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AT&T Puts Brakes on Fiber, Citing Uncertainty Over Net Neutrality Rules

In April, AT&T announced plans to expand its fiber network to 100 cities and municipalities. The company has decided put those plans on hold, due to uncertainty over how the Federal Communications Commission chooses to regulate the Internet, AT&T’s top executive revealed Wednesday.

AT&T Chief Executive Randall Stephenson disclosed AT&T’s plans to halt its investment just days after President Obama called for the FCC to regulate the Internet under a regime that Internet providers claim is reminiscent of a 20th century monopoly phone era.

“And very literally, what the President has outlined is a regulatory framework that says from the last-mile broadband service all the way through to the backbones, the Internet, into the content providers, those would explicitly be regulated. It’s effective end-to-end regulation of the Internet,” Stephenson said during an investor conference in response to a question from a Wells Fargo analyst, Jennifer Fritzsche.

AT&T had planned to build fiber to 100 cities and municipalities that was capable of delivering advanced television services and broadband speeds up to 1 Gigabit per second.

Stephenson said AT&T still intends to build out fiber to 2 million additional homes under a commitment it made as part of its agreement to acquire DirecTV, the satellite TV company with 20.2 million U.S. subscribers.

“And we can’t go out and just invest that kind of money, deploying fiber to 100 cities other than these 2 million, not knowing under what rules that investment will be governed,” added Stephenson, who has served as AT&T’s CEO since 2007 and began his career with Southwestern Bell Telephone nearly 33 years ago in Oklahoma. “And so, we have to pause, and we have to just put a stop on those kind of investments that we’re doing today.”

Last week, in connection with its plans to acquire Mexico wireless provider Iusacell for $2.5 billion, AT&T said it expected its 2015 capital expenditures to be around $18 billion. For the last four years, Stephenson said Wednesday, AT&T has been investing at a “torrid” and “historic” pace.

“It’s been a $20-plus-billion-a-year effort, plus spectrum acquisitions, plus fill-in investments, acquisitions to improve our footprint,” he said.

Part of the vigorous Net neutrality debate is whether subjecting broadband to Title II regulation would endanger – rather than protect – the Internet ecosystem.

“The arcane regulatory framework embodied in Title II was crafted for 19th Century railroad monopolies and the early 20th century one-wire telephone world,” Verizon declared in a blog over the summer. “The price and service regulation inherent in Title II have no place in today’s fast-paced and competitive Internet marketplace, and the threats posed by this approach would not likely be confined to broadband providers, but would spread inevitably to other Internet sectors.”

On Monday, the president laid out a proposal to regulate the Internet under Title II, drawing the praise of consumer groups and certain factions within the telecommunications industry but enraging Republican leaders and conservative groups.  

Stephenson said FCC rules that have been in place for 20 years – treating broadband as a so-called information service – don’t “accommodate” the president’s proposal and would require a rulemaking process at the FCC that could take years.

“When we initiate projects – fiber projects, building new cellular infrastructure – these are two- to three-year efforts. And while the rules probably are not going to change in the two- to three-year time frame, we are now starting infrastructure projects that we don’t have any clarity or line of sight in terms of what rules those will be governed under,” Stephenson added. “So, you’re doing multi-billion-dollar investments and you really have no clarity in terms of how those investments will be regulated. That can have no effect other than to cause one to pause.”

Obama said the commission should ban so-called paid prioritization agreements, which could give certain websites like Amazon and Netflix faster Internet access to consumers through negotiated agreements with ISPs. He also said the FCC should prevent ISPs from blocking websites or services, ban them from “throttling” or slowing down content, and require certain disclosures under “transparency” rules that were upheld earlier this year by a federal appeals court.

The dialogue over Net neutrality has been a divisive one but resulted in a fair amount of consensus on at least one issue: that the FCC regulations won’t appease everyone with a dog in the fight, likely resulting in another trip to the federal courthouse in Washington, D.C.


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