Communications Daily Special Bulletin Report: AT&T Agrees to Major Concession on Net Neutrality, Special Access
AT&T and BellSouth late Thurs. agreed to a number of new merger conditions arrived at during dozens of hours of negotiations in recent days as talks continued over the Christmas holiday between the companies and the offices of Comrs. Copps and Adelstein. AT&T agreed to conditions on special access, net neutrality, naked DSL and the sale of 2.5 GHz spectrum that go well beyond anything in earlier offers from the Bells. With AT&T’s offer on the table the merger order is now teed up for a vote as early as Fri. (Dec. 29).
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On net neutrality, AT&T agreed to “a neutral network and neutral routing in its wireline broadband” network for 30 months, extending from the customer premise all the way to the point where Internet backbones exchange traffic. This concession had been critical to groups like Consumer Federation and Free Press and companies like Google, which argued it was necessary to deny AT&T the ability to use their market power to squeeze customers. The 30 months would give Congress time to craft legislation on net neutrality.
On an issue with immediate impact, AT&T agreed to special access price caps for 4 years in all areas where they now have pricing flexibility in their entire 22-state footprint. The provision only covers DS1 and DS3 loops and transport, which are for the most part used by small- and medium-sized businesses, but not the largest capacity lines like OC1 or OC98 used by massive corporations with tens of thousands of lines. But the biggest companies do have the option of buying their own dedicated lines, an option not available to smaller players. The concession, which is expected to cost AT&T $500 million over the 4 years, is designed to appeal to both CLECs and commercial customers who have to pay for special access. Negotiations on special access occurred against a backdrop of the recent GAO report which found that only 6% of buildings with demand for special access have an alternative to the Bells.
On the wireless side, AT&T agreed to divest within a year all of its 2.5 GHz spectrum. Competitors had expressed concerns that AT&T wanted to warehouse the spectrum and not offer broadband wireless, in direct competition with its wireline offerings. In addition, AT&T agreed to a build out requirement for its extensive 2.3 GHz holdings. By July 21, 2010, the merged company agreed to offer service on the band to 25% of the population in its service area. Competitors were most concerned about the 2.5 GHz spectrum because service on that band was closest to commercial reality, with Clearwire already rolling out a broadband offering to more than 160,000 customers.
AT&T also agreed to offer naked DSL for 30 months. The concession will give customers an alternative to buying wireline service and broadband from the Bell, making VoIP or cellphone service and DSL a viable alternative for residential consumers.
AT&T also agreed to new concessions on fiber buildout, agreeing to offer fiber service to 1.5 million households in the BellSouth territory by the end of 2007. And AT&T agreed to offer for $10-per-month DSL service to historic BellSouth and AT&T customers who have never subscribed to DSL. In addition, AT&T agreed to give dial up customers who want to switch to DSL a free modem.