Rather Than Invest, Financially Strapped Sprint Asks FCC For Government Discount

Wednesday, November 4th, 2015

Why is Sprint—a company who primarily offers wireless services to residential consumers—pushing the Federal Communications Commission (FCC) to impose new price regulations on business data services (also known as “special access”) provided by telcos over copper telephone lines? Because it wants government help in its desperate effort to slash capital costs while Sprint’s new executives try to overhaul its network, and Sprint wants to use price-regulated special access lines for its wireless “backhaul.” (“Backhaul” is industry jargon for the link connecting a cell tower to the Internet cloud. This link can be a copper line provided as special access, a fiber connection, or a high-capacity wireless link.)

Sprint already holds the spectrum assets it needs to have the best network in the nation. But the gross mismanagement of its prior executive team left Sprint’s network in last place, causing it to fall behind T-Mobile in the wireless race. In its effort to turn things around, Sprint’s new management recently announced a “network densification” project, i.e., a plan to deploy tens of thousands of small cellsto increase its network coverage and capacity.

Sprint’s turnaround plans include slashing at least $2 billion in costs annually. According to Sprint CEO R. Marcelo Claure, “this reduction will come from every area of the business, leaving no stone unturned,” including executive luxuries. Claure reportedly informed employees by email that “Sprint will no longer provide free water bottles and yogurt to staff” at the company’s headquarters and that “executives will no longer be able to hire a driver with a limousine for business trips.”

Another Sprint cost-cutting measure involves lobbying the FCC to force its competitors—e.g., Verizon and AT&T T -3.03%— to help fund Sprint’s next generation wireless network. In a recent FCC filing, Sprint claimed that “every one” of the tens of thousands of new cell sites it deploys as part of its network densification project “will require additional backhaul,” and Sprint has decided it should “depend” on Verizon and AT&T to provide it with “special access” backhaul links at artificially low rates imposed by the FCC.

In Sprint’s view, backhaul is just another “cost center” it should be free to cut. But, unlike executive limousines, water bottles and yogurt, Sprint can’t cut the cost of backhaul provided at another company’s expense by sending an email to employees. So it’s attempting to convince the FCC that telephone companies are using their outdated copper wires to “dominate” the market for wireless backhaul, leaving Sprint with no competitive options for its new network deployment. Unfortunately for Sprint, it’s story has already been proven false.

This is not the first time the FCC has heard a wireless carrier spin a yarn about telco dominance over backhaul connections. More than eight years ago T-Mobile urged the FCC to “immediately impose” new price regulation on telcos’ special access lines because, according to T-Mobile, it had “no competitive alternative” to the telcos’ copper wires. The FCC didn’t believe it, and time proved the FCC right. Earlier this year, T-Mobile’s CFO noted that 50,000 of its 54,000 cell sites already have fiberbackhaul connections. According to its senior VP of technology strategy, “T-Mobile began an aggressive rollout of enhanced backhaul in 2007—well ahead of our competitors and long before we began to offer 4G.” T-Mobile later cited its decision to deploy it own fiber backhaul network as the reason it was been able to upgrade its network to 4G more rapidly than Verizon or Sprint.