Las Vegas phone company alleges Sprint violating law on competition

Grace Leong

Wednesday, Aug. 2, 2000 | 11:12 a.m.

Mpower, the largest of Sprint Corp.'s local telephone industry rivals in Las Vegas, filed another antitrust lawsuit in U.S. District Court accusing Sprint of monopolizing the local telephone and high-speed data service markets.

Pittsford, N.Y.-based Mpower, formerly called MGC Communications, alleged Sprint controls about 95 percent of the local telephone and high-speed data service markets, with new competitors like Mpower holding the remainder.

Mpower says Kansas City, Mo.-based Sprint violated the Telecommunications Act of 1996 -- a federal law aimed at encouraging new entrants in the telecommunications market -- when it allegedly erected artificial barriers to block Mpower's entry and preserve its own market share.

Mpower said its ability to compete is sabotaged by Sprint's alleged "deliberately poor" performance to install loops on a timely basis. A loop is the line that connects Sprint's switch or local telephone exchange with other telecommunications carriers' customers' premises.

"Sprint has demonstrated remarkable inefficiency to provide loops to Mpower despite making repeated commitments that it will do so," said Mpower General Counsel Kent Heyman. "Sprint's actions keep us from getting a level playing field to continue to offer Las Vegas consumers a competitive product."

The suit said Sprint often issues orders that confirm the day Sprint is to provide the loop to Mpower so Mpower could provide local telephone service or hi-speed digital subscriber service to its customers -- without first checking to see if such facilities are available.

"When Sprint does a poor job of provisioning, by missing the FOC (firm order commitment) due date for any number of reasons, that customer frequently blames Mpower and chooses to return to Sprint or obtain Sprint's service," the suit said. Mpower has had to reschedule the installation dates and placate customers by offering free service for several months, the suit said.

Mpower said Sprint's poor loop service is a deliberate anti-competitive tactic because Sprint -- when it allegedly wanted Mpower to stop opposing a plan by Sprint in 1997 in which Sprint would have jointly marketed Sprint's local telephone and long distance products -- substantially improved its performance in one month and maintained this performance 90 percent of the time for three consecutive months. But Sprint's performance deteriorated after receiving the PUC's approval for its marketing proposal, the suit said.

"While Sprint's FOC success for local telephone service over the last six months of this year has on average fluctuated between 70-80 percent, for the first two weeks of July 2000, Sprint's 'success' rate nose-dived as it failed to meet the installation due dates for Mpower's local telephone service orders on average 38 percent of the time," the lawsuit said.

It said four of 10 Mpower local telephone service customers now can't obtain their service on time.

But Rob McCoy, Sprint's local spokesman, maintained: "We believe strongly that this is one of the most open and competitive telecommunications markets in the country." He declined to comment further on the lawsuit's allegations.

Mpower also accused Sprint -- while marketing its own digital subscriber line service product to its business customers--of sabotaging Mpower's sales of its DSL package when it issues confirmed orders without checking to see if DSL-capable facilities are available.

Mpower said it sells a DSL package that offers small businesses high-speed Internet access and up to eight voice lines over an existing phone line for $450 a month, compared with Sprint's high-speed Internet access lines that allegedly cost as much as $1,000 a month.

The suit said Sprint's ability to meet due dates for DSL averaged 48 percent from November 1999 through end May 2000, which meant five out of 10 Mpower customers could not get service on the date ordered.

Mpower charged that in response to what Mpower called its "woefully inadequate" performance, Sprint implemented a new procedure on May 17 to improve the timeliness of its installation of DSL loops only.

But Sprint's performance hasn't improved, Mpower said. For the last six months Sprint met its installation due dates for DSL to Mpower only 41 percent of the time.

"For each missed date, Mpower must devote substantial personnel and time to ascertain the problem, obtain a response from Sprint, reschedule a new due date, reschedule Mpower's provisioning team and offer the customer credits for the inconvenience of being out of service," the suit said.

Mpower, also alleged Sprint failed to pay it $9 million in local access charge fees. This was an effort by Sprint to impede its ability to reach new customers and build facilities by "starving Mpower of a principal source of revenue necessary for those critical ventures," Mpower charged.

Meanwhile, Mpower dropped its first antitrust lawsuit filed in February 1999 against Sprint, after Sprint agreed, as part of a settlement, to pay its competitors that use its residential lines $3.65 per line per month -- up to a cap of $7 million over three years. This credit is offered only to competitors that lease Sprint lines that run into homes.

The February suit alleged Sprint subsidized its local telephone service with revenues generated by advertising sold in the yellow pages of Sprint's First Source telephone directory. MGC believes the telephone and directory industries operate as monopolies in the local market and that it should be entitled to the benefits of directory advertising.

"The first lawsuit was intended to attack Sprint's anticompetitive subsidy," said Heyman. "By refusing to share the subsidy, Sprint was erecting a barrier to our entry in the residential market."

Separately, Sprint last month dropped its lawsuits filed in October 1999 in federal and state courts against the Public Utilities Commission after the PUC agreed to review a $9.87 price that Sprint said telecommunications carriers currently pay to lease its phone lines and infrastructure.

The federal court, however, issued an order July 28 denying the PUC's motion to dismiss the Sprint suit. The court rejected the PUC's claims that the 11th Amendment to the U.S. Constitution gave it immunity from lawsuits in federal courts.

"The Telecommunications Act provides for review in federal court," U.S. District Judge Roger Hunt wrote in the July 28 order.

Attorneys for Sprint and the PUC said it's unclear what will happen with the federal lawsuit since Sprint wants to drop it but the judge declined the PUC's motion that it be dismissed.

A hearing on the loop access rate will be held on Oct. 10-11 at the PUC. The settlement agreement said the PUC, which won't allow new cost studies to be introduced at this stage of the proceedings, will issue its new final decision on the changes, if any, in Sprint's loop access rates around mid-November.

"The PUC issued an order in May 1999 cutting loop access rates from $18.95 to $13.89. And within two months, the PUC cut the rate further to $9.87," McCoy said. "But we maintained all along the true cost of building and maintaining the loop should be around $18.95."

"We are required to continue to apply prices the PUC has determined, which is $9.87, until it issues a new price, and if it does," he said.