Sprint Presses for Cheaper Access to Broadband Lines
Tuesday, October 2, 2007
Sprint Nextel is picking a fight with the country's largest phone companies over the price it pays for access to their fastest networks.
The industry skirmish has swelled into a political battle that will find an audience in front of members of Congress today. Sprint, of Reston, along with some competitors, says it has hundreds of millions of dollars riding on an upcoming Federal Communications Commission decision, which hinges on the unpredictable swing vote of Republican Commissioner Robert M. McDowell.
The dispute centers on the high-capacity fiber-optic lines that provide huge volumes of phone and Internet connections to businesses. The largest telecom companies -- AT&T, Verizon and Qwest Communications -- have networks that reach most buildings, and competitors such as XO Communications and Level 3 Communications often lease capacity on those lines to serve their customers. Wireless companies including Sprint and T-Mobile also use the capacity to connect calls to their cellphone towers.
But these competitors, led by Sprint, say the giants charge too much for access to the high-capacity lines and want the FCC to more tightly regulate the prices. Sprint says its access fees have risen sharply in recent years. AT&T, Verizon and Qwest argue that their prices are reasonable and that they should not be regulated in markets that have sufficient competition.
"You don't induce more competition by controlling or reducing the prices," said Randy May, president of the Free State Foundation, a Maryland group that opposes regulation for the big phone companies. "More regulation discourages them from investing in their own facilities because they can piggyback on other networks."
Complicating the situation are separate requests by the phone giants to renegotiate prices with their competitors in some markets rather than offer government-set prices.
FCC Chairman Kevin J. Martin and Commissioner Deborah Taylor Tate have opposed placing regulations on these high-capacity services, known as special access. Democratic commissioners Jonathan S. Adelstein and Michael J. Copps have said firmer price caps may be necessary to ensure competition.
Now all eyes are on McDowell, whose tiebreaking vote could shift the balance of this $16 billion market. McDowell is a former lobbyist for Comptel, a group that represents smaller competitors, and some observers expect him to vote in favor of tightening price regulations.
But after the commission's last meeting, McDowell expressed disappointment that Qwest failed to win support for loosening price controls on some lines leased to competitors, which others say indicates his willingness to further reduce regulations.
In an interview yesterday, McDowell acknowledged the difficulties of determining the extent of competition in certain markets.
"A lot of the fundamental facts are at loggerheads," he said, noting that more detailed information might be needed. "It makes resolving this issue very challenging."
Sprint said its spends more than one-third of its operating costs for each of its 60,000 cellphone towers to buy capacity from the telecom giants. In testimony today before the House Subcommittee on Telecommunications and the Internet, Sprint chief executive Gary D. Forsee plans to attack AT&T and Verizon for charging "inflated prices" for what he calls the "lifeblood of the telecommunications industry."