UPDATE: Sprint, T-Mobile To Campaign For Network Price Caps

Sprint Nextel Corp. (S), T-Mobile USA, U.S. Cellular Corp. (USM) and several smaller phone companies are joining ranks with consumer advocates to ask the Federal Communications Commission to cap the price for network connections they need to transfer their customers' voice and data exchanges.

T-Mobile is a unit of Deutsche Telekom AG (DT).

The coalition, launched Monday, 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.

Sprint says one-third of its operating costs for each cell tower are devoted to those access charges.

AT&T Inc. (T) filed comments to the FCC Monday, saying Sprint is blaming its "precipitously declining capital expenditures" on rising special access rates.

AT&T said Sprint's efforts "are a cynical attempt to obtain government-mandated reductions...in order to alleviate some of the short-term financial and business pressures" resulting from its merger with Nextel Corp.

"What's important to know about special access is that it's stopping broadband," said Maura Corbett, a partner at Qorvis Communications LLC, the public relations firm the group has hired to ratchet up rhetoric on the issue.

High network-access charges represent the biggest barrier to Internet deployment, the "No Choke Points" coalition says.

It's a tough sell. FCC Acting Chairman Michael Copps earlier this year had planned to put out a request for more data on the access charges, but that proposal has been put on ice.

Public Knowledge President Gigi Sohn said it would be a setback for the coalition if the FCC punted the question by asking for more information. The commission has all the data it needs to impose the price caps now, Sohn said.

The coalition says Verizon Communications Inc. (VZ) and AT&T control 80% to 90% of the market connecting to the "backhaul" network, which connects to the main Internet artery.

Companies that sell the network capacity are fighting back. Verizon, AT&T, Qwest Communications Inc. (Q), Embarq Corp. (EQ) and Windstream Inc. (WIN) say capping their network prices would deter Internet deployment, because then companies wouldn't build their own connections.

"They want policies that minimize their own investment in U.S. broadband," said a fact sheet from USTelecom, an association representing large phone companies.

USTelecom also says price caps already exist in two-thirds of the country's census regions. The FCC has lifted caps only in areas where it has seen sufficient competition. More regulation would be overkill, the association said.

Sprint and others seeking lower access prices say that's nonsense. Parsing the data in terms of people, instead of geographic regions, shows that 87% of the American population is in unregulated territory, said Colleen Boothby, who runs a group of "large business customers who are heavy users of telecommunications."

Robert Quinn, AT&T senior vice president of federal regulatory affairs, said the FCC needs to obtain data from competitors to get the complete picture of the special access market. AT&T has given this type of pricing information to the FCC and the Justice Department as part of past mergers.

Competitor phone companies recently told the FCC they are willing to turn over "highly sensitive" network pricing information to allow the commission to regulate in this area. Quinn said any data offered to the FCC on a voluntary basis won't be enough.

Boothby's Ad Hoc Committee has long been lobbying for more regulation in this area. Her group includes companies from the financial services, automotive, manufacturing and insurance sectors. The committee doesn't represent phone companies.

The "No Choke Points" coalition's members include the wireless Internet company Clearwire Corp. (CLWR) and several small competitor phone companies like tw telecom inc. (TWTC), Cbeyond Inc. (CBEY), Covad Communications Group Inc., One Communications, and XO Communications, a unit of XO Holdings Inc. (XOHO).

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