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Expert Opinion: Why the FCC should deny the AT&T / T-Mobile Merger

in Expert Opinion/Media ownership/Mobile Broadband/Wireless by

In order for the Federal Communications Commission to approve the mega-merger between AT&T and T-Mobile, AT&T has to make a showing that the merger is in the public interest. Despite AT&T’s declaration that this merger is the most pro-consumer, pro-innovation and pro-investment solution to America’s wireless problems, a mega-merger like this can only hurt the broadband market, both for innovators and consumers alike.

Basic Facts

The basic facts are that post-merger, AT&T will control nearly 40 percent of the wireless market, and together with Verizon Wireless will create a duopoly that is approaching 80 percent market share in the wireless industry.  To put this in perspective, the market power of the top two companies in the wireless market post-merger will amount to 76.1 percent – more than double the market share of the top two companies in the Oil (24.0 percent), Airline (30.7 percent), Banking (20.2 percent), and Auto (35.3 percent) industries.

New Media Rights recently filed a detailed petition to deny the merger citing its negative affect on innovation, access to the internet, customer service quality, prices, service availability, and consumer privacy. We’ve also asked the California Public Utilities Commission to review the merger. Below is a discussion of just one of the areas that we think justify close scrutiny of this merger, the effect of the merger on Internet gatekeeping.

How AT&T uses its gatekeeping role to stifle innovations in voice telephony and control the way consumers access the internet

The current “gatekeeper” model of wireless internet access, where access providers like AT&T and service providers like Apple can control the services we can access, will only become more rigid should this merger be allowed. In the past few years AT&T has shown that it will work with other gatekeepers, such as Apple, in order to keep competitive products, such as Google Voice, out of its markets. In 2009, AT&T was called to explain its role in Apple’s decision to block Google Voice from the App Store, an app which would have introduced direct competition to AT&T’s voice services. During those proceedings it was revealed that Apple and AT&T had agreed not to approve Voice over Internet Protocol (VoIP) services for use over the 3G network because the service is in direct competition to voice plans used on the phone. Initial approval for VoIP apps was limited to those that would only work when the phone was hooked up to a local wireless network rather than AT&T’s data network.

Skype, another VoIP application for the iPhone, was similarly blocked in 2009 for use on AT&T’s network. Both Skype and Google Voice would have allowed consumers to move to cheaper voice plans, as well as have access to more affordable international calling.

The fewer wireless internet access providers available to internet users, the greater the ability of gatekeepers at all layers of the communications marketplace to affect how we use the internet and what services we access.

Apple’s gatekeeping power would also be enhanced by this merger, affecting the version of internet individuals have access to over wireless broadband.  Software developers and start-up businesses who rely on the benevolence of gatekeepers for distribution of their product can suffer though imposition of fees and unfavorable terms of service, especially when their products are perceived to compete with the gatekeeper’s. For example, a recent change in Apple’s policies for software developers and in-app sales appear to have forced at least one e-book reader out of business.

As further evidence of the need for competition at the various layers of the wireless internet marketplace, Apple has also demonstrated an ability and willingness to censor and block apps that it deems “offensive.” Two apps critical of President George W. Bush were blocked from sale in the app store, because Apple decided that they were in violation of the Terms of Service, namely, either a provision against criticizing a public figure, or one restricting views deemed to be offensive to a large part of Apples customers. Other apps have been labelled obscene and censored by Apple before being released to the public.

Apple and AT&T are two separate companies, but as demonstrated directly with the Skype and Google Voice apps, they have worked together to shape the “Internet” that is available to consumers to use through AT&T’s network.

The Commission chose in late 2010 not to engage in basic net neutrality regulation in the wireless space to ensure service providers do not abuse their gatekeeper powers, limiting regulations to ensure an open and free internet to the wireline space. The Commission, by avoiding basic regulation in the wireless space, made a choice to rely on competition as the only force to ensure an open and free Internet for consumers in the already highly concentrated wireless marketplace.

With a major competitor eliminated from the market through the potential merger, AT&T would have the ability to write new chapters in its history of anti-innovation behavior.

It should be consumers driving the future of the mobile Internet, picking the winning and losing services and applications at different layers of the market through individual choice. Instead, this merger will allow AT&T and Apple the kind of vertical market power that, instead of promoting competition, permits preemptive elimination of services and applications that are perceived to be competing.  Innovation and consumer choice will be what suffers.

To read more of our comments on the negative affect of this merger on innovation, access to the internet, customer service quality, prices, service availability, and consumer privacy, you can read our recently filed petition to deny the merger here.

Art Neill is Director of New Media Rights, a San Diego based digital rights and advocacy organization, and is an adjunct professor at California Western School of Law.


Google Voice Controversy with AT&T Freshens Up Access Charges Battle

in National Broadband Plan/Universal Service by

WASHINGTON, November 13, 2009 – Access charges are well above the actual costs to connect telephone calls, despite the efforts made by the Federal Communications Commission, said Andy Regitsky of Regitsky and Associates, in a webinar presentation on “Access Charges and Network costs – A Guide to FCC Reform,” hosted by CCMI.

“The FCC is not ready to give control over access charges which have been flawed for the 25 years of their existence,” said Regitsky.

Regitsky said that access reform is an urgent issue that needs to be addressed, with the national broadband plan due to be presented to Congress in February 2010. The plan will likely require universal service changes. Most internet telephone companies – including Google Voice – have become enmeshed in controversy for refusing to pay access charges for terminating some voice calls.

Currently, he said, the FCC must work with different state public utility commissions on the thorny question of equalizing telephone calls that cross state lines and those that stay within the boundaries of a particular territory. Interstate calls are under the jurisdiction of the FCC, and access charges for those calls tend to be lower than calls within a state.

“If I am making a call from my house in Virginia, it doesn’t matter whether it is going to a neighbor next door, or to someone in California,” Said Registsky.

Google to FCC: Less Than 100 Phone Sex Numbers Blocked

in FCC/National Broadband Plan/Net Neutrality by

By Winter Casey, Reporter,

WASHINGTON, October 28, 2009 – Google told the Federal Communications Commission Wednesday that its Google Voice service currently is restricting calls to fewer than 100 specific phone numbers that it believes are involved in the business of adult sex chats.

Google provided a detailed response (PDF) Wednesday to questions posed by the FCC concerning Google Voice’s practice of preventing calls to certain telephone number prefixes.

The FCC launched the investigation after AT&T filed a complaint that Google was limiting outbound Google Voice calls to phone numbers in a small number of rural areas. Google claimed it did this because certain local phone carriers’ charge exorbitant termination rates for calls and partner with adult sex chat lines and conference calling centers to drive high volumes of traffic otherwise known as “traffic pumping.”

But Google said Wednesday that its engineers have developed a solution for restricting calls to specific numbers. In its blog post, Google linked to an article from last year about its current foe, AT&T, who claimed in the story that the practice of pumping was costing the company hundreds of millions of dollars.

“To prevent these schemes from exploiting the free nature of Google Voice – making it harder for us to offer this new service to users – we began restricting calls to certain telephone number prefixes,” wrote Rick Whitt, of Google, on Wednesday.

“But over the past few weeks, we’ve been looking at ways to do this on a more granular level. We told the FCC today that Google Voice now restricts calls to fewer than 100 specific phone numbers, all of which we have good reason to believe are engaged in traffic pumping schemes,” he wrote.

Whitt added that Google still believes the “Commission needs to repair our nation’s broken carrier compensation system.” He said earlier this month that “AT&T apparently now wants web applications – from Skype to Google Voice – to be treated the same way as traditional phone services. Their approach is what a former FCC chairman has called “regulatory capitalism,” the practice of using regulation to block or slow down innovation. And despite AT&T’s lobbying efforts, this issue has nothing to do with network neutrality or rural America. This is about outdated carrier compensation rules that are fundamentally broken and in need of repair by the FCC.”

Neither AT&T nor the FCC responded to emailed press inquiries by deadline.

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Google Stands Accused (by AT&T)

in Broadband Updates/Wireless by

Google has been accused by AT&T of violating the U.S. Federal Communications Commission’s net neutrality rules for blocking Google Voice calls to some rural areas. In a letter to the FCC, AT&T urged the Commission to level the playing field and order Google to play by the same Internet Policy rules as other carriers.

The FCC in 2007 prohibited traditional carriers from blocking voice over internet protocol (VoIP) calls because it said the practice might degrade the reliability of the telecommunications network, wrote AT&T’s senior vice president for federal regulatory issues Robert Quinn. Google systematically blocks consumer calls to certain geographical areas on its Google Voice service, claimed AT&T, so that it can reduce its local exchange access expenses.

AT&T’s charges against Google assert that call blocking violates the fourth principle of the FCC’s internet policy statement, which says consumers should be able to reap the benefits of competition among network, application, service and content providers. Google has said that Google Voice is not a traditional phone service. According to AT&T it effectively is, even if it is a computer application and not a phone service. Google Voice should therefore still be governed by the same principles that cover carriers, the letter said.

5:37 p.m. update below. -Editor.

Google responded to allegations they are preventing users from making calls by saying that Google’s goal is to provide consumers with free or low-cost access to as many advanced communications features as possible. “In order to do this, Google Voice does restrict certain outbound calls from our Web platform to these high-priced destinations,” the company’s response read.

Google went on to list differences between Google Voice and traditional telephone services, such as, unlike traditional carriers, Google Voice is a free, Web-based software application, and, as such, not subject to common carrier laws. Google Voice is not intended to be a replacement for traditional phone service, the company said. Although you generally need an existing land or wireless line in order to use it, other VoIP numbers can be routed to and from Google Voice numbers.

Users are still able to make outbound calls on any other phone device, and Google Voice is currently invitation-only, serving a limited number of users, the company said.

Google argued that under the common carrier laws, AT&T and other traditional phone companies are required to connect these calls. Google says that, “(t)he FCC’s open internet principles apply only to the behavior of broadband carriers — not the creators of Web-based software applications. Even though the FCC does not have jurisdiction over how software applications function, AT&T apparently wants to use the regulatory process to undermine Web-based competition and innovation.”

Apple, AT&T Deny Collusion in FCC Google Voice Inquiry

in FCC/National Broadband Plan/Wireless by

WASHINGTON, August 24, 2009 – Apple, Inc. and AT&T on Friday filed responses with the Federal Communications Commission in which both companies strenuously denied that Apple’s removal of the Google Voice application from Apple’s iPhone App Store was for anticompetitive reasons.

The two companies, as well as Google, were responding to an inquiry by the commission’s Wireless Telecommunications Bureau that had been prompted by Apple’s refusal to allow consumers to download Google’s Google Voice application to use on their iPhones. The application lets users make and receive calls, text messages and voice mail from Google Voice – not the underlying AT&T wireless service.

Apple denied it had banned Google Voice, instead insisting it was “studying” the application to determine its’ effect on the iPhone user experience. Google Voice “appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voicemail,” Apple said in its’ response – an alteration Apple feels requires further investigation.

But Apple insisted it had no dealings with AT&T in its’ decision: “Apple is acting alone and has not consulted with AT&T about whether or not to approve the Google Voice application,” the company wrote.

AT&T also denied any consultation with Apple, with both companies insisting no contractual arrangement exists between with with respect to the iPhone app store.

But Google might have other thoughts. In it’s response to the FCC’s inquiry, Google redacted Apple’s reasons for rejecting the application as “confidential.”

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