AT&T Nixes Net-Neutrality Proposal

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A senior AT&T executive rejected a proposal that would require the company to adhere to Internet-nondiscrimination rules in order to gain approval from the Federal Communications Commission to merge with BellSouth.

The Internet-regulation proposal -- advanced by a coalition funded by Google, Yahoo!, eBay and Amazon.com -- would require AT&T to promise not to discriminate “in their carriage and treatment of Internet traffic based on the source, destination or ownership of such traffic.”

The net-neutrality condition would apply to AT&T, but to no other provider of broadband Internet access in the United States.

“The proper place to be debating the pros and cons of net neutrality is in the U.S. Congress or in an industrywide proceeding at the FCC,” AT&T senior executive vice president Jim Cicconi said in a prepared statement.

FCC chairman Kevin Martin agreed to launch an agency study of market conditions facing broadband-access providers and Web-based providers of voice, video and data services and applications.

The FCC vote, scheduled for Nov. 3, is the last regulatory hurdle facing the $81 billion deal. AT&T has been forced to make a number of concessions because only four of five FCC members are planning to cast votes.

A key issue is whether AT&T needs to embrace some form of nondiscrimination in order to persuade Democrats Michael Copps or Jonathan Adelstein to provide the necessary third vote.

Stifel Nicolaus telecommunications analyst David Kaut said he didn’t believe that AT&T would accept a nondiscrimination condition. “I think they are dug in on that -- they will not give that up, particularly in a merger proceeding where they would be the only company affected,” he added.

The Department of Justice approved the merger a few weeks ago without conditions. But Copps and Adelstein -- outraged that the DOJ let such a huge transaction pass unscathed -- refused to vote on the deal Oct. 13.

“I think at some point the odds are that they will work out a bipartisan deal to get this done. It looks like [Nov. 3] is in significant doubt,” Kaut said. “I just don’t think they are poised to get it done.”

AT&T put forward a number of voluntary conditions, although none of them dealt with one proposed by a few midsized cable companies that would require AT&T to exchange digital-phone traffic on fair and efficient terms.

Under current law, cable providers of voice-over-Internet-protocol calling services do not have the right to interconnect with AT&T, but cable operators have been able to route VoIP traffic through telecommunications carriers that do have interconnection rights.

Among other things, AT&T committed to offer broadband access to every home within its 22-state territory by Dec. 31, 2007. It also agreed to market $10-per-month broadband access to voice-service customers who have not previously signed up for digital-subscriber-line service. And within one year, customers in the nine former BellSouth states will not be required to purchase circuit-switched voice service in order to subscribe to DSL.

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