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AT&T's Whitacre: 'Nobody Gets a Free Ride'

Light Reading
News Analysis
Light Reading
8/1/2006
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AT&T Inc. (NYSE: T) CEO Ed Whitacre spoke to state utilities regulators in San Francisco Tuesday on a variety of subjects, but the one topic he seemed to want to block out was the issue of network neutrality. (See Net Neutrality's End Might Turn a Buck.)

Whitacre spoke to a crowd of about 500 state regulators at the National Association of Regulatory Utility Commissioners (NARUC) annual meeting. The chair of that group’s telecommunications committee, Tony Clark mixed his metaphors thoroughly, calling network neutrality the “800-pound gorilla in the room” after Whitacre’s speech.

Whitacre didn’t mention the issue in his prepared remarks and when network neutrality came up during the Q&A session, Whitacre quipped: "Well I’ve got to go; I’ve got to catch a plane.”

Kidding aside, Whitacre likened Internet access to any other kind of service telcos have offered over the years and said commercial interests should be allowed to pay for the amount of access they need.

Whitacre complained that “some people” want AT&T to act as a “dumb pipe that just keeps getting bigger and bigger.”

“This thing is growing at a rate that nobody would imagine,” Whitacre said of the market demand for bandwidth. He said AT&T networks are now handling 5.6 Petabytes of data every day. “There’s more and more content, and you need more and more bandwidth, and somebody’s got to build it."

“If you build it, you have to make a return on that,” he continued. “Nobody gets a free ride, that’s all.”

This kind of language, of course, leaves open the possibility that AT&T will (or already does) offer some of its customers a better ride across its access networks in exchange for fees. But it doesn't necessarily mean the provider would block content that it disagreed with, which is a fear that most net neutrality backers discuss the most. (See AT&T Sets Up Internet Tollbooths.)

“It’s a much over talked issue; it will all get worked out and will best get worked out on a commercial basis,” Whitacre concluded.

Judging by lawmakers’ attempts so far to get meaningful network neutrality safeguards into law, Whitacre will probably get his wish. (See Net Neutrality Debate Wydens.)

Other issues covered by Whitacre include AT&T's reinvention to become a company that's no longer mostly dependant on access line revenues. AT&T is on pace to lose 2.5 million to 3 million access lines this year, Whitacre said.

“After we complete the BellSouth Corp. (NYSE: BLS) acquisition, a little less than a fourth of our revenue will come from voice,” Whitacre said. He added that more than a third of his company’s revenues will come from wireless services. The combined company, he said, will have more than 10 million DSL customers.

He pointed out that Time Warner Cable Inc. (NYSE: TWC) recently announced its one millionth voice customer. “In video, we are trying to return the favor,” Whitacre said. “We’re doing pretty well on that.” (See IDC Reports on Cable VOIP.)

Whitacre said AT&T is testing WiMax technologies using both licensed and unlicensed spectrum. “It’s pretty good most of the time,” Whitacre said. “It’s not quite ready for prime time, but overall it works pretty well.”

As for video, the CEO said AT&T’s fiber-based U-Verse video offering has already reached a 10 percent market share in places where it is available. To date, the service is only available in select neighborhoods in San Antonio, Texas, AT&T’s home town. (See AT&T to Launch Lightspeed Next Month.)

And though U-Verse has launched, Whitacre noted that there's still room for improvement. “It’s not bad, but it’s not where we want it to be." (See Is Lightspeed Slowing?)

On video franchising, the carrier chief was equally outspoken: “Today’s video franchising is like a relic from another era,” Whitacre said. “If we receive one franchise a day, five days a week, in six years we will be able to offer service to all our customers.” (See Video Franchise Gains Steam in DC.)

Clark told Light Reading that NARUC's telecom committee is in favor of a national video franchise but would support legislation that would "grandfather out" existing state-level franchises.

NARUC’s Clark explained later that regulators even in the smallest states are constantly asking for information about network neutrality. He said NARUC’s telecommunications committee hasn’t yet taken an official position on the subject.

— Mark Sullivan, Reporter, Light Reading

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mr zippy
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mr zippy,
User Rank: Light Beer
12/5/2012 | 3:46:27 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
and the telcos are charitable organisations ?

I ask because down here in Australia, we pay our ISP for access to their network, and assume that as competent business people, they'd ensure they're charging enough money to not go out of business, make a profit, and ensure that they are also charging enough to allow them to grow their network as they need to increase it.

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"Ill" Duce,
User Rank: Light Beer
12/5/2012 | 3:46:25 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
I get free internet.

Thanks to my neighbor's unsecured wi-fi con nection.

Don't frown at me, it's the American way!!!

Just kidding.
ethertype
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ethertype,
User Rank: Light Sabre
12/5/2012 | 3:46:25 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
Not necessarily a good assumption, Mr. Zippy.

Broadband pricing in the U.S. could be characterized as "All you can eat for $19.95! (But we're sure counting on you to keep your actual usage way below 1%, or else our economics will get really ugly.)" Problem is, the SPs never actually said the parenthetic part, so customer expectations have been set to think "all you can eat" really is just that. Now people are starting to download 28 YouTube videos a day, not to mention all the P2P crap, and the SPs' implicit usage assumption is getting more and more wrong by the day. Meanwhile, they scramble to increase bandwidth, so that even more people can watch skateboarders castrating themselves in high-def, but still don't take the opportunity to rethink the all-you-can-eat pricing.

In Europe and in Canada, most of the SP's woke up over the past year or two, said "Gee, we better tell people what we REALLY meant about usage," and implemented monthly download quotas geared to limiting the heaviest users. U.S. ILECs and Cable MSOs are so deathly afraid of doing anything that might put them at a competitive disadvantage against each other that most of them haven't followed suit yet (Cox is the only major one that has). Instead, they whined about "people using the pipes for free", inadvertently provoking all sorts of paranoid speculation about blocking and favoritism, and then had to backpedal so far that they're now more scared than ever to bring up something as unbiased and obviously fair as simple usage quotas. It'll happen, but we might see a few more wrong turns before we get there.
rbkoontz
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rbkoontz,
User Rank: Light Beer
12/5/2012 | 3:46:22 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
Great points here. I am dead tired of the Mobys and Internet Hippies and Journalists of the world crying foul over their perfect Internet World being ruined by profit-hungry monopolistic telcos. These guys need to realize that if some business idea makes you FEEL GOOD about yourself but does not make money - then it ain't gonna be around long. Let economics and the competitive forms of broadband service drive the solution to net neutrality.

Tax the rich! Feed the poor! 10 Gig for everyone!

Get a life!
Mark Sullivan
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Mark Sullivan,
User Rank: Light Beer
12/5/2012 | 3:46:22 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
I think what Mr. Whitacre means when he says "no free ride" is that the companies like Vonage and Google who depend on the broadband connection will have to PAY for better/faster carriage of their products. It seems to me that one way this issue has become so confused is by introducing the consumer angle. Certainly that's part of it, but the real debate is over the possibility of companies like AT&T "pricing out" small Internet-based companies by getting in the habit of recieving large "Internet tollway" payments from bigger players like Google who can afford it. That, it's argued, might keep young, innovative companies down.
paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 3:46:21 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'

Actually, just ask them to offer their services for free. Given that Google has so many ads, they should cut their rates by 50%. Then, next year they should allow you to place any number of ads for the same amount. And there should be no premium advertising.

seven
OldPOTS
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OldPOTS,
User Rank: Light Beer
12/5/2012 | 3:46:20 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
Maybe the solution would be for Google to pay the network operators for every ad delivered. Reverse engineer their business plan. Then the customer doesn't pay for bad free service.

OP
desiEngineer
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desiEngineer,
User Rank: Light Beer
12/5/2012 | 3:46:17 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
We have this thing about how greate free market economics works, and when it works, we bring in socialistic overtones because we think the rich shouldn't get thaaaat rich.

And free lunches - we don't believe there is such a thing, but we ask for it all the time.

I don't mind people bargaining down to the best price. I just don't think we want to get into a situation where things are free or too cheap - that's just a ticket to poor customer service, bad quality, and govt subsidised private sectors.

-desi
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:46:13 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
We have this thing about how greate free market economics works, and when it works, we bring in socialistic overtones because we think the rich shouldn't get thaaaat rich.

Desi,

Not sure a free market is functioning in US telecom. In an ideal free market supply would meet demand and prices would trend to the marginal cost to produce. For bandwidth in the US this isn't happening, even by Whitacre's own comments.

Whitacre complained that GÇ£some peopleGÇ¥ want AT&T to act as a GÇ£dumb pipe that just keeps getting bigger and bigger.GÇ¥

GÇ£This thing is growing at a rate that nobody would imagine,GÇ¥ Whitacre said of the market demand for bandwidth.


The demand is there for bandwidth but supply isn't being built to meet that demand. Whitacre doesn't want to build the pipes (or tubes). Instead we get mostly empty rhetoric and complaints about video franchising, google/yahoo not paying enough, etc. etc.

Also, Greenspan on income disparity in 2000:

"The major issues that I see the United States has during this affluent period is the question of distribution of income. No society succeeds unless virtually all of its participants believe that it's fair and gives people opportunities." Jan. 26, 2000, to Senate Banking Committee.

As the disparity widens he says in 2005:

"I'm concerned about this. It's a major issue in this country," said Mr. Greenspan, who has announced he will retire in January.

"A free-market, democratic society is ill-served by an economy in which the rewards are distributed in a way" that leaves out the majority, he said. "Too many of our population ... don't feel the advantages and benefits coming from the system."
startup_shutup
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startup_shutup,
User Rank: Light Beer
12/5/2012 | 3:46:11 AM
re: AT&T's Whitacre: 'Nobody Gets a Free Ride'
>> As the disparity widens he says in 2005:

Pease do not quote Greenspan (the greatest SCAMSTER ... the mess he made with liquidity bubble ... resulting in home equity cashouts ... USA a giant nation of flipper ... people PIMPING houses to each other ...)
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