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Verizon, Covad Mend Fences

Covad Communications and Verizon settled their longstanding differences and sealed the deal with a DSL line-sharing agreement.

The two DSL providers agreed Tuesday to drop their respective legal disputes; Covad had filed an antitrust suit against the Baby Bell and Verizon had a number of charges against Covad over billing disputes.

Verizon signed an agreement that expands its existing line-sharing relationship with Covad to allow the DSL provider to sell high-speed Internet services to Verizon voice service resellers.

Separately, Covad penned a line-sharing agreement with MCI that allows the company to be a preferred provider of network and access services for MCI DSL business customers.

Eric Rabe, a Verizon spokesman, would not disclose financial terms of the comprehensive deal but said he thinks both sides are happy to put these legal matters behind them and move forward.

"In these legal matters you still go ahead and do business; they're separate issues, but it's good to get this stuff resolved [so] it's not overhanging any discussions that we may have about doing business," he said.

"It just clears the air. I think both sides are pleased to have these things off the table and no longer have to worry about litigating."

While all is now forgiven in the interest of mutual business gains between the two companies, that certainly wasn't the case four years ago.

The Covad-Verizon spat was symbolic of industry-wide friction between the Baby Bells that owned the telephone networks used to transport DSL -- Verizon, AT&T (formerly SBC), BellSouth and Qwest -- and upstart competitive local exchange carriers (CLEC) such as Covad who piggybacked on the network to provide DSL services.

The Telecommunications Act of 1996 ushered in a wave of competition within the industry.

The law, enacted to push high-speed Internet throughout the country, made interconnection between carriers a requirement with set fees and requirements for line-sharing.

CLECs over the years charged the incumbents with price gouging (such as selling DSL service to consumers below the cost of the line charged to resellers) and provisioning mismanagement.

Covad sued Verizon, AT&T and BellSouth for antitrust actions; earlier this year, an appeals court in March ruled the company could pursue litigation against BellSouth but got mixed messages on how to proceed with Verizon.

Verizon had filed a number of suits against Covad as well, though Rabe wouldn't go into the details of any of them outside acknowledging that the trouble-ticket issue was part of the settlement.

In June 2001, Verizon charged Covad with falsifying more than 22,000 trouble tickets sent to the carrier for DSL installation problems; a district court judge later dismissed the lawsuit.

Charles Hoffman, Covad president and CEO, said he was pleased to move on with business, especially over the chance to continue its working arrangement with MCI.

Verizon is currently in the middle of an $8.4 billion acquisition of MCI.

"The agreements we are announcing today provide an exciting opportunity to grow our business with the combined companies upon closing of the MCI acquisition," Hoffman said in a statement. "MCI has a substantial customer base outside of Verizon's local footprint."