A recent filing at the FCC indicates that the vast majority of Sprint’s recent purchases of backhaul for its wireless network are from competitive providers, rather than the large incumbent telcos. This fact runs counter to its long-standing claims that it has no choice for such services other than special access services purchased from AT&T and Verizon.
Verizon supplied the commission with data it learned from studying bids that Sprint awarded as part of the company’s network modernization plan launched in December 2010. Sprint is rapidly moving away from TDM-based services to next-generation higher-capacity services which are necessary to support 3G and 4G wireless broadband services. The company issued a request for bids to provide high-capacity backhaul to approximately 38,000 wireless sites across the United States.
Using longitude and latitude measurements, Verizon determined that Sprint awarded Verizon backhaul business in less than 6 percent of the sites within its incumbent local exchange carrier (ILEC) footprint. “While Verizon has no direct information about what Sprint did with the contracts and sites that Verizon did not win, public reports indicate that” Sprint has nearly finished the contracts and Verizon is not a significant vendor, the filing said. Other public reports indicate that all of the major cable companies were awarded part of the contract to provide Ethernet services to Sprint.
The data illustrate “without question that competitive alternatives are available” for high-capacity services, and “companies like Sprint are using them in earnest,” Verizon said in its filing. “This is precisely the kind of information that Sprint and others have failed to provide to the Commission and that they are trying to prevent the Commission from collecting.”
It is indisputable that the industry is quickly moving away from reliance upon traditional ILEC “special access” facilities – not surprising given that the vast majority of these facilities don’t even qualify as “broadband” under the commission’s own recent definition. And, interestingly, the commission recently found that backhaul makes up such a small percentage of wireless service costs that it “is unlikely to have a material impact on wireless rates.” Nonetheless, the commission continues to dedicate significant resources towards quantifying the competitiveness of this marketplace.
para. 131 of the order approving the Verizon-cable deal:
131. Second, we conclude that the record does not support the claim that the Commercial
Agreements significantly increase the ability or incentive to harm wireless providers through wholesale
provision of these inputs in the short term.320 With regard to backhaul services, the available evidence
does not suggest in any way that the Cable Companies will have the ability in the near term to cause any
significant anticompetitive harm in the mobile telephony/broadband services market. Sprint Nextel
indicates that backhaul costs account for [REDACTED].321 Thus, even a significant increase in backhaul
costs is unlikely to have a material impact on subscriber rates. We acknowledge that backhaul costs could
consist of a greater percentage of a wireless provider’s costs in the future, particularly if providers
increasingly adopt a small cell architecture, but the impact of the Commercial Agreements on this future
transition is uncertain and speculative and does not justify remedies to govern the provision of these
services in the present. As discussed further below, we believe the modifications to the Commercial
Agreements adopted in the proposed Consent Decree, particularly the limitations on the durations of the
Agreements, will protect the public interest as the markets evolve.322
As the commission moves forward with this examination, Verizon advised the agency to seek “forward-looking” data that will help it evaluate where the high-capacity services marketplace is headed, and what policy framework will best encourage continued investment in new technologies.