Saturday, July 29, 2006

Conditions for AT&T/BS merger?

AT&T is set on acquiring BellSouth. Whitacre, AT&T's CEO, wants to rebuild the old AT&T monolith? And the FCC doesn't appear to have the will to block it? Well at least require the public service that goes with granting a class of monopoly.

That's the peevish suggestion of Dave Burstein of DSL prime.

Burnstein's point is that the public ought to get something out of allowing this enormous reconcentration of economic power. He thinks it should be DSL-like bandwidth at affordable, DSL-like prices. Burnstein points out that the Goliath could, at reasonable cost relative to its size, provide 90 percent of it's footprint with DSL or WiMax-at-DSL speeds and a satellite service to the rest. As he points out, this would only be making Whitacre make good on an old promise:
In 1999, Ed Whitacre promised 80 percent coverage with Project Pronto in 2002, and "all our customers" in the next few years after that, using whatever technology proved most effective. Instead, SBC stopped below 76 percent and refused to even reveal the number. If Kevin Martin has the backbone, 100 percent availability will be part of the coming AT&T/BellSouth merger. AT&T would huff and puff, but Martin faced them down before on UNE-P.
Serving us all with at least moderate bandwidth is not all so unlikely as it might appear at first blush, though Burnstein doesn't explain why: Doing so would be "merely" requiring universal coverage of a set of services that AT&T and BellSouth are already starting to deploy for their second and third tier markets--the ones, the size Lafayette and below, that won't get fiber. They'd be profitable businesses--just not as profitable as other ways the new giant might spend its money. (Yes, yes, I know--BellSouth won't be able to to compete in this market with merely DSL speeds. LUS changes the competitive situation in Lafayete. Both incumbents will have to expend more effort-and more bandwidth--if they intend to stay in this market.)

Beyond those questions, however, Bernstein claims there is a real issue anti-trust issue before the FCC and that affordable, universal, bandwidth in the 20 meg range is the remedy. He believes that when AT&T launches its "Uverse" video over IP service it will be deliberately preventing competitors from entering the market by refusing to sell customers enough bandwidth to allow them to purchase competing with video products. The idea is that the FCC can avoid a crisis
...this fall, when AT&T turns on their HD service and creates a prima facie antitrust violation. AT&T is blocking customers from all but six Mbps of the 20 to 25 Mbps Lightspeed connections. They refuse to sell higher speeds at reasonable or even unreasonable prices.
So his take on the issue of net neutrality focuses less on the threat of tiering and packet prioritization and more on the raw economic power that control of the last mile's bandwidth gives the incumbents in the emerging video over Internet Protocol market.
Not merely did Ed Whitacre and Randall Stephenson say they want a tollbooth, they are already telling reporters they will limit speeds with the result that live HD video can't challenge Lightspeed.
It's not just that AT&T/BS wants to put a toll road on the faster, more useable lanes of the internet highway. More crucially they also want to be the only trucking company with a useable off-ramp to your home.

Put that way, the antitrust charge makes a good bit of sense. And one remedy--the least intrusive remedy--would be to mandate that they sell you enough bandwidth to allow you to purchase competing products from some one else.

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