AT&T Gets What It Needs

Michael Armstrong should be spinning some classic Jagger today. You can’t always get what you want, but if you try some times you just might find, you get what you need.

That’s the real lesson hidden in AT&T’s “concession” agreement with Mindspring, the Atlanta-based Internet Service Provider (ISP). I had heard a month ago that all AT&T really needed in its “broadband exclusivity battle” was time to build out the Excite-@Home network (due in 2002), not a monopoly for all time (what it claimed it wanted). The deal with Mindspring gives AT&T the time it needs.

The agreement, which was announced in the Washington Post Sunday, isn’t a contract. It’s really just a letter sent to FCC chairman William Kennard, who has been trying to defend the unlikely proposition that AT&T’s cable should have an Internet monopoly when the company has already agreed to open access when the same cable sells local telephone service.

The deal is that in the middle of 2002 (when AT&T’s current exclusive contract with Excite-@Home expires) AT&T cable customers will be able to choose Mindspring as their ISP. They’ll still get an AT&T charge (for Internet transport) which will be added to their cable bill, but they’ll have a choice of (at least two) ISPs. AT&T called the Mindspring agreement a model for deals it might do with other ISPs.

This is a big deal for Mindspring, and (most reporters don’t know this) its third with a major telecomm carrier. Earthlink (the two complete their merger next quarter) has an exclusive to provide Sprint’s dial-up ISP service, and earlier this year, Mindspring got a deal with BellSouth to provide DSL on BellSouth phone lines.

The new Earthlink (they’re taking the California-based operation’s name after the merger, rather than my suggestion of MindLink) thus goes to market with a nationwide broadband strategy, plus a great reputation for customer service. (Watch that stock shoot up – talk about broadbanding goodness.)

The losers here are small ISPs, which will be unable to meet the conditions laid down by the AT&T-Mindspring agreement, and thus still don’t have a broadband strategy (other than DSL).

Other losers are the Competitive Local Exchange Carriers (CLECs) served by those ISPs – AT&T becomes a CLEC with this agreement. AT&T knows Mindspring will have to build-out its network to serve those cable subscribers (a major commitment of resources, Earthlink stock speculators) and it will have all the marketing advantages of a Malaysian opposition party (that is, none) after making that investment.

The guess here is that Mindspring (Earthlink) will spend the money to serve broadband customers, but won’t put all its eggs into AT&T’s basket, and will look at DSL as well as wireless solutions to its customers’ problems. (Note to Mindspring – Sprint has a ton of MMDS licenses, originally given for wireless cable TV, which the FCC licensed for data early this year.)

Ever since the web was spun, we’ve been waiting for the number of ISPs nationwide to fall, but they’ve kept rising. Will broadband be the challenge that finally kicks the number down? That’s what regulators need to consider as they look at the fine print of this agreement. Mindspring’s survival alone isn’t enough for consumers – real choice demands that local ISPs be given a fair chance to make it in a broadband world.

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