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It was a stunning concession, but AT&T Inc. was eager to move forward with its $86 billion purchase of BellSouth Corp., even if that meant taking a contrary industry position on network neutrality. Late last month, the Federal Communications Commission green-lighted AT&T’s acquisition, the largest telecommunications merger in U.S. history, but only after the FCC’s two Democratic commissioners — Michael Copps and Jonathan Adelstein — strong-armed the telephone giant into agreeing to maintain a neutral Internet network for two years. Pro-net-neutrality lobbyists working for tech companies such as Google Inc., Amazon.com, and eBay Inc. who were involved in lobbying the FCC’s two Democrats, hailed the move as a breakthrough, with the FCC setting — for the first time — a coherent definition for net neutrality. Net-neutrality proponents believe that broadband operators such as AT&T have plans to turn the Internet into a cable system with operators deciding what fees, in addition to normal access rates, can be tacked on to content and service providers. They want Congress to put the principle of “Internet freedom” in writing. The fact that a major government agency made a merger conditioned, in part, on preserving net neutrality adds clarity to an issue that has been muddy at best, say some observers. The FCC’s ruling, say net-neutrality lobbyists, in effect weakens one of the telecom lobby’s chief arguments. For the past year, as Congress debated net-neutrality legislation, telecom lobbyists stressed that it made little sense to pass a net-neutrality bill for an issue they described as arcane and impossible to define. “Frankly, we always thought that was a bogus charge,” says Gerard Waldron, a partner at Covington & Burling who represents Microsoft Corp. and Qualcomm. “This [FCC rule] defines net neutrality in a way that critics can’t charge anymore that no one doesn’t know what it means.” As part of the agreement, AT&T will commit to maintaining “a neutral network and neutral routing in its wireline broadband Internet access service,” agreeing “not to provide or to sell to Internet content, application, or service providers” for two years, when the provisions are expected to sunset. Despite the popping of champagne corks by proponents of net neutrality, AT&T seems remarkably cool to the concession. In a statement, Jim Cicconi, AT&T’s senior executive vice president for external and legislative affairs, simply expressed the belief “that net neutrality regulations are unwarranted and unwise.” The telephone company declined further comment. The effort to gain a concession from AT&T was made easier when Robert McDowell, a Republican member of the five-member commission, recused himself from the process because he was a former lobbyist for Comptel, a communications trade association that opposed the merger. FCC Chairman Kevin Martin, who supported the merger without the conditions, said in a statement that the provisions may deter broadband infrastructure investment, adding that the decision does not mean that the FCC “has adopted a net neutrality principle.” Despite the FCC’s action, telecom lobbyists say they see little change with regard to how they will fight net-neutrality regulations in Congress. They assert that the conditions are specific to the merger and won’t necessarily be applied as a broad policy matter, though Thomas Donohue, president of the U.S. Chamber of Commerce, concedes the FCC’s conditions are a setback. “It has taken some steam out of what we were trying to do, but it makes us move forward,” he says. “And remember, it’s only two years.” Allison Remsen, a spokeswoman for the United States Telecom Association, the telecommunications industry’s chief trade group, says her association will continue, regardless of the merger, to fight any regulation of the Internet. The drama over net neutrality began in late 2004, when the FCC deregulated broadband. Content providers say the move paved the way for the telecommunications industry to control the Internet. Throwing gasoline onto a growing fire was AT&T Chief Executive Edward Whitacre Jr., who noted in a BusinessWeek article that investment in high-speed pipes has been expensive. “What [Google, Vonage, and others] would like to do is use my pipes for free. But I ain’t going to let them do that,” Whitacre was quoted as saying. Last year net-neutrality language sank the congressional rewrite of the 1996 Telecom Act. Ben Scott, policy director for Free Press, a nonprofit media group, says the issue is likely to have a better airing this year, with Democrats now in the majority. The young tech community has stepped up its lobbying presence in Washington recently. In the first half of 2006, tech companies such as Amazon.com and eBay spent over $3 million on in-house lobbying. While it pales next to the $15.3 million spent by the USTA, it indicates the tech community’s desire to become players in Washington’s power circles. According to U.S. Senate disclosure records, eBay spent $1 million on in-house lobbying in 2005, compared to the $1 million spent on lobbying for the first half of 2006.
Joe Crea can be contacted at [email protected].

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