Expert Opinion: On Backhaul, Sprint is Playing Both Sides of the Street

Wall Street and K Street are separated by a mere 225 miles, but for many companies they are worlds apart.  In particular, industry observers would do well to compare everything said to policymakers with statements by the same competitors made to Wall Street investors.

Defense companies, for example, warned policymakers that sequestration would spell the death of the defense industry, yet defense stocks more than doubled since the law prescribing the spending cuts was passed and defense players figured out how to deal with the changes, as they promised Wall Street they would.  Telecom companies likewise present sometimes radically-divergent world views on K Street and Wall Street.

Take Sprint.  In a January 7 filing at the FCC, Sprint argued that the special access market “in almost every part of the country does not support competition for core DS-1, DS-3 and similarly sized Ethernet channel termination facilities [.]”    Sounds pretty dire.  Unfortunately, in its conversation with the FCC, Sprint failed to include some other important facts it shared with its understandably-bullish investors.  Specifically:

• Two years ago, Sprint entered the market for competitive alternatives for their back haul services to replace incumbent telephone company special access in its network – under the project name “Network Vision.”;
• Sprint initiated a competitive bidding process for its “Network Vision” project that it expected to have 25-30 “significant backhaul providers.”
• Following the competitive bid process, Sprint awarded numerous contracts for their backhaul services to competitive backhaul providers.  In fact, in a filing at the FCC, Verizon confirmed that it bid for Sprint’s backhaul business in this process, yet was awarded only 6% of Sprint’s backhaul sites in Verizon’s incumbent telephone company footprint.
• Sprint recently provided details regarding its Network Vision project to the Securities and Exchange Commission, and noted in its 2013 10-K filing that “Network Vision will encompass approximately 38,000 cell sites. We have more than 13,500 sites on-air and have launched LTE in 88 cities. Further deployments of Network Vision technology, including LTE market launches and enhancements of our 3G technology, are expected to continue through the middle of 2014. We expect Network Vision to bring financial benefit to the Company through migration to one common network, which is expected to reduce network maintenance and operating costs through capital efficiencies, reduced energy costs, lower roaming expenses, backhaul savings, and reduction in total cell sites.”
• In short, Sprint told the SEC not only that Network Vision was proceeding but that it expected further deployments through 2014.

Investors will reasonably conclude that the market is competitive for what Sprint terms “core DS-1, DS-3, and similarly sized Ethernet channel termination facilities.”  And Sprint seems to have a reasonable competitive position and strategy that is proceeding apace.  Good news for customers and investors, but tougher news for those aiming to perpetuate the perception that our highly-competitive telecommunications network lacks competition in the special access market.

Bruce Mehlman is a founding co-chairman of the Internet Innovation Alliance. This piece was originally posted at http://www.internetinnovation.org/blog/entry/playing-both-sides-of-the-street, and is reprinted with permission.

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