Bells Are Ringing

Ray Gifford was stumped.
The questions seemed so simple.
Why have hundreds of US West customers had to face waits of up to five months for telephone service?

Why have these problems plagued the company for five years?
A parade of US West Colorado division vice presidents--in gray suits and trim skirts--took turns at the microphone, trying to provide the answers to Gifford and the two other members of Colorado's Public Utilities Commission, which had summoned them to a hearing last month.

The executives--half a dozen or so--blamed the problems on everything from continuing population growth to spring storms and flooding; from six accidental cable cuts to vandalism to the demand for lines created by the hordes of media that descended on Columbine High School in April and May.

Everything but themselves.
One even told the commissioners that the phone network was getting "hardening of the arteries" because it simply couldn't accommodate the demand on its existing infrastructure, especially with the rise of the Internet and the need for thousands of new computer connections.

Gifford, a Republican who was appointed to the PUC earlier this year by Governor Bill Owens, wasn't satisfied. US West pays its shareholders the highest dividend of any of the regional Baby Bells, he noted, even though it has a reputation for offering the worst service anywhere.

Most perplexing of all, however, was a chart compiled by the PUC staff showing that despite the growth, despite the natural and unnatural disasters, despite the vandalism, US West's investment in Colorado's network--the cables, switches and circuits that make telephone service possible--has declined dramatically over the past three years.

For example, the figures revealed that the company spent $70.3 million on transmission equipment in 1996 but only $51.4 million in 1998, and the budget for cable and wire additions went from $26.2 million to $10.9 million during the same period.

And Gifford wondered aloud why US West would cut back on investments in its network just as AT&T geared up to offer its own local telephone service over cable-television wires, a move that would potentially create genuine competition for residential customers.

"It mystifies me," Gifford told the audience.
Three days later, US West gave the commissioners, the public and everyone else in its fourteen-state region what may have been the real answer.

US West--which had been involved in merger talks with upstart fiber-optics company Global Crossing--announced that it would instead merge with Denver-based long-distance carrier Qwest Communications International. The $48.5 billion deal created a telecommunications powerhouse with 25 million customers and a $12 billion annual revenue stream. The new company, to be known as Qwest, planned to pour US West's accumulated riches into developing a system of fiber-optic cable lines that will zap voice, data and video traffic all over the globe.

The deal marked a major transformation for US West, which instantly shed its reputation as a dowdy old Baby Bell saddled with outmoded technology for the far more profitable role of telecom trendsetter. The agreement also marked a personal triumph for US West chairman Sol Trujillo, who as a fresh-faced MBA from the University of Wyoming was hired by US West in 1974 as an economic forecaster and who now reportedly stands to make $100 million from stock options and other incentives that were part of the agreement (see sidebar, page 28).

It's a long way from the Park Avenue suite in New York where the deal was consummated to the humble Logan Street headquarters of the Colorado PUC. So what could lousy telephone service in Conifer have to do with a multi-billion-dollar merger that was the talk of Wall Street?

A great deal, as it turns out. The Coloradans who have flooded the PUC with more than 5,000 complaints about US West in the past year may have helped the company pull off the most daring transformation in its history, proving that in the new age of telecommunications, customer service can take a backseat to corporate strategy.

From Denver to Des Moines to Seattle, the complaint has been the same: US West has failed to provide decent telephone service. "It's pretty well-known that their service quality and delays in hooking up new service and responding to complaints has left something to be desired in Iowa," says Gary Stewart of the Iowa Office of Consumer Advocate.

Like residents in the other thirteen states served by US West, Iowans have complained about the company for years. Although Iowa hasn't seen the explosive growth that Colorado, Washington and other states have, the experience there has been remarkably similar: hundreds of people waiting weeks for new lines.

"I was talking to a gentleman yesterday who is an executive for another utility company," says Stewart, "and he was complaining about how long it took to get telephone service. He built a new home and went weeks without service. I believe that's a fairly common occurrence."