AT&T, Google Battle Over Net Neutrality

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By AMY SCHATZ

WASHINGTON—There's nothing neutral in the battle between AT&T Inc. and
Google Inc. over the future of the Internet.

Google, the powerhouse of Silicon Valley, and AT&T, champion for the
old-line phone industry, are marshaling political allies, lobbyists
and—in AT&T's case—labor unions for a fight over proposed "net
neutrality" rules that could affect tens of billions of dollars in
investments needed to upgrade the U.S. broadband network, which lags
in speed and affordability compared with some countries.

On Thursday, the Federal Communications Commission made good on its
promise to push new rules that would require Internet providers such
as AT&T to deliver Web traffic without delay.
Digits

* AT&T on iPhone Exclusivity, Dropped Calls and Net Neutrality
* Angels Weigh In on Net Neutrality
* Facebook and Twitter Founders Join Net-Neutrality Wars
* 'Blue Bell' Democrats Ask FCC to Tone It Down on Net Neutrality

Broadly, that means cable and phone companies couldn't block or slow
access to services from Google, Netflix or others that are a drain on
their networks or could compete with their businesses.

But as the details of the new rules are hammered out in coming months,
AT&T and Google are ramping up efforts to ensure the FCC doesn't
impose rules that could hurt their profits or expansion plans.

Plenty of lobbyists have made their concerns about the FCC's proposal
known to their political allies over the past few weeks. But AT&T
lobbyists were particularly active, swarming Capitol Hill and state
houses, prompting a bipartisan mix of governors, congressmen and
senators to send worried letters to the FCC. Two big labor unions have
taken out newspaper ads attacking the new rules.

"Google to date has gotten relatively a free pass that they're somehow
promoting the public good on net neutrality as opposed to, what I see,
is that they're trying to entrench their business model," said Robert
Quinn, AT&T's senior regulatory lawyer in Washington.

Google responded this week with letters of support from dozens of
technology-company CEOs and venture capitalists.

"It's not too strong to say we were caught off guard" by AT&T's
efforts, says Richard Whitt, Google's top Washington policy lawyer,
who said AT&T was deliberately trying to make the issue about Google,
not the Internet itself.

"Part of it is this notion that you find one name and you make it the
object of all your scorn and your vilification," Mr. Whitt added.
"What we represent unnerves them."

As phone and video services have migrated online, the FCC has
struggled to stretch its authority over new technologies. The FCC's
net neutrality proposal, driven by Chairman Julius Genachowski, is the
strongest move yet by the federal government to assert control over
the rules of the road on the Internet.

Mr. Genachowski and his aides have been taken aback by the uproar. "In
the run-up to today's meeting, there has been a deluge of rumors, and
no shortage of myths and half-truths," Mr. Genachowski said during
Thursday's FCC meeting. "We're addressing a topic of great importance,
where parties have strong views based on differing perspective and
experiences."

FCC commissioners voted unanimously to move forward with the
rule-making process but the two Republicans on the commission
disagreed on the need for them and raised concerns about how the rules
might apply to wireless providers and premium services that cable and
phone companies want to offer.

AT&T and other Internet-access providers want latitude to manage
traffic on congested wireless networks and freedom to devote a chunk
of their wired networks to selling more expensive services. Internet
providers are worried regulators are assuming veto power over their
efforts to develop new revenue streams from their Internet lines.

Google and other Internet companies fret that phone and cable
companies will hobble their efforts to offer competing services online
or will try charging them more for better connections to consumers.

Google wants phone and cable companies to deliver all traffic equally,
so carriers can't get in the way of it offering consumers
high-definition TV shows or movies on YouTube or phone services like
Google Voice.

Thus far, there have been only two high-profile instances of blocking
or slowing Internet traffic, and both stopped soon after the FCC told
the companies to knock it off.

The skirmishing over federal regulation of the Web between AT&T and
Google has gone on for several years. But the FCC's move to put
forward stronger open Internet rules has escalated the fight.

AT&T recently accused Google of blocking calls with its Google Voice
service, and provided evidence to the FCC that the search giant wasn't
connecting calls to a convent of Benedictine nuns, among others. The
FCC launched an inquiry.

Earlier this week, two big labor unions—the Communications Workers of
America and the International Brotherhood of Electrical Workers—took
out advertisements in the Washington Post raising concerns that the
new rules could discourage investments in telecommunications
infrastructure, which to the unions means jobs.

Google returned fire late Sunday night, releasing a letter from 24
chief executive officers and tech-company founders, including Facebook
Inc.'s Mark Zuckerberg, and IAC/InterActiveCorp.'s Barry Diller,
urging the FCC to move ahead with the proposal. A similar letter, from
more than two dozen venture capitalists, arrived at the FCC Tuesday
morning.

It's not the first time the two companies have faced off in
Washington. AT&T and other wireless carriers were infuriated when
Google successfully pushed the FCC to impose conditions on airwaves
auctioned in 2008. Google bid enough to trigger the conditions—some
$4.6 billion—and promptly dropped out of the auction. The wireless
carriers weren't much happier when Google helped to successfully push
the FCC to set aside some valuable airwaves for free, unlicensed use
by potential competitors.

Google's success at getting the FCC to embrace its vision of the
Internet hasn't been matched at other agencies. Last month, the
Justice Department urged a federal appeals court to reject a
settlement between Google and the Authors Guild and Publishers over
its book search service.

A Federal Trade Commission investigation prompted Google CEO Eric
Schmidt to leave Apple Inc.'s board and Genentech Inc. CEO Arthur
Levinson to leave Google's board.

Meanwhile, both Congress and the FTC have expressed concerns about
current online advertising and privacy practices of Internet companies
including Google. Consumer groups have also weighed in, along with
advocacy groups such as the Future of Privacy Forum, which is funded
by AT&T.