AT&T offers Net Neutrality concessions to the FCC

October 17, 2006

According to AT&T's latest filing with the FCC, and in an effort to have its proposed merger close with BellSouth, the company is willing to adhere to the FCC's Net Neutrality principles for the next 30 months, after the official closing of its merger.

As a result, the Department of Justice has approved the deal with no strings attached. FCC Chairman Kevin Martin also supports unconditionally approving the merger, but he lacks a majority among the three Republicans on the panel since Commissioner Robert McDowell is recusing himself from the vote based on his previous work as a lobbyist for competitive local exchange carriers.

The current deadlock at the FCC forced Martin to re-open the proceedings for public comment and reschedule the merger vote for November 3rd.

On Friday, AT&T's original response to the new proceedings only conceded the "possibility of further conditions" relating to network neutrality.

After the first letter was sent to the FCC, AT&T sent a second letter "within an hour" making further concessions on network neutrality.

The first AT&T letter ran on the FCC site over the weekend, but FCC officials said the agency would update the information later this afternoon.

An AT&T spokesman blamed the second letter on a "word processing error." "This is all fairly curious since network neutrality is a major point," said Mark Cooper, research director of the Consumer Federation of America. "Maybe they realized that the merger wouldn't fly without it."

Cooper added, "Everyone in Washington this morning is scratching their heads over this." In last year's approval of the AT&T-SBC and Verizon-MCI mergers, the FCC required AT&T and Verizon to follow the agency's network neutrality principles for two years after the merger closed.

In August 2005, the FCC declared that consumers are entitled to access the lawful Internet content of their choice, run applications and services of their choice and plug in and run legal devices of their choice.

The FCC also said consumers have a right to competition among network providers, application and service providers and content providers.

"One of the fundamental problems with the FCC's network neutrality principles is that the FCC staff immediately said the principles have no force of law," Cooper said. "We're interested in enforceable principles."

What the FCC principles do not address is a proposed plan by AT&T and Verizon to charge content providers such as Amazon and Google different rates based on bandwidth consumption.

AT&T's latest concessions do not address that issue beyond its willingness to further discuss network neutrality non-discrimination in handling network traffic.

"We can do better than [AT&T's latest proposal]," Art Brodsky, communications director for the policy advocacy group Public Knowledge, told internetnews.com. "We'd like to see a fifth principle of non-discrimination as advocated by Michael Copps."

Copps, along with Jonathan Adelstein, is one of the two FCC commissioners currently opposing the merger.

Under Copps' proposal, a fifth principle would be added that states broadband network providers must operate on a non-discriminatory basis to those who offer content, services and applications.

"Adding an enforceable non-discrimination principle to the merger conditions would send the signal that the Commission is serious that as the telephone industry becomes more and more concentrated, that its power over the operation of the Internet will be limited," Gigi Sohn, president and co-founder of Public Knowledge, said last week.

While offering concessions, AT&T still insists the deal "should be approved promptly without any conditions whatsoever."

In its letter to the FCC, AT&T noted the "benefits of this transaction has been corroborated by the findings of 18 state commissions and three foreign countries, all of which approved the merger without imposing any conditions."

Nevertheless, AT&T proposed a number of concessions in the "interest of facilitating the speediest possible approval of the merger."

In addition to meeting the FCC's network neutrality principles, AT&T also pledged to offer standalone DSL for 30 months after the merger approval.

AT&T also said it would it offer broadband to 100 percent of the living units in the AT&T-BellSouth market by January 2008.

To promote adoption of broadband, AT&T will offer free modems throughout next year to residential customers who upgrade from dial-up service.

For new Internet customers, AT&T proposes to offer broadband service at $10 a month for an unspecified time period.

The merger would make AT&T the world's largest telecommunications company with 70 million landline customers across 22 states.

Currently a co-owner of Cingular Wireless with BellSouth, the deal would give AT&T full control of the nation's largest cellular company.

Combining the two companies' DSL broadband customers would give AT&T 9.1 million high-speed Internet customers, barely behind market leader Comcast's 9.3 million subscribers.

When the proposed merger was announced in March, the stock swap was valued at $67 billion. The rising price of both stocks over the months has pushed the value to almost $80 billion.

Source: Internet News

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