Thursday, October 22, 2009

AT&T, Google Battle Over Web Rules

WASHINGTON—There's nothing neutral in the battle between AT&T Inc. and Google Inc. over the future of the Internet.

Google, the powerhouse of Silicon Valley, and AT&T, champion for the old-line phone industry, are marshaling political allies, lobbyists and—in AT&T's case—labor unions for a fight over proposed "net neutrality" rules that could affect tens of billions of dollars in investments needed to upgrade the U.S. broadband network, which lags in speed and affordability compared with some countries.

On Thursday, the Federal Communications Commission made good on its promise to push new rules that would require Internet providers such as AT&T to deliver Web traffic without delay.

Broadly, that means cable and phone companies couldn't block or slow access to services from Google, Netflix or others that are a drain on their networks or could compete with their businesses.

But as the details of the new rules are hammered out in coming months, AT&T and Google are ramping up efforts to ensure the FCC doesn't impose rules that could hurt their profits or expansion plans.

Plenty of lobbyists have made their concerns about the FCC's proposal known to their political allies over the past few weeks. But AT&T lobbyists were particularly active, swarming Capitol Hill and state houses, prompting a bipartisan mix of governors, congressmen and senators to send worried letters to the FCC. Two big labor unions have taken out newspaper ads attacking the new rules.

"Google to date has gotten relatively a free pass that they're somehow promoting the public good on net neutrality as opposed to, what I see, is that they're trying to entrench their business model," said Robert Quinn, AT&T's senior regulatory lawyer in Washington.

Google responded this week with letters of support from dozens of technology-company CEOs and venture capitalists.

"It's not too strong to say we were caught off guard" by AT&T's efforts, says Richard Whitt, Google's top Washington policy lawyer, who said AT&T was deliberately trying to make the issue about Google, not the Internet itself.

"Part of it is this notion that you find one name and you make it the object of all your scorn and your vilification," Mr. Whitt added. "What we represent unnerves them."

As phone and video services have migrated online, the FCC has struggled to stretch its authority over new technologies. The FCC's net neutrality proposal, driven by Chairman Julius Genachowski, is the strongest move yet by the federal government to assert control over the rules of the road on the Internet.

Mr. Genachowski and his aides have been taken aback by the uproar. "In the run-up to today's meeting, there has been a deluge of rumors, and no shortage of myths and half-truths," Mr. Genachowski said during Thursday's FCC meeting. "We're addressing a topic of great importance, where parties have strong views based on differing perspective and experiences."

FCC commissioners voted unanimously to move forward with the rule-making process but the two Republicans on the commission disagreed on the need for them and raised concerns about how the rules might apply to wireless providers and premium services that cable and phone companies want to offer.

AT&T and other Internet-access providers want latitude to manage traffic on congested wireless networks and freedom to devote a chunk of their wired networks to selling more expensive services. Internet providers are worried regulators are assuming veto power over their efforts to develop new revenue streams from their Internet lines.

Google and other Internet companies fret that phone and cable companies will hobble their efforts to offer competing services online or will try charging them more for better connections to consumers.

Google wants phone and cable companies to deliver all traffic equally, so carriers can't get in the way of it offering consumers high-definition TV shows or movies on YouTube or phone services like Google Voice.

Thus far, there have been only two high-profile instances of blocking or slowing Internet traffic, and both stopped soon after the FCC told the companies to knock it off.

The skirmishing over federal regulation of the Web between AT&T and Google has gone on for several years. But the FCC's move to put forward stronger open Internet rules has escalated the fight.

AT&T recently accused Google of blocking calls with its Google Voice service, and provided evidence to the FCC that the search giant wasn't connecting calls to a convent of Benedictine nuns, among others. The FCC launched an inquiry.

Earlier this week, two big labor unions—the Communications Workers of America and the International Brotherhood of Electrical Workers—took out advertisements in the Washington Post raising concerns that the new rules could discourage investments in telecommunications infrastructure, which to the unions means jobs.

Google returned fire late Sunday night, releasing a letter from 24 chief executive officers and tech-company founders, including Facebook Inc.'s Mark Zuckerberg, and IAC/InterActiveCorp.'s Barry Diller, urging the FCC to move ahead with the proposal. A similar letter, from more than two dozen venture capitalists, arrived at the FCC Tuesday morning.

It's not the first time the two companies have faced off in Washington. AT&T and other wireless carriers were infuriated when Google successfully pushed the FCC to impose conditions on airwaves auctioned in 2008. Google bid enough to trigger the conditions—some $4.6 billion—and promptly dropped out of the auction. The wireless carriers weren't much happier when Google helped to successfully push the FCC to set aside some valuable airwaves for free, unlicensed use by potential competitors.

Google's success at getting the FCC to embrace its vision of the Internet hasn't been matched at other agencies. Last month, the Justice Department urged a federal appeals court to reject a settlement between Google and the Authors Guild and Publishers over its book search service.

A Federal Trade Commission investigation prompted Google CEO Eric Schmidt to leave Apple Inc.'s board and Genentech Inc. CEO Arthur Levinson to leave Google's board.

Meanwhile, both Congress and the FTC have expressed concerns about current online advertising and privacy practices of Internet companies including Google. Consumer groups have also weighed in, along with advocacy groups such as the Future of Privacy Forum, which is funded by AT&T.


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