AT& T Deal Raises Issue of Internet Control
Thursday, March 9, 2006
Consumer groups and big online brands say mega-deals such as the proposed AT&T purchase of BellSouth are creating a growing threat to the openness of the Internet by consolidating power in the hands of companies that provide access to the Web.
To date, cable and telephone companies have had limited ability to act as gatekeepers or toll collectors for the content passing through their networks. But AT&T Inc. Chairman Edward E. Whitacre Jr. and executives at BellSouth Corp. -- companies that together serve nearly half the country -- have been outspoken about their desire to exert greater control over their lines.
The proposed $67 billion purchase of BellSouth gives the issue new urgency among opponents.
"We don't begrudge the telcos their market power; what we're strongly arguing is that they not be allowed to extend that market power to content," said Paul Misener, vice president of global public policy for Amazon.com Inc. Allowing telecommunications and cable companies -- the two primary providers of Internet access -- to charge fees for preferential treatment over their networks destroys the flat, democratic structure of the Internet and ultimately limits what customers can do online, he said.
The Federal Communications Commission addressed the issue last year when it approved Verizon Communications Inc.'s acquisition of MCI Inc. and the SBC Communications Inc. buyout of AT&T. (San Antonio-based SBC took the AT&T name upon completion of that deal.) Commissioners ordered the companies to abide by guidelines that bar them from imposing any limits on Web access for two years.
But some major Internet players want permanent protection. Amazon and eBay Inc. last month joined Google Inc., Yahoo Inc. and Microsoft Corp. in sending a letter to members of Congress calling for clearer measures to ensure that the companies will not use their market size to create tiers of access to the Internet.
EBay said restricted, or "pay for play," Internet systems will increase costs for all Internet users, and some of the 90 million U.S. eBay users have started asking their legislators for "network neutrality" protections, said Hani Durzy, a spokesman for the San Jose-based company.
AT&T spokeswoman Claudia Jones denied that the company had an interest in changing the open nature of the Internet.
"We have no intentions of blocking content or access," she said. But she added that as usage and speeds on the Internet increase, companies should share in the responsibility to make sure the system remains "healthy." "I think people have used the merger to talk about net neutrality," but those people have yet to cite an example of discrimination on the Internet, she said.
But Verizon chief executive Ivan G. Seidenberg and deputy general counsel John Thorne, AT&T's Whitacre, and BellSouth chief technology officer William L. Smith all have stated their preference for a system that allows the carriers to charge to carry some kinds of traffic.
America Online Inc. and Yahoo have also provoked outrage among consumer advocates with a plan to charge e-mail senders who want to bypass spam filters. Although the issue there differed from neutrality, it sparked opposition from several nonprofit groups, as well as free-Internet advocates, who protested the proposed fees as a further step toward restricting the Internet's wide-open culture.
Lobbying is still new for the relatively young Internet companies, which face much more established government-relations organizations in the telephone and cable companies. Some of those Internet firms also have business alliances that may make their interests diverge. Yahoo, for example, has marketing partnerships with both AT&T and Verizon to sell broadband Internet services; Google made a $1 billion investment in AOL, which is owned by cable company Time Warner Inc.
But, as was the case with eBay, some companies are hoping to tap their online community of users to help make their case among regulators.
Congress is just beginning to take up the issue of how to referee the competing Internet interests. Hearings have been held in House and Senate committees, and Sens. John Ensign (R-Nev.) and Ron Wyden (D-Ore.) have introduced legislation addressing aspects of network neutrality.
Rep. Edward J. Markey (D-Mass.) called the network neutrality debate "the single most important debate we're going to have in the communications sector for the next generation."
Jeff Chester, executive director for consumer-advocacy group Center for Digital Democracy, said questions over the freedom of the Internet will figure heavily into the AT&T-BellSouth deal.
"[Regulators] are sadly mistaken if they believe there won't be intense opposition to this deal from all those who care for the Internet's democratic and competitive future," he said. "AT&T's ambition knows no bounds and places the future of the broadband Internet at risk."
Other companies agreed that ensuring a neutral network will be a central issue in this deal, more than in mergers past.
The FCC is likely to impose the same neutrality restrictions on the AT&T-BellSouth deal as it did in the past two big telecom mergers, and that in turn sets the stage for possible congressional action, said Christopher Putala, executive vice president of public policy for EarthLink Inc. "Politically, it's important for increasing the momentum for congressional action."