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AT&T's BellSouth concessions

December 29, 2006 |  3:08 pm

A little more than a year ago, Ed Whitacre, CEO of SBC (since renamed AT&T), famously told Business Week, "For a Google or Yahoo or Vonage or anybody to expect to use these pipes [for] free is nuts!" The response from Google, Amazon and other Web-based companies was, in essence, "It's ON." And now it looks like Whitacre was nuts to think he could say something like that and not be the one to pay.
Today, the FCC approved the latest in a string of Whitacre acquisitions, AT&T's $84.5 billion acquisition of BellSouth. But it did so only after AT&T agreed not to charge Google, Yahoo, Vonage or anybody else for priority delivery of its data. The restriction, which lasts for two years, specifically bars AT&T from offering "any service that privileges, degrades or prioritizes" any data transmitted to its broadband customers.
In other words, the FCC told AT&T that it was stuck offering a "dumb pipe" to DSL users for at least two years. The two exceptions to the Net neutrality requirement were for managed corporate networks and for the TV service AT&T is starting to introduce. Those carve-outs make sense because they draw a bright line between what happens to data transmitted by an Internet access service and how traffic can be managed in other services running over the same network. And a temporary restriction is appropriate, given the promise of more competitors emerging (particularly in wireless broadband) as well as the new Democratic majority in Congress' interest in Net neutrality.
Other interesting new concessions by AT&T include agreements to bring 3,000 jobs back to the U.S. that BellSouth had sent offshore; to offer relatively low-speed broadband (768 kbps) for less than $20 a month with no obligation to buy AT&T's phone service, too; and to offer wireless broadband to at least one fourth of its service area by 2010 (if it doesn't, it will lose those wireless licenses).

Addendum: FCC Chairman Kevin Martin and fellow Republican Commissioner Deborah Taylor Tate issued a remarkable joint statement that declares the Net neutrality condition unnecessary and pledges not to extend it to other carriers. Read it here. AT&T agreed to the condition (and several others aimed at preserving competition for business phone lines) at the insistence of the FCC's two Democratic commissioners. Given their stance, look for Democrats on Capitol Hill to legislate on this issue, using the AT&T rules as the starting point.

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