WASHINGTON, June 23, 2009 - Wireless carriers and consumer advocates joined forces Monday to open a new front in the battle over pricing for "special access" markets.
The newly-formed NoChokePoints coalition brings together a number of unlikely bedfellows that usually clash on many topics, most notably Sprint Nextel and Public Knowledge, in order to battle the "chokehold that these huge phone companies have on the special access market."
The markets in question are located in rural areas where large wireline carriers are required to lease "backhaul" capacity to both wireless carriers and other internet service providers at "special access" points along the so-called middle mile. Coalition members say this creates "chokepoints" are underregulated, providing opportunities for incumbent carriers to overcharge competitors.
While the telecommunications sector has very little competition in general, there is even less in the special access world, said Public Knowledge president Gigi Sohn. "We are taking special access out of the shadows and into the light where it belongs," she said.
And while the Obama administration, Congress and the FCC have highlighted the importance of broadband to the nation's economic recovery, a coalition spokesman said "it defies explanation that we are still fighting this market abuse" on the middle-mile.
The FCC has done little to solve the problem despite years of notice, said Ad Hoc Telecommunications Users Committee representative Colleen Boothby. "The former FCC [under Kevin Martin] ignored the facts, deregulated these services, and did nothing as prices and profits rose to unprecedented levels," she said. The incoming FCC must prioritize the problem to end "price-gouging by the incumbent telephone companies," she added.
Sprint Nextel senior vice president Bob Azzi said high special access rates, which his company pays in approximately 90 percent of markets it served, reduce broadband availability and create a "broken market."
The U.S. can look to other nations for an easy solution, said New America Foundation Fellow Sascha Meinrath. Meinrath compared the special access problem in the U.S. to the gasoline market: "Imagine if gasoline had a 13,000% mark-up." He said New America will release a report comparing the two markets in detail later this week.
The Obama administration, specifically FCC Chairman-designate Julius Genachowski, can take action to solve the problem "if we are to meet President Obama's challenge for broadband in the United States and create the innovation... that will, ultimately, play a vital role in leading America out of this recession," said TW Telecom Public Sector Vice President Ken Folderauer.