Back in March, AT&T announced it intended to buy T-Mobile U.S.A. for $39 billion. That move would have given AT&T a massive boost in bandwidth, which the company asserted would allow it to provide better service to its customers. It also would’ve made AT&T the largest wireless provider in the U.S., and it would have left AT&T and Verizon in control of 70 percent of the domestic wireless market. The proposed merger has been under fire since then — mostly from competitor Sprint Nextel (one notch behind Verizon in U.S. market share) and from the U.S. government. It came up before committees in both houses of Congress, and the Department of Justice filed its antitrust suit on Aug. 31, citing the chances of, as deputy attorney general James Cole put it, ”tens of millions of consumers across the U.S. facing higher prices, fewer choices and lower quality products for wireless services.” On Nov. 22, the FCC opposed the merger by requesting an administrative hearing — a move that surprised many who were aware of AT&T’s formidable lobbying capabilities (the Washington Post has a detailed report today on what went wrong for AT&T over the course of the proposed acquisition and resultant hearings). In the face of FCC resistance, AT&T withdrew its application to acquire T-Mobile on Nov. 24.

In spite of everything, AT&T still wants to go through with the acquisition, which means the postponement of the antitrust case leaves the company stymied. AT&T says it pulled its FCC application so it could focus on the Department of Justice case; U.S. District Court Judge Ellen S. Huvelle pointed out AT&T could change the terms of its deal with T-Mobile in the midst of emerging from the antitrust case and re-applying with the FCC. ”You could change the deal in a month and everybody’s time will be wasted,” the judge said. That explains why the Justice Department will postpone court proceedings until AT&T and T-Mobile go before the FCC again.

German telecommunications company Deutsche Telekom AG still wants the deal, because it reportedly has enough spectrum to last until the end of 2015.

On Sept. 23 the Federal Communications Commission will vote on opening up spaces between television broadcast channels, known as white spaces, for public use in wireless networks. The agency actually voted to open the white spaces two years ago, but had to develop a framework to prevent interference with TV signals and wireless microphones. In addition, the transition to digital television broadcasting last year left room for a whole new buck of signal.

The white spaces will allow device makers to develop more powerful wifi technology featuring longer range. Such devices should start appearing in about a year, Dell’s Liam Quinn told The Huffington Post. According to Quinn, signals can traverse the white spaces as fast as cable modems — 15 to 20 megabits per second

Such powerful wifi would certainly gel with the FCC’s goal of expanding high-speed Internet to 90% of Americans by 2020.

Turns out, it will be a vacuum — just after the stock market closed on Thursday, the FCC killed the negotiations in the wake of the Verizon-Google news and a wave of public criticism.

“We have called off this round of stakeholder discussions,” FCC Chief of Staff Eddie Lazard said in a statment. “It has been productive on several fronts, but has not generated a robust framework to preserve the openness and freedom of the Internet — one that drives innovation, investment, free speech, and consumer choice.”

You can’t blame the agency for feeling betrayed (as many Internet users are considering Google’s complete about-face on net neutrality) — FCC Chairman Julius Genachowski had been floating the “Third Way,” which would subject broadband providers to only a subset of the Title II controls of the Telecommunication Act of 1996 rather than the whole jalopy. In other words, Genachowksi was cutting broadband providers a deal over its regulatory reach after an appeals court ruled in favor of Comcast shot down the agency’s powers to prevent blocking and slowing of traffic by providers.

Google seemed to be in favor of this move, signing a letter from the Open Internet Coalition — a group of Internet giants such as Google, Amazon and Facebook — supporting the compromise and posting a blog by Washington Telecom and Media Counsel George Whitt praising the Third Way.

The OIC said in a statement it was upset to see the negotiations end as they were a platform for industry and government to debate what was best for industry regulation. Too bad one of its members went and derailed the whole process.

Google and Verizon were in full-court denial mode. On its public policy Twitter account, Google claimed, “We’ve not had any convos with VZN about paying for carriage of our traffic. We remain committed to an open internet.” Verizon said on its public policy blog that The NYTimes article misunderstood the purpose of the negotiations and the company is dedicated to “Internet policy framework that ensures openness and accountability, and incorporates specific FCC authority, while maintaining investment and innovation.” A NYTimes spokesperson confirmed that the newspaper is standing by its story.

In Verizon and Google’s defense, Dana Blankenhorn writes on ZDNet that the sped-up service is actually “to allow for service level agreements (SLAs) on critical services that need low latency — like large medical files being used in real-time — and leave everything else alone by voluntary agreement.” Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg outlined this in a WSJ editorial back in January. But it’s awfully funny that Verizon and Google wouldn’t point to that in their rebuttals to the story.

More anonymous sources told The New York Times that the Verizon-Google deal would be announced publicly soon as a model for industry self-regulation.

Consumer advocacy groups such as Free Press hailed the end of the “backroom meetings” and said an outraged public digitally stormed the FCC when they heard about the closed-door negotiations. Combined with the discovery that negotiating partners were putting together their own backroom deal, the FCC showed some backbone by shutting down the negotiations.

And whether the NYTimes got the story right or wrong, the end of the talks would seem to be a positive. Tony Bradley of PC World commented “asking the fox how to protect the henhouse is generally unwise.” Just like you shouldn’t have oil companies advise you on energy policy, advocacy groups had a right to fear that big web companies and providers were using the backroom meetings to “carve up the Internet.”

Arguably, net neutrality has been a boon to innovation for all Internet industries, including advertising. Google and Verizon’s agreement would be the start of a downward spiral in which web companies with deep pockets have an even greater advantage over the scraggly startups. In advertising, longer-tail publishers would get thrown into the “untouchable” caste and struggle more than now. On the other side, advertisers wary of the web may continue to avoid it as premium site CPMs skyrocket.

I can’t help but think of this old Onion article: “Scrappy Band Of Lovable Misfits No Match For Rich Kids.” In America, we love it when the underdog wins — but only in the movies. In real life, the biggest companies keep making sure the deck is stacked in their favor, and the result is industry innovation slows to a trickle. I’ll stand by the notion that net neutrality has played a large role in the continuing innovation of Internet services, and breaking it will bring web progress to a screeching halt — or possibly worse.

Bradley also points out: “When government agencies try to play nice with the industries they are tasked to oversee and include key stakeholders in developing the framework of rules they are supposed to follow, we end up with Enron, the meltdown of Wall Street, the BP oil fiasco in the Gulf, and people dying from taking Vioxx.”

According to The Washington Post, industry insiders and analysts (anonymous, of course; granting anonymity to anyone who can serve up some tasty gossip is MSM SOP) say Genachowski is starting over from scratch. The Comcast case is headed to the Supreme Court — I bet his fingers are crossed that they accept it.

Coincidentally, the day the news of the Verizon-Google deal broke, Democratic Minnesota Senator Al Franken wrote an editorial for CNN.com titled “Net Neutrality Is Foremost Free Speech Issue of Our Time.” But don’t look to the U.S. Congress for leadership — a few Republican senators have been trying to breathe life into a rewritten anti-net neutrality bill and the chairman of Senate communications subcommittee, Democrat John Kerry of Massachusetts, said the chances of a pro-net neutrality bill making it through this session were slim.

In exchange for an agreement not to slow or block any content, Google will let Verizon will rev up the speed of selected online content delivered to Internet users — if the content creators are willing to pay a fee. It’s a pretty big reversal for Google, formerly a fierce advocate for net neutrality — an unspoken truce between content creators, Internet providers and the government that all access is equal.

In 2006, CEO Eric Schmidt composed a blog urging Internet users to call their congresspeople in support of net neutrality, warning that “phone and cable monopolies, who control almost all Internet access, want the power to choose who gets access to high-speed lanes and whose content gets seen first and fastest. They want to build a two-tiered system and block the on-ramps for those who can’t pay.”

My, how four years can change things. However, it may be that Google is settling for the lesser of two evils: while it will be able to offer faster speeds for paying content subscribers, Verizon will not be able to selectively slow Internet content over its broadband connections. The deal leaves the door open concerning the mobile web.

Critics of the deal argue that consumers could see a tiered payment system and higher costs for premium service — something akin to pay-cable. In general, it could stifle Internet innovation as companies with deeper pockets can pay more to push their (possibly subpar) material to consumers first. You could argue that’s the nature of competition — the manufacturer with more funds can hire a larger workforce to produce a product line.

But the Internet has been a relatively level playing field since providers had agreed not to leave traffic speeds alone — and you could argue that’s the reason some small blogs and social networks have taken to the stratosphere.

“The point of a network neutrality rule is to prevent big companies from dividing the Internet between them,” Gigi B. Sohn, president and co-founder of consumer advocacy group Public Knowledge, told The New York Times. “The fate of the Internet is too large a matter to be decided by negotiations involving two companies, even companies as big as Verizon and Google.”

Heightening the “oh really?” factor of the report, both Verizon and Google are in closed-door negotiations with the Federal Communications Commission over Chariman Julius Genachowski’s proposed rules on regulating Internet carriers’ handing of web traffic.

The FCC’s authority over broadband services was restricted by a federal appeals court decision in April in regards to a case in which provider Comcast was blocking peer-to-peer sharing sites. The court ruled that the FCC didn’t have authority over providers’ decisions to block or slow content and applications or give favors to others. I imagine the atmosphere at those negotiations is going to be rather chilly.

Certainly other providers and large content creators will strike up deals in the wake of this announcement. How do you see this development affecting the interactive advertising industry?

The commission’s report, done with the Aspen Institute, is titled “Informing Communities: Sustaining Democracy in the Digital Age.”

It found that in our democratic republic, information is essential to the civic health of communities as good streets or clean water. People need (1) the information itself, (2) access to it and the ability to use it and (3) ways as communities to engage with the facts we need to improve our collective lives.

The FCC’s plan is a start to the nation taking the issue seriously. Why is it so important? Let’s consider what’s at stake:

In the digital age, countries without high-speed broadband will be left behind, their citizens able to vote but not knowing why they should; able to work but not knowing how to find a job online.

In the past, we grew because we built the railroads and highways we needed to haul people and their physical things across this vast continent. Today, we will not grow unless we build the technology we need to haul our ideas and innovations around the world.

Nearly two dozen other nations now rank ahead of the United States in high-speed broadband. That just won’t do.

That’s why Knight Foundation’s President and CEO Alberto Ibargüen says: “Broadband access for all is essential to meeting the information needs of communities in a democracy. Without it, we’ll end up with a new category of second-class citizens. With it, everyone will be able to harness the social and economic opportunities of the digital age.”

Digital cities, the connected ones, will be the best environment for local news products, the most interesting laboratories for new ideas, the perfect places to chase the American Dream.

But I did get an eyeful and an earful of cable news this weekend, which was particularly depressing considering all the protesting in Washington due to the health care reform vote. I gaped at screen after screen displaying protesters outside the capital screaming about socialism, pointing their fingers in the air and screaming, “We’re no. 1!”

Only the U.S. is not no. 1 and it is fast falling behind other nations in terms of public education and, yes, health care. But perhaps most pathetic, we seem to trailing ever further in terms of high-speed Internet access.

While the FCC’s National Broadband Plan takes steps in the right direction, an article yesterday in The New York Times by Yochai Benkler, a professor and the codirector of the Berkman Center for Internet and Society at Harvard Law School, points out that it’s not enough for the U.S. to keep up with the access levels of Japan and several European nations.

Oh, the tech will be there — it just won’t be affordable. Benkler notes that the U.S. already boast the highest prices for high-speed broadband, some three to five times higher than other nations, while providers like Comcast and Time Warner plan to keep jacking up prices.

What’s the real hold up? FCC staff have grudgingly admitted that the lobbying powers of provider monopolies have strangled the potential for open access policies, in which companies that build networks must sell access to rivals that not only compete on but also invest in the network. Many countries have employed such policies, encouraging collaboration and even seducing with public investment, to much success.

Benkler argues that without such a policy shift that would increase competition, broadband service in this country will keep stagnating in comparison to the rest of the hi-tech world. But as long as providers keep greasing the wheels of policy with lobbying money, fat chance.

Anyway, the government forcing companies to compete? Sounds like socialism! Good luck seeing that kind of initiative pass in the current political environment (which reeks of poor education — see how this all ties together?).

However, TechCrunch has another hope: Google, which is planning to deploy an experimental 1 Gb per second network to anywhere from 50,000 to 500,000 households. Several smaller U.S. cities want to be the guinea pig, with Topeka, Kan., unofficially changing its name to Google for the month of March. The gimmicks go on and on as other municipalities try to garner big G’s interest.

There’s something else here worth admiring — the local governments are stepping up and trying to make life better for their citizenry, which is smart on quite a lot of levels. For one, it will attract hi-tech companies and smarter, more affluent types to the regions — for example, look what North Carolina’s research triangle has done for that state.

If the federal government is hobbled by the corporate interests, perhaps its up to the smaller governments to make broadband access happen. It’s just a shame that so many local and state governments are having their budgets squeezed, but this is an investment in the future — and the U.S. returning to the no. 1 slot, neighborhood by neighborhood, town by town.

“In every era America must confront the challenge of connecting the nation anew,” said Blair Levin, executive director of the FCC’s broadband initiative, a yearlong effort to draft the 356-page plan. “If successful, we will transform our country and, as America does when it transforms itself, transform the world.”

Such high language is being used because the new initiative has already met resistance from the television broadcasting industry. The new plan would require the FCC to reclaim some of the TV broadcast spectrum airwaves and reallocate it to wireless internet functions. And this will be a political battle because TV airwaves are owned by the usual media giants.

The FCC’s plan also calls for a dramatic expansion of affordable, high-speed Internet. A major goal is to ensure that at least 100 million homes have access to networks that allow data downloads at speeds at least 20 times faster than what most networks now deliver.

Change is inevitable, in fact, some would claim change is the only constant. What lies ahead for the communications infrastructure of the United States remains to be determined. But one thing is for sure, mud will be slung in the U.S. congress by representatives and senators voicing opinions by the opposing sides of the battle.

In the Recovery Act passed last year, Congress and the president ordered the Federal Communications Commission to develop a strategy to bring high-speed Internet to 90% of all Americans by 2020. Considering that technology is progressing at a clip, that doesn’t sound like the highest of bars — the FCC estimates currently that 65% have access to broadband.

Embedded in an announcement that the FCC’s National Broadband Plan will be released next week, the federal agency suggested a way to keep broadband affordable was to “consider use of spectrum for a free or a very low cost wireless broadband service.”

I know I’m not alone in shouting, “Keep your filthy government paws off my broadband!”

At the Digital Inclusion Summit — held at the Newseum in Washington, DC, and hosted by the FCC and the John S. and James L. Knight Foundation — FCC Chairman Julius Genachowski detailed elements of the plan in a speech was focused on broadband use by the disabled. A recent FCC study showed that 39% of the third of Americans without broadband access had a disability.

“In order to ensure long term American competitiveness and prosperity, we must not leave one-third of the nation behind,” Genachowski said. “The National Broadband Plan provides a vision for federal, state and local leadership and partnerships with the private and non-profit communities that will bridge the digital divide and transform America into a nation where broadband expands opportunities for all.”

The plan will recommend the formation of an interagency working group to coordinate policies that promote broadband adoption by people with disabilities, as well as an ongoing “Accessibility and Innovation Forum” established so industry reps, consumers, third-party application developers and others can hold a dialog on best practices and new innovations.

The FCC is mulling over many options to increase broadband access across the country, including providing subsidies to companies partnering with government agencies. Comrade Genachowski also has made it a priority to install 1 gigabyte connections at public institutions such as libraries and schools by 2020. Someone check Lenin’s tomb to see if he’s smiling!

“Broadband is our generation’s major infrastructure challenge,” said Genachowski, who bears a slight resemblance to Karl Marx (if you squint). “It’s like roads, canals, railroads and telephones for previous generations. It’s like electricity in its transformative power.”

The plan is set to be released right as Comcast and AT&T are increasing charges on broadband access for some customers. Also, creating a government broadband service is only a suggestion (it’s a push to call it a recommendation); the actual implementation would have to jump many hurdles.

But when will Americans learn that broadband is a privilege, not a right? Is there an amendment in the Constitution that promises freedom of Internet? I don’t think so.

Besides, corporations are already increasingly supplying free wifi for patrons. Adam Smith wins again — yay, capitalism!

The proposed rules would prevent broadband providers from blocking or slowing certain content. However, providers would be allowed to use “reasonable” network management to relieve net congestion and maintain good service.

Service providers, including AT&T and Verizon, argued that new regulations are unnecessary and threaten the growth of broadband Internet to all Americans, a goal of President Barack Obama. However, proponents counter that since the FCC deregulated network sharing rules in 2005, few options for broadband exist, leaving a lack of alternatives if those providers block or slow content.

In addition, other large Internet players like Google have put forth the argument that net neutrality guidelines are required to prevent providers from hobbling the sales of products on the Internet.

“Given the potentially huge consequences of having the open Internet diminished through inaction, the time is now to move forward with consideration of fair and reasonable rules of the road,” concluded FCC Chairman Julius Genachowski.

The next step is allowing public comment before the guidelines are finalized sometime next year. A court challenge is most likely — Comcast has brought a lawsuit questioning the FCC’s authority to enforce four informal principles of net neutrality issued in 2005.

However, wireless companies are the most likely to feel the brunt of the new regulations as mobile internet providers have not felt the same open Internet heat as other broadband companies.

In particular, the proposed guidelines currently would prohibit exclusive deals between manufacturers and providers — for example, the hunky-dory relationship between Apple and AT&T would be squashed.

Yahoo to focus on display advertising, content and mobile services technology
CEO Carol Bartz said she sold the search business because Yahoo could not match the investment Google and Microsoft. While reducing the amount of money used for marketing and search technology, Bartz plans to invest in display ad, content and mobile services technology. Investors though fear that it may have traded one of the most profitable businesses for a deflating, media business that already peaked. In addition, Yahoo will lose talented engineers to Microsoft and layoff as many as 400 employees because of the deal.

Washington Post cries about Gawker ‘rip off’
Ian Shapira wrote a story about a “business coach,” who charges her early-Gen-X/Boomer clients hundreds of dollars to explain how mostly people in their 20s and late teens behave in the workplace. Gawker picked it up, excerpting chunks of the story. Shapira wonders about the death of journalism, but really it boils down to what is worth more to a newspaper, pageviews or the value of having content distributed throughout the web.

State, local online election ads facing restrictions
A Floridia election case could restrict using online ads for local political campaigns, especially search. Federal election law requires candidates to disclose in their ads who is paying for them, and whether the candidate approved of the ad. Most states have similar laws. While federal law has exemptions, depending on if it’s impractical, Florida has rare exceptions that don’t include online ads.