Covad and SBC Form Marketing Agreement to Deliver
Broadband Nationwide
Contact:
$600 Million Contract Struck Over Six Years; SBC Plans to
Invest $150 million in Covad; Various Legal Issues Settled
Santa Clara, CA and San Antonio, TX
(September 11, 2000) - Covad Communications (NASDAQ: COVD) and
SBC Communications, Inc. (NYSE: SBC) today announced an agreement
making Covad an in-region and out-of-region DSL provider for SBC.
SBC also announced plans to invest $150 million to acquire a
stake in Covad.
In addition, the companies said that several pending antitrust
and regulatory legal issues were settled and terms were established
regarding unbundled network element pricing, line sharing,
provisioning, operational support system (OSS) development, remote
terminal access and other proceedings.
"This changes the market dynamics and demonstrates that customer
demand for broadband is so strong that two industry leaders can set
aside past disputes and cooperate to deliver DSL faster and to a
wider range of customers," said Robert E. Knowling, Jr., chairman,
CEO and president of Covad. "This deal is the Telecom Act in action,
proving that it works. Everyone wins here, especially customers who
are waiting to experience high speed Internet access. We welcome
working closely with SBC."
"We are very pleased to strategically align ourselves with Covad
in this rapidly growing sector of the industry," said Edward E.
Whitacre Jr., chairman and CEO of SBC Communications. "Although we
will continue to be vigorous competitors, this agreement allows us
to work together to fulfill the exploding demand for broadband for
both businesses and consumers nationwide."
The commercial agreement includes a guaranteed $600 million in
resale revenue to Covad which will be phased in over six years
starting October 1, 2000. The agreement also provides incentives for
SBC to sell business lines provided by Covad. SBC will begin
marketing both symmetric business service DSL and asymmetric
consumer service DSL provided by Covad throughout the US. The
companies will work together on network, provisioning and product
planning activities needed to support this agreement.
SBC also announced plans to take a minority ownership position in
Covad, pending regulatory approval. SBC would acquire an ownership
interest position approximately equivalent to six percent. This
investment would increase Covad's cash balance to continue the rapid
deployment of its service across a nationwide broadband network that
is nearing completion.
Regarding pending legal matters, Covad's antitrust suit against
SBC and Pacific Bell and Covad's arbitrations against SBC affiliates
Southwestern Bell and Pacific Bell were settled, including Pacific
Bell's claim for alleged past due service fees. In addition, the
parties resolved several critical issues in line-sharing disputes in
Texas, Kansas, Illinois, Michigan, Ohio, Wisconsin, Indiana,
Connecticut, and California, plus key issues in pending
interconnection arbitrations in Texas and Kansas. Further,
performance standards in all 13 SBC states were agreed upon, which
will further reduce regulatory disputes.
Standards for SBC performance were agreed upon so that both
companies will operate under a standard set of measures and remedies
in all SBC states, which include California, Nevada, Texas,
Oklahoma, Arkansas, Kansas, Missouri, Ohio, Indiana, Michigan,
Wisconsin, Illinois and part of Connecticut (SNET territory.) These
standards include stand-alone and line-shared loop provisioning
intervals, collocation intervals, repair and maintenance, and access
to loop plant data. In addition, the parties agreed upon a 13-state,
line-sharing price consisting of a $10 non-recurring charge and a
$5.75 monthly recurring charge for all physical elements of the
line-sharing UNE, including installation.
SBC and Covad also agreed to continue joint OSS development to
support SBC's resale of Covad products, including the fully
automatic loop ordering provisioning process pioneered by Covad. By
working closely with SBC to integrate both companies' OSS systems,
Covad intends to simplify the ordering process and improve DSL
provisioning times. Covad's OSS system currently is integrated with
Pacific Bell and has shown improved installation rates of 25 percent
and higher.
In region agreements also include continued access to
neighborhood gateways utilized in the recently announced Project
Pronto, competitively neutral terms and conditions for spectrum
management and agreements regarding the collocation of equipment in
SBC central offices. Nothing in the agreements announced today would
hinder or prohibit SBC and Covad from competing against one another
in any market.
SBC will continue to provide DSL services in-region primarily
through its affiliate, Advanced Solutions, Inc.
About SBC
SBC Communications Inc. (www.sbc.com) is a
global communications leader. Through its subsidiaries' trusted
brands - Southwestern Bell, Ameritech, Pacific Bell, SBC Telecom,
Nevada Bell, SNET and Cellular One and world-class network,
SBC's subsidiaries provide local and long-distance phone service,
wireless and data communications, paging, high-speed Internet access
and messaging, cable and satellite television, security services and
telecommunications equipment, as well as directory advertising and
publishing. In the United States, the company currently has 61.2
million access lines, 12.2 million wireless customers and is
undertaking a national expansion program that will bring SBC service
to an additional 30 markets. Internationally, SBC has
telecommunications investments in more than 20 countries. With
approximately 219,000 employees, SBC is the 13th-largest employer in
the U.S., with annual revenues that rank it among the largest
Fortune 500 companies.
About Covad
Covad is the leading national broadband
services provider of high-speed Internet and network access
utilizing Digital Subscriber Line (DSL) technology. It offers DSL,
IP and dial-up services through Internet Service Providers,
telecommunications carriers, enterprises, affinity groups, PC OEMs
and ASPs to small and medium-sized businesses and home users. Covad
services are currently available across the United States in 98 of
the top Metropolitan Statistical Areas (MSAs). By the end of 2000,
Covad services are expected to be available in 165 MSAs (which
includes MSAs that will be added as a result of the acquisition of
BlueStar Communications). At that time Covad's network is targeted
to reach more than 45 perent of all US homes and 50 percent of all
US businesses. Corporate headquarters is located at 4250 Burton
Drive, Santa Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web Site:
www.covad.com.
Covad Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
The statements contained in
this release which are not historical facts may be deemed to contain
forward-looking statements, including but not limited to statements
regarding the intention to deploy our network in new and existing
MSAs, the timing and breadth of coverage in each MSA, and our
ability to provide high-quality, media-rich content. Actual results
may differ materially from those anticipated in any forward-looking
statements as a result of certain risks and uncertainties,
including, without limitation, the company's dependence on incumbent
local exchange carriers for collocation, unbundled network elements,
transport and other facilities, development of necessary
technologies and operations, ability to manage growth of our
operations, and the need to raise additional capital. For other
risks and uncertainties applicable to our business refer to the
Company's Securities and Exchange Commission filings.
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