The AT&T/BellSouth/FCC Soap Opera

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The AT&T/BellSouth/FCC Soap Opera

The AT&T BellSouth merger has gained FCC approval after AT&T decided to make some concessions and many are hailing this as a win for net neutrality. Below are some of the recent articles – a massive amount for a telecom merger --  I found on TMCnet regarding this soap opera of a merger:
 
 
Most of the articles have a positive spin but at least one critic of this merger is Dave Burstein at DSL Prime who thinks AT&T's net neutrality concession has no meaning. Why?
 
According to Dave this seemingly innocuous later sentence -- following the 2-year net neutrality pledge -- effectively makes it almost meaningless.
 
“This commitment also does not apply to AT&T/BellSouth's Internet Protocol television (IPTV) service.” AT&T has always intended to give paying customers priority by routing them over the “IPTV” part of their network, with Alcatel routers and Microsoft software designed for QOS.
 
Basically AT&T says it won't favor one type of traffic on its network over another -- the essence of net neutrality, it then adds this statement that negates their concession.
 
Many fear service providers will favor some services over others and also restrict competition with pricing which makes it prohibitive to launch a new service that in any way competes with a service provider offering.
 
After all, would YouTube have stood a chance if they had the service providers stacking the deck against them from the beginning? Would they have been able to afford expensive tolls to get videos to the masses?
 
There are just so many pieces to the net neutrality puzzle and while some want the LECs to be able to freely invest in building infrastructure without the fear of giving competitors an undue advantage, others point out the Bells have build their existing and new networks using public rights of way. In exchange for their use of these rights, many believe the public should get a guarantee of net neutrality.
 
Some have suggested the concessions AT&T has made will reduce their desire to invest in infrastructure. The assumption is net neutrality promises are bad for service provider investment.
 
Trouble is net neutrality is good for investment from just about every other type of technology company relying on the internet as a method to disseminate information.
 
On balance the argument here is whether it is better to have companies like Vonage, Skype, YouTube, MySpace and Google investing money or Verizon and AT&T. Which investments are better for consumers?
 
It seems obvious the non-phone companies have done more for the world in the last five years than AT&T and Verizon. Now let's put aside wireless broadband like EVDO because I consider this to be a tremendous innovation (really a network upgrade but a very expensive and useful one). Let's focus on the wired side of the house.
 
If I had to decide what has recently benefited consumers most, I would say it is VoIP, search, social networking and video.
 
Let's look at some recent telecom innovations for guidance. The phone companies watched Vonage build a VoIP company and then decided they would get in the game. Vonage gave us the ability to use an ATA to make calls from any broadband connection and a softphone. These are innovations the Bells copied years later. History has shown virtually all the money phone companies spend is on marginally incremental improvements (touch tone, call waiting, called ID) and defensive strategies.
 
Notice the argument cannot be made that the RBOCs were not aware of VoIP. They all used VoIP in their backbone networks. The top brass of these companies just decided not to roll voice over IP out to customers.
 
So in the end the concessions AT&T has made will likely be beneficial to consumers and if they are beneficial it may be a short honeymoon as in two years the net neutrality provision goes away. Congress may get into the act during this time but with AT&T's massive lobbying force it will be unclear whether the government will get involved at all.
 
Then again the Wall Street Journal seems to think no service provider can forgo net neutrality without angering the public. In a recent article it cites a quote from FCC commissioner Jonathan Adelstein who says, "Anybody who violates this policy is going to run into a political buzz-saw." In addition it points out how the fiasco over Cox Communications accidentally blocking Craigslist as evidence that no service provider is immune from the wrath of the public.
 
Perhaps the ultimate service provider net neutrality compromise will be IMS-based networks where content providers will be able to offer services to the masses and share revenue with providers. AT&T has done an amazing job combining a number of massive telecom companies under a single brand. Now the time has come to digest it all and find ways to effectively compete against cable companies. The one ace up the Bell's sleeve is wireless leadership and even though they are behind in video the wireless advantage should not be underestimated.
 
To balance out these strengths and weaknesses we will see more acquisitions soon.
 
Certainly the fluidity of the telecom market continues to make an interesting soap opera to watch and I am on the edge of my seat waiting for the new 2007 season.


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