must be held together with rubber bands
or fasteners. Any envelopes must be disposed of before entering the
building. Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to

9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service
first-class mail, Express Mail, and Priority Mail should be addressed to
445 12th Street, SW, Washington, D.C. 20554. All filings must be
addressed to the Commission\'s Secretary, Office of the Secretary,
Federal Communications Commission.

**In addition, one copy of each pleading must be sent to each of the
following:**

(1) the Commission's duplicating contractor, Qualex International, 445
    12^th^ Street, S.W., Room CY-B402, Washington, D.C. 20554; e-mail:
    <qualexint@aol.com;> facsimile: (202) 863-2898; phone: (202)
    863-2893.

(2) Tracey Wilson, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room 5-C437, Washington, D.C.
    20554; e-mail: [twilson@fcc.gov](mailto:jmyles@fcc.gov), and

(3) Christine Newcomb, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room 5-C360, Washington, D.C.
    20554; e-mail: cnewcomb@fcc.gov, and

(4) William Dever, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room 5-C266, Washington, D.C.
    20554; e-mail: [wdever@fcc.gov](mailto:dcjohnso@fcc.gov); and

(5) Kimberly Reindl, Office of General Counsel, 445 12^th^ Street, S.W.,
    Room 8-C812, Washington, D.C. 20554; e-mail: <kreindl@fcc.gov>.

Filings and comments are also available for public inspection and
copying during regular business hours at the FCC Reference Information
Center, Portals II, 445 12th Street, SW, Room CY-A257, Washington, DC,
20554. They may also be purchased from the Commission\'s duplicating
contractor, Qualex International, Portals II, 445 12th Street, SW, Room
CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile
202-863-2898, or via e-mail <qualexint@aol.com>.

For further information, please contact Tracey Wilson, at (202)
418-1394, or Christine Newcomb (202) 418-1573.

\- **FCC** -

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[^1]: 47 C.F.R §§ 63.03, 63.04; *see* 47 U.S.C. § 214.

[^2]: Applicants state that QCC and QIA currently provide a bundled DSL
    and internet access service to small and medium-sized business
    customers. Consistent with their position in other proceedings,
    Transferors dispute that such a bundled offering includes a
    telecommunications service subject to section 214 of the
    Communications Act. *See Appropriate Framework for Broadband Access
    to the Internet over Wireline Facilities,* CC Docket Nos. 02-33,
    95-20, 98-10, Notice of Proposed Rulemaking, 17 FCC Rcd 3019,
    3032-34 (2002), paras. 24-27. However, Transferors state that they
    are seeking the Commission's approval for this transaction under
    section 214 out of an abundance of caution.

[^3]: For purposes of the streamlining rules, the term "carrier"
    includes any affiliates of such entities. *See* 47 C.F.R. §
    63.03(b)(3). QCC and QIA's affiliate, Qwest Corporation, is an
    incumbent local exchange carrier (LEC).

[^4]: *See* 47 C.F.R. § 63.03(c); *Implementation of Further
    Streamlining Measures for Domestic Section 214 Authorizations,* 17
    FCC Rcd 5517, 5531-32 (2002) (providing that the Commission, acting
    through the \[Wireline Competition\] Bureau, will decide on a
    case-by-case basis whether streamlined treatment should be afforded
    to a particular application).

[^5]: An additional 550 QIA customers located in California, Illinois,
    Massachusetts, Texas and Virginia, receive DSL internet access from
    DSLAMs located in their office buildings, instead of being serviced
    from central offices. These customers are not being transferred to
    Covad as part of this sale.

[^6]: *See* 47 C.F.R. § 63.03(a).

[^7]: Such authorization is conditioned upon receipt of any other
    necessary approvals from the Commission in connection with the
    proposed transaction.