Competitors May Ally against Big Carriers in 2009

Earlier this month retiring Rep. Chip Pickering, R- Miss., in a keynote at the CompTel show, urged formation of an alliance by competitive telecom companies (CD Oct 7 p2). As a lineup, he suggested Comcast, Sprint Nextel, Clearwire and Google, along with CompTel’s competitive local exchange carrier members. In a CompTel panel the next day, Comcast Vice President Susan Davis urged more alliances between CLECs and cable companies. She cited Comcast’s recent effort with CompTel to double-team Verizon on the company’s retention marketing practices. “We need to work together as a coalition of competitors” in the capital, she said. In August, CompTel’s Salmon and Pickering privately discussed competitive coalitions, Salmon said recently.

In recent years’ lobbying, AT&T and Verizon consistently have outspent other phone, wireless and Internet companies. They lead CQ’s 2008 Political Moneyline list for phone company outlays. AT&T spent $9.9 million lobbying, disclosure forms show -- itself spending $8.5 million, the rest divvied among 20 or more law firms and lobbying practices. Verizon spent $6.9 million, and another $925,000 in lobbying shop contracts.

Comcast’s 2008 lobbying outlay of $6.3 million so far is not far behind Verizon, leading the cable industry with the exception of the NCTA and its $6.8 million. Sprint Nextel spent $1.6 million. Google reported $1.3 million in expenses. CompTel, a relatively small player, has spent $550,000 so far this year, with another $150,000 to a lobbying group run by former NAB president Eddie Fritts. CompTel ended the Fritts contract at the end of the second quarter.

Capitol Hill conflict between competitors and AT&T and Verizon is “a modern-day David and Goliath” story, Salmon said: “We're outgunned in dollars and headcount.” Since the 1996 Telecom Act, merger and acquisition activity has eroded competitors’ power, he said. SBC’s acquisition of AT&T and Verizon’s buy of MCI were particularly damaging, but consolidation on the CLEC side also has hurt, he said.

To approximate big carriers’ lobbying power, competitors must ally with companies to which they previously haven’t reached out, Salmon said. Alliances are “good for business,” he said. “Building those kind of coalitions enhances our ability to deliver better quality and cheaper services for all of our customers.”

Salmon imagines competitive coalitions forming “issue- by-issue,” he said. “It’s not [one] coalition that’s going to glide through every issue.” Issues around which competitive alliances might form include forbearance rules, universal service and intercarrier compensation, he said. Comcast, for example, has backed CLECs on their push to kill the “deemed granted” rule for forbearance petitions, he said. CompTel is “in the process of working and talking through” the mechanics for promoting alliances, he said. “I wouldn’t call it a formalized process just yet.”

Most likely, competitive alliances will be informal, via joint filings and meetings, said a wireless industry official. But if Pickering or another party “with credibility” held a press conference announcing something more formal, at least some competitors might show interest, the official said.

CompTel probably stands to gain the most from competitive alliances, said Kaut. “A bit of a vacuum” has formed on the CLEC side since Verizon absorbed MCI and Sprint quit long distance, he said. On the other hand, Google’s interest probably would be indirect at best, said Brian Adkins, Embarq federal regulatory director. Google might care about special access reform, which could lower the cost of entering some businesses that interest the company, he said.

In 2009 a new administration and a reconfigured Congress will trigger a “natural scrambling,” as many industry players reevaluate the strategic and tactical value of alliances, said Adkins. Individual issues will drive formation of particular affinity groups, he said. For example, net neutrality spurred bitter battles, but yesterday’s conflicts don’t preclude tomorrow’s accords, he said. However, he doesn’t expect to see competitors create a formal, staffed entity. They're likelier to hold meetings and make joint filings, he said.

Those in Pickering’s competitor lineup could find common ground on interconnection or special access issues, Adkins said, but probably not on net neutrality. Google has fought with Comcast and CLECs, while Clearwire has taken heat for WiMAX bandwidth limits, he said. Competitors probably would agree on “traditional telecom issues,” such as intercarrier compensation, universal service and interconnection, Kaut said. They also might agree on newer issues, such as reform of forbearance rules and retention marketing, he said.

Election results could promote competitive alliances, Kaut and Adkins said. Competitors might tend more to ally under a Republican administration, since that party tilts toward big companies -- competitors’ common enemy, Kaut said. But Adkins sees a competitive alliance as more viable if the Democrats hold the White House, since that party is more likely to consider special access and other issues that would unify competitors, he said.

Forming competitive coalitions is “smart” no matter which party takes the presidency Tuesday, Salmon said. Many issues, including the controversial “deemed granted” provision, are nonpartisan, he said. Alliances already are forming, he said, “but I think you'll see only more in the future.”