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New AT&T and ‘Net Neutrality’

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New AT&T and ‘Net Neutrality’

New AT&T and ‘Net Neutrality’

Some have speculated that AT&T in its new, hypothetical post-acquisition position as the nation’s dominant broadband provider might be tempted to pursue fees from companies (e.g., Google, Vonage, etc.) that use lots of “bandwidth.” This is the essence of the “net neutrality” debate. In a November, 2005 interview in BusinessWeek then SBC CEO Edward Whitacre said the following:

How concerned are you about Internet upstarts like Google (GOOG ), MSN, Vonage, and others?

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?

The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

Last Thursday Oregon Sentor Ron Wyden introduced legistlation “aimed at preventing high-speed Internet service providers from charging content companies extra so consumers have faster access to their Web sites or receive special treatment.”

I predict that net neutrality will become central to some of the potential anti-competitive concerns that will be reviewed as part of the federal approval process of the acquisition. Here’s what Whitacre told BusinessWeek regarding a potential takeover of BellSouth:

Is it a possibility that SBC would acquire BellSouth?

It sure would be nice, but it doesn’t have much chance of happening because of market power, size, etc. I think it would be real hard to do. I don’t think the regulators would let that happen, in my judgment.

Accordingly, I think those regulators will formally prohibit the new AT&T from exacting fees from Google and Vonage, et al. In an ironic way, the AT&T acquisition of BellSouth may end the debate over net neutrality and accelerate the imposition of formal legal controls to prevent it.

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