PK's Feld questions AT&T's special-access claim

AT&T alleged last week that its merger with T-Mobile will have no impact on the special-access market, a claim that was immediately viewed as suspect by wireless providers who buy access to AT&T's wireline network as a critical component in connecting cell phone calls. 

Sprint, T-Mobile and public advocates have traditionally argued that AT&T overcharges for special access. The Federal Communications Commission (FCC) is considering action on the issue, and House Democrats see AT&T's special-access rates as a critical barrier to maintaining a healthy wireless market. 

You can find AT&T's argument here. Public Knowledge legal director Harold Feld, a longtime advocate on the special-access issue, had several counterpoints to AT&T's argument. See below. 

"Two things. One, it's a multiplier effect on the harm to competition. The merger disadvantages Sprint (and other competitors except Verizon) not only because AT&T's market share increases, but because the increase works synergistically with all of AT&T's other advantages, including special access. If Sprint were buying T-Mobile, it acquire not just the additional T-Mobile customers, but the expense associated with those customers for special access data transport. AT&T acquires the T-Mobile customers and actually reduces T-Mobile's overall operation costs through the simple expedient of no longer charging access charges. A double whammy from Sprint's perspective.

"Second, special access is a different market from a usual market because AT&T doesn't want to sell special access. They are required to do it by law. That's why the usual argument 'but of course we would never hurt our special access customers, that would be bad for business' argument is false. AT&T doesn't want special access customers. But they are required to offer their special access services at just and reasonable rates, so they grudgingly do so.

"One measure of just and reasonable is comparing similarly situated customers. So AT&T has to at least be reasonably consistent in pricing. That means T-Mobile benefits to some degree from any pricing concessions that Sprint can negotiate, and vice versa. And if AT&T is too unreasonable to either one, or both, having two similarly situated companies complain to the FCC and produce evidence that AT&T is being unreasonable makes a stronger case than having just one company.

"Perhaps more importantly from Sprint's perspective, it has at least one competitor laboring under the same disadvantage. In this dynamic, even if Sprint cannot overcome the advantages of AT&T and Verizon, it can at least hope to beat T-Mobile and become a stronger 3rd place contender.

"Post merger, Sprint is out there all alone. It has no other carrier to help it negotiate better prices. It has no benchmark it can point to if it claims AT&T is being unfairly discriminatory. And it has no other competitor laboring under a similar disadvantage. It's bad enough when you are forced to pay your biggest competitor for a critical input. It's far worse when you are the only one stuck with that competitive disadvantage — especially when that same biggest competitor is more than double your size."