Telecom Merger Signals Two-Tier Potential; Neutrality Bill May Prove Weak

The merger plans of AT&T and Bell South, which could create a more-powerful telecom giant, have sharpened concerns that telecoms will begin charging a premium for faster delivery of certain types of Web content. Such a two-tier system would affect anyone involved in broadband content or advertising, including media companies, their advertiser clients, and related technology companies.

“[The networks and ISPs] have the opportunity to charge even more, and that is going to cause a sort of class distinction,” said Daniel Webster, SVP of product and client development for The FeedRoom, a firm that distributes broadband content for clients including Intel, GM and USA Today. “We’re in the business of distributing big media files….If our clients would be hit, I guess by extension we would be hit.”

Last Thursday, that worry reached Capitol Hill, prompting U.S. Senator Ron Wyden (D-OR) to propose legislation that would prohibit network operators from charging media outlets these additional fees for speedier delivery.

“Legislation is not the answer to this issue; the questions change too quickly for legislation to answer them,” commented Mark Moran, EVP, general counsel at Internet marketing and ad serving company, 24/7 Real Media. “The only regulations needed for the continued development of the Internet are those that promote a free marketplace, in which telecoms, cable companies, wireless providers and even electric utilities all have unfettered access to the consumer.”

Despite what many see as negative implications of a two-tier delivery system, some aren’t so sure Wyden’s Nondiscrimination Act of 2006 — or any other legislation for that matter — will stave off potential problems. The proposed law would prevent ISPs and Internet delivery firms from creating a “priority lane” that would enable faster delivery to certain content providers that pay an extra charge for the privilege. It would also ensure that consumers have a say in which devices they choose to use while online.

“[The bill is] good in that it’s bringing exposure to the problem,” said Dan Rayburn, executive VP of, a Web site covering the streaming media industry. Still, he’s not convinced government intervention will help ensure “net neutrality,” or open and equal delivery of Internet content.

Jeff Chester, executive director at The Center for Digital Democracy (CDD), a nonprofit organization “promoting a diverse and democratic broadband media system,” opines, “We’re not so sure [the proposed legislation] is going to ultimately protect the Internet in terms of democratic expression.” However, he added that the bill serves as “a good check” on the telecoms’ plans for broadband delivery.

Telecom companies are considering charging more for faster access to content in part because they have invested heavily in the development, capacity and scalability of their networks. As demand increases for online entertainment like movie trailers, music, multiplayer games and the like, the pipelines they’ve invested in become more and more clogged with data.

Plans reportedly include divvying up the Net so they could charge more for high-speed delivery of voice communications like VoIP, video and other broadband content, than they do for less bulky content. Some have also floated the idea of charging more for one publisher’s content than for another — for instance, potentially pitting Yahoo content against Google content in an entirely new way.’s Rayburn believes that telecoms are raising the two-tier issue now because up until recently there was little money being made by broadband content providers. The way Rayburn sees it, “The networks are starting to realize, ‘Wait a minute. This is starting to turn into a business.'”

Chris Wilson, director of marketing at video ad firm Klipmart, thinks that firms like his and their advertisers could be affected by additional broadband fees, especially now that “the public is demanding this stuff.” He and others predict that if ISPs charge a premium for broadband content or play favorites with specific content providers, smaller ISPs could step in, making net neutrality their slogan.

Rayburn envisions a coalition of entertainment firms rising up to develop their own delivery networks. “We’re talking about creative people here,” he adds.

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