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AT&T's IP Investment Could Reshape Telecom Regulation AT&T's IP Investment Could Reshape Telecom Regulation

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AT&T's IP Investment Could Reshape Telecom Regulation

November 8, 2012

AT&T's plan to invest $14 billion in expanding its wireline broadband offering and its wireless 4G network--announced on Wednesday--will accelerate the policy discussion about how to regulate the nation's fiber optic communications infrastructure.

"This totally reshapes the discussion," said Harold Feld, senior vice president of the advocacy group Public Knowledge.

AT&T is asking the Federal Communications Commission for permission to transition to an all Internet Protocol-based fiber network on a trial basis in a few of its wire centers. This experiment would in effect create a regulation-free zone in which AT&T could roll out fiber, roll back copper, and not be subject to rules that require them to continue to invest in their legacy networks.

The move is important for AT&T, because the company is behind rival Verizon in its fiber-to-the-home offering, and is losing out to cable in terms of home broadband speeds. "From an engineering perspective, this totally makes sense," Feld said. "We want to see better broadband in America." However, he worries that the deregulatory push could have the effect of dialing back what's meant by universal service. "We're in danger of becoming the only industrialized nation to go back on access to basic phone service," he said.

The AT&T plan does include a promised expansion of its 4G network to reach 300 million Americans, and the company has indicated it could meet its universal service requirements with wireless home phone service.

Phone carriers are required to carry each other's traffic, and it is unclear how this obligation will evolve in an IP-based world. Mike Romano, senior vice president of policy at the National Telecommunications Cooperative Association, which represents rural telecoms, said, "I do think there are concerns about what this means for the fundamental mission of universal service, and the way carriers interconnect with one another in an IP enabled world."

In the absence of any regulatory requirements, telecommunications companies would negotiate reciprocal agreements to carry traffic. In a worse-case scenario, this could lead to interruptions of the type seen in pay-TV, when broadcast signals and cable network feeds are withheld from subscribers when service providers and content owners negotiate over pricing.

"Whether I get to see Mad Men is one thing," said Feld, citing a recent dispute between AMC and Dish Network. "Whether I can call the hospital in an emergency--that's something else."

The acceleration to an all-fiber network could bring big changes to the market for business broadband. Incumbent providers like AT&T and Verizon are required to offer access at regulated rates to their "last-mile" infrastructure--the wirelines that connect to office buildings, malls, and other commercial centers--to competitive telecom companies.

Former Rep. Chip Pickering, R-Miss., who represents a coalition of companies that provide business broadband, is skeptical that AT&T needs to establish a few regulation-free services areas to experiment on how a transition to all-fiber and an elimination of copper would play out. "Their proposal is to end competition in the business broadband market," he said.

AT&T is mindful of the raft of issues raised in its filing. A company official said, "We understand there are a lot of policy questions that have to be answered. A lot of technology and operations questions. We have to play four-dimensional chess to make this conversion."

How the policy issues will be addressed is another matter. "Ideally, you'd do it legislatively," said Feld, but he doesn't see a path to a revised Telecom Act in the current political climate.

AT&T was wise to time its FCC filing to news of the massive investment, said David Kaut, telecom analyst for Stiefel Nicolas. "They're framing it as part of an overall effort to upgrade their network," he said. "It's not a pure quid pro quo, but there is a relationship between what they see as 21st century regulation and 21st century investment."

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