TELECOM Digest OnLine - Sorted: Consumer Effects of AT&T-Bell South Combination

Consumer Effects of AT&T-Bell South Combination

Peter Svensson, AP Technology (
Fri, 29 Dec 2006 18:16:53 -0600

By PETER SVENSSON, AP Technology Writer

The concessions AT&T Inc. made to win regulatory approval of its
mammoth merger with BellSouth Corp. has many implications for

With Friday's approval of the plan by the Federal Communications
Commission, here's what consumers can expect in the combined company's
service areas in 22 states:

* DSL to new customers for $10 a month, for 30 months. This looks like
a good deal for high-speed Internet, as the Digital Subscriber Line is
even cheaper than the cheapest plan AT&T now has, at $15 a month. It's
even better in BellSouth's territory, where the company has kept
prices higher than other phone companies -- BellSouth's cheapest plan
is now $25 a month. AT&T is likely to lose money on this because
current DSL plans are no cash cows. However, to be eligible, you must
never have had AT&T or BellSouth DSL, and you need local phone

* Free broadband modem to those who replace AT&T or BellSouth dial-up
services with DSL. This is not a major benefit, and there's nothing to
prevent AT&T from recouping the cost by raising general prices (except
on the mandated $10 plan). AT&T is currently offering a mail-in rebate
that covers the cost of a DSL modem.

* A pledge to offer broadband wherever the new AT&T is the local phone
company. This sounds good, but AT&T is allowed to use satellite
broadband, which is comparatively slow and expensive, to cover the
last 15 percent of homes. This means rural homes that are too far from
phone-switching stations may still not get DSL.

AT&T already sells satellite broadband in partnership with WildBlue
Communications Inc. Service starts at $50 a month for downloads at up
to 512 kilobits per second, slower than AT&T's $15 DSL plan. The
equipment costs $300. One emerging alternative: fixed wireless
broadband, which is cheaper than satellite, but is only available in a
few areas so far.

* DSL service without local phone service. This is something consumer
advocates have fought for because many broadband users make phone
calls over that connection and feel no need for a traditional
landline. But so-called "naked" DSL is something that appeals mostly
to the technically sophisticated, and they're unlikely to be thrilled
by the relatively slow plan that AT&T has offered to sell, with a
download speed of 768 kilobits per second. At $20 a month or less,
it'll cost a bit more than the cheapest DSL plans but you can drop
charges for phone services. This pledge will be good for 30
months. After that, there's a good chance AT&T won't make any new
demands of current customers, but there's no promise.

* A pledge to sell wireless broadband licenses held by BellSouth. This
is intended to open up competition in providing broadband to the home, a
market that now has only two main competitors in each area: the phone
company and the cable company. BellSouth already uses this spectrum to
provide broadband service in parts of 15 cities in eight states. The
technology is similar to that used in Wi-Fi hotspots, but allows for
longer range.

Cell-phone carrier Sprint Nextel Corp. has announced plans to build a
competing wireless network and would probably love to get its hands on
the frequencies to be surrendered by BellSouth. But there's nothing in
AT&T's offer that says it has to sell the frequencies in an open
process, so it may well chose a less-threatening buyer.

* A pledge to uphold "net neutrality" principles. This is the most
abstract promise, but some consumer groups say it's the most
important. The major phone companies -- most prominently AT&T -- have
suggested they would like to be able to charge large Web companies
like Google Inc. and Amazon Inc. for preferential treatment of their
traffic, ensuring that, for instance, online movies they sell don't
stutter or break up because of Internet traffic jams.

In a sometimes vehement debate over the past year, the Web companies
and consumer advocates have fought this idea, saying it runs counter
to the egalitarian and public nature of the Internet and will stifle
innovation when smaller companies can't afford the extra Internet

When SBC bought AT&T Corp. to become AT&T Inc. and when Verizon
Communications Inc. bought MCI, they both promised to uphold certain
loose principles of "net neutrality," but that promise expires next
year. AT&T is now offering the FCC to go even further and to refrain
from offering any service that prioritizes or degrades any Internet
data based on its source, ownership or destination. This would apply
for two years after merger.

AT&T's IPTV service, a competitor to cable TV, would be exempt, as
would the Internet backbone. But "network neutrality" proponents were
largely pleased with the offer on Friday.

"This is a major step forward for supporters of an open Internet and a
great improvement on the conditions applied to the earlier mergers,"
said Ben Scott at Free Press, a nonprofit that promotes freedom of

Copyright 2006 The Associated Press.

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