AT&T Trying To Subtly Reshape the Definition of Net Neutrality

Following up on some of the Net Neutrality comments from this morning’s post, this from the Business Week Cover Story on AT&T’s iPhone Mess:

The rise of iPhone Nation—with its media-savvy and data-greedy citizenry—has left AT&T with a tough set of options. It could significantly upgrade its network to handle all the new demand, but that would cripple profits. It could charge more for network access or limit what customers can do on their phones, but that would enrage the all-you-can-eat subscriber base as well as Net Neutrality types who seek to prevent telecom companies from dictating customers’ options. It could permanently halt iPhone sales in overcrowded markets, but that would bring more mockery, not to mention place AT&T in the unusual position of denying consumers access to a product it doesn’t even make.

To keep its uneasy equilibrium, AT&T is trying a little of everything: It’s marginally increasing capacity while trying to squeeze network hogs and subtly reshape the definition of Net Neutrality.

Interesting, in a sluggish economy one of the bright spots is the astounding sales of smartphones — 54.5 million smartphone devices in the fourth quarter of 2009, an increase of 39 percent compared to the same period in 2008 — yet those who buy and use them and expect them to perform as advertised are “data-greedy?”

If AT&T has made a market error, it should pay a market price: “cripple profits.” Did you notice in the list of “trying everything,” reduced profits wasn’t there? Also from the Business Week story:

On Jan. 28, AT&T said its fourth-quarter profit had risen 26% from 2008 and that it had added 7.3 million wireless customers in 2009, equaling its most ever in a single year.

We live in a world where banks are too big to fail and we should feel sorry for corporations that make market errors but they should not lose profits???

What we will see are seeing is Net Neutrality redefined:

Instead of betting big on new investment or aggressively raising prices, AT&T is choosing a controversial third way: It’s trying to limit the iPhone features customers can use. The company prohibits Webcasts and file sharing on its unlimited data plans, activities some other carriers allow. “We need to be able to manage our traffic,” says Stankey. “You can’t have everybody watching YouTube during an emergency.” The Net Neutrality movement disagrees with that reasoning. “We’re at a critical moment,” says Ben Scott, policy director of Free Press, a nonpartisan group that argues telecom providers should have no ability to limit their customers’ network access. “Do we as a country invest in bandwidth, or the network tools to limit bandwidth?”

I know which I want them to invest in but it’s pretty darned clear they’re not going to do it. The story reports, “Ma Bell is back.” And that’s a good thing?

RELATED: GigaOM’s Stacey Higginbotham reports AT&T will keep the iPhone exclusive for the next 12-18 months, through 2011. And moves like AT&T pressuring Sling Media to make its iPhone App use less bandwidth make sense to me. Meanwhile, expect to see an AT&T Nexus One soon.