Qwest

» see qwest.com as it lived, on the wayback machine

~ the obituary ~

At the end Qwest was the telephone company for fourteen states in the American west, the dial tone in Denver and Seattle and Phoenix, with a long-distance fiber network underneath it that almost no customer knew was there. On 1 April 2011 CenturyLink, a smaller carrier out of Monroe, Louisiana, closed a $22.4 billion merger and took all of it. The name came off the trucks that August.

It began as a railroad asset. Philip Anschutz bought the Southern Pacific in 1988 and with it a telecom arm that existed to run the railroad's own signals. What he understood before most people did was that the right of way mattered more than the trains: a continuous strip of private land connecting every city in the country, already surveyed, already owned. Qwest was incorporated in 1996 to dig a trench beside the track and pull glass through it. The company went public in June 1997 with a slogan that fit the decade exactly, ride the light.

Joseph Nacchio came over from AT&T at the start of 1997 to run it, and for three years the stock did what fiber stocks did. On 30 June 2000 Qwest used that stock to buy US West, the Baby Bell covering the mountain states and the northwest, in a deal valued around $48 billion. US West had more customers, more employees and more revenue. Qwest had the multiple. The smaller company swallowed the larger one and inherited fourteen states' worth of copper, regulators and pension obligations along with it.

What followed is the part with a docket number. The SEC eventually alleged that roughly $3.8 billion of revenue had been recognized improperly between 1999 and 2002; the company restated about $2.2 billion of it and paid a $250 million penalty in October 2004. Nacchio left in June 2002. He was convicted on nineteen counts of insider trading on 19 April 2007 and served about four and a half years. CenturyLink announced the merger on 22 April 2010 and closed it eleven months later. qwest.com redirects to the acquirer's successor today and has done for years.

~ the case file ~

~ the railroad underneath ~

Almost every American long-distance network of that era was laid by a railroad or beside one, and the reason is not romantic. Fiber is cheap and trenching is not, so whoever already holds a continuous corridor between cities holds the only part of the business that cannot be bought quickly. Sprint is the clearest case, an acronym that unpacks to Southern Pacific Railroad Internal Networking Telecommunications, and Qwest came out of the same railroad a generation later.

Anschutz's version had a second trick in it. While Qwest dug its own conduit it laid spare conduit alongside and sold that to other carriers, which meant the construction project paid for itself before the network carried a single customer's traffic. By 1998 the company had bought LCI International and had a real long-distance business. The engineering was never the weak part. A continental trench with glass in it is a durable object, and the whole of it is still lit today under somebody else's name.

~ the swaps ~

The industry practice was to sell a competitor an indefeasible right of use on your fiber and buy an equivalent right on theirs, on the same day, for matching amounts. The sale was booked as revenue immediately while the purchase went on the balance sheet and was spread over twenty years. Both companies reported growth and no traffic moved. That mechanism is written up in full on this site under KPNQwest, the European joint venture that died of it first, so it does not need retelling here. What is worth saying is that Qwest was the American end of the same trade, at a much larger scale, and that the restatement was the price of unwinding it.

~ the man who said no ~

Nacchio's defense was that the government came after him for something else. He said that on 27 February 2001, six months before the September attacks, the National Security Agency asked Qwest to hand over customer call records without a warrant and that he refused on legal advice, after which the agency pulled contracts worth hundreds of millions of dollars. The claim first surfaced in a 2007 sentencing filing. The judge ruled most of it inadmissible and the jury never heard the bulk of it.

Nobody has ever fully resolved whether the refusal caused the prosecution, and it probably cannot be resolved. Both things are true independently: Qwest's books were wrong, and Qwest was the one large carrier that said no in February 2001 while AT&T and Verizon and BellSouth reportedly did not. The conviction was upheld on appeal in 2009 and the meeting is in the record too.

That meeting is the only part of this company that ever traveled. Qwest sold dial tone in Denver and Phoenix and nowhere near me, and the name meant nothing in Turkey at any point in its fifteen years. Then the Snowden documents landed in 2013 and the surveillance timeline got rebuilt in public, and a Colorado telephone executive's February 2001 calendar entry turned up inside coverage that was read everywhere, here included. A company that never had a single customer outside the United States is remembered abroad for one conversation it declined to have.

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