DOJ Wants to Probe Telcos? It Should Take a Number

Department of Justice LIf the Department of Justice wants to scrutinize the telecommunications industry, as The Wall Street Journal suggests it does, then it should get in line behind the new FCC, Congress and possibly the Federal Trade Commission. It also should focus on the much less sexy aspect of middle-mile access, rather than which network operator gets exclusive access to the iPhone. The Journal cites sources in the DOJ that say the agency is taking a close look at the influence and relationships Verizon (s vz) and AT&T (s T) have, and how they use their market power.

Potential targets for the investigation include handset exclusivity on wireless networks and net neutrality, according to the sources cited in the story. But for the Justice Department to bring a case, it needs to be sure it can prove that these firms have a monopoly, and that they are using their power to artificially keep it — something that could prove difficult in the above-mentioned areas, given the number of competitors in the wireless market and the amount of ISPs on the wired side.

An AT&T spokesman said via email, “We are not aware of any formal investigation by the Department of Justice, nor have they asked us to provide any information. The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments.” A Verizon spokesman said via email, “We haven’t had any indication from the DOJ about any such review.”

Given the number of wireless providers, as well as other types of wired broadband companies, it’s hard to prove a monopoly situation. (I’m not arguing either of those areas are all that competitive, only that they’re not a monopoly). However, in terms of the agreements between carriers that allow them to connect back to the Internet backbone, Verizon and AT&T appear to own the lion’s share of those connection points — between 80 percent and 90 percent, according to an industry group that wants to see that access regulated.

The group, called NoChokePoints, is agitating for solid data to prove monopolistic pricing by AT&T and Verizon that causes harm to consumers and businesses — from wireless Internet access providers in rural areas stuck delivering service on pricey T-1 lines to businesses that can’t get Internet service to their buildings. Because the special access providers can also provide the backhaul for cellular towers, and both AT&T and Verizon operate wireless networks, it’s a situation where they can use their monopoly to make Internet access more expensive for direct competitors on the cellular side, the group says.

The NoChokePoints group is composed of firms that have to pay AT&T and Verizon for connections to their backhaul networks. It argues that the two hold a duopoly that enables them to charge artificially high fees for access to the Internet backbone. The organization was formed in June to bring special access issues before the FCC. Members include Sprint (s S), T-Mobile, Clearwire (s clwr), BT, Covad, CBeyond (s cbey), XO Communications, US Cellular, Time Warner Telecom (s twtc) and assorted other players.