NEW YORK (CNN/Money) -
Regulators in six states are investigating Qwest Communications International Inc. for making secret deals with rival telecom firms that agreed not to oppose Qwest's expansion of its long-distance operations, according to a published report Monday.
Qwest (Q: down $0.70 to $5.05, Research, Estimates) shares, which have fallen 84 percent in the last year, dropped more than 11 percent Monday.
AT&T Corp. brought the secret deals to the attention of state regulators, alleging that Qwest struck agreements with several telephone companies to give them favored rates on Qwest's 14-state local phone network, the Wall Street Journal reported. In return, the rival phone companies would not oppose Qwest's bid to expand in long-distance markets in Minnesota, Arizona, Oregon, New Mexico and Utah, the report said.
The deals raised the ire of AT&T (T: Research, Estimates) because regional phone carriers, such as Qwest, are required to provide "nondiscriminatory" access to local networks, according to the 1996 Telecommunications Act. But in striking the deals, Qwest excluded AT&T from the favorable rates it was giving other rivals, the paper reported.
"The agreements at issue are not about Qwest failing to allow competition. The issue is about whether 11 contracts between Qwest and individual wholesale customers should have been filed with state public utility commissions," Qwest Vice President Steve Davis told CNNfn.
"The contracts at issue settled disputes with individual wholesale customers. Qwest does not believe that these agreements were required to be filed, but because this is a question that has not been previously clarified, we've asked the FCC to confirm our interpretation."
The Securities and Exchange Commission also is investigating Qwest for possibly inflating revenue in 2000 and 2001.
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