Group Takes Aim At Special Access Pricing
Sprint, T-Mobile others lobby Obama for caps or cuts...
Sprint, Covad, T-Mobile, Clearwire and several other smaller carriers have joined forces with consumer advocacy firm Public Knowledge to take aim at "special access pricing." Through a new lobbying group dubbed "No Choke Points
," the companies today issued a slew of statements
complaining that AT&T and Verizon have abused their dominant position as gatekeepers of massive backhaul and core networks, imposing unreasonable special access charges on smaller operators requiring cross connectivity. Says the group:
Excessive pricing and other market abuses by these companies have long been an issue of concern at the Federal Communications Commission (FCC). Nearly five years ago, after many complaints by broadband customers in several FCC proceedings, the Commission began a review of the high-capacity broadband market to determine the changes needed to ensure reasonable prices. Despite ample evidence of excessive pricing, the Commission inexplicably has yet to take any action."
This debate is certainly not new, heated up recently since smaller operators are hoping to include special access reform (special access price cuts or caps) in the new broadband stimulus plan. The group claims that 87% of customers live in areas where special access pricing isn't regulated, giving Verizon and AT&T unchecked power amidst limited to no competition.
Repeating a trend at the recent FCC, the GAO has issued studies
(pdf) over the years highlighting how the FCC doesn't correctly measure competition on the special access front.
As is usually the case in the lobbying wars, the telecom truth is in the eye of the beholder. AT&T and Verizon have consistently argued the special access market is "highly competitive," and that regulating the sector would impede progress and investment. AT&T takes particular aim at Sprint and their Nextel headache, telling the Wall Street Journal
Sprint's efforts are "a cynical attempt to obtain government-mandated reductions in order to alleviate short-term financial and business pressures."
"Special" access isn't Let's take a step back and understand what's really going on here.
The first thing folks need to understand about this issue is that there's nothing "special" about "special access." It consists of the ordinary wholesale connections, often called the "middle mile," which connect cell phone towers to the telephone system and ISPs to the Internet backbone.
The second thing you need to understand is that overcharging for "special access," if it's allowed to continue, will lead to a cellular duopoly in many parts of the country or maybe even the whole country. Why? Because AT&T and Verizon, the two large telephone monopolies, are also cellular providers. When they do business in each other's territories, each overcharges the other for the "special access" lines which are necessary to hook their towers up to the phone system. But since they do this about equally to one another, it's a wash. However, cellular providers which are not also ILECs (telephone monopolies) do not have anyplace to overcharge. They have to pay the exorbitant prices everywhere. So, the two biggest providers, which are also ILECs, can very easily put the others out of business over time and achieve a nice, cozy duopoly. That's why Sprint and T-Mobile are so much in favor of doing something about the price gouging: their long term survival depends upon it.
The third observation which is interesting is that the remaining ILEC, Qwest, doesn't offer cell phone service. This is intentional. Their idea is to overcharge everyone for "special access" without having to pay any of that money back out! This is how Qwest hopes to prosper without getting into the wireless business in competition with the larger ILECs.
Finally, it's important to understand how all of this affects ISPs, including cable companies. ISPs, in nearly all locations, have to buy "special access" lines to connect themselves to the Internet backbone. But the ILECs charge incredibly high prices for it. In fact, to get Qwest to carry data 45 miles in my region costs about twice as much as an Internet backbone provider charges to take it to the rest of the world! This drives up the cost of bandwidth outside major cities. Our rural ISP's net cost of bandwidth is about $100 per Mbps month, and some ISPs we know are paying $300 to $400 per Mbps per month. Obviously, at these prices, we can't allow the use of bandwidth hogging applications without caps, metering, or simply prohibiting some of the worst applications (e.g. BitTorrent) altogether.
For all of these reasons, it's important to do something about this issue. Even if you just use a cell phone and not the Internet, you have good reason to want the government to fix this failed market.