AT&T's Stephenson: FCC's net neutrality order puts telecom industry into a state of limbo

A top AT&T (NYSE: T) executive is concerned that the FCC's new net neutrality rules, which are now being challenged in court, create an ongoing air of uncertainty for all members of the telecommunications industry ecosystem.

Speaking to investors during the UBS 43rd Annual Global Media and Communications Conference, Randall Stephenson, chairman and CEO of AT&T, said the various rulings and challenges on the FCC's order will likely not be entirely sorted out until 2017.

"The byproduct of this is we're undoubtedly going to be in this state of limbo where I don't care if you're a cloud provider, an over the top video distributor, a cable company, or a wireless company, you basically don't know what you're environment is right now," Stephenson said. "You're probably not going to know until this thing gets ruled on next spring, gets appealed to the Supreme Court by somebody, which will then rule on it in 2017 so we're probably well into 2017 before any of the players in this ecosystem have much clarity of what the environment looks like."

At this point, the current net neutrality rules won't impede AT&T's current plans to provide integrated mobile and video services that leverage content it already delivers to its U-verse and DirecTV customers.

The service provider is also rolling out fiber-based 1 Gbps services to an additional 12.5 million homes as part of an agreement it made with the FCC to get its DirecTV acquisition approved. It also announced today that it will deploy FTTH to parts of 38 additional metros.

"There are two layers of regulations that constrain us right now on what we can we do and what can't we do," Stephenson said. "Obviously, there's the net neutrality order that's currently before the courts, which is still the law of the land and everything we're planning on doing fits within the rules and we also agreed to some merger concessions with the DirecTV deal and all of this complies with that as well."

Stephenson added that "what's interesting to us is what happens if the courts invalidate a couple pieces of this order and it's not inconceivable that we end up in a worse place than what we had in the 2010 agreement we all signed that was invalidated by the Verizon case."

In developing its net neutrality rules, the FCC developed a framework to regulate three main elements: wireless, the wireline last mile network, and carrier interconnection agreements.

"The point of this when you're attempting a triple bank shot if any one piece of it is invalidated, our question does the whole thing fall under its own weight," Stephenson said. "It seems highly improbable to us that the FCC would be allowed to regulate just this piece of the Internet -- cable broadband -- but not wireless so you'd be asking the FCC to pick winners and losers and that seems highly improbable."

According to a New York Times article, the judges participating in the review of the FCC's rules that began last Friday "showed skepticism of several aspects of the FCC rules, including whether the agency had the authority to strap net neutrality rules onto wireless services and whether it was reasonable to ban "paid prioritization," a practice that enables faster downloads of content if consumers pay a premium fee to an ISP.

One of the key points that AT&T and other telcos have railed against is the FCC's move to reclassify broadband service as a "common carrier" under Title II regulation. Telcos and cable operators have maintained that broadband services are not the same as traditional TDM-based telephone services and should not be strapped with the same utility-style framework of heavy regulations.

The U.S. Court of Appeals for the D.C. Circuit is expected to rule on the net neutrality rules this spring.

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Related articles:
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AT&T claims Title II regulation forced it to put various service ideas on hold
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Federal court sets fast-track schedule for net neutrality challenges
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