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Telecoms want Web sites to pay tolls to clear superhighway
[February 03, 2006]

Telecoms want Web sites to pay tolls to clear superhighway

(San Antonio Express-News (KRT) Via Thomson Dialog NewsEdge) Feb. 3--As the Internet becomes a conduit for downloading the latest movie or making a free phone call to someone half the world away, phone companies are arguing that it shouldn't be run the same way as the quaint, old Net you used for e-mailing baby pictures to Aunt Tillie.

Big telecom providers such as AT&T Inc. and BellSouth Corp. want Internet companies such as Google, eBay and Yahoo to pay additional money to guarantee fast transmission of big data files over their broadband networks.

Internet companies, the carriers say, are getting a free ride on their networks even as new services such as video downloads eat up more and more bandwidth. So the telecoms are in quiet talks with some of the Net's biggest content providers to set up just such deals.

But consumer groups and some Internet companies aren't happy about the prospect of tollbooths going up on the networks.

They've asked regulators and lawmakers to block the phone companies' efforts, saying the deals would stifle innovation and give big telecoms say over which content providers succeed and fail.

"The basic question that's being debated here is who gets to decide how the Internet works -- the public, or the companies who own the networks," said Ben Scott, director of Free Press, a media reform group that opposes the phone companies' plans. "We think that it should be in the hands of the public." If the phone companies get their way, Scott said, gone will be the days of "network neutrality" when consumers could pay their monthly access fee and gain access to whatever they wanted on the Internet.

Phone companies say they have no intention of blocking consumers' access to any part of the Web, likening their role to that of a delivery service offering customers the option of overnight or two-day service.

They're not about to throw the two-day packages out the back of the van, they add.

After all, the phone companies say, what's wrong with giving Internet companies the option of paying a little more to make sure the video they offer on their sites plays smoothly and downloads quickly? Especially if it's the Internet companies, not consumers, paying the extra fees.

"What we feel that we're offering is an additional product, an additional choice," said Dorothy Attwood, San Antonio-based AT&T's senior vice president for regulatory planning and policy. "We're not taking anything away from the consumer." Though it may sound like an academic argument, analysts said the issue is gaining such momentum that the federal government probably will have to resolve it.

On one side are big phone companies such as AT&T and BellSouth, which have long wielded serious lobbying power. They've poured billions into building their networks and say they're being forced to pay for all the upkeep on the increasingly busy information superhighway.

"They shouldn't get on (the network) and expect a free ride," AT&T Chief Executive Officer Edward E. Whitacre Jr. said last week during a New York analyst meeting.

On the other side are consumer advocates and Internet powerhouses such as Google, who argue that the phone companies' plans are a blasphemous attempt to change the very thing that made the Internet so valuable in the first place.

"Charging extra to the provider of information goes against the founding principles of the Internet," said Max Engel, a broadband analyst for Frost & Sullivan in San Antonio. "Just bringing the idea up is guaranteed to generate a lot of heat." Although many consumers only check their e-mail and occasionally download driving directions, more and more are downloading songs, videos and other large files.

And the broadband demand will only grow as providers begin offering downloads of whole movies or home videoconferencing.

"Very soon, all TV will be broadcast over the Internet," Cisco CEO John Chambers told analysts recently.

He estimated that carriers' Internet-driven network traffic could increase 500 percent a year.

All this comes after phone companies drastically slashed the cost of their broadband service to compete with cable providers and now offer consumers speedy Internet access for about the price of a slower dial-up connection.

What's more, the free long-distance services offered by Internet-based phone ventures such as Skype have cut into the phone revenue of traditional telecom companies, and low-cost video downloads have the potential to do the same to the telecoms' video businesses just as they're being launched.

"Are the phone companies going to be able to last just by stringing a line into the home?" Atlanta-based telecom analyst Jeff Kagan said. "I'm not so sure. It's in everyone's best interest for the phone companies to stay in business, so we're going to have to discuss this issue and come up with a solution." More than likely, that discussion will come as Congress works to rewrite the Telecommunications Act, the sweeping, 10-year-old law that deregulated the communications business and let phone and cable providers duke it out in each others' businesses.

Telecom companies have lobbied intensively for the rewrite, driven in part by an interest in adding provisions that make it easier for them to enter the television business without negotiating a separate contract with each city they want to serve.

Meanwhile, consumer groups and Internet activists are lobbying both Congress and the Federal Communications Commission to implement rules to keep carriers' hands off the way the Internet operates.

So far, the cable companies have been largely quiet in the debate. Analysts said they're likely to come down on the side of the phone companies but are choosing not to risk a public drubbing for calling for changes to the way the Internet is structured.

Although Internet users may not sense anything different in the near term if the phone companies get their way, consumer advocates say the longer-term impact could be great.

One of their chief concerns is that a phone company victory could quash the Internet as a source of innovation.

Imagine a fledgling company poised to become the next Google trying to pony up the cash to make its service work as quickly as those of its deep-pocketed competitors, said Mark Cooper, research director for Consumer Federation of America.

Even though the start-up's service might be the most innovative on the market, who would use it if ran at a crawl compared with those of companies that could pay for better bandwidth?

"It will kill competition, and it will also kill the incentive to innovate," Cooper said. "Essentially, what these phone companies will do is start to pick and choose who wins in this market." Increasingly, the companies that offer broadband access are providing content over the Internet. AT&T, for example, has a deal with Yahoo to provide content for its customers, and it's expected this year to begin offering cable-like video services over its broadband network.

What's to stop AT&T from cutting a sweetheart deal with Yahoo or its own video subsidiary, Cooper asks, while charging exorbitant fees for competitors such as Google when they want to offer competing services?

But the phone companies dismiss such claims, saying activists such as Cooper are trying to whip the public into a panic.

The carriers say they're not trying to stand in the way of competition, nor do they have any intention of keeping competitors off their networks. Content providers' ability to offer faster downloads would only increase the usability of their sites and make them more competitive, AT&T's Attwood argues.

"There will always be the ability for broadband users to connect to the content of their choice," Attwood said. "What it will come down to, we hope, is that there will be other opportunities and other choices in the market." Right now there are no laws to ensure the Internet remains neutral, but the FCC is considering guidelines to make sure providers such as phone and cable carriers aren't harming consumers.

Last year, the commission stopped telecom company Madison River Communications from blocking consumers' access to Vonage, the popular Internet-based phone service.

Despite the intense lobbying from phone companies and those who support neutrality, analysts said it's unlikely Congress will pass telecom reform legislation this year.

Many in Congress are more consumed with the November election, and telecom regulations tend to be complicated and open to prolonged debate.

That delay is worrisome to net neutrality advocates, who say there's no major barrier to phone companies striking deals with Internet companies ready to go to the table.

"It's important not to think of this as a theoretical debate," Frost & Sullivan's Engel said. "This will have real repercussions on the Internet and the way people use it in the future."

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