AT&T plan heightens debate over Net's future

Martin Wolk Chief economics correspondent • Profile • E-mail

AT&T's $67 billion plan to buy rival BellSouth has intensified debate over whether the Internet will remain a wide-open information freeway or a multitiered tollway where preferred content whizzes along in high-speed lanes while other traffic languishes in jams.

The debate over so-called "Net neutrality" pits giant broadband carriers including AT&T, rival Verizon Communications and cable giants like Time Warner against content providers Google, Yahoo and Microsoft's MSN as well as upstarts like Vonage and Skype, which offer voice-over-Internet service. (MSNBC.com is a joint venture of Microsoft and NBC.)

"We're already starting to hear from consumer advocacy groups that they absolutely are going to make Net neutrality a big part of the regulatory review of this merger," said Joseph Laszlo, an analyst at Jupiter Research.

AT&T chief executive officer Ed Whitacre has made himself a major target in the debate with his outspoken comment that he would like to charge Google and other content providers for using the company's high-speed Internet connections into homes and businesses.

"Why should they be allowed to use my pipes? The Internet can't be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo or Vonage or anybody to expect to use these pipes (for) free is nuts," he said in a BusinessWeek interview last year.

AT&T and others say they should be allowed to provide preferential treatment to their partners including content providers who pay for the right to use their high-speed lines. But this notion violates the historically democratic promise of the Internet and could doom providers like Vonage, whose customers expect service to be as reliable as traditional telephones.

In a white paper outlining their case, Vonage executives warn that "broadband services are at risk of being controlled by gatekeepers who have the ability to skew the marketplace against the interests of consumers."

In at least one case that was literally true. A small telephone company called Madison River agreed to pay a small fine last year to settle a federal inquiry into charges that it was blocking voice-over-Internet providers.

"Basically this merger will mean even less competition for broadband Internet, and frankly that makes a Net neutrality requirement even more imperative," said Gigi Sohn, president of Public Knowledge, a non-profit that focuses on intellectual property issues. "If there was real competition in the provision of high-speed Internet access we might not be having this conversation, but now the world has gotten even smaller than it was before."

Telephone and cable companies contend there is more competition than ever before, with developments like voice over Internet, video over Internet and the proliferation of high-speed wireless "hot spots."

But the reality is that the vast majority of new services depend on high-speed Internet access, and nearly half the nation's homes have only a single choice for such service — or none at all, according to Public Knowledge.

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