at&t Gives Both Sleeves From Its Vest

The good news according to this AP story on Yahoo is that at&t felt it had to make some concessions (full text here) to get FCC approval of its acquisition of BellSouth. The bad news is that the concessions, which are mainly window dressing, may be accepted by the FCC as sufficient. Ouch!

Net Neutrality

Here’s the part that sounds good:

“AT&T/BellSouth also commits that it will maintain a neutral network and neutral routing in its wireline broadband Internet access service. This commitment shall be satisfied by AT&T/BellSouth's agreement not to provide or to sell to Internet content, application, or service providers, including those affiliated with AT&T/BellSouth, any service that privileges, degrades or prioritizes any packet transmitted over AT&T/BellSouth's wireline broadband Internet access service based on its source, ownership or destination.”

Here’s why this concession is NOT sufficient to protect the public interest if this monopoly-enhancing merger is allowed:

1. at&t’s IPTV is exempted from the neutrality provision. It is the TV “pipes” that at&t CEO Ed Whitacre thinks are his.  Trouble is, there are no separate pipes on an IP network. at&t has left itself full flexibility to favor its own Internet video offers over all challengers or to charge others a premium for equal treatment.
2. Very carefully, the ACCESS network is defined as the part of the at&t supplied network between the customer premises and the nearest Internet peering point. But at&t owns huge stretches of Internet BACKBONE (the part of the Internet between peering points); there is absolutely no promise of neutrality here.
3. Even this very weak concession sunsets in two years rather than the three and half years at&t has offered for their other “concessions”.

It would be a step backward if at&t succeeds in having this definition of “net neutrality” become a standard.

Promoting Accessibility of Broadband Service

Under this important title, at&t commits to “offer broadband Internet access service

(i.e., Internet access service at speeds in excess of 200 kbps in at least one direction) to 100 percent of the residential living units in the AT&T/BellSouth in-region territory” by the end of 2007.

200 Kbps in one direction?  Yippie! Lucky people who get that.

at&t makes clear that it can satisfy this commitment by using satellite for up to 15% of the subscribers. Trouble is that satellite is already available in all these areas. And that satellite Internet access is pretty worthless except in special cases: uplink is too slow and latency too high for the modern Internet.

The 85% with wireline access are promised a service with a speed “up to” 768Kbps.  Even if we ignore the fact that “up to” cannot be a minimum, this pretty clearly is talking about an asymmetric DSL connection which today has an uplink speed of 128Kbps.  There is no commitment to improve the uplink speed.

One genuine concession is to offer “naked” DSL (no requirement to also buy at&t phone servce) for no more than $19.95/month.  However, the service offered “up to” 768Kbps download and no promise on upload, may well not be adequate for many customers who’d like to use their broadband connection to buy inexpensive VoIP service rather than overpriced at&t voice.

Public Safety, Disaster Recovery

at&t will make it’s existing disaster recovery services available in the BellSouth region (do you think they weren’t going to do that?) and they’ll donate a million bucks (that’s ONE million) to unnamed charities or public entities for the purpose of “promoting public safety”.  Nothing meaningful here like providing voice mail to people who’s landline phones are out of service or inaccessible due to disasters.

Resale and Interconnect

Carriers and ISPs who compete with at&t still have to interconnect with the giant and often have to rent last mile facilities from the incumbent. There are a number of concessions (for 42 months) preventing at&t from harassing these carriers with delays and/or discriminatory pricing. Some of these do sound like an improvement to me but it will take someone with a better background in this part of the business to tell whether there are huge loopholes in what is offered here.

at&t says it will resell facilities to those who want to offer competing DSL services “at a price not greater than the retail price in a state for ADSL service that is separately purchased by customers who also subscribe to AT&T/BellSouth local telephone service.” In other words, if you want to compete with at&t on these facilities (most of which were built in the old monopoly days and financed by the customers), you can buy wholesale at the retail consumer rate. Tough to make a good margin under those circumstances.

Summary

If this is the opening salvo for a negotiation, it’s not a bad start. If this is the result of a negotiation which has been going on between the holdout Democrat Commissioners on the FCC (Chairman Martin would apparently have immediately given unconditional approval to the merger as the Justice Department did), then it’s a sadly unsatisfactory result.

Mike at TechDirt headlines “And By The Time Anyone Reads The Sneaky Fine Print On AT&T's Concessions, The Merger Will Be Done”. Paul Kaputska writing at GigaOM says “Look, we told you the AT&T-BellSouth deal would get done.”

I hope they’re both wrong and that there’s still negotiating to be done. But I’m afraid they’re right.