Transforming Network Infrastructure Industry News

[December 30, 2006]

AT&T bends, wins deal OK: FCC approves BellSouth buyout after giant agrees to maintain `net neutrality' for 2 years

(Chicago Tribune (KRT) Via Thomson Dialog NewsEdge) Dec. 30--A compromise proposed by AT&T Inc. to win federal approval of its $85 billion acquisition of BellSouth Corp. signals how much the impending takeover of Congress by Democrats has shifted telecom's regulatory landscape.

The Federal Communications Commission approved the acquisition Friday upon reviewing the proposal submitted Thursday night by AT&T. The companies closed the deal Friday after winning the FCC's OK.

After opposing restrictions on its ability to prioritize Internet traffic it carries, AT&T agreed to "maintain neutral network and neutral routing in its wireline broadband Internet access service" for two years.

The concept of preserving "net neutrality" has been the paramount telecom issue for consumer advocates all year.

While specific Internet traffic abuses have been rare, activists fear that the economic interests of big telecom and cable companies that own Internet infrastructure will compel them to discriminate against smaller competitors whose Internet-based voice and video services undermine the cash cows operated by the giants.

For their part, large telecom carriers contend that they need flexibility to manage the trillions of bits and bytes that flow across their lines daily. Government restrictions intended to ward off potential anti-competitive moves could stifle technologic innovation, say executives at big telecom concerns.

AT&T's concessions sparked year-end celebrations Friday among consumer advocates who had been stymied through most of 2006 in their efforts to pass network neutrality laws in the Republican-controlled Congress.

"We are no longer having a debate about whether net neutrality should be the law of the land," said Ben Scott, policy director for Free Press, a consumer advocacy group. "We are having a debate about how and when."

Another aspect of AT&T's compromise proposal would put a cap of $20 a month on its basic digital subscriber line high-speed Internet service for 30 months. At present consumers who want to buy DSL without also getting an AT&T phone line must pay a minimum of about $45 a month.

Gene Kimmelman, vice president of Consumers Union, said that customers who cannot afford AT&T's prices today should soon be able to "get fast connections to the Internet at a reasonable price."

The phone giant also agreed to freeze some rates it offers to customers who buy bulk service, to sell wireless spectrum licenses held by BellSouth and to "repatriate" some 3,000 jobs outsourced abroad by BellSouth.

AT&T's BellSouth takeover had received approval from state regulators and the Justice Department but was hung up by two Democratic members of the FCC who wanted consumer-friendly concessions.

The three Republican FCC members could not override the two Democrats because one of them, Robert McDowell, had served as a telecom industry lobbyist before his federal appointment, and recused himself for ethical reasons.

Several Democratic House members slated to take leadership positions in the coming Congress had warned the FCC against approving the takeover without some concessions.

While the symbolic significance of AT&T's compromise is considerable, some observers said the substance may be less so.

David Burstein, who operates the telecom newsletter, said that buried in AT&T's proposal is a sentence that exempts its own Internet-based television service from network neutrality restrictions.

"In a seemingly innocuous sentence, AT&T opened a huge loophole for itself," said Burstein. "In the future, they can take anything they want, call it IPTV, and have no restrictions. If someone objects, they'll tie it up in court for longer than their two-year neutrality commitment."

Most consumer advocates chose to focus on the positive aspects of AT&T's proposal rather than speculate on future neutrality evasions.

"This will be a win for the public," said Mark Cooper, research director for the Consumer Federation of America.

Copyright (c) 2006, Chicago Tribune
Distributed by McClatchy-Tribune Business News.
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