Sprint's special access reform call paints contradictory picture to regulators, Wall Street, says IIA

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Sprint (NYSE: S) may be leading efforts to reform regulation of special access circuits it rents from large incumbent telcos like AT&T (NYSE: T) and Verizon (NYSE: VZ), but the Internet Innovation Alliance (IIA) claims the wireless operator is giving regulators a contradictory picture of the special access market.  

In a report titled "Fact Check: Sprint's Tale of Two Stories on FCC Special Access Regulation," the IIA cited times when Sprint told Wall Street that the competitive service market forgoes the need to regulate special access services, while asking the FCC to extend what the organization says are "outdated regulations" over legacy networks as a way to enhance its standing in the market.

IIA points to two statements Sprint made in 2015 to the FCC and SEC in various filings.

Sprint said in a September FCC filing that being able to get access copper-based last-mile facilities will enable it to compete for wireless and business wireline customers. At that time, Sprint said being able to purchase special access services at competitive rates is important since "Sprint and other competitors will depend on both TDM and Ethernet special access more than ever to be able to compete." 

However, the IIA said that Sprint told the SEC that it has found ways to continue to reduce its dependency on ILEC special access services by purchasing alternative Ethernet services from other competitive fiber providers.

Sprint said in an SEC filing that as part of a modernization program, it "modified our existing backhaul architecture to enable increased capacity to our network at a lower cost by utilizing Ethernet as opposed to time division multiplexing (TDM) technology."

For its part, Sprint isn't standing still in altering its last-mile network options. Following a similar sentiment made by Windstream, Sprint revealed during its fourth quarter earnings call that it would be using a mix of 2.5 GHz spectrum and dark fiber for small backhaul.

Handing over more of its backhaul services to competitors like Zayo and UPN could also help Sprint reduce backhaul costs it typically pays to the ILECs for special access circuits. The carrier recently said that it pays more than $1 billion a year for such circuits.

While it is true that Sprint and other mobile operators do have more choice for last mile access services, competitive providers and cable operators which are also becoming more active in wireless backhaul, can't match the ubiquity of the ILEC network. Being a large wireless operator that does not own a lot of its own last mile infrastructure, Sprint will still have to rent last-mile TDM facilities from the likes of AT&T and Verizon to backhaul its wireless traffic.

Charles McKee, VP of government affairs for federal and state regulatory at Sprint, said the cost of the special access circuits it pays to ILECs (incumbent local exchange carriers) have continued to rise, adding that the costs will drive up prices of its wireless services for consumers.

"The inflated costs of these circuits and the unreasonable tie up provisions associated with these circuits result in higher prices for consumers, less innovation and slower speeds," McKee said.

For more:
- see this IIA post

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