Using the Regulatory Process To Defend Telecom Jobs

Want to know what's in store for CWA members and their customers in a corporate spinoff? Just follow the money and distribution of debt. That's what CWA did over a year ago when Sprint Corp. sought to shed its local telephone operation prior to merging with Nextel Communi-cations. The questions and wave of regulatory action the union generated led Sprint to address members' concerns.

Now, as Alltel seeks to spin off its wireline service, $2.4 billion is moving in the wrong direction, away from the new wireline company that will employ more than 1,000 CWA members who currently work for Alltel and toward Alltel's newly restructured, totally wireless, totally nonunion company. The new wireline company, yet to be named, will be merged with Valor Communications. Valor currently employs about 700 CWA members.

"We successfully intervened through the regulatory process to make sure the Sprint-Nextel deal addressed the job and retirement security concerns of our members," said Jimmy Gurganus, CWA vice president for Telecommunications. "And, we intend to be just as successful with Alltel. We've analyzed the particulars of this new spinoff and have already filed to intervene in three states."

A Better Deal from Sprint

CWA determined that the Sprint-Nextel deal as originally structured would have created an economically feeble new company loaded down with debt, unable to invest in infrastructure and service improvements. Such a company would ultimately fail for lack of ability to provide the quality service necessary to compete, putting the future employment and retirement security of 3,800 CWA members at risk.

By bringing its concerns about Sprint-Nextel before state and federal regulators who had to approve the merger and wireline spinoff, CWA was able to get them addressed.

Sprint needed the approval of regulators in several states before it could complete the spinoff. CWA moved swiftly, filing interventions with public service commissions in New Jersey, Pennsylvania, Ohio, Florida, Kansas, Missouri, North Carolina and Tennessee. CWA insisted that the state PSCs enforce the commitment Sprint had made to the FCC regarding equitable distribution of debt and assets — including pension assets — between Sprint Nextel and the new wireline holding company.

"Sprint grew concerned that we could block or slow down the deal," Gurganus said. "John Short, Sprint's vice president of regulatory affairs, called me and said, 'Let's talk.' I've never seen anything like it in our relations with Sprint. We met and ironed out our concerns about the new company's long-term financial viability and ability to provide job and pension security for our members. CWA agreed to withdraw its objections and states began to approve the spinoff."

CWA has since negotiated joint committees to share information and address mutual concerns at Embarq Communications, the Sprint-Nextel wireline spinoff. The union and company are working together to address health care and pension concerns, and CWA members now participate in the company's short-term incentive program of bonuses for meeting business goals.

Now CWA has filed with the Pennsylvania, Kentucky and Nebraska Public Service Commissions to intervene in the Alltel spinoff in those states. Each of the commissions must approve the spinoff.

In each case, CWA will point out to regulators and the public that the new wireline company will be saddled with $5.4 billion in debt — including $2.4 billion it will be required to pay back to Alltel wireless as a "special dividend." Alltel wireless, on the other hand, would carry only $1.2 billion in debt. "The wireline company will be so debt laden it won't be able to invest in infrastructure and its customers will get short shrift," Gurganus said.

"It goes without saying that high quality service is best provided by well-trained union workers," he said. "There is no question here that what is good for our members is good for the community. We're fighting for good service and broadband access for rural America."