@jbtaylor on tech

The folks at The Hill newspaper's Hillicon Alley technology blog picked up on remarks yesterday from the chief counsel to the FCC Chairman, Rick Kaplan.

In offering his reaction to the GAO report on wireless competition, Kaplan said:

"Wireless connectivity is a key economic driver that creates enormous opportunities for consumers, innovators, and businesses. We agree with GAO that data-driven analysis of the wireless marketplace is essential for pro-innovation, pro-competition policies. The FCC has taken proactive steps to improve our data and analysis, including collecting new and better data for this year’s Mobile Wireless Competition Report. We’re pleased that GAO has recognized the need for the FCC to collect more comprehensive data on special access and will soon be taking steps to address many of the issues raised in the report.”

Now in Washington, "soon" can mean something different than what it means elsewhere in the country, but I'm taking this as a sign that the FCC is getting ready to act to fix this broken market.

I sure hope I'm right.

This morning, the U.S. Government Accountability Office (GAO) released a report which examined the level of competition in the wireless industry.

What's that have to do with AT&T, Verizon and "The Church Lady", one of my all time favorite Dana Carvey characters?

Well, bear with me.

First you have to get a little bit of info about the report.

In my personal view, it was really significant that the GAO acknowledged the inherent advantages AT&T Mobility and Verizon Wireless have because of the fact that they are owned by landline companies.

The long story short is that the GAO recognized that the wireless industry is beholden to the landline industry to deliver wireless phone calls and to connect its customers to the Internet. These connections are made possible by landline circuits known as special access circuits.

Regular readers of this Posterous know that while other companies provide these circuits, the landline companies control between 80 and 100% of the market for special access in most cities.

Because there's virtually no meaningful competition, the landline guys, chiefly Verizon and AT&T, mark up their prices an average of 100% over cost.

So what this means for the wireless business is if you're Verizon Wireless and AT&T Mobility, you're engaged in an elaborate scheme of overcharging yourself. (Remember, it's not a big deal if Verizon rips off Verizon Wireless or if AT&T rips off AT&T Mobility. For every other wireless company, it's real money being shoveled out the door.)

The huge cost advantage this gives Verizon Wireless and AT&T Mobility is significant and it allows them to undercut T-Mobile, Metro PCS, Cricket, US Cellular, Clearwire and Sprint who don't have a choice but to work with the landline guys at AT&T and Verizon.

As the Church Lady used to say, "Well, isn't that special?"

Actually, it's special access and AT&T, Verizon and the nation's other landline companies are laughing all the way to the bank.