FCC To Examine Prices Phone Cos Pay For Network Connections

Federal Communications Commission Chairman Julius Genachowski has pledged to open an inquiry into the prices telecom firms charge others for the network capacity needed to transfer phone calls and Internet exchanges, signaling that further regulation of that market may be on the horizon.

In a letter sent Tuesday to Sen. Daniel Inouye, D-Hawaii, Genachowski said the FCC will issue a public notice within the next 30 days seeking comment on the "appropriate analytical framework" for examining the network pricing structure.

Curbing the prices for the network connections is a top priority of Sprint Nextel Corp. (S), T-Mobile USA, U.S. Cellular Corp. (USM) and several smaller phone companies that claim they are being gouged by high connection prices from giants like Verizon Communications Inc. (VZ) and AT&T Inc. (T).

Sprint says one-third of its operating costs for each cell tower are devoted to those access charges. T-Mobile is a unit of Deutsche Telekom AG (DT).

A coalition of those companies and some public interest groups argues that the current "special access" pricing regime is getting in the way of President Barack Obama's goal of blanketing the country with high-speed Internet access.

Verizon and AT&T, along with Qwest Communications Inc. (Q), Embarq Corp. (EQ) and Windstream Corp. (WIN) - which all sell the network capacity - say curbing their network prices will deter companies that rely on their networks from building their own connections.

The FCC began looking into special access in 2005 and asked for more data two years ago, but questions still remain about whether the market is competitive. Parties on both sides of the issue claim the pricing data backs their point of view.

Genachowski said the FCC inquiry would establish as a "threshold matter" the framework that will determine the types of data it needs to collect. Companies may be reluctant to give up that information, citing its market sensitivity.

"These issues have been pending for many years, and I appreciate the understandable frustration of many parties regarding the Commission's lack of progress in addressing special access issues," Genachowski's letter said.

In a related development, the FCC on Thursday sought public comment on whether the costs of connecting rural residents and businesses to the main Internet arteries is an impediment to broadband deployment.

"Several entities have claimed that adequate, reasonably priced, and efficiently provided access to middle and second mile transport services and facilities play an important - if not gating - role in the economics of broadband deployment," the FCC inquiry said.

- By Fawn Johnson, Dow Jones Newswires; 202-862-9263; [e-mail]