The takeover of Congress by the Democrats last November has led the House Subcommittee on Telecommunications and the Internet to revisit the topic of special access. The level to which the government should be involved in pricing such services is an arcane philosophical debate, but it has a real impact on the pricing and availability of telecommunications services.
Special access refers to the rates, terms and conditions for wholesale access to dedicated circuits that connect the client carrier to another carrier or to its customers. Two stories about the hearing, at eWeek and The Washington Post, offered different details within largely parallel reports.
Much of the denseness of telecommunications regulation stems from the reliance of most carriers on a select few who built (or inherited those who built) the massive national infrastructure under special rules that made it worthwhile for them to do so. Regulators must tell the FCC how to balance things in a manner that protects the interests of the infrastructure holders (Verizon and AT&T are most often mentioned) and the carriers seeking connections. The Post story said the hearing will help determine whether to put firmer control on prices, which were deregulated when the Republican ran things.
Sprint Nextel president and CEO Gary Forsee testified that special access rates being charged by AT&T and Verizon are too high and are retarding the rollout of broadband services. In his testimony, Forsee, who asked for a rate cap or regulation, said the portion of the special access sector controlled by incumbents had grown from 92.7 percent in 2001 to 94.1 percent in 2005.
Representatives of Verizon and AT&T countered Forsee's testimony. Tom Tauke, a senior vice president for Verizon, said Sprint was trying to "undermine a successful market-based business environment" and that the FCC should affirm the current structure. Parley Castro, AT&T's assistant vice president for strategic pricing, said competition is healthy in the special access market -- evidenced by his claim that Sprint constantly reminds AT&T that it has other options for special access.
This is, without a doubt, a complex topic. But everyone in the food chain, especially those whose entrepreneurial futures are to some degree dependent on what they pay for access, should be familiar with the parameters of the issue. As publius points out at Obsidian Wings, even wireless services should pay attention, since they use wired infrastructure to backhaul signals from cell towers to carriers' points-of-presence. Backhaul and countless other services fall under the aegis of what Forsee, Tauke and Castro were testifying about.
A taste of that complexity can be glimpsed in this academic back and forth between Randolph May, the president of The Free State Foundation, and Paul Kouroupas, the vice president in charge of regulatory affairs for Global Crossing. In a white paper published in June, May makes the case for the continued deregulation of the free access markets. Soon after the paper's posting, Kouroupas posted a response that sought to debunk the arguments.
Reading May's white paper and Kouroupas' response confirms that it is virtually impossible for somebody not familiar with the topic, steeped in telecommunications history, to take a position or even fully understand the issues. It's also difficult for a layperson to make a snap judgment on the whether today's regulatory regime is fair to the companies involved and, more importantly, to end users.
What a layperson can do, however, is look at results. Broadband penetration in the United States trails a surprising number of other countries. Substandard infrastructure and high prices likely have a lot to do with that. Regulators should push beyond the philosophy and ask providers what they can do to encourage investment in reasonably priced high-capacity networks.