tw telecom Rails Against AT&T's Proposal

DALLAS -- Comptel Plus -- A policy fight brewing in Washington could impact how quickly U.S. businesses gain access to advanced services, such as on-demand bandwidth, as well as the future health of the competitive carrier industry itself, tw telecom inc. (Nasdaq: TWTC) CEO Larissa Herda said in her Monday keynote address here.

Unlike much more public battles, such as future Universal Service Funding, this one hasn't garnered much publicity. It revolves around an AT&T Inc. (NYSE: T) filing with the Federal Communications Commission (FCC) , which argues that with the transition to an all-IP network, competitive carriers no longer need the legal right to access the incumbents' last-mile connections -- a right they've had since the 1996 Telecom Act.
"AT&T's argument makes no sense," Herda said, urging her fellow competitive carriers to oppose this action in Washington, D.C. "It doesn't matter what the electronics are; the incumbents' market power comes from control of those wires that connect to the business. The FCC should establish technology-neutral policies."

If allowed to shed its wholesale obligations for last-mile connections, AT&T would be in position to restrict choice to many businesses located in buildings where there is still only one connection -- the incumbent's, Herda argued.

tw telecom continues to aggressively expand its footprint, growing to 16,000 on-net buildings, but to reach many more buildings and customers, it still relies on connections leased from incumbents. This summer, the company rolled out a bandwidth-on-demand service that lets its Ethernet customers dramatically increase their bandwidth within seconds, based on integrated intelligent network capabilities tw telecom has been building for the past several years.

That's the kind of advanced service that will enable U.S. businesses to more efficiently connect to data centers and cloud services and make their overall IT operations more flexible and scalable, Herda said. It's part of the industry's overall move from circuits to services and from physical to logical infrastructure, but that transition can be threatened by policy changes in Washington.

The buildout of tw telecom's new intelligent network service took place during the recession years of 2007 to 2009, when tw telecom decided not to follow the industry trend of making cuts in staffing and capex, Herda said.

"We raised our sails in uncertain times in order to advance," she said. "It really took guts -- the world really seemed like it was crumbling around us. Our stock took a major hit."

That determination to keep investing enabled tw telecom's current track record of growth acceleration over the last 31 consecutive quarters, Herda said.
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