Could the Merger Mean Back-Pedalling?

By Wayne Rash  |  Posted 2011-05-19 Print this article Print

On May 18, Bob Quinn, AT&T senior vice president for Federal Regulatory posted a blog entry calling Sprint's claims of an unfair advantage and unfair pricing a "myth". Quinn then brought up the relationship between Sprint and Clearwire, and pointed out that Clearwire uses microwave backhaul. This, Quinn claimed, proved that Sprint was obviously using landline backhaul because it wanted to, not because it was forced to.

Without going into the many ways that Quinn's argument was totally specious, the fact is that the vast majority of Sprint's cell sites predate Clearwire, don't have access to the microwave backhaul and may not be in locations where the microwave backhaul is even possible. It was so clearly an effort to spread FUD (fear, uncertainty and doubt) about the merger that it should have carried a warning label. Perhaps, the fact that much of Quinn's assertions are pure fiction gets around that.

Still, Sprint came out with a statement of its own. "The only companies who share AT&T's fairy tale view of the special access market are the landline phone companies that control approximately 85 percent of the special access market and face no meaningful competition to meet the needs of wireless carriers or others who depend upon high-speed broadband connections," wrote Sprint PR Manager John Taylor in a prepared statement. "When you leverage market power to earn rates of return in excess of 100 percent, it's easy to understand why you support the status quo."

The senior telecom executive mentioned above who has access to current rate practices, said that in addition to the pricing provided, special access customers are also put into a position where they suffer huge penalties if they try to move to another carrier.

The way this works is that to get favorable pricing, wireless carriers must commit to a specific number of digital lines in any given metropolitan area. If they reduce their usage, the price goes up dramatically on all of their lines-so high the executive said, that it would more than offset any potential savings from using an alternate carrier.

There are ways a wireless carrier can avoid being held at the mercy of the wireline carriers. The first is to be a wireline carrier yourself. The second is never to use them in the first place, which is what Clearwire did. The third is to never get in bed with them and their special rate plans, which is what T-Mobile did when it decided to build its cell sites with metro Ethernet and only use T1 lines where there was no alternative. Sprint, unfortunately, was built out before those other methods were options, and despite Quinn's assertions, a change clearly isn't an option for Sprint.

Hesse, meanwhile, has reason to worry. AT&T and Verizon can raise their rates when they please and if it means forcing Sprint out of business, they can do that any time. If AT&T gets the market share it wants with T-Mobile, it has just that much more incentive. 


Wayne Rash Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazineÔÇÖs Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.

He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.

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