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Video Q&A with AT&T: Biggest corporate users of Web should pay more for network

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Hank Hultquist, AT&T’s federal regulatory vice president answered your questions on reforms of a phone subsidy that the Federal Communications Commission wants to use for the buildout of broadband lines. Hultquist argues that maybe some businesses that gobble up more capacity on the network should pay more into the fund. On net neutrality, the idea that network service providers such as AT&T should be forced to treat all content equally, Hultquist said content providers (Google, Skype, Facebook) that ride on their network are getting closer to agreeing that higher quality services for some sites over others could make sense.

As the Obama administration attempts to significantly expand broadband Internet connections across the United States, AT&T is positioned at the center of several regulatory debates on how to accomplish those goals. AT&T is both a leading proponent of reforms of the USF fund and also one of the biggest beneficiaries – a dichotomy Hultquist said makes sense, according to his recent blog posting. Hultquist said AT&T couldn't just "sit idly by" while its competitors tapped into the federal subsidies. So that's why the telecom giant's "mobility affiliates" apply too.

For a broad overview of the broadband debate – from the reform of USF to the FCC’s recent criticism of broadband service providers for a poor job on getting lines out fast enough, please check out a discussion on WAMU’s "Kojo Nnamdi Show", with FCC Chief Counsel Rick Kaplan, US Telecom President Walter McCormick, Free Press policy director Derek Turner and me.

Thanks again for your questions (couldn't get to all of them) and here’s an edited transcript of Hultquist’s answers:

Q: Shouldn’t those who use the most bandwidth contribute relatively more to the Universal Service Fund?
A: Ultimately the question is how to fund the Universal Service Fund. It has been primarily to fund phone service through what amounts to a tax on inter-state phone services. Over time, the long distance market has gotten a lot smaller, so the base of the support has shrunk, which means tax has risen. Question raised is: As the FCC transitions the USF from one that supports voice to broadband, what is the appropriate contribution base for that program. I have to think from equity perspective and an efficiency perspective because it’s still a tax. The FCC should think about (whether) the focus of the contribution mechanism be on the entities that benefit commercially from broadband.

Q: But there is already so much controversy over usage based pricing. Would you be concerned that users would not use applications on Web as frequently if companies were charged by usage?
A: That raises efficiency points. You don’t want a tax that has consequences like that. The FCC will open a preceding later this year and my hope is that people will come forward with ideas that do find a way to broaden the base of support so we don’t end up with a 15 percent tax on broadband, so we have a broader base with lower per unit contributions.

Q: Do you think the nondiscriminatory nature of the telephone service contributed to the success of dial up ISPs? Five years ago, AT&T CEO Ed Whitacre made his “What they would like to do is use my pipes for free” speech. Is that still your position, that Internet content companies are freeloaders?
A: I don’t know if it was ever AT&T’s position that Internet content companies are freeloaders. I think AT&T recognizes that we are all sort of in this together. Demand for broadband is driven from usefulness of applications available to consumers on broadband. So the idea that there is simplistic view that these entities are freeloaders is not an accurate representation of what AT&T thinks of the relationship of the eyeball side of the Internet and content side of the Internet. Ultimately it's all just endpoints on the Internet.
With respect of the nondiscriminatory nature of phone contributing to the early success of dialup, it’s not a good question in some ways because it’s true that the fact that everyone had phone service made dialup a feasible business because it didn’t have to go out and convince people to put terminals in their houses. My view of what contributed to the success of dialup as all you can eat service, were rules in place in terms of compensation for companies for traffic.

Q: An op-ed by Paul Misener of Amazon on net neutrality seemed to indicate they understand capacity constraints of network providers. Is there more agreement on this? And from these meetings by industry players AT&T, Verizon, Google and Skype and the FCC on a net neutrality deal, how close is that?
A: As a substantive matter, the debate over net neutrality has narrowed in the last few years. Paul’s thinking has developed over time. It’s narrowed primarily to where there is a lack of consensus on the question of biz models that people call paid quality of service arrangements. Paul’s piece is to say I think there is a way where you could have arrangements like that and benefit everyone. So I think the value of Paul’s point, that even on this point, where there isn’t consensus, some parties say there is a way to do this. My hope is people recognize that if you treat network like a static thing, with a fixed capacity, then you will think of quality of service as potentially problematic because you will think all you are doing is auctioning off capacity to those who are willing to bid the most. But Paul suggests that if you view the network as a dynamic resource, where it grows and spreads and changes, then can see quality of service arrangements can in fact be win-win for everyone.

Q: Many users desire service other than local Incumbent Local Exchange Carriers, but changes to USF include language that assumes broadband comes only from a ubiquitous monopoly. How would you amend laws and regulations so as not to assume or lock in monopoly?
A: Ultimately this is a question that policy makers have not fully worked out in wake of the 1996 Telecom Act. To step back, The 1996 Act put in place the idea that we should have explicit USF fund to promote availability of service in high cost areas. Until then, the way we did was that was regulated local monopolies with cross subsidies baked into their rates: pay more for call waiting, pay more for long distance, businesses pay more than residential. So the question is how do we do that so we don’t continue to rely on the idea that there is a monopoly provider? My way of thinking is not that this is going to put in place permanent monopolies. We need to identify places where service is not available. We will offer programs that allow parties to apply to get funding and have project evaluated by expert policy makers and decide which project we going to fund. And decide that we will fund for some limited time. When period of years is over the obligation goes away that would address problem by not locking in monopoly but cost effectively serving an unserved area.

By Cecilia Kang  |  August 2, 2010; 8:00 AM ET
Categories:  AT&T , Broadband , FCC , VIDEOS  
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