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Covad, Verizon Bury Legal Hatchet

12/28/2005 4:59 AM Eastern

A longstanding legal tiff between Verizon Communications Inc. and competitive broadband telco Covad Communications Inc. appears to have been resolved.

In a settlement announced today, San Jose, Calif.-based Covad has agreed to drop its pending antitrust case against Verizon, and Verizon will likewise scrap its countersuit against Covad. It also resolves all billing disputes.

Instead, the two companies have agreed to a plan to expand Covad’s commercial line-sharing agreement to provide digital subscriber line service using lines that Verizon resellers are tapping for voice services. Financial terms of the agreement were not disclosed.

The last of the competitive local-exchange carriers that emerged in the 1990s to offer DSL and broadband services with leased lines from incumbent telcos, Covad has managed to stay afloat by shifting more toward enterprise services, and it recently made the leap into voice-over-IP technology to keep pace with telecom rivals. But the end in October 2004 of regulations requiring telco incumbents to share their phone lines with competitive outfits like Covad raised doubts as to whether the company could survive.

Covad, meanwhile, had filed suit against Verizon and fellow Bell operator BellSouth Corp., alleging that the companies were trying to unfairly shut down competition in broadband and voice service in violation of federal antitrust laws and the Federal Telecommunications Act. While today’s announcement settles the legal wrangle with Verizon, the BellSouth suit is still in play.

In a separate pact also announced today, long-distance network provider MCI Inc. -- which Verizon is in the process of acquiring -- has agreed to designate Covad as a preferred provider of local access and network services to its DSL business customers.

“The agreements we are announcing today provide an exciting opportunity to grow our business with the combined companies upon closing of the MCI acquisition,” said Charles Hoffman, Covad president and CEO, in a release. “MCI has a substantial customer base outside of Verizon’s local footprint.”

September