Published March 23, 2006
LAS VEGAS – Ed Whitacre Jr., the chief executive of AT&T Inc. (T), dismissed critics who say its planned merger with BellSouth Corp. (BLS) will form a near-monopoly for Internet access and give it the clout to dictate terms to Web sites if they want to remain reachable.
At issue is the current principle of "network neutrality," under which all traffic is treated equally on the Internet.
The major Internet carriers, with AT&T in the fore, want to be able to provide different tiers of service, giving higher priority to, for instance, Internet phone calls, which could improve their quality.
At the TelecomNEXT telecommunications conference in Las Vegas on Tuesday, Whitacre rejected the notion that this would harm the sites and companies that don't pay for premium service.
"There's been a lot of talk about this in order to scare people into thinking that access to the Internet is somehow at risk, or that the Internet as we know it is a thing of the past," Whitacre told attendees. "AT&T will not block anyone's access to the public Internet, nor will we degrade anyone's quality of service."
Content providers and Internet phone companies have equated tiered service with extortion, as Web sites that don't pay extra could become relatively harder to access. Instead, they urge the carriers to improve traffic quality for everyone equally.
Whitacre said some have turned AT&T's acquisition of BellSouth, valued at $67 billion when announced two weeks ago, into a "referendum" on net neutrality.
SBC Communications Inc. pledged last year to uphold the principles of net neutrality until 2007 as a condition of its acquisition of AT&T Corp. The merged company took the name AT&T Inc.
Analysts have noted that AT&T will likely have to extend that pledge for two more years to gain approval for the acquisition of BellSouth, which is expected to close next year. That would delay resolution of the issue until 2009.
The chairman of the Federal Communications Commission, Kevin Martin, addressed the conference in terms that were generally favorable to the carriers.
"We need to have a regulatory environment that allows companies to invest in their networks," Martin said.
Analyst Shiv Bakhshi of IDC said the issue facing the FCC is creating a balance that gives carriers incentives to improve Internet capacity, without creating "an environment that is so pro-network operator that it stifles innovation."
Separately, AT&T executives said they would seek the same easing of regulation on data services to large enterprise and wholesale customers that Verizon Communications Inc. (VZ) gained from the FCC on Monday, exempting it from rules regarding tariff filings and pricing requirements.
"We will be filing something seeking similar regulatory treatment," AT&T spokeswoman Claudia Jones said.
The applications normally have a 15-month waiting period. Speaking to reporters, FCC's Martin said Tuesday that the commission "will act as quickly as it can" on applications from other carriers.
Given that the commission's Democratic members disagreed with the decision, saying it did not further competition, it is unclear how quickly other carriers could gain Verizon's terms from the FCC.
The commission now has two Democratic and two Republican members; the Senate is expected to soon confirm a Republican as the fifth commissioner.
The Verizon decision occurred by default, as the commission declined to rule on the company's application, filed in 2004.