The Qwest For An RBOC Makeover

Qwest Communications is getting on with the business of
being a regional Bell operating center (RBOC), judging by the senior
management housecleaning conducted by its new chairman and chief executive

Richard Notebaert instituted an almost complete revamp in the way the Bell
runs its business, reorganizing the telephone company into three units —
consumer, business and wholesale — all led by old hands in the telecom

Qwest has been treading financial dissolution since the beginning of 2002,
when it became embroiled
in the accounting scandal
begun by Enron’s demise.

The new Qwest chief is well-known in the telecom industry, notably during
his tenure as chairman of Ameritech, where he gained notoriety from rumored
reports of his gutting the telephone company for its merger with SBC
Communications in 1999.

But what gained Notebaert notoriety with one Bell might stand him well with
the company he runs today, according to one analyst at META Group, a
Stamford, Conn., research firm.

“He was actually know for heavy cost-cutting and turning over what was
really considered a minimally-functioning enterprise over to SBC,” said
David Willis, META Group vice president of global networking
strategies. “That says two things: this guy is going to slash and burn
where he has to and treat the business like it’s an RBOC business and that
spells bad news for the national service.”

RBOC is a term that’s fallen out of favor, and has become increasingly
obsolete, in today’s telecom market. Focusing on regional telephone and
network services isn’t as sexy and lucrative as providing national and
international services like frame relay, virtual private networking (VPN)
and Web hosting.

But going back to business as a plain ol’ RBOC is something Qwest — which
zero growth in 2002
— is going to need to look at, and most likely
already is, if it plans to come out of its current financial mess, Willis

“They’re going to focus on in-region service and in getting long-distance
approval try to get customers end-to-end,” he said. “Anything that’s
outside of that is going to be superfulous and may well get sold off.”

Back when the telecom industry was taking venture capital by the billions,
spreading operations onto the national and international stage was a
tailor-made solution. But with the burst of the dot-com bubble, the telephone
companies were forced to compete with a crowded field of carriers providing
the same services.

As a result, Willis said, “the sales force will give hefty discounts just
to show any kind of revenue growth whatsoever.”

Qwest officials need look no further than one its peers, BellSouth, for an
example of a successful RBOC. With the notable exception of its joint
wireless phone venture (Cingular Wireless) with SBC, BellSouth has managed
to excel where the other incumbent telephone companies have
failed: digital subscriber line (DSL).

While officials at Verizon Communications and SBC bemoaned the state of DSL deployment throughout the U.S. — blaming
either the competition, the Federal Communications Commission (FCC) or both
— BellSouth shined in its DSL growth.

Also noteworthy is the company’s absence in nationwide services, something
the other Bells maintain is essential to keep shareholders happy.

Further proof the company is getting back to the basics is the makeup of
Qwest’s new senior management, made up primarily of old hands from
Notebaert days at Ameritech, when it was an RBOC.

  • Oren Shaffer, the new Qwest chief financial officer replacing Robin
    Szeliga, worked at Ameritech from 1994 to 2000.
  • Joan Walker replaces Michael Tarpey, who retired last April, as senior
    vice president of corporate communications. She held the same role at
    Ameritech from 1996-1999 and was president of the Ameritech Foundation.
  • Gary Lytle is Qwest’s new vice president for policy and law. Lytle is
    a long-time Ameritech hand, first as vice president of government affairs
    for Michigan Bell (an Ameritech subsidiary) and then as vice president of
    Ameritech’s federal relations. Before joining Qwest, Lytle was the interim
    president and chief executive officer for the U.S. Telecom Association (USTA).

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