@jbtaylor on tech

The Wall Street Journal has reported this week that one of the reasons that Sprint is opposed to AT&T's takeover of T-Mobile is because AT&T (and Verizon) are already anticompetitive in the special access market.

And boy does this have AT&T hoppin' mad.

AT&T's Senior Vice President of Government Affairs Bob Quinn complains loudly in this story, saying "This merger has absolutely no impact on the issue of special access/wireless backhaul." Quinn goes on to say, "If the special access debate comes up during the merger review, it will come up because of Sprint."

Actually Bob, it will come up because of AT&T.

You see it was the old AT&T who filed the original complaint at the FCC asking the Commission to rein in the Landline guys. (Then AT&T was an independent long distance carrier.)

It will also come up because the special access rip off that AT&T and its Ma Bell cousins carry out is hurting our economy. A study released earlier this year shows that shutting off the Special Access ATM machine would create approximately 176,000 jobs and add $37.7 billion in economic output to the nation's economy.

From Sprint's point of view AT&T is already being anti-competitive in the special access market. Approving the takeover of T-Mobile would simply strengthen AT&T's chokehold on the wireless industry and the nation's broadband economy, essentially allowing an anti-competitive company to be even more anti-competitive.

That's why opposition is building to AT&T's takeover plans.

Today Rep. Ed Markey (D-Mass.) and Rep. John Conyers (D-Mich.) held a news conference to announce their opposition to the T-Mobile takeover.

Rep. Markey said, "I believe it would be a historic mistake for this merger to be approved" while Rep. Conyers went even further saying that the Department of Justice has allowed “AT&T to combine with other companies and basically reform Ma Bell, only with T-Mobile, it will be Ma Cell.”

Conyers later said, “This constitutes, in my mind, a mega-merger in an already concentrated industry,” Conyers said. If approved it would be “one of the largest duopolies of all time.”

Well there you have it.

p.s. The photo is one I took of the special access lines AT&T sells Sprint to support a cell site in Charlotte, N.C. Incidentally, the upload and download speeds of this connection is less that AT&T's UVerse, but costs Sprint 7 times what AT&T charges you for U-verse. What accounts for the difference? AT&T recognizes that you have a choice to get cable or satellite if you don't want U-verse, but with special access, there is no competition. That's how they get away with 100 percent rates of return on special access.

"Mr. Watson -- Come here -- I want to see you."

125 years ago today, Alexander Graham Bell spoke these words into his first version of a telephone. His assistant, Thomas A. Watson, replied and came running.

As some on Twitter quipped today, Watson was the person interrupted at work by a phone call from the boss.

Bell later received a patent for what he called a "the method of, and apparatus for, transmitting vocal or other sounds telegraphically ... by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sound".

It's really remarkable how quickly the telephone advanced in such a relatively short period of time. By 1983, the first cellular phone call was made by an executive at Ameritech to Bell's grandson. Now 93 percent of Americans have a cell phone and 1 in 4 households are wireless only.

As for Bell, his legacy lives on. To market his invention, Bell founded the American Bell Telephone Company, a forerunner to American Telephone & Telegraph Company -- otherwise known as AT&T.

Regulators concerned about the effects of the phone monopoly on competition and consumers broke up AT&T in 1984 into several different companies, including 7 different Regional Bell Operating Companies. Over time, the government has approved numerous mergers and acquisitions that has reconstituted the monopoly it sought to break up in 1984.

Readers of this blog know all too well what this means for wireless carriers and how the playing field is tilted toward AT&T and Verizon Communications and their wireless subsidiaries.

But that's such a depressing thought.

Today, on the anniversary of the first phone call, I'd rather focus on the technology and how it's improved our lives rather than the underlying policy issues the technology (and consumers) depend upon.

As part of its commitment to the Federal Communications Commission to cooperate with the FCC’s investigation of the special access market, today Sprint submitted a comprehensive set of network data which clearly demonstrates the lack of competitive alternatives for the special access circuits necessary to operate Sprint’s wireless and wireline networks.

In addition, Vonya B. McCann, senior vice president – Government Affairs at Sprint released the following statement:

“Earlier this week, President Obama called for the expansion of advanced wireless services to cover 98 percent of Americans within the next five years. Perhaps the biggest obstacle to achieving this goal is that the failed and broken special access market has raised the costs of expanding and operating a wireless network to artificially high levels. This in turns limits what wireless carriers can invest in the expansion of these services.

What the public must understand is that special access circuits are relied upon by more than just the country's telecommunications companies. Manufacturers, banks, insurance companies, retail stores, hotels, airlines, educational institutions and government agencies all spend billions of dollars each year to purchase special access. Because special access prices are distorted, the cost of doing business in these sectors of the nation’s economy is substantially higher than it should be; and unfortunately, these costs are passed on to consumers.

Sprint believes the Commission is right to pursue a fact-based and data-driven investigation of the special access market. Now that the data is in, we look forward to the Commission moving forward expeditiously in resolving the outstanding issues in this docket.”

If you were to do a quick search for news stories about the FCC today, you'd probably assume that the most important regulatory news coming out of the Federal Communications Commission was news that Verizon Wireless has agreed to pay $25 million to the federal government and to refund $52 million to its customers to settle charges about the company's "mystery fees." Verizon had been under investigation for incorrectly collecting and charging its customers fees for data never accessed on wireless phones.

Surely, that's big news, but it's not the biggest news to come from the FCC today.

A much bigger story is that the FCC issued a public notice in the special access docket which requests data from incumbent local exchange carriers and commercial mobile radio service providers.

How's that for telecom gobbledygook?

In English, what it means is the FCC is asking landline and wireless phone companies to provide confidential data about the prices charged and paid for special access connections. This request for data is a necessary step to take before the FCC can do anything to rein in Verizon, AT&T and other landline phone companies who dominate the special access market which our broadband economy depends upon.

As I've written in this Posterous before, special access circuits are the connections that wireless companies depend upon to connect your wireless call and to make sure your smartphone can surf the Web. Special access also connects your bank's ATM, the credit card payment system at a retail store like Wal-Mart or Best Buy and also the 1-800 reservations centers used by hotels, airlines and the like. It's also how your Internet service provider connects you to this or any other Website and how your email gets delivered.

The special access market is worth about $18 billion a year and it's a broken market. In economic terms that means there is no competition which pressures prices downward.

In the Washington, D.C. area, where I live and work, Verizon controls about 90 percent of the special access market. This means they can charge prices which are jacked up as much as 100 percent over their actual cost.

I call it Verizon's ATM machine.

Today's news about the FCC data request is a clear sign that the FCC is serious in enforcing the law and taking action in the special access docket.

Personally, I welcome it.

At Sprint, we issued the following statement to media about the FCC's step:

"Today’s announcement by the Federal Communications Commission that it is issuing a request for data about the special access market is an important milestone in the Commission’s efforts to fix this broken market. We would like to thank Chairman Genachowski, his fellow Commissioners and the FCC staff for their work to address this problem facing the country’s broadband economy.

Sprint has repeatedly indicated that it will provide the data the FCC needs to make a fact-based, data driven decision in this docket. Because the nation’s broadband economy depends upon these special access circuits, it is essential that the Commission get accurate and timely data from both purchasers and sellers of special access. We urge other communications companies to join with Sprint in fully cooperating with the FCC as it acts in addressing the matters pending in the docket.”

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.