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Special access gets special scrutiny from the courts

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AT&T (s t) may soon face another blow along with Verizon (s vz), as the D.C. Circuit Court of Appeals decided to take action on a request asking the court to force the FCC to get moving on the issue of how much mobile and rural operators pay for access to the Internet. If the potential court order from Monday prompts the FCC to take action, the big wireline phone companies might see regulations capping how much they can charge others for access to their middle-mile pipes.

NoChokePoints, an organization funded by those affected by high special access charges (this includes businesses), filed a petition in July asking the court to issue a writ of mandamus forcing the FCC to decide the issue within the next six months. On Monday the court ordered expedited briefings ending Feb. 10, 2012, and told its clerk to set oral argument “at the first appropriate date.” A mandamus petition is a request to a higher court asking a lower court or agency to rethink a decision, and most mandamus petitions go nowhere, so analysts and public interest organizations think the court’s action is noteworthy.

However, the court may not issue a mandamus, but it should take action either way by spring or early summer. Even having the issue in court might give the FCC the kick in the pants it needs to move forward.

This would be a huge victory for Sprint (s s) and T-Mobile (as well as smaller rural wireline and wireless providers), which would see some relief when it comes to paying their wireless rivals tens of millions each year in order to provide customers a connection to the Internet. That’s right, even when you choose Sprint or T-Mo to protest AT&T or Verizon, you’re still helping line Ma Bell’s or Big Red’s pockets. The issue has been stuck in FCC purgatory for more than half a decade as the agency sought facts about monopoly powers and how much firms had to pay for access. The Bells lobbied for less disclosure while the smaller rivals tried to shine some light on the rates and practices of the large wireline providers.

In 2009 the FCC called for another inquiry into the topic, but its focus on network neutrality, the AT&T and T-Mobile merger and Universal Service Fund reform have distracted it from an issue that is unsexy and affects few. However it has the opportunity to disrupt the revenue projections at AT&T, Verizon and CenturyLink, while possible helping out smaller players. But it’s unclear how draconian the FCC might be on this issue. From a Stifel Nicolaus research note issued today:

If the FCC does act, we suspect it’s more likely the Bell/telco services would face measured new constraints that cap or perhaps trim their prices in certain markets and control some practices, rather than impose deep rate cuts and massive re-regulation. But the Bells oppose any new regulation and say further deregulation is justified due to increasing competition, including from cable business services (e.g., CMCSA, TWC).

Sprint has said that about one-third of the costs associated with its base stations come from paying special access fees for its backhaul, money that goes to Verizon, AT&T, and in more recent cases sometimes the cable providers. As the wireless carriers seek to divide the broadband landscape through spectrum deals and cross selling agreements, perhaps the FCC will take action on this issue before the new broadband oligarchy crystalizes.