Sprint Attacks Phone Giants on Access
Wednesday, October 3, 2007
Sprint Nextel chief executive Gary D. Forsee locked horns with executives from the country's largest phone companies at a congressional hearing yesterday, continuing his push to reduce prices that high-volume users like Sprint pay for communication services.
The Reston company said it overpays to access the high-speed fiber-optic networks run by AT&T and Verizon. Sprint leases capacity on those networks to connect wireless calls through its cellphone towers.
"Competition in this market has not developed," Forsee told the House Commerce subcommittee on telecommunications and the Internet. He added that Sprint leases capacity from AT&T and Verizon Communications to service 98 percent of its 60,000 cell sites because there are no competitive alternatives, allowing prices to rise.
Smaller broadband providers Cavalier Telephone and Time Warner Telecom told the lawmakers that they also rely on the phone giants' networks to provide Internet services to their customers.
The hearing took place as the Federal Communications Commission considers whether firmer price controls are needed to improve competition.
Parley Casto, an assistant vice president at AT&T, said that the company faces "intense competition" from such companies as Time Warner Telecom to provide business broadband services, known as special access. Verizon said its prices for such services have dropped 5 percent a year since 2002.
But Larissa Herda, chief executive of Time Warner Telecom, criticized the giants for locking customers into contracts with high cancellation fees and discounts for bulk purchases.
"It's like a heroin drip," she said. "We've tried to sell services to Sprint, but we can't bring prices down low enough to make up for the penalties Sprint would have to pay to get out of its contracts with the incumbents."
Several Democrats, including Rep. Edward J. Markey of Massachusetts, supported Sprint's push for firmer price caps. Republicans including Fred Upton of Michigan argued that adding "red tape" to AT&T and Verizon would stifle investment.
In the renewed debate over telecom competition, several key figures have found themselves switching sides.
The former long-distance companies AT&T and MCI were two of the largest purchasers of high-capacity services from the giant phone companies before merging with them. In 2002, AT&T asked the FCC to lower rates the incumbents could charge for access to their networks. Now also a local exchange carrier, AT&T is fighting a similar request from competitors.
Thomas Tauke, a Verizon executive vice president who testified on the company's behalf, was a member of the House subcommittee for more than a decade as an Iowa congressman. Yesterday, he faced tough questions from Markey over Verizon's rights to reduce its network's availability to competitors.
Forsee also sparred with a former colleague, William Cheek, president of wholesale markets for Embarq, the local phone company spun off by Sprint last year. Embarq opposes the price caps Sprint seeks.
Cheek said Embarq "bids against multiple competitors . . . few of whom are regulated to the extent we are."