Genuity Independent Until At Least 2002

By eweek  |  Posted 2001-09-21

Verizon Communications latest regulatory approval to sell long-distance services in Pennsylvania gives the regional Bell about half of the lines it needs to take over Web hosting and IT outsourcing firm Genuity.

Under the terms of the merger of Bell Atlantic and GTE that created Verizon, Genuity - formerly known as GTE Internetworking - had to be spun off and remain independent until Verizon gained the right to sell long-distance services in former Bell Atlantic territory. GTE had long-distance rights going into the merger, and therefore operated one of the largest Internet backbones and a Web hosting business. In order to not lose Genuity to competitors, Verizon negotiated a deal that it would own 10 percent of Genuity during the period in which it was getting regulatory approval to sell long-distance in Bell Atlantic states.

Verizon needs to sell long-distance on 95 percent of all phone lines in former Bell Atlantic territory, at which point it can convert its 10 percent stake in Genuity into a more than 80 percent stake. Verizon counts on Genuitys facilities and business as it takes on AT&Ts and WorldComs business of servicing large corporate customers. With the Web hosting and backbone operating industry falling on hard times, Genuity is increasingly viewing its forthcoming unification with a former corporate parent as a blessing.

"The game plan has been all along that when they receive the necessary approvals from the regulators, Verizons intention is to exercise their options," said Phil Santoro, a Genuity spokesman.

The Verizon camp cant provide a date, but has indicated that Pennsylvania approval gives 46 percent of the lines it needs. While hard numbers are not available yet, it is expected that a combination of Main, New Hampshire, New Jersey and Vermont would push the line share beyond the 95 percent threshold. In the best case scenario, this would happen some time in 2002.

"We plan to file by the end of the year in [the four states]," said Kevin Irland, a Verizon spokesman. State regulators are unlikely to start working on Verizons requests before the New Year.

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