AT&T's $10 DSL and the Renomination of Commissioner Tate: What The Senate Confirmation Hearing Should Ask

The Consumerist runs this good but inaccurate report on AT&T’s offering its mandated $10 DSL intro rate for those who have not subscribed to DSL previously. AT&T accepted this as a merger condition when it acquired BellSouth last year. What Consumerist gets wrong is that this condition comes not from the FTC, which did not review the merger (regular readers will recall that it was the Department of Justice Anti-Trust Division that gave the merger a thumbs up with no conditions). The price control aspect came from the FCC, as part of the bucket ‘o concessions AT&T made after it failed to get McDowell unrecused and suddenly had to respond to Democrats rather than blowing them off with bogus concessions.

This matters for two reasons. First, it means that complaining to the Federal Trade Commission, as suggested by Consumerist, is not exactly effective. FTC had nothing to do with the condition and won’t enforce it under their merger authority. If AT&T makes it damn hard for people to order the cheap rate, then there might be a claim as an unfair or deceptive trade practice, but I think that is kind of a stretch.

No, the place to complain is at the Federal Communications Commission. While it doesn’t hurt to file a complaint with the FCC’s Enforcement Bureau, you will also want to make sure that you copy it to the FCC’s record in the AT&T/BellSouth merger via its Electronic Comment Filing System (ECFS). The relevant docket number is 06-74.

But, more importantly, this raises some serious questions that Congress needs to ask not merely about AT&T’s commitment to honoring the merger conditions, but also about the FCC’s willingness to enforce them — especially in light of statements made by Chairman Martin and Commissioner Tate at the time of the merger. Fortunately, President Bush’s decision to nominate Tate for a second term provides an excellent opprtunity for members of the Senate Commerce Committee to put these questions to Commissioner Tate directly.

Because while $10 DSL is important, this is also important to other AT&T merger conditions, such as network neutrality condition. And while, unlike many of my colleagues, I don’t think Martin or Tate are mindless Bellheads or wholly owned subsidiaries of AT&T, I do think it’s important to get them pinned down on the record that they will vigorously enforce the merger conditions and not allow AT&T to weasel out by “complying” in a way that deprives these conditions of meaning.

More below . . . .

Like anybody else, AT&T will try to evade the intent of a rule it doesn’t like by complying with the letter of the law even if that violates its intent. For example, when SBC acquired AT&T in 2005, it agreed to provide “naked” DSL, so that customers could have choice of voice provider (e.g., through a VOIP provider) and still get DSL. When it came time to comply, it turned out naked DSL only cost $1 less than DSL with phone service. Oh those whacky guys! This is why the AT&T/BS merger contains price controls as well as a condition to make it available. Reminds me of the time designed an interoperable radio to comply with FCC rules, and then refused to actually manufacture it because the rule just said “design.”

More to the point, the FCC has authority to enforce the substance of its rules (including merger conditions) and not stand by while incumbents technically comply while underminining the actual intent. On the flip side, when the FCC does let companies slide by on this sort of thing, it sends a powerful message to the industry: “Please treat our rules as a joke. We do.” All the pro-consumer conditions in the world mean nothing if the industry participants know they can violate them without risking even a slap on the wrist.

In this particular case, finding out if the FCC is serious about enforcing the merger conditions or if it intends to let AT&T vitaite them through technical “compliance” has particular urgency. AT&T also committed to network neutrality conditions. While we can argue whether those conditions amount to much, they only work (to the extent they do) if the FCC shows it’s serious about enforcement. Indeed, given the difficulties in discovering and proving actual discrimination by network operators, only an FCC serious about enforcing merger conditions can make them work. If the FCC signals that it will not use its powers to investigate allegations of network neutrality violations or that it will sit on complaints and refuse to act — then AT&T will know it has a blank check to do whatever it wants.

The urgency is compounded by the statements made by Chairman Martin and Commissioner Tate that they thought AT&T had been unfairly coerced into making “unnecessary” concessions. Martin & Tate explicitly singled out the $10 DSL rate (and the $19.95 “naked” DSL condition under which AT&T must sell DSL service without requiring the subscriber to take phone or television) as conditions that, while bringing consumer benefits and encouraging broadband adoption, they “would not have adopted as regulations.” While their statement does not mention network neutrality as an “unnecessary” condition, Martin and Tate have said on numerous occassions that they do not support anything stricter then the current FCC “Four Freedoms” policy statement (and Martin has expressed doubts about enforcing even these.

Martin and Tate have already been questioned by the Senate Commerce Committee on whether they would enforce the merger conditions. They responded that their particular objection went to a condition that required AT&T to offer special rates to business customers (“special access” rates) and to refuse to extend those rates to other telcos (the other LECs) that refused to offer similar rates. Martin argued that such a condition was illegal, because it also applied to carriers not part of the merger. Otherwise, Martin indicated he would “stand by the deal” AT&T agreed to. (The FCC subsequently eliminated this condition .) In addition, Martin and Tate have both provided written responses on this to questions by House Commerce Committee Chair Dingell (D-MI) (you can see Tate’s answers here).

Nevertheless, in light of AT&T’s efforts to hide its $10 DSL, and efforts to divert customers that ask for it to other services, I think it is fair to ask Tate where she stands on this and whether she thinks technical compliance is enough. Let me add that I do not share the common opinion that Martin and Tate are the mindless tools of the incumbent telcos. For example, Martin was quick to crack the whip at the telcos when they tried to carry over the discontinued Universal Service Fund charge on DSL as a “DSL fee”, forcing them to back down rather than face a possible investigation (and, unspoken, Martin’s wrath on future favors from the FCC). Prompting both Martin and Tate to applaud this “consumer friendly” decision. Martin has also voiced concerns about Bell’s abusing market power on special access rates, prompting Verizon to announce a new special access discount rate plan. But there is a world of difference between preventing obvious price gouging through informal pressure (what some like to call “regulation by raised eyebrow”) and vigorously enforcing rules you never liked in the first place. Tate may not be a Bellhead, but the American people deserve to hear her say under oath before the Senate that she will press the FCC to be as vigorous as possible in forcing AT&T to comply with the intent of the merger conditions, even though she opposed requiring them.

Because, at the end of the day, Commissioner Adelstein got it right in his concurring statement. After noting earlier how AT&T had played games with naked DSL after the previous merger, Adelstein concluded his summary of the conditions with the following admonition:

I rely specifically on the companies’ assurances that they will faithfully and fairly implement the commitments they have made both in their applications and in their more recent filings. I fully expect they will live up to the letter and spirit of this agreement. It will also be important that this Commission commit to monitor and vigorously enforce the terms of this Order.

Exactly so. Whether or not Tate agreed with the conditions, she voted for them and she knows the difference between compliance and “compliance.” It is the ultimate test of the respect of the Rule of Law if the officers charged with enforcement are as rigorous and as zealous when they disagree with the law as when they agree. On reconfirmation, the Senate Commerce Committee should ask Commissioner Tate to pledge herself publicly to this highest standard by asking how she will enforce the AT&T merger conditions to give them meaning.

Stay tuned . . . .

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