(Updates with details on cable competition in last three paragraphs.)

By Fawn Johnson

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- A bid from Qwest Communications International Inc. (NYSE:Q) ( Q) to raise its prices for competitors has prompted 20 chief executives from small phone and Internet companies to travel to Washington in protest.

The group is meeting with Federal Communications Commission commissioners and 25 congressional offices this week, asking for a rejection of Qwest's (NYSE:Q) petition for greater pricing flexibility in four cities.

Competitor companies view such pricing relief requests as the latest tactics by big phone companies to drive them out of the market.

"These will be used as precedent-setters for every other market in the country," said EarthLink Inc. (NASDAQ-NMS:ELNK) (ELNK) CEO Rolla Huff. "Because we're competitors, we can't raise prices. The reality is, we'll just leave."

Qwest (NYSE:Q) rejects the notion that its request is a trend-setter, noting that any price deregulations are individual, local decisions based on market data.

"Looking at these markets based on precedents FCC has established, based on the facts, we've shown that they're competitive," said Steve Davis, Qwest's (NYSE:Q) senior vice president of public policy.

The FCC also must adhere to market data when deciding whether to grant the request.

Qwest (NYSE:Q) filed four petitions last April asking the FCC for relief from requirements that it offer cost-based prices to smaller competitors in Denver, Phoenix, Minneapolis and Seattle.

The FCC must rule on the request at the end of July.

Qwest (NYSE:Q) argues that it is facing significant competition from a variety of carriers in those markets. They include wireless carriers, cable, and Internet- based voice services.

In each city, Qwest (NYSE:Q) said the wireless and Internet phone services are more advanced than they were in Omaha, Neb., where the FCC granted a similar deregulation bid in September of 2005.

Shortly after the Omaha decision, the FCC denied a similar request from Verizon Communications (NYSE:VZ) (VZ) for pricing relief in six East Coast markets.

Competitor companies staged an aggressive lobbying campaign opposing the Verizon (NYSE:VZ) petition, which they credit as influencing the FCC's 5-0 vote denying it. They are waging the same battle against Qwest's (NYSE:Q) bid.

Qwest's (NYSE:Q) Davis said the Verizon (NYSE:VZ) rejection should not have an impact on Qwest's (NYSE:Q) request. "We're not comparing ourselves to Verizon (NYSE:VZ) ," he said.

The FCC is reviewing data on the four markets from Qwest (NYSE:Q) and its competitors.

At issue is whether Qwest (NYSE:Q) faces enough competition in those cities to justify relieving it from pricing rules for smaller companies that use its infrastructure.

Opponents say Qwest's (NYSE:Q) request for relief is tantamount to rewriting the 1996 telecommunications law that ensured competitors access to the telco giants' copper wires to guard against monopolies. "They were to give us wholesale access at cost-based rates. That's the deal," said Nuvox CEO Jim Akerhielm.

But Qwest (NYSE:Q) notes the 1996 law also gave big phone companies an out from the pricing requirements, in the form of FCC petitions for relief, if their markets became too competitive.

"The law and what the FCC has previously found, when a market becomes competitive, we're no longer required to sell to competitors at below-cost prices," Davis said.

The FCC granted Qwest's (NYSE:Q) Omaha petition largely because the phone company faced significant competition from Cox Communications' cable service. Cox also is a major Qwest (NYSE:Q) competitor in Phoenix. In Seattle, Qwest (NYSE:Q) faces competition from cable giant Comcast Corp. (NASDAQ-NMS:CMCSA) (CMCSA, CMCSK).

The competitor companies opposing price relief petitions such as Qwest's (NYSE:Q) view cable competition as a red herring, noting that cable generally only competes with phone services in residences and not in the business market.

But Qwest (NYSE:Q) says cable is only one in a series of competitors. "We've shown intense competition from cable companies. We have shown substantial competition from wireless service," said Davis.

-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com

    (END) Dow Jones Newswires   06-03-08 1659   Copyright (c) 2008 Dow Jones & Company, Inc.