AT&T, Comcast Face New Web, Antitrust Enforcement Under Obama

By Molly Peterson and Ian King

Nov. 5 (Bloomberg) -- AT&T Inc. and Comcast Corp. will probably face new Internet rules backed by Google Inc. under Barack Obama's administration, and find it more difficult to persuade the government to approve acquisitions.

The Democratic president-elect's top technology priorities include ``network neutrality'' policies that would bar Internet- service providers from accepting payments to make some Web sites work faster than others.

``He wants the small mom-and-pop provider that has a new application, for example, to have equal treatment with the big content providers,'' said Paul Glenchur, an analyst at Stanford Group Co. in Washington.

Obama also pledged to double federal spending on science research over 10 years and establish a permanent tax credit for research and development, policies advocated by Intel Corp. and Microsoft Corp.

Phone companies have fought the net neutrality rules. ``Probably the thing that scares the industry the most about a Democratic administration is regulating the one real shining star that's really working really well -- and that's the Internet,'' Sprint Nextel Corp. Chief Executive Officer Dan Hesse said after a speech in Washington Oct. 24.

Sprint, based in Overland Park, Kansas, is the third- biggest U.S. wireless carrier. Network neutrality rules would have ``horrendous implications'' for the industry, he said.

`Play Favorites'

Consumer groups and Internet companies such as Google, Amazon.com Inc. and EBay Inc. say new regulations would preserve the open nature of the Internet and prevent service providers from charging companies for priority access to their networks.

``It means the operators who run the Net can't play favorites,'' Google CEO Eric Schmidt, who personally campaigned for Obama, said last month in a Bloomberg Television interview.

Google, based in Mountain View, California, makes almost all of its $16.6 billion in annual revenue from Internet advertising.


Telecommunications industry consolidation will likely slow under an Obama administration, Glenchur said. Obama pledges to ``reinvigorate'' antitrust enforcement, according to his technology policy statement.

Since 2000, AT&T and Verizon Communications Inc., the two biggest phone companies in the U.S., have spent more than $100 billion on acquisitions.

`Footing the Bill'

Companies such as Intel, the world's largest chipmaker, and Microsoft, the biggest software company, may push Obama for more spending on science research, lower corporate taxes and immigration reform so foreign graduate students at U.S. universities aren't forced to return home.

``The U.S. government hasn't been footing the bill to the degree that it should for basic science research,'' Craig Mundie, chief strategy officer at Redmond, Washington-based Microsoft, said last week in an interview.

The federal government needs to invest more in long-term research on semiconductor technology and software development, he said.

About two-thirds of PhD students at U.S. universities are foreign-born, said George Scalise, president of the Semiconductor Industry Association in San Jose, California, whose members include Intel and Advanced Micro Devices Inc.

Patent Reform

Obama plans to appoint a cabinet-level chief technology officer to upgrade government computers and oversee the deployment of a nationwide wireless network for public safety agencies.

He also wants to overhaul the Patent and Trademark Office to make patents less vulnerable to legal challenges.

``Many of our small, medium and even large companies are facing lawsuits by companies that really don't have a vested interest in commercializing the patents,'' said Mark Bohannon, general counsel for the Software and Information Industry Association in Washington, whose members include Oracle Corp. and International Business Machines Corp. ``That that will be something that we'll be looking at very closely.''

To contact the reporters on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net