Verizon, AT&T See the Regulation Writing On The Wall

AT&T and Verizon are indicating that there is a chance that they will not seek funds from the broadband stimulus portion of the American Recovery Act.

Verizon Executive VP Thomas Tauke has stated that, “We don’t have any plans to apply; we also have not made a decision not to apply.”

Similarly, AT&T Senior Executive VP told reporters that, “We do not have our hand out seeking government funds.”  But, “[AT&T is] open to considering things that might help the economy and might help our customers at the same time.”

This reluctance to accept government funding shows that major ISPs realize that acceptance of stimulus funds puts them squarely under the FCC Network Neutrality principles.   These principles could bleed into the other networks—such as Verizon’s FiOS TV or AT&T’s U-Verse—that these large Internet players own.   Meaning this policy would be the camel’s nose under the tent.  I ‘ve previously referred to this potential phenonmenon as “Gateway Neutrality.”

Molly Peterson of Bloomberg News confirms that big ISPs realize the danger associated with accepting recovery funds:

AT&T, Verizon and Comcast Corp., the largest U.S. cable provider, say the rules are unwarranted and would hinder their ability to manage congestion on networks they have spent billions to build.

So, it could be that networks built with stimulus funds would have sub par service when compared to networks built without the funds.  This forces one to wonder what the point of the multi-billion-dollar subsidy is in the first place.

Additionaly, were ISPs forced to merge networks that ran under different principles—those that are neutral like Internet service and those that are very non-neutral like television or phone service—very costly problems could emerge.  Trying to slam together TV, Internet, and phone service into one neutral IP-based service could even prove to be financially impossible.

At OpenMarket we often say that government should never be in the business of picking winners.  It appears the winners at broadband build-out will be those who avoid picking government.