S&P rates Eschelon notes CCC+

Standard & Poor's said it assigned its CCC+ corporate credit rating to competitive local exchange carrier Eschelon Telecom Inc. and a CCC+ rating to the $100 million senior notes due 2010 by Eschelon Operating Co., a wholly owned subsidiary of Eschelon.

The outlook is developing.

S&P said the corporate credit rating on Eschelon primarily reflects the company's lack of sustainable competitive advantages in the intensely competitive telecommunications services industry. Eschelon provides commodity voice and data services to small and midsize enterprises in 12 major metropolitan markets in which Qwest Communications International Inc.'s regional Bell operating subsidiary, U.S. West, operates as the incumbent local exchange carrier.

The company's network is mostly based on owned switches and leased fiber and local loops, and a small portion on unbundled network element-platform. Eschelon has been winning market share from the ILEC on the basis of superior customer service and competitive pricing. However, given that the commodity nature of the business may encourage the ILEC and other CLECs to compete on the same basis and because there are no substantial barriers to improving customer service, competitive pressure on Eschelon is likely to remain strong in the foreseeable future.

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