Covad Awarded $27.2 Million in Battle With Pacific Bell

Covad Communications Co. announced Tuesday that
the American Arbitration Association
granted the national digital
subscriber line provider $27.2 million in damages stemming from a dispute with Pacific Bell, which it accused of violating the Telecommunications Act of 1996.

Arbitrators determined in November 1998 that Pacific Bell, a SCB Communications Inc.
subsidiary, had violated the Telecom Act as well as its contract with
Covad by failing to timely deliver collocation space
and operable loops.

Arbitrators awarded Covad $27.2 million plus attorneys’ fees and costs as
part of its Intended Award of Damages decision. The ruling is in addition
to the panel’s January 1999 interim decision, which awarded Covad $257,166
in damages and $474,995 in court costs.

Dhruv Khanna, Covad executive vice president and general counsel, said the
company was pleased with the ruling and that Pacific Bell would most likely
challenge the award.

“We expect this ruling to provide additional incentives to all incumbent
phone companies to supply services to Covad in a timely manner and comply
with the requirements of the Telecomm Act,” Khanna said.

John Britton, Pacific Bell spokesperson, said the “Baby Bell” would
appeal the decisions.

“Pacific Bell with appeal the arbitrator’s ruling, which relate to events
that took place in 1997 and 1998,” Britton said. “The issues have been
resolved by recent interconnection agreements made with Covad.”

Britton alleged that Covad is using the decision to compensate for revenue
short falls it anticipates this year.

“Covad is attempting to compensate for its own revenue short falls,”
Britton said. “They have not legal basis for their claims.”

Britton noted that the California DSL markeplace is one of the most
competitive in the U.S. due to Pacific Bell’s aggressive deployment and
line sharing of its telecom services. Currently Pacific Bell operates 1,900
collocation cages for competitors. Its facilities provide 2.3 million DSL
lines and the company adds 4,000 new clients each day for Pacific Bell and
rival broadband service providers.

While the squabble between the companies has been successfully resolved
through arbitration, it does not change the fact the telecom firms are
coming under fire for slow and arbitrary upgrades of their respective
central offices to deploy DSL services.

The Federal Communications Commission
upped the ante on DSL deployment in November 1999 when it issued its “line
sharing” order in a move to allow independent Internet service provider’s
opportunities to provide broadband services.

The FCC’s Advanced Services Third Report and Order permits competitive
carriers to obtain access to the high-frequency portion of the local loop
from the incumbent carriers, like the regional Bells and GTE Corp. .

This regulatory action enabled competitive carriers and DSL wholesalers
like Covad to provide high-speed services over the same telephone lines
simultaneously used by incumbents to provide basic telephone service.

The decision by the FCC made less expensive for ISPs and consumers to
procure the broadband services and compete with telephone companies in
providing high-speed communication services.

Although several service provides have alleged telecom work slowdowns
damaged their ability to deploy high-speed services, only a handful of
companies have filed complaints with local Public Utilities Commissions,
fewer still have won their case in court or arbitrated a settlement.

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