Sprint says ILEC control over special access cost U.S. economy $150B over five years

Charles McKee, VP of government affairs for federal and state regulatory at Sprint (NYSE: S), said that incumbent local exchange carriers' control over special access connections has "cost our economy $150 billion in the last five years alone" in a statement supporting FCC Chairman Tom Wheeler's technology-neutral proposal.

Sprint, which purchases special access circuits from wireline operators like AT&T (NYSE: T) and Verizon (NYSE: VZ) to backhaul its wireless traffic, said that implementing the suggested new framework for business data services will bring a long-awaited end to monopoly control over the market and will usher in a new era of competition.

"The Chairman's recommendation today moves to end that enormous drag on our economy, ushering in a new framework supported by rules that look forward not backward, towards competition and away from market failure and artificial technology or legal distinctions," McKee said. "Sprint looks forward to working with the Commission as it moves to adopt a competitive, sustainable framework consistent with these principles by the end of this year."

Not having a last mile network of its own, Sprint has to rely on special access circuits from large ILECs to support wireless densification projects to extend 4G coverage to more customers and lay a foundation for 5G. The operator sees the wireless backhaul circuit costs from the wireline ILECs as an impediment to future builds.

Sprint maintains that the high prices of ILEC special access circuits could have the unintended effect of driving up prices of its wireless services for consumers and business customers.

Joining Sprint in support of the proposal is BT Americas (NYSE: BT), which offers services to large enterprise customers throughout the United States.

"BT agrees that we need forward-looking rules that reflect the realities of the 21st Century marketplace, are technology-neutral and support competition as the best way to serve customers, drive innovation and grow the US economy," BT said in a statement.

Wheeler on Friday circulated a four-pronged strategy in a draft Further Notice of Proposed Rulemaking (FNPRM) to create what he says will be a new regulatory framework for the evolving business data services market. Key tenets include:

Identifying competitive markets: While ensuring that the special access market does not cause harm consumers and businesses or stifle investment, Wheeler will identify markets that that are competitive and those that are not, and adopt a regulatory framework that lays out those distinctions.

Technology neutral approach: Wheeler's proposal calls to create rules that reflect the current economy and the differences between products, places or customers, but can't be based on artificial distinctions between companies or technologies. Under the plan, business data services (BDS) services should be governed by the same principles.

Encouraging technology transitions: Although TDM-based BDS services are a large part of the ILECs' wholesale revenue stream, the FRNPM contains a tariff order proposing to prevent certain specific contractual practices like the lock-in plans that slow down the switch from legacy TDM services to newer IP-based services.

Addressing current, future transitions: One of Wheeler's proposals is to end BDS tariffing in all markets.

"If we want to maximize the benefits of business data services for U.S. consumers and businesses, we need a fresh start," Wheeler said in a blog post. "The marketplace is changing. Cable companies are entering the market, and Internet Protocol (IP)-based technologies can now deliver services traditionally satisfied by legacy, circuit-based products. Yet, competition remains uneven, with competitive carriers reaching less than 45 percent of locations where there is demand."

Besides asking questions on how best to construct the new BDS regulatory framework consistent with these principles, the FRNPM also seeks comment from all interested parties about how best to determine where competition does, and does not, exist, looking to competition among products, to the supply and ability to supply BDS in specific geographies, and to the needs of different classes of customers.

Wheeler said that he wants the FCC to adopt a final order this year.

Just as Wheeler issued his plan, Verizon and Incompas, an advocacy group for CLECs, on Friday developed a proposal to regulate special access services.

Similar to Wheeler's proposal, Verizon (NYSE: VZ) and Incompas called for a technology-neutral regulatory regime for special access while advocating compliance with Title II of the Communications Act.

The FCC will review the special access FRNPM and other issues during its April monthly meeting.

For more:
- see this FCC blog post

Related articles:
Verizon, Incompas call truce in special access regulation war
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CFA says incumbents hold on special access market cost consumers, U.S. economy $150B since 2010
TDS disagrees with AT&T, says it's not asking FCC to reimpose price cap on Ethernet services
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