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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 02-M-1977 (BNB) (Consolidated with Civil Action No. 02-M-1978 (BNB) for pretrial purposes)

DOUGLAS CHEESMAN, ROXANNE LEWIS, LORI VALDEZ, AND DOUGLAS MACKEY, Plaintiffs, v. QWEST COMMUNICATIONS INTERNATIONAL INC., AND QWEST CORPORATION,

JURY TRIAL DEMANDED

Defendants. ________________________________________________________________________ _______________________________________________________________________ SECOND AMENDED CLASS ACTION COMPLAINT ________________________________________________________________________

Plaintiffs, on behalf of themselves and others similarly situated, by and through their attorneys, for their Second Amended Class Action Complaint, upon knowledge as to themselves and their own acts, and upon information and belief with respect to all other matters, allege as follows: NATURE OF THE ACTION 1. Plaintiffs bring this class action individually and on behalf of persons and

entities who obtained local telephone service in four states ­ Arizona, Minnesota, New
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Mexico, and Washington ­ during the period October 2, 2000 through July 8, 2004 ("Class Period"). The public utility regulators in these states investigated Qwest for the exact conduct plaintiffs allege in this case, undertook exhaustive and adversarial evidentiary hearings, and based on evidence admitted in those investigative dockets issued detailed findings against Qwest. These findings and the other facts alleged herein support far more than plausible grounds to allege an agreement or conspiracy that restrained trade and resulted in antitrust injury. 2. The action alleges that defendants Qwest Communications International Inc.

and Qwest Corporation (collectively, "Qwest") unlawfully required two of its competitors to keep price agreements secret from other competitors, consumers and regulators. The agreements ("interconnection agreements") set prices charged by Qwest for competitors to interconnect with its telephone network. By law, and to encourage competition, these interconnection agreements were required to be filed with state regulators and the terms of the agreements made available to all competitors. 3. Qwest, however, gave competitors McLeodUSA, Inc. and Eschelon Telecom

an across-the-board 10% discount in two interconnection agreements, and bound them to secrecy. None of the many other telephone companies that might have entered or expanded operations in Qwest's region were aware of the discounted rates to which they were legally entitled. Any potential competitor had to interconnect with Qwest, so the higher filed rates (which established the "going rate") made the local telephone business in Qwest's region less

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attractive. Fewer competitors to Qwest meant higher prices and less choice for consumers. In a context where market participants perceived higher, filed rates, as the going rate, secret interconnection deals distorted market forces and operated as a drag on competition. 4. In 2002, the Minnesota Public Utilities Commission ("MPUC") investigated

the secret interconnection agreements, and related bribes that were given by Qwest to McLeod and Eschelon. The MPUC opened an investigative docket, took evidence from dozens of witnesses and conducted exhaustive, lengthy, adversarial hearings. Regulators in Arizona, Minnesota, New Mexico, and Washington did likewise. In each instance, Qwest presented its side. The Arizona, Minnesota, New Mexico, and Washington regulators all made extensive factual findings against Qwest. Among their findings was that Qwest had kept the agreements secret for anti-competitive reasons, that doing so had harmed competition in local telephone markets, and that the harm had extended to telephone customers. 5. For instance, the MPUC found, inter alia: The direct and inevitable result of such anti-competitive behavior is that customers have been deprived of the benefit of a market place fairly and freely open to competition. ... CLECs not getting the 10% discount obviously could not offer their products at a price reflecting that discount. They were, therefore, at a competitive disadvantage vis-a-vis the favored CLECs. This discriminatory treatment hurt both the un-favored CLECs and their customers. ... Competitors not receiving the 10% discount were inhibited from expanding their local marketing efforts and potentially discouraged from entering the Minnesota local market, thereby reducing customer choice.

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6.

The record in state regulator proceedings establishes that the conduct by Qwest

alleged in this action egregiously harmed competition in local telephone service markets, deceived potential competitors, and injured telephone customers. The response of regulators was to assess Qwest with over $57 million in fines. Qwest's customers, and the customers of its competitors were not, however, participants in the regulator proceedings. Regulators could not and did not award any damages to telephone customers, despite having found that telephone customers were in fact injured. 7. If telephone customers are to obtain any compensation for injury inflicted by

Qwest it will be through a class action. While individual losses are small, the aggregate customer loss estimated by plaintiffs' expert is in the many millions of dollars. Congress declared (in a "savings clause") that antitrust remedies would remain available to address any violations of the regulatory regime whereby interconnection terms were to be universally offered to competitors. Likewise, in 2003, the FCC said it anticipated that the known violation by Qwest of the requirement to make interconnection terms universally available could be addressed in a federal or state complaint under Federal Communications Act of 1934 ("FCA") §§ 206 and 207 (see Count II herein). 8. This class action is an action contemplated by Congress and the FCC. It

alleges a successful scheme by Qwest to keep secret the price agreements that harmed competition in local telephone markets, discriminated among competitors and misrepresented the filed rate as the going rate for interconnection. Plaintiffs allege facts that were

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conclusively determined by state regulators, based upon evidence from reams of documents, dozens of witnesses, and months of contested hearings. These facts and others obtained by plaintiffs establish that Qwest restrained trade in violation of section 1 of the Sherman Act, unreasonably discriminated in violation of section 202 of the Federal Communications Act of 1934, and violated state consumer protection statutes prohibiting the use of deceptive acts and practices in connection with the sale of goods or services. JURISDICTION AND VENUE 9. This Complaint alleges violations of section 1 of the Sherman Antitrust Act of

1890, 15 U.S.C. § 1 and section 202(a) of the FCA, as amended, 47 U.S.C. §202(a). It also invokes the Court's supplemental jurisdiction with respect to the plaintiffs' and the Class's claims that arise under state law, pursuant to 28 U.S. § 1367. 10. The jurisdiction of this Court exists pursuant to sections 4 and 16 of the Clay-

ton Act, 15 U.S.C. §§ 15 and 26; sections 206 and 207 of the FCA, 47 U.S.C. §§206,207; and sections 1331 and 1337 of the United States Judicial Code, 28 U.S.C. §§ 1331 and 1337. 11. Qwest is found or transacts business in the District of Colorado and a

substantial part of the events or omissions giving rise to the claims herein occurred in this district, and venue in this Court therefore exists pursuant to section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. § 1391(b). In addition, Qwest has sufficient contacts with the District of Colorado so as to make it subject to personal jurisdiction in this District and venue in this Court therefore exists pursuant to section 1391 of the Judicial Code, 28 U.S.C.

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§ 1391(c). PARTIES 12. Plaintiff Douglas Cheesman was a purchaser of local telephone service from

Qwest during the Class Period. Mr. Cheesman resided at 3509 East Caballero Street, Mesa, Arizona, and suffered injury as a result of the conduct of defendants alleged herein. 13. Plaintiff Roxanne Lewis was a purchaser of local telephone service from Qwest

during the Class Period. Ms. Lewis resided at 10255 Greenbrier Road, Minnetonka, Minnesota, and suffered injury as a result of the conduct of defendants alleged herein. 14. Plaintiff Lori Valdez was a purchaser of local telephone service from Qwest

during the Class Period. Ms. Valdez resided at 1521 Calle Del Sur, Sante Fe, New Mexico, and suffered injury as a result of the conduct of defendants alleged herein. 15. Plaintiff Douglas Mackey was a purchaser of local telephone service from

Qwest during the Class Period. Mr. Mackey resided at 4219 North 19 th Street, Tacoma, Washington, and suffered injury as a result of the conduct of defendants alleged herein. 16. Defendant Qwest Communications International Inc. ("Qwest

Communications") is a corporation incorporated in Delaware, with its principal offices at 1801 California Street, Denver, Colorado 80202. Qwest is the predominant telephone service provider in Arizona, Minnesota, New Mexico, Washington, and ten other states. Qwest provides wireline communications services, including local exchange and network access.

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17.

Defendant Qwest Corporation ("Qwest Corp.") is a corporation incorporated

under the laws of Colorado, with its principal offices at 1801 California Street, Denver, Colorado 80202. Qwest Corp. is the operating subsidiary of Qwest Communications, and provides local telecommunications and related services, as well as wireless services, to millions of residential and business customers in Arizona, Minnesota, New Mexico and Washington. CONGRESS MANDATED COMPETITION IN LOCAL TELEPHONE SERVICE MARKETS 18. For a century, American Telephone & Telegraph Co. ("AT&T") provided U.S.

consumers with virtually all long distance and local telephone service. In the 1970's, to encourage competition in long distance markets, the U.S. Justice Department forced AT&T to divest its local telephone service subsidiaries, known as Regional Bell Operating Companies ("RBOCs"). RBOCs were required to provide competitors such as MCI and Spring with non-discriminatory access to local networks needed for long distance service. Qwest's predecessor, U.S. West, was among the RBOCs required to provide nondiscriminatory access to long distance competitors of AT&T. As a result of the requirements placed upon U.S. West and other RBOCs to provide access, competition among long distance companies flourished. Competitor entry into long distance markets triggered lower consumer prices, prices which remain low today. 19. Local telephone service, however, continued to be provided by RBOC

successors, such as Qwest, known as incumbent local exchange carriers ("ILECs"). An
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ILEC is the telephone company in a given area that owns the telephone wires entering customer homes and businesses ("access lines") traditionally used to deliver telephone service. Because telephone service was delivered almost exclusively through access lines for nearly a hundred years, and because these wires could not feasibly be duplicated by competitors on public streets, ILECs operated for an extended period as state-sanctioned monopolies, with rate-regulation as the means for protecting consumers against unnecessarily high prices. Accordingly, the access lines and other telephone network infrastructure now controlled by Qwest was funded by Qwest customers who paid bills at rates over a period of many decades during which Qwest was effectively insulated from competition by a statesanctioned monopoly. 20. In 1996, the United States Congress eliminated local telephone service

monopolies by enacting the Telecommunications Act of 1996 Act ("1996 Act"). The purpose of the 1996 Act was to inject competition into local telephone service markets, and to substitute competition for classic rate regulation as the means to control excessive customer prices in the local telephone service market. 21. The centerpiece of the 1996 Act was to require ILECs to permit potential

competitors in local exchange markets ("CLECs") to use the ILECs' access lines to reach customers. Local exchange markets are the markets where ILECs sell CLECs

interconnection to the ILEC's access lines. It was and is infeasible for CLECs to construct and install duplicates of the ILECs' access lines, due to cost, disruption, physical space

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limitations, and difficulties in obtaining rights of way. In order to provide local telephone service competitive to Qwest's service, CLECs had no choice but to interconnect their networks with Qwest's local telephone network facilities at reasonable cost and at the same quality level as Qwest provided its own retail customers. 22. Accordingly, under the 1996 Act, Qwest and other ILECs were obliged to enter

into an agreement with each CLEC setting forth price and other terms whereby Qwest would interconnect its access lines with the CLEC's network. 23. In order that all CLECs would know the terms of interconnection given to all

other CLECs, the 1996 Act required Qwest and other ILECs to file their interconnection agreements with state public utility regulators. According to the FCC, "filing of all

interconnection agreements best promotes Congress's stated goals of opening up local markets to competition, and permitting interconnection on just, reasonable, and nondiscriminatory terms." "Conversely," the FCC said, "excluding certain agreements from public disclosure could have anti-competitive consequences." 24. Thus, under the 1996 Act, the local exchange markets where ILECs sold

CLECs interconnection service were to be fully transparent. Each CLEC was to have contemporaneous knowledge of the terms of the interconnection agreements between Qwest and every other CLEC. Moreover, Qwest and all other ILECs were required under the 1996 Act to make the interconnection service provided for in any interconnection agreement available to any other CLEC on the same terms and conditions. FCC regulations provided

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that a CLEC could "choose among individual provisions" contained in the interconnection agreements of any CLECs for inclusion in its own interconnection agreement. The ability of CLECs to "pick and choose" among the most attractive terms given other CLECs was meant to foster competition and bring customer prices down. 25. A "savings clause" in the 1996 Act clarified that the Sherman Act continues

to apply to any anti-competitive conduct by ILECs: Antitrust Laws ... Savings Clause ... [N]othing in this Act shall be construed to modify, impair, or supersede the applicability of any antitrust law. * * *

Federal State And Local Law ... No Implied Effect ... This Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State or local laws unless expressly so provided in such Act or amendments. Upon signing the 1996 Act into law, President Clinton stated "even for activities allowed under or required by the legislation, or activities resulting from FCC rulemaking or orders, the antitrust laws continue to apply fully." 26. An FCC order provides that the anti-discrimination and antitrust laws are

available to private parties to address ILEC violations within the new regulatory scheme: [P]arties have several options for seeking relief if they believe that a carrier has violated the [non-discrimination standards of the 1996 Act]. ... [An aggrieved party could,] pursuant to section 207, file a complaint against a common carrier with the Commission or in federal district court for the recovery of damages. ... We clarify ... that nothing in [the non-discrimination sections of the 1996 Act] or our implementing regulations is
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intended to limit the ability of persons to seek relief under the antitrust laws. QWEST'S SCHEME 27. During the Class Period, Qwest served as the ILEC throughout nearly all of

Minnesota, Arizona, Washington and New Mexico. Access lines owned by Qwest and by CLECs, respectively, in Minnesota, Arizona, Washington and New Mexico were:

State

Access lines Owned By Qwest as of 12/31/00 2,904,723 2,201,782 859,322 2,516,414

Access lines Owned By CLECs as of 12/31/00 50,224 59,333

Access lines Owned By Qwest as of 06/30/04 2,241,742 1,639,775 784,483

Arizona Minnesota New Mexico Washington

96,925

2,109,895

As of December 31, 2000, the access lines owned by Qwest, as a percentage of all access lines in the respective states, was 98.3% (Arizona), 97.4% (Minnesota) and 96.3% (Washington), respectively. 28. Qwest was dominant as the provider of local telephone service to customers Local

in Arizona, Minnesota, New Mexico and Washington during the Class Period.

telephone service is the relevant product with respect to the antitrust claims alleged in this action. Local telephone service consists of a "bundle" that includes a dial tone, calling plan

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minutes, features such as Call Waiting, Call Forwarding and Voice Mail, regional calls, and exchange access service needed to connect to a long distance carrier. 29. As of December 31, 2000, five CLECs operated in Arizona, twelve in

Minnesota, two in New Mexico and ten in Washington. The identity of the CLECs that operated in each state is presently unknown but on information and belief are thought to be overlapping to such a degree that only a handful of distinct CLECs operated in the four states during the Class Period. Also upon information and belief, Qwest had in place individual interconnection agreements with each of these CLECs. Also upon information and belief, with respect to each agreement containing a price term, with two exceptions, Qwest filed the interconnection agreements with state regulators and made the prices contained therein available to all other CLECs operating in the respective state. 30. Qwest did not file but instead purposefully concealed the interconnection

agreement between it and McLeodUSA, Inc. effective October 2, 2000 (the "McLeod Agreement," exhibit A). Qwest did not file but purposefully concealed the agreement between it and Eschelon Telecom effective November 15, 2000 (the "Eschelon Agreement," exhibit B). Qwest concealed the McLeod and Eschelon Agreements to hinder the

development of competition in local exchange markets, and to distort market forces that otherwise would have created meaningful competition to Qwest in the local telephone

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business. The McLeod and Eschelon Agreements gave McLeod and Eschelon across-theboard percentage price discounts.1 31. McLeod operated in Arizona, Minnesota, New Mexico and Washington during

the Class Period. The McLeod Agreement gave McLeod price discounts ranging from 6.5% to 10%. The term of the McLeod Agreement was three years and three months (through December 31, 2003), subject to automatic renewal thereafter. 32. As a condition to receiving price discounts, Qwest required that McLeod keep

the McLeod Agreement secret. 33. Also as a condition to receiving price discounts, Qwest required that McLeod

"remain neutral regarding Qwest's Section 271 application". At the time, Qwest had applied to the FCC for approval to enter long distance markets, subject to input from competitors, including McLeod. By virtue of West's condition, McLeod could not submit negative input to Qwest's 271 application without forfeiting the valuable price discounts in the McLeod Agreement. 34. West's former chief executive, Joseph Nacchio, was personally involved in

negotiation of the McLeod Agreement, and gave it final approval. At the meeting where Macleod's discounts were negotiated, according to Mr. Nacchio, "Qwest recognized competition was developing in its local markets". The Macleod Agreement was in part a

Aside from the 1996 Act, filing of the agreements was required by state regulations. See e.g., RCW 80.36.100 (Washington State tariffs to be filed and open to public); Minn. Stat. § 216B.05(1) (same).
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response to this competitive threat. Mr. Nacchio has since been convicted by a federal jury on felony charges relating to his tenure at West during the Class Period. 35. The percentage price discounts in the Macleod Agreement applied to all

interconnection purchases from West. The discounts were the same regardless whether the end customer was a business customer or a residential customer. The discounts were the same regardless of the calling plan (defined below) sold by Macleod to end customers. The discounts were the same regardless whether the residence of the end user customer was rural, urban or suburban. 36. Eschelon operated in Arizona, Minnesota, and Washington during the Class

Period. The Eschelon Agreement, effective November 15, 2000, gave Eschelon a 10% discount: "Qwest agrees to pay Eschelon an amount that is ten percent (10%) of the aggregate billed charges for all purchases made by Eschelon from Qwest for November 15, 2000 through December 31, 2005". The Eschelon Agreement bound the parties for five years and six weeks, through December 31, 2005. 37. As a condition to receiving price discounts, Qwest required that Eschelon keep

the Eschelon Agreement secret. 38. The price discount in the Eschelon Agreement applied to all interconnection

purchases from Qwest. The discount was the same regardless whether the end customer was a business customer or a residential customer. The discount was the same regardless of the

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calling plan (defined below) sold by Eschelon to end customers. The discount was the same regardless whether the residence of the end user customer was rural, urban or suburban. 39. Keeping the Macleod and Eschelon agreements secret deprived other CLECs

of terms to which they were entitled, terms that would have attracted those other CLECs to enter Qwest's local exchange markets. The result was that fewer CLECs competed with Qwest, Macleod and Eschelon for local telephone business in Qwest's local exchange markets. 40. All plaintiffs were direct purchasers of local telephone service from Qwest

during the Class period. All suffered the same injury from the same conduct of Qwest: they paid higher prices and received less choice because fewer CLECs competed for their business in Qwest's local telephone markets. Plaintiffs did not purchase local telephone service from CLECs. The claims of Class members who are CLEC customers in Arizona, Minnesota, New Mexico and Washington are premised upon the conduct alleged herein and its effect upon local exchange markets. These claims of CLEC customers are "fairly encompassed" by the antitrust claims plaintiffs allege which are premised on the same conduct by Qwest and its effect. FACTUAL FINDINGS MADE BY STATE REGULATORS Minnesota 41. In March 2002, the MPUC referred a complaint filed by the Minnesota

Department of Commerce to an administrative law judge to collect evidence to determine

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whether, inter alia: (a) Qwest had entered into secret agreements with favored CLECs; (b) the secret agreements limited CLECs' ability to compete in local exchange markets; (c) by doing so Qwest "provided] discriminatory treatment in favor of the CLECs that are party to these agreements and to the detriment of CLECs that are not; and (d) "[as a result of Qwest's conduct, Minnesota's end user customers have been denied the benefits of potentially increased competition." 42. The MPUC determined that Qwest's conduct harmed competition in local

exchange markets and harmed end-user customers such as plaintiffs: (a) "The testimony in this case from CLECs that were actually harmed by

Qwest not making the unfiled agreement terms available to them demonstrates the harm caused by Qwest's intentional conduct to both customers and competitors;" (b) "Because none of the provisions cited in the Complaint have yet been

made available to other CLECs for pick and choose, the harm continues. Qwest's conduct generally harms competition and the growth of CLECs in Minnesota;" (c) "While all the unfiled agreements are patently discriminatory on their

face and violated laws intended to protect fledgling competitors and competition in the local telephone industry and the ratepayers who are to benefit from that competition, the Eschelon IV and Macleod III violations warrant the maximum penalty allowable under the law because by giving selected CLECs such a significant price edge over their competitors (the 10% discount), they had the potential to cause the most serious damage to competition."

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(d)

"The degree of Qwest's wilfulness and intent to violate the cited

anti-competitive laws was quite high. The record indicates that Qwest's activities were not isolated, spur-of-the-moment decisions by entry-level personnel but were taken in a calculating and deliberate manner by experienced, high-ranking Qwest officials. Qwest has defended these actions as being the result of confusion over what the law required. This defense has no merit." (e) "Furthermore, CLECs have been harmed momentarily and customers

have been harmed by Qwest impeding fair competition in this manner. The direct and inevitable result of such anti-competitive behavior is that customers have been deprived of the benefit of a market place fairly and freely open to competition. While this harm may not be quantified in terms of dollars and cents, the first fruits of competition (lower prices and wider choices) were undoubtedly impacted by Qwest's anti-competitive and discriminatory behavior. Example of the impact on price: CLECs not getting the 10% discount obviously could not offer their products at a price reflecting that discount. They were, therefore, at a competitive disadvantage vis-a-vis the favored CLECs. This discriminatory treatment hurt both the un-favored CLECs and their customers. Example of impact on choice: CLECs not receiving the 10% discount were inhibited from expanding their local marketing efforts and potentially discouraged from entering the Minnesota local market, thereby reducing customer choice."

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(f)

"Finally, the gravity of the violation is judged as much by what it

intended to accomplish as by quantifying the monetary harm. In this case, the Commission concludes that Qwest intended to disadvantage certain CLECs, its competitors, through illegal means. That is a grave matter." (g) "The significant duration of each agreement (the intended duration of

the most damaging secret agreement was five years and 6 weeks) indicates Qwest's intention to advantage favored CLECs and disadvantage the non-favored CLECs for a significant period of time." The "most damaging secret agreement" referred to by the MPUC is the Eschelon Agreement. (h) "Likewise, the number of violations and several repeat violations with

the same favored CLEC within a relatively short period of time also suggests that these anticompetitive and discriminatory practices were not aberrations but represented a concerted portion of Qwest strategy." (i) "The Commission believes that what has been most damaged by

Qwest's anti-competitive behavior is the competitive environment in Minnesota and more concretely, Minnesota CLECs." (j) "[Parties to the proceeding] have suggested that the goal must be to

reform Qwest's approach, to lead it from the anti-competitive behavior identified in this and related dockets and to build a competitive environment which motivates Qwest to begin treating wholesale customers as customers rather than competitors. In that context, the

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Commission believes that a proper consideration in determining the size of a monetary penalty is that it be large enough to motivate abandonment of anti-competitive behavior by indicating the seriousness with which the Commission views such behavior." 43. The number of days that Qwest kept interconnection discounts secret from

competitors was used by the MPUC to determine appropriate penalties: "Having completed this review [of the record generated in the proceeding], the Commission will assess a penalty of $10,000 per day for two of the unfiled agreements that had the greatest anti-competitive and discriminatory negative impact ([the Eschelon and McLeod Agreements]) and $2,500 per day for the remaining 10 unfiled agreements for a total of $25.95 million." 44. The MPUC found particular harm to competition from the secret agreements

that bribed counter-party CLECs: (a) "The commission should also consider the quid pro quo that Qwest

received from its conduct, including the elimination of CLEC participation in regulatory proceedings addressing the public interest, and the damage that caused to the furtherance of competition in Minnesota." (b) "Qwest's unfiled agreements with Eschelon, Macleod, Covar, and 10

Small CLECs sought to secure the silence of those companies, thereby skewing the regulatory record. The gravity of Qwest's actions in so doing can be likened to bribing potential witnesses not to report what they saw to an administrative body."

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(c)

"While Qwest's activity buying silence injured the regulatory process

in general and is reprehensible as such, the relevant consideration for this proceeding (penalty assessment) is that it also directly harmed the unavowed CLECs in an anti-competitive and discriminatory manner. Qwest removed valuable sources of input regarding actual commercial usage and issues that major CLECs were dealing with at the time. It is reasonable to assume, as West apparently believed, that Macleod and Echelon's information would have generally hurt Qwest's position and helped the CLECs' position. By keeping relevant information from regulators, Qwest sought to skew the process in its favor, all to the detriment of the unavowed CLECs who, due to Qwest's actions, would not be receiving the benefits of proper regulatory process." 45. The MPUC also determined that keeping the Secret IAS secret from

competitors constituted intentional discrimination on Qwest's part: (a) "Qwest provided terms, conditions, or rates to certain CLECs that were

better than the terms, rates and conditions that it made available to the other CLECs and, in fact, it kept those better terms, conditions, and rates a secret from the other CLECs. In so doing, Qwest unquestionably treated those select CLECs better than the other CLECs. In short, Qwest discriminated against the other CLECs in violation of Section 251;" (b) "Qwest knew [section 252(a)] required [the pertinent portion of the

unfiled agreement] to be filed with the Commission but intentionally did not make the required filing;" and

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(c)

"By failing to make this provision available to other CLECs, Qwest

knowingly and intentionally discriminated against them in violation of 47 U.S.C. § 251." 46. The MPUC found it to be "an unreasonable restriction on resale to withhold

favorable terms offered to competitors." 47. The MPUC findings alleged here were affirmed on appeal by a federal district

court in Minnesota. Qwest Corp. v. Minnesota Public Utilities Common, 2004 WL 1920970 (D.Minn. Aug. 25, 2004). Arizona 48. In April 2002, the Arizona Corporations Commission ("ACC") commenced

an investigation of Qwest's secret agreements and impact on competition. 49. The ACC found: (a) that Qwest's failure to file the Macleod and Echelon agreements, among

others, "impermissibly discriminated against other CLECs and harmed competition in Arizona." (b) that the agreements were intentionally withheld, "calculated attempts

to provide favorable pricing" not offered other CLECs. 50. The ACC determined that its actions were necessary to "rectify the harm to

competition caused by Qwest providing discounts to Echelon and Macleod." 51. The ACC fined Qwest to "prevent[] a repetition of Qwest's anti-competitive

behavior," "chang[e] Qwest's anti-competitive behavior and actions," and "ameliorate the

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anti-competitive outcome of the unfiled agreements and remedy the adverse impact on the emergence of local competition in Arizona from the existence of the unfiled agreements." 52. "The relationship between Macleod, US WEST, and later, Qwest, was unique

and discriminated against other CLECs who could not view and possibly opt-in to the agreements between the parties since they were not publicly filed. Qwest and Macleod benefitted from this relationship, while other CLECs did not." 53. "Both Qwest and Macleod benefitted from their unique and discriminatory

relationship....Since the agreements between Macleod and Qwest were not filed, other CLECs could not opt-in to these agreements. This spared Qwest the cost of providing these same terms to other carriers. These other carriers were discriminated against by the existence of the unfiled agreements between Macleod and Qwest.....The decision to enter into a unique and discriminatory relationship with Macleod was an intentional and willful decision by Qwest." 54. "If these CLECs [among others, Macleod and Echelon, under the Macleod and

Echelon Agreements] receive better wholesale service, then their retail customers may be more satisfied with their service. More satisfied CLEC customers may result in an increase in local competition in Arizona" 55. "These discounts gave Echelon and Macleod enormous pricing and operational

advantages vis-a-vis other CLECs that did not have an opportunity to obtain the same discount....Every CLEC that did not have this 10% discount suffered the direct harm of

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paying more for interconnection, network elements and services than the law requires. That directly affects each CLECs bottom line by reducing the net between revenues and expenses. To many CLECs who are struggling to survive in the currently troubled telecommunications market, reductions to their bottom line can be devastating." 56. "The parties' conduct has stunted the growth of real competition in Arizona,

harmed CLECs that are not party to the agreements and tainted several regulatory proceedings." 57. competition. (a) "The agreements between Qwest, Echelon, and Macleod are especially The ACC found Qwest's bribes to competitors especially harmful to

troubling. Based on Staff's analysis, Qwest intentionally and willfully chose not to file these agreements, and adversely impact the development of local competition in Arizona, in order to achieve its goal of Section 271 approval." (b) Both of these companies [Macleod and Echelon] are relatively large

competitors in the local exchange market in Arizona. As stated earlier in this testimony, both companies were experiencing poor wholesale service from Qwest. These companies had relatively large volumes of orders and enough experience with Qwest to be able to provide invaluable information to regulatory agencies reviewing whether Qwest should receive Section 271 approval. This information could have been detrimental to Qwest, in that it could have impacted when and even whether Qwest received Section 271 approval."

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58.

"Because Qwest's actions were anti-competitive, anti-consumer and made a

mockery of the rule of law, a finding that Qwest willfully and intentionally violated the law was necessary to restore integrity to the process." New Mexico 59. In March 2002, the New Mexico Public Regulation Commission ("NMPRC")

initiated an investigation into Qwest's unfiled interconnection agreements. 60. The NMPRC found: (a) that secret interconnection agreements were "contrary to the public

interest" and that Qwest had "discriminated against other CLECs that were unaware of the rates, terms and conditions of the unfiled agreements;" (b) that "other CLECs had no opportunity to review [the secret agreements]

or opt into the conditions; these CLECs were apparently the subject of discriminatory behavior by Qwest and Macleod. In addition, the bribes forced CLECs "to give up certain legal rights in exchange for Qwest agreeing to do what the Act obligates it to do, i.e., negotiate with CLECs in good faith." 61. "Qwest apparently chose not to file these agreements, but rather to mark them

confidential and keep them secret. These secret agreements had terms, conditions and rates that were unavailable to other CLECs, which were discriminated against by such action...." 62. "[T]o achieve a competitive market place...Congress sought to make the market

transparent and put all CLECs on equal footing...Qwest was aware of all the terms,

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conditions and rates available, because Qwest had secret agreements with certain CLECs that altered terms, conditions and rates of the filed, approved interconnection agreements, thus making transparency in the market impossible." 63. "Qwest's failure to file these agreements in a timely manner, while making the

preferential terms available to some other competitors, had the effect of stalling, or even preventing, competitive entry by other CLECs, thus delaying the benefits of competition clearly anticipated in the Telecommunications Act of 1996 and HB 400. The regulatory framework of these statutes is premised on the ILEC making its network available to all interconnectors (competitors) on the equal and transparent basis. As owner of the local network, the ILEC is under a particular obligation under these statutes to facilitate competition, not to manipulate it." 64. "Giving one wholesale customer `preferred treatment' over another, thus

allowing a better, undisclosed agreement for one over the other defeats the purpose of the `Pick & Choose' provision that is intended to make interconnection terms and conditions equally accessible to any and all other CLECs for entry into the marketplace." 65. "Also, these agreements, which contained numerous confidentiality provisions,

stated that non-participation and/or objection to Qwest's 271 Approval was mandatory for these `secret agreements' to be consummated. ... This constitutes nothing more than a blatant bribe. Qwest entered into these "secret agreements" with certain CLECs, in total disregard to the Commission's regulatory authority, in obvious knowledge that the Commission would

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not have approved these particular Interconnection Agreements that are definitely contrary to the public interest. Clearly, Qwest was attempting to "lock in" a competitive advantage through hasty, unchallenged approval of its 271 application, before competitions could establish a foothold in local markets." 66. "To what severity Qwest's actions hindered other CLECs from entry into the

New Mexico marketplace is immeasurable. This anti-competitive behavior harmed New Mexico customers and definitely other telecommunication carriers (CLECs), thus NMSA 1978, § 63-7-23(D) most certainly applies to this case. Staff finds that Qwest intentionally, willfully and repeatedly violated both State and Federal law. These violations are extremely serious and furthermore, jeopardized the telecommunication industries' (CLECs) willingness and ability to provide fair and competitive services to the citizens of New Mexico." 67. "The fact that some CLECs received these terms that no other CLECs were

aware of created an anticompetitive environment by not making them publically available to other competitors. Staff believes this resulted in discriminatory treatment that is contrary to the public interest and prohibited by Section 252. Such discriminatory treatment

necessarily has an impact on the status of competition for local telecommunications services in New Mexico, however difficult to measure. Staff believes if all of these agreements were filed and available to all CLECs certified in New Mexico, it would have resulted in a more competitive telecommunications market in New Mexico, which Staff believes is in the public interest."

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Washington 68. In August 2003, the Washington Utilities and Transportation Commission

("WUTC") filed a complaint against Qwest alleging unfiled interconnection agreements. The WUTC then commenced "an enforcement proceeding concerning Qwest's anti-competitive and discriminatory behavior in the local telecommunications services marketplace." 69. Qwest entered a settlement agreement with the WUTC in which Qwest's

admitted it "willfully and intentionally" violated requirements to file the Echelon and Macleod Agreements. 70. "The key is secrecy and the ability of the incumbent monopolist to keep

customers in separate classes of service by not allowing other carriers to find out that they are being treated differently. If a particular CLEC is permitted to have secret most favored carrier status, the result could be a competitive advantage for that CLEC as well as the ILEC, a depression of competition in the market, and, ultimately a decreased benefit for consumers." 71. "[T]he damage to the marketplace from discrimination is multiplied as more

and more secret agreements are implemented, but not filed. Furthermore, since the ILEC has perfect information because it is entering into the agreements with the various CLECs, it may use that information to attempt to influence which CLECs succeed in which marketplace and the direction of investment and competition to its benefit."

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72.

"Secrecy enabled harm to occur because of unreasonable preferences and

advantages given to some CLECs but prejudicing other CLECS who did not receive similar treatment or receive the opportunity of pick and choose....The fact that Qwest entered into secret interconnection agreements that were not made publicly available shows that Qwest gave preferences. The element of secrecy makes the preferences undue and unreasonable as well as the fact that they caused harm." 73. "By making the terms and conditions of the agreement for interconnection

services secretly unavailable to other CLECs it is apparent that severe harm from discrimination and unfair disadvantages occurred." 74. "With regard to CLECs who did not participate in secret interconnection

agreements, to the extent that entry decisions were based on higher prices and lower quality service provisioning compared to the secret agreements, the non-participating CLECs were harmed, and so were their end users. The result is damage to competition, the competitive marketplace, and loss of consumer welfare." 75. The WUTC found that Qwest had "willfully and intentionally" withheld the

Macleod and Echelon Agreements "to prevent other competitive carriers from becoming aware of [them]" and that the effect was "anti-competitive". 76. The WUTC assessed fines against Qwest based upon "the significance of

Qwest's anticompetitive and discriminatory actions".

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ISSUE PRECLUSION 77. Issues that were presented to and determined by state regulators in the

proceedings alleged herein also present themselves as issues in this action. 78. Issues that were presented to and determined by state regulators in the

proceedings alleged herein were finally adjudicated on the merits. 79. Qwest was a party to each of the proceedings alleged herein where issues

presented in this action were fully adjudicated on the merits. 80. Qwest was given a full and fair opportunity to litigate the issues by this action

that were fully adjudicated on the merits in regulator proceedings as alleged herein. CLASS ACTION ALLEGATIONS 81. Plaintiffs bring this action on their own behalf and as a class action pursuant

to rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of all persons and entities (other than defendants, their affiliates, successors and assigns) who subscribed to basic local exchange service in the Service Area by means of traditional circuit-switched twisted pair wireline facilities during the period from October 2, 2000 through July 8, 2004 (the "Class"). The Class is further subdivided into the: "Arizona Subclass;" "Minnesota Subclass;" "New Mexico Subclass;" and "Washington Subclass" (collectively, the "Subclasses"). The Class and Subclasses exclude persons and entities who subscribed to basic local exchange service by means of wireless service, voice over Internet protocol

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("VoIP"), non-VoIP cable telephony, or other facilities apart from circuit-switched twisted pair wireline. 82. The members of the Class are so numerous that joinder of all members is

impracticable. 83. Plaintiffs' claims are typical of the claims of the other members of the Class.

Plaintiffs and all other members of the Class sustained damage to their business and property interests as a result of the wrongful conduct complained of herein. 84. Plaintiffs will fairly and adequately protect the interests of the other members

of the Class, and have retained counsel competent and experienced in class action and antitrust litigation. 85. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy. Because the damages suffered by individual Class members are relatively small, the expense and burden of individual litigation make it virtually impossible for Class members individually to seek redress for the wrongful conduct alleged herein. 86. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether Qwest entered into any agreement or conspiracy to maintain in

secrecy price discounts for interconnection service;

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(b)

whether Qwest did in fact withhold interconnection discounts from

CLECs other than McLeod and Eschelon; (c) whether disclosure of the interconnection discounts in the McLeod and

Eschelon Agreements would have attracted additional CLECs to Qwest's local exchange markets; (d) whether issues determined by regulators in Arizona, Minnesota, New

Mexico and Washington establish any of the elements of a Sherman Act § 1, Communications Act § 202, or the state consumer protection statutes in respect of customers in a particular state; (e) whether Qwest is a "common carrier" under the Federal

Communications Act of 1934 subject to the prohibition of discrimination contained in that statute; (f) whether discounts offered by the McLeod and Eschelon Agreements

were, under FCC rules applicable during the Class Period, legally separable from the volume requirements contained in those agreements; (g) whether the McLeod and Eschelon Agreements offered "like service"

within the meaning of Communications Act § 202 to the interconnection agreements between Qwest and a handful of other CLECs operating in Arizona, Minnesota, New Mexico and Washington during the Class Period; and

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(h)

whether fewer competitors in Qwest's exchange markets caused higher

prices and poorer service than would have been the case under circumstances of robust competition. 87. Varying characteristics among local exchanges can be dealt with by grouping

by population density (urban versus rural), customer type (residential versus business), and frequency of competitors (no competitors versus, 2 or 3 or more competitors) in the various exchanges. (Upon information and belief, the data necessary to effect such groupings is available from Qwest and/or the FCC.) For example, the intensity of competition in a given exchange may be categorized as "low" if between zero and two CLECs served the exchange during the Class Period; medium if between three and five CLECs, and high if greater than five CLECs. Differences among services offered and requested by customers, and

differences among the types of customers, ultimately will bear on damages, but will not create individual issues that predominate over the common questions alleged above. The discounts were "across the board" and stable across these various differences. 88. Plaintiffs know of no difficulty that will be encountered in the management of

this litigation that would preclude its maintenance as a class action. 89. The names and addresses of the members of the Class can be obtained from

Qwest and CLECs that provided local telephone service. Notice can be provided to such Class members using techniques and a form of notice similar to those customarily used in class actions.

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COUNT I Section 1 of the Sherman Act, 15 U.S.C. § 1 Unreasonable Restraint Of Trade 90. herein. 91. During the Class Period defendants entered into a conspiracy or contracts in Plaintiff repeats and realleges the foregoing of paragraphs as if fully set forth

unreasonable restraint of interstate trade and commerce in violation of Section 1 of the Sherman Antitrust Act of 1890 by agreeing with certain CLECs to keep secret the preferential terms of interconnection with defendants' facilities needed for the provision of local telephone service. In the context of a regulatory scheme that in order to spur

competition required terms of interconnection to be disclosed and made available to all competitors, the contra requirement of secrecy restrained trade in local exchange markets where interconnection was sold. 92. As a result of this unlawful conduct, fewer competitors entered and expanded

operations in Qwest's region and local telephone service customers were charged supracompetitive prices and/or received service that was materially below what they would have received but for such conduct. 93. As a result of the foregoing, plaintiff and the other members of the Class have

been injured in their business and property by defendants' violation of section 1 of the Sherman Act in an amount as yet un-ascertained, but believed to be at least in the tens of

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millions of dollars, to be trebled pursuant to the provisions thereof, with interest, for which damages defendants are jointly and severally liable. COUNT II Section 202 of Federal Communications Act of 1934 Discrimination 94. herein. 95. Section 202(a) of the Federal Communications Act of 1934 provides that: It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage. 47 U.S.C. § 202(a). 96. 97. Qwest is a "common carrier" within the meaning of section 202(a) of the FCA. Qwest's conduct complained of herein has violated section 202(a) of the FCA Plaintiffs repeat and re-allege the foregoing paragraphs as if fully set forth

in that Qwest has engaged in and continues to engage in unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular

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person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage. 98. Because it is a "common carrier," under section 207 of the FCA, Qwest is

liable to plaintiffs and the other members of the Class who have been damaged by Qwest's violation of section 202 of the FCA in an amount to be determined at trial. 99. Plaintiffs and other members of the Class have suffered injuries as a result of

Qwest's violation of section 202 of the FCA. Fewer CLECs were attracted to enter and expand operations in Qwest's region than would have been the case if the secret percentage discounts given to McLeod and Eschelon had been disclosed and made universally available. The result of fewer competitors to Qwest in local telephone markets was that purchasers of basic local service from Qwest and from CLECs paid higher prices and received poorer service. These allegations are supported by the findings of state regulators. See ¶¶ 41-76, supra. 100. Pursuant to section 206 of the FCA plaintiffs and Class members are entitled

to recover the full amount of damages sustained in sequence of such violation, together with reasonable attorneys' fees. 101. Plaintiffs and the other members of the Class have not asserted the claims set

forth in this Complaint that arise under section 202 of the FCA before the Federal Communications Commission. COUNT III

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State Consumer Protection Statutes 102. herein. 103. The rates for interconnection that Qwest filed with state regulators effective Plaintiffs repeat and re-allege the foregoing paragraphs as if fully set forth

during the Class Period were higher than discounted rates Qwest gave to McLeod and Eschelon under the McLeod and Eschelon Agreements during the Class Period. 104. By filing higher interconnection rates with state regulators, Qwest

misrepresented those higher rates as the best available terms for interconnection with Qwest when in fact lower rates were available and were being paid by McLeod and Eschelon. 105. Qwest concealed the McLeod and Eschelon Agreements from competitors and

from plaintiffs and the other members of the proposed Class with the intent that state regulators, consumers (including plaintiffs and the members of the Class), and competitors other than McLeod and Eschelon would rely upon the higher filed rates as the best available terms for interconnection with Qwest. 106. Qwest's misrepresentations and/or omissions were made in connection with

the sale of local telephone services in the regular course of its business. 107. Plaintiffs and the other similarly situated local telephone service customers

were injured as a result of Qwest's misrepresentation and concealment because they paid higher prices and received poorer service when competitors set their local telephone service rates based upon the rates filed by Qwest as the best terms available for interconnection with

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Qwest's access lines. In fact, the going rate for interconnection was 10% lower. Believing that interconnection costs were higher than they in fact were, these potential and actual competitors did not enter and compete with Qwest or expand operations in Qwest's service region to the extent they would have had Qwest make the discounts universally available as required by law. 108. Qwest's misrepresentation and concealment of interconnection rates violated

the consumer protection statutes of the following four states as set forth below: (a) Arizona's consumer protection statute, A.R.S. §§ 44-1521, et seq.

This consumer protection statute makes unlawful the "use or employment by any person of any deception, deceptive act or practice ... misrepresentation, or concealment ... with intent that others rely upon such concealment ... in connection with the sale ... of any merchandise whether or not any person has in fact been misled". By definition, "merchandise" includes "services" such as the interconnection service at issue in this action; (b) Minnesota's consumer protection statute, MN ST § 325F.68 et seq.

This consumer protection statute makes unlawful the "use or employment by any person of any ... misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby"; (c) New Mexico's Unfair Practices Act, NMSA § 57-12-1 et seq. The

New Mexico Unfair Practices Act makes unlawful any "false or misleading oral or written

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statement, ... or other representation of any kind knowingly made in connection with the sale, ... of goods or services ... which may, tends to or does deceive or mislead any person and includes: ... (11) making false or misleading statements of fact concerning the price of goods or services"; (d) Washington's consumer protection statute, RCW § 19.86.010 et seq.

This consumer protection statute makes unlawful any "[u]nfair methods of competition and unfair or deceptive acts and practices in the conduct of any trade or commerce". The statute prohibits an unfair or deceptive act or practice that occurs in trade or commerce, impacts the public interest and causes an injury to the plaintiff's business or property, which injury is causally linked to the unfair deceptive act. 109. The claims plaintiffs assert against Qwest under state consumer protection

statutes in this Count III satisfy each of the elements of the above statutes. In addition, these claims arise under the same facts as the claims alleged by the larger group of plaintiffs against Qwest in the Spa Universaire litigation. Accordingly, these claims under consumer protection statutes relate back to March 2003, the date of the filing of the Spa Universaire consolidated complaint. PRAYER FOR RELIEF WHEREFORE, plaintiffs, on behalf of themselves and the other members of the Class, prays for judgment as follows: (i) Entering an order certifying this action to be a proper class action

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pursuant to rule 23(b) of the Federal Rules of Civil Procedure on behalf of the Class defined herein, declaring plaintiffs to be adequate representatives of that Class, and declaring plaintiffs' counsel to be counsel to the Class; (ii) Awarding judgment against Qwest in an amount to be

determined at trial for its violations of Sherman Antitrust Act of 1890 for the damage to the business and property interests suffered by plaintiffs and the other members of the Class as a result of Qwest's violations; (iii) Awarding judgment against Qwest in an amount to be

determined at trial for its violations of the Federal Communications Act of 1934 for the damage to the business and property interests suffered by plaintiffs and the other members of the Class as a result of Qwest's violations; (iv) Awarding judgment against Qwest in an amount to be

determined at trial for its violations of state consumer protection statutes, A.R.S. §§ 44-1521, et seq., MN ST § 325F.68 et seq., NMSA § 57-12-1 et seq. RCW § 19.86.010 et seq. for the damage to the business and property interests suffered by plaintiffs and the other members of the Class as a result of Qwest's violations; (vii) Awarding attorney's fees and costs in this action; and

(viii) Granting such other relief as the Court may deem just and proper.

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JURY DEMAND Plaintiffs hereby demand a trial by jury on all issues triable by jury. Dated: Denver, Colorado December 10, 2007 JONES & KELLER, P.C.

By: s/ Thomas P. McMahon 1625 Broadway, 16 th Floor Denver, Colorado 80202 (303) 573-1600 Peter S. Linden Randall Berger KIRBY McINERNEY LLP 830 Third Avenue, 10th Floor New York, New York 10022 (212) 317-2300 Attorneys for Plaintiffs

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