AT&T’s suggestion that edge content providers contribute to funding universal service calls for new paradigm of U.S. advanced telecom

AT&T wants to see edge content providers contribute to the cost of connecting all Americans to advanced telecommunications infrastructure. It’s a company cudgel first wielded two decades ago by then AT&T chief Ed Whitacre. Whitacre was famously quoted as saying these providers should not be able to “ride my pipes” for free.

“The seven largest and most profitable companies in the world built their franchises on the internet and the infrastructure we provide,” noted current AT&T CEO John Stankey in remarks this week to the USTelecom’s Leadership Summit posted at AT&T’s policy blog. “They stand to benefit handsomely from every home that is incrementally connected to our networks. I doubt there is anyone in this room who wouldn’t gladly swap places with the return profiles of Google, Meta, Apple and others.” Stankey continued:

“These companies make money offering today’s equivalent of yesterday’s universal voice service. Why shouldn’t they participate in ensuring affordable and equitable access to the services of today that are just as indispensable as the phone lines of yesteryear?”

Stankey however raises a broader policy issue of how universal service is to be attained and specifically the high cost of the ownership, financing, and operation of its infrastructure in the digital IP era as it was for copper cable delivered analog voice telephone service in the previous century. There is no clear, long term policy in place to do so. Policymakers have instead resorted an aspirational policy of throwing money at the challenge in a Pinata policy of competitive, one off grants, each with separate funding sources and eligibility rules, a situation decried by Stankey:

“By splitting the funding across many departments, we’ve got all these agencies examining the same problem… but they’re looking at it through the wrong end of the telescope. So what’s the solution? Streamline the design. Align agencies, widen the aperture, and focus on the larger problem we all want to solve.”

In his remarks, Stankey criticized policymakers who “have prioritized outcome-based regulatory approaches and political expedience at the expense of effective market-based capital allocation.” This goes the heart of public policy to attain universal service. By definition, universal service is a measurable outcome. Policymakers are thus right to set that as the public policy goal. But over the past three decades, the market-based scheme has been unable to reach it because the goal of universal service is misaligned with the needs of investor owned companies that own the great majority of advanced telecommunications infrastructure. 

Their mission is not to modernize the twisted pair copper that reached nearly every American doorstep in the 20th century to fiber. Rather, it’s to generate relatively rapid return on investment and generous utility dividends shareholders have received for many decades from the assured revenue stream of voice telephone service. Consequently, areas where population density and household income are not seen as good risks and sufficiently profitable are passed by. This despite billions in subsidies and trillions of dollars of investment by investor owned companies like AT&T, another long running company talking point.

Suggesting content providers contribute to the cost of creating near ubiquitous fiber as author Susan Crawford envisioned in her 2019 book Fiber: The Coming Tech Revolution—and Why America Might Miss It also suggests a wholesale reorganization is needed. One that recognizes that advanced telecommunications calls for a new paradigm providing more optimal alignment of goals, incentives, resources and rewards for Crawford’s vision to be realized.

The present misalignment generates way too much adversity, frictional costs, and posturing and protectionism instead of good public policy benefiting all Americans versus making winners of some and losers of others.