Federal Communications Commission Chairman Kevin Martin is facing increased congressional pressure to re-regulate the special-access market dominated by AT&T Inc. and Verizon Communications Inc., with Sprint Nextel Corp. Chairman Gary Forsee warning lawmakers that excessively high rates for high-capacity dedicated lines could hinder large-scale rollout of wireless and wired broadband services.
“The special-access market failure is apparent in the overwhelming and increasing market share of the two dominant special-access providers, AT&T and Verizon,” said the Sprint Nextel CEO. “It is apparent in their vast and increasing special- access revenues, in their inflated special-access prices, and in their anti-competitive contract terms and conditions.”
Costs hurting WiMAX plans
Forsee, noting special-access charges eat up one-third of cell site operational costs because of lagging competition for those services, said the issue is especially critical as the industry’s No. 3 wireless operator gears up for the launch of its WiMAX mobile broadband service-Xohm-by year’s end.
“A particularly pernicious effect of the special-access market failure is that it slows the nation’s broadband deployment,” Forsee said. “The high cost of special access, without which competitive broadband providers cannot provide service, acts as a significant barrier to broadband deployment. Sprint Nextel is committed to broadband. We are investing $2.5 billion through the end of 2008 to deploy our fourth generation network, as well as millions more to upgrade our EV-DO network. But forcing us-as well as Internet service providers, competitive local exchange carriers, and other long-distance carriers and wireless companies-to subsidize the BOCs [Bell operating companies] through overpriced special access slows the rollout of broadband.”
Forsee said compounding alleged special-access overcharges by AT&T and Verizon is that Sprint Nextel is subsidizing the very companies with whom it competes. AT&T and Verizon are the parent companies of the two largest mobile-phone carriers, AT&T Mobility and Verizon Wireless.
VZ bucks duopoly claims
Thomas Tauke, top lobbyist for Verizon, painted a totally different picture of the specialaccess business. “By just about any measure, special access is a competitive market: prices are declining, output is growing and customers are benefiting from discount-pricing plans and increasingly individualized service arrangements more than ever before,” he stated.
Ruling delayed
House telecom subcommittee Chairman Edward Markey (DMass.) had pressed Martin to rule on special access by mid-September, but a delay has ensued due to pending FCC rulings on related forbearance petitions by Bell telephone companies and possibly resistance from Republican Commissioner Robert McDowell to keep intact special-access pricing flexibility approved by the commission in 1999.
“Special-access circuits are the lifeblood connections for wireless carriers, such as Sprint,” stated Markey at last week’s subcommittee hearing. “Wireless carriers’ dependence on special access will grow as they deploy broadband networks that deliver greater bandwidth but correspondingly require more capacity.”
Markey framed the special-access issue in terms of broadband deployment and penetration in the United States, a state of affairs in which the Bush administration faces frequent criticism because of this country’s lackluster standing on the world stage.
$16B market
Last year, the Government Accountability Office said the $16 billion special-access market was largely non-competitive.
House Commerce Committee Chairman John Dingell (DMich.) is skeptical about a rush to judgment on special access and wants commitments from those seeking special-access price reductions that cost savings will be passed through to consumers.
“The FCC must have all the relevant data if it is going to make an informed decision. I am troubled by reports that those seeking re-regulation have thus far been less forthcoming than they might be with data about their facilities,” said Dingell. “It is not the business of the government to simply affect the transfer of funds from one set of private actors to another.”
