NoChokePoints Coalition Slams AT&T for Rate Hikes

WASHINGTON, June 30, 2010 – AT&T’s special access lines are set for price hikes, and the NoChokePoints Coalition says FCC regulation of this “is essential to the health of our information economy.”

The coalition held a teleconference panel discussion Tuesday to call on the FCC to take action and regulate what it says is a rapidly developing monopoly.

“Move special access back to the front burner,” said coalition Executive Director Colleen Boothby.

When SBC merged with AT&T in 2005 for $16 billion, it became the largest phone company in the United States. When AT&T spent $67 billion to acquire BellSouth in March 2006, it became a telecom giant. As part of the BellSouth merger, AT&T agreed to offer reduced rates on interstate special access services until June 30, 2010. The rates will now return to the original pre-merger rates.

The coalition, which includes companies and AT&T rivals such as Sprint, T-Mobile and U.S. Cellular, says it promotes “access to a robust and competitive market for high-capacity broadband” and special access lines.

Frank Simone, assistant vice president, federal regulatory for AT&T, said in an official company a blog post Tuesday that “using the expiration of those discounts as an excuse, some in the industry have decided to resurrect a coalition calling for those discounts to be extended or to have the government impose price controls on those legacy, copper-based special access services.

“Why aren’t the companies that are complaining about our special access prices instead focused on getting their own fiber into buildings they want to serve?,” he wrote.

Special access lines serve the last mile of connection before the home. Businesses, banks and consumers are dependent on these lines because they buy the access running through them from their internet providers.

This is the “nervous system for the nation’s economy,” said Boothby, adding, “every business in America does business through special access.”

Panelist Gigi Sohn, president and co-founder of Public Knowledge, encouraged listeners to compare special access to oil. We don’t buy crude oil directly, we buy gasoline from a gas station; We don’t pay for special access directly, we buy internet service from our providers.

“Companies like Verizon and AT&T control virtually all of the broadband facilities your business depends upon,” reads the coalition’s web site, “That costs you dearly while it generates profit margins above 100 percent for them. Our economy cannot afford it.”

The FCC approved the AT&T merger with BellSouth in December 2006. Although the commissioners voted 4-0, the agency expressed some concern at the time: “In a small number of buildings in the BellSouth in-region territory where AT&T and BellSouth are the only carriers with direct connections, and where entry is unlikely, the merger is likely to have an anticompetitive effect,” the FCC said in a press release.

There was a commitment by AT&T to divest “indefeasible rights of use” to those facilities that the FCC thought would “adequately remed[y] the competitive harm.”

This commitment had a 48-month expiration date. It is now over, and those predictions the FCC made about competition turned out to be wrong, Boothby said.

“This will affect a number of industries, not just broadband,” Boothby continued, enumerating how every industry is going to have to pay more for the service they already had.

AT&T announced these price increases three years ago according to Boothby, but the companies affected by these price hikes could not do the same, their only option being to raise their prices for consumers.

“This is not an insignificant rate increase,” said panelist Paul Schieber, vice president of access and roaming at Sprint Nextel. He said that given the importance of these facilities, the price increases is indicative of the lack of a robust and competitive network.

“They can charge whatever they want,” he said of AT&T and that is what the FCC should address because returns of over 100 percent are unreasonable.

The market for special access is tough for companies that are not vertically integrated, added Sohn.

Parul Desai, vice president of the Media Access Project, said it was important that broadband be available and affordable, adding that during the past two years the special access market has become increasingly concentrated.

All panelists called on the FCC to regulate this area.