AT&T Corp. has formally agreed to eventually allow rival Internet services to use its cable lines to provide high-speed computer connections, knowledgeable sources said last night.
AT&T's new policy is aimed at defusing a high-stakes controversy over who controls access to the next generation of the Internet, or "broadband." Ever since it purchased Tele-Communications Inc., the nation's largest collection of cable systems, and declared it would honor an agreement requiring that its customers buy high-speed Internet access from its exclusive provider, the company has been under fire in the courts and in several municipalities.
But AT&T has now struck an agreement in principle with MindSpring Enterprises Inc., the nation's second-largest Internet service provider, formally committing itself to a new "open access" policy, sources said. The two companies plan to send a letter on Monday detailing the agreement to Federal Communications Commission Chairman William E. Kennard. AT&T plans to highlight the new policy at a meeting the same day with hundreds of Wall Street analysts, the sources said.
The agreement will gain the signature of Kenneth Fellman, chairman of an FCC advisory board that represents local governments, sources said. The signatories have been holding talks steadily since July at Kennard's urging.
Rival Internet providers and consumer advocates last night acknowledged the deal as a step in the right direction, one that would limit AT&T's ability to control traffic over the global computer system. But some stressed it is no more than a concurrence between two companies and provides no assurance that all providers will be able to reach their customers through AT&T's network. AT&T's most powerful adversary, America Online Inc., the nation's largest Internet provider, is not a party to the deal, and was not included in the talks. Officials there declined to comment last night.
"It's a good thing as far as an example goes, but the fact they've done a deal with MindSpring doesn't solve the underlying issue: AT&T wants control of the customer," said Barbara Dooley, president of the U.S. Internet Service Provider Association, which represents about 1,000 companies.
Though the letter does not amount to a binding business contract, it proclaims agreement on the principles of open access that should prevail in contracts to come. A cable industry official said the deal was aimed at dissuading regulators from wading into the issue, while pressuring AOL to "come negotiate. Get your own deal. Don't go crying to the government."
"It sends the message that the industry can work this issue out," another source said. "We don't need the regulators getting involved."
But one party to the talks, consumer advocate Andrew Schwartzman, president of the Media Access Project, will not sign the agreement, maintaining that AT&T has not gone far enough to ensure it won't impede its rivals.
"What they're trying to do is very much a step in the right direction," Schwartzman said last night, "but it isn't open access."
Open access has become a pivotal issue within the technology world ever since AT&T bet its future on cable, spending $120 billion. It plans to upgrade its cable wires into conduits for high-speed Internet connections, telephone service and video entertainment.
AT&T's largest cable purchase, Tele-Communications Inc., carries with it a contract requiring that all high-speed customers connect to the Internet via Excite At Home, which manages AT&T's data network and oversees a popular Internet page with links to myriad destinations. AT&T has long pledged that it will honor that contract through its expiration at the end of 2002.
That position has brought AT&T no end of grief. Consumer advocates maintain that AT&T could use its exclusive arrangement to undermine the free-flowing ethic of the Internet, funneling traffic to preferred customers while discouraging traffic elsewhere. They say that would end the days when anyone with an idea and a modem can compete with the biggest brand names.
But AT&T says that's rhetoric. One of the most fervent proponents of open access is AOL. As AT&T portrays it, AOL is motivated not by principle, but by basic economics: It wants a free ride to customers on AT&T's cable systems. The two companies have long discussed an arrangement that would allow AOL to sell its service over AT&T's wires but have stalled on two key matters: price, and who controls the relationship with the customer, sources said.
The city of Portland, Ore., adopted rules forcing AT&T to allow rival Internet service providers to connect with customers over its cable wires. AT&T filed suit. After a preliminary ruling for the city, the two parties await a ruling from the 9th U.S. Circuit Court of Appeals.
But Kennard and the FCC have declined to step in, asserting that cable Internet service is a nascent industry, one no one yet dominates. Regulating now might discourage the investment crucial to upgrading the systems and giving consumers faster connections, Kennard argues.
AT&T has already said it plans to allow open access once the Excite At Home contract expires, though never so formally as now.
Schwartzman said he walked out of the talks that led to the agreement two weeks ago after AT&T refused to include language specifically promising not to discriminate against Internet content providers, and refused to budge on the question of who would control the billing relationship with the customer.
"They insist on controlling the relationship with the customer," Schwartzman said.
But a source with knowledge of AT&T's plans said the company's open access agreement does in fact provide flexibility on both scores. "Everyone is going to be offered similar terms and conditions," the source said, adding that Internet providers will be able to bill customers directly for the services they provide.