Copyright 2000 Times Mirror Company
Los Angeles
Times
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May 20, 2000, Saturday, Home Edition
SECTION: Business; Part C; Page 1; Financial Desk
LENGTH: 648 words
HEADLINE:
COVAD WINS DSL RULING AGAINST PACBELL
BYLINE: ELIZABETH
DOUGLASS, TIMES STAFF WRITER
BODY:
Pacific Bell must pay rival Covad Communications more than $27.2 million in
damages and costs for illegally obstructing the company's competing high-speed
Internet access service, an arbitration panel ruled.
The decision,
released this week by the panel, stems from a long-running case brought by Santa
Clara, Calif.-based Covad against PacBell, the state's largest local phone
company.
Covad, which sells fast Internet connections using digital
subscriber line technology, said the award reflects lost business suffered by
Covad in 1997 and 1998 when PacBell did not provide access to equipment and
switches in the time required under the federal Telecommunications Act
of 1996. Covad accused PacBell of substantially hampering its DSL
business by falsely claiming that certain PacBell equipment offices had no room
for Covad's DSL gear. The company said it was denied access to a key office in
Menlo Park, Calif., for about a year because of purported lack of space.
"When we finally got to inspect the office, we found that there was room
for not one but 11 competitors there," said Dhruv Khanna, a Covad founder and
the firm's general counsel.
The award comes as Covad's stock price
continues to lag on Wall Street and rumors circulate of a potential buyout
offer. A senior Covad official said the company hopes to remain independent.
Covad's stock, which traded at a 52-week high of $ 66.66 in early March,
fell $ 4.38, or more than 16%, to close at $ 22.50 on Nasdaq. A PacBell
spokesman said the company will appeal the Covad decision, arguing that the
problems cited in the lawsuit already have been resolved and that there is no
legal basis for Covad's damage claim.
"Covad is trying to use the
Telecom Act to compensate for its inability to meet its own revenue forecasts,
claiming that PacBell is responsible for every dollar it fell short," said
PacBell spokesman Steve Getzug.
Nationwide, PacBell and parent SBC
Communications have installed an estimated 200,000 DSL lines, while Covad says
it has installed about 100,000.
Khanna said that although PacBell has
improved since the case was filed, the company still falls short of the
requirements outlined in the Telecommunications Act, a law enacted in part to
spur competition in the local phone market.
PacBell's performance under
the Telecommunications Act remains a key issue for the company because it is
seeking approval to enter the long-distance market on its home turf in
California.
In reviewing PacBell's long-distance application, state and
federal regulators will decide whether the phone company has opened its phone
market to rivals as specified by the 1996 act.
Since the
Telecommunications Act was passed, Covad has sued PacBell and its affiliates
several times over alleged anti-competitive behavior, and now has won cases in
Texas and California. Covad still is pursuing an antitrust lawsuit against
PacBell in federal court in San Francisco.
"So far, we've won every
single time," Khanna said. "The findings of these arbitration panels clearly
demonstrates that PacBell has violated the law, has repeatedly violated the law,
and that it has damaged competition--and Covad in particular--at least to the
tune of $ 27.2 million."
Under provisions of the Telecommunications Act,
incumbent local phone companies such as Pacific Bell are required to give
competitors access to certain parts of their networks and switching
facilities--and to provide the access within certain time limits.
In
late 1998, an arbitrator ruled that PacBell had violated those rules, and later
awarded Covad interim damages and fees totaling more than $ 740,000. Last week,
the American Arbitration Assn. added the $ 27.2-million damage award to the
case.
SBC shares fell $ 1.56 to close at $ 42.69 on the New York Stock
Exchange.
*
Bloomberg News was used in compiling this
report.
LOAD-DATE: May 20, 2000
