Thursday, August 03, 2006

AT&T's Whitacre Sticks to the Script

Big Ed
AT&T chief Ed Whitacre regurgitated now familiar talking points on Tuesday when he claimed -- once again -- that others can no longer eat AT&T's broadband lunch for free.

"Some companies want us to be a big dumb pipe that gets bigger and bigger. No one gets a free ride," Whitacre said, in a statement reminiscent of his now infamous interview last October with BusinessWeek.

Ummm… Aren't we already paying for the ride, Ed?

Last I checked AT&T and the other large ISPs made $20 billion from our broadband access fees alone. It's a piece of the $170 billion in annual revenues recorded by the four Bells -- AT&T, Verizon, Qwest and BellSouth -- for telecommunications services.

This lucrative business model -- returning nearly $95 billion in annual gross profits to the Bells -- has worked so well for AT&T that they recorded an 81% increase in profits over the second quarter of 2006

But what's good news for Ed is often bad for the rest of us. Not only does he want us to pay more to ride AT&T's gravy train, we now have to endure Whitacre's B.S. along the way.

The AT&T CEO -- with his army of PR flacks and lobbyists – will say whatever it takes to get Washington to award phone companies with control of the Web. Net Neutrality -- the principle that guarantees that they treat all Internet information equally -- now stands in their way.

In this game, winning over Congress isn't about telling the truth. It's about spending money, buying up lobbyists, filling campaign coffers and spinning politicians.

The telcos are good at this. Since 2003, telephone and cable companies have spent more on Washington lobbying than the oil and gas industry, according to the Center for Responsive Politics. On the issue of Net Neutrality alone, they ran up more than $100 million in expenses to grease lobbyists and politicians, buy TV, radio and print ads and fund phony grassroots groups like "Hands off the Internet" and "NetCompetition."

Despite the telco shopping spree, Whitacre's talking points remain flimsy.

This is not about AT&T fostering new innovation.

Compared with the computing industry, telecoms invest little money in actual research and development. According to Paul Starr, a Princeton professor and author of the 2005 book, The Creation of the Media, the incumbents in the telecommunications business "invest more in politics than in technology -- indeed, they are downright frightened by innovation, whose ultimate effects they can't control."

This is not about AT&T providing better choice and cheaper broadband to more people.

The phone companies want to force content providers to pay protection money to get faster services. And it's consumers who will pay. If Net Neutrality is so bad for consumers, why do ALL the major consumer groups support it and ALL the major phone companies oppose it?

As for choice, the GAO found that the median number of providers available to a given household is just two. That’s all. Cable and DSL systems dominate, holding more than 98 percent of the broadband market. This is hardly a competitive market. In fact, the share of the market held by all the other broadband technologies combined — satellite, fixed wireless, mobile wireless, and broadband over power lines — actually decreased over the past few years, according the FCC.

And the last thing an old-school monopolist like Whitacre wants is to offer choice of non-AT&T services – unless, of course, they're offered by companies that have paid AT&T's new access tolls.

This is not about content providers paying for their fair share of the "pipes."

They do that already. According to "It's Our Net" – a coalition representing eBay, Google, Yahoo!, Amazon and other Internet companies – Web businesses already collectively pay billions of dollars per year to network operators for Internet connectivity and transport. That money fully compensates the network operators for their network investment. "Overall, the four Bell companies alone make some $14 billion annually in revenues from selling special access services to Internet content and applications companies, Internet service providers, and other corporate and institutional users of the local network." FCC figures show that this business returns over 50 percent to the phone companies.

For Ed, this is not about creating a faster, smarter, cheaper and more accessible Internet for Americans. It's simply about increasing returns for AT&T shareholders.

That's often expected of a CEO. But let's call it what it is, Ed, and stop pretending that you have the best interests of the Internet at heart.

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