Mobile Backhaul Among Issues Regulators are Looking At, as Part of AT&T T-Mobile USA Buy
U.S. backhaul markets now are part of the regulatory review of the proposed AT&T purchase of T-Mobile USA. Specifically, the Federal Communications Commission is looking at potential harm to the market for supplying mobile backhaul connections. The FCC six of AT&T’s top competitors to answer questions on network coverage, backhaul, pricing and spectrum for its review of AT&T’s $39 billion takeover of T-Mobile USA.
The agency sent 37-page letters with a list of nine questions Monday to Verizon Wireless, Sprint Nextel, U.S. Cellular, MetroPCS, Cellular South and Cricket Communications parent Leap Wireless International asking for detailed information about the companies’ operations.
Citing a new business arrangement between AT&T and Verizon, Lynn Refer, president and CEO of Telecom Transport Management, a small wireless backhaul provider, says the future of the independent backhaul business may be at risk.
Under the pact, Refer and others in the industry said, the two largest wireless companies have a reciprocal arrangement to provide infrastructure to connect each other’s wireless data traffic. See Rivals’ alarm grows over AT&T / Verizon deal – Eliza Krigman and Elizabeth Wasserman – POLITICO.com.
Washington lobbyists generally in the pay of smaller carriers and service providers have for years been trying to get the FCC to dictate terms in this market, without success. There are obvious reasons. A small carrier does not have the money to build a significant amount of special access capacity most places it is needed, and must buy from other carriers. A competitive market for access circuits, where rates reflect demand, will tend to benefit those who own the assets, especially where there are not so many other providers.
“Market power” tests never go away. But the success many firms have had in providing competitive backhaul services precisely because an AT&T or Verizon is the only other alternative has generally created opportunity for competitors to jump in and provide options for buyers. Oddly enough, “higher prices” are the magnet to attract new competitors. Lower prices will keep them away. Some might argue that so long as competitors are free to enter markets, neither AT&T nor Verizon will have the ability to harm other providers by maintaining excessively high prices.
In fact, given the general and legitimate concern within the global industry about bandwidth pricing, deals that might lead to marginally higher prices might be exactly what is needed to encourage all providers to invest more in facilities. In a competitive market, high prices fix themselves. Mobile backhaul won’t be any different.
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