Cox, Qwest under scrutiny for anti-trust violations

GREEN VALLEY--Cox Communications is being investigated by the Justice Department for its exclusive arrangement with a residential developer and both Cox and Qwest Communications have been asked to participate in a state regulatory action.

The Arizona Corporation Commission (ACC) on Feb. 1 opened an investigation into preferred-provider arrangements after getting a complaint from Accipiter Communications, ACC spokeswoman Heather Murphy said.

The Justice Department would be looking into anti-trust violations that prevent or reduce competition.

Under typical preferred-provider arrangements, a builder may give a telecommunications company, for a fee, exclusive access to model homes and builder newsletters and brochures.

Qwest spokesman Jeff Mirasola said such arrangements have been in effect in Arizona since 1996 and do not prevent other telecom firms from selling products to homeowners.

May pay twice

What may upset homeowners, however, is if part of their homeowners' association (HOA) dues go to pay for telephone or Internet service, they would have to pay twice if they chose another provider.

What drew the complaint from Accipiter, Mirasola said, is that for the 17,000-unit Vistancia development developed by a subsidiary of Sunbelt Holdings in the city of Peoria, the city gave the developer control over the utility rights of way.

Exclusive control over a right of way, Mirasola said, is not a typical preferred-provider arrangement. Accipiter or another competitor reportedly would have had to pay a $1 million fee to gain access.

Cox filed a motion to dismiss the ACC inquiry, but the investigation remains open and fact-finding letters have been sent to both Cox and Qwest, Murphy said.

Meanwhile the Justice Department has begun an investigation of Cox, which plans to cooperate, a spokeswoman said.

"At this point, because of the investigation, our only statement with regard to the preferred provider agreements is that we have received subpoenas and we are going to cooperate fully," said Monica Contreras, director of government and public affairs for Cox Communications in Southern Arizona.

Response from developer

The developer is not responding to the ACC inquiry, Murphy said.

"Letters were sent to potential parties. Attorneys for the developer, Shea Sunbelt Pleasant Point LLC [an affiliate of Sunbelt Holdings], said that 'while we do not agree with Accipiter's recitation of the facts, Vistancia and Shea will not be responding to the complaint or otherwise participating' [in the inquiry]," Murphy said.

Cox reportedly is under investigation by Arizona Sen. John McCain and the Senate Commerce, Science and Transportation Committee.

The predecessor to Qwest, U.S. West, pioneered the use of preferred-provider arrangements in 1996, when it arranged with builder DMB Associates to put high-speed Internet access into all homes in the high-end DCRanch in Scottsdale, Mirasola said.

At that time, homebuyers were waiting months to get telephone service.

Mirasola said that when Qwest makes a preferred-provider arrangement with a builder, it does not limit consumers from choosing other telephone or Internet providers, but may give them a price or other break negotiations by the developer.

Mirasola said that by Federal Communications Commission rules, Qwest cannot exclude other providers of telephone service from its network, but that Cox, which started out as a cable television company before diversifying, may exclude other telecom firms from its network.

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