Cell phone war! AT&T about-face on Web calls follows Verizon-Google pact

Just hours after Verizon Wireless (VZ) announced a major deal Tuesday to sell new phones equipped with Google's (GOOG) Android mobile operating system, its arch-rival AT&T (T) said it would reverse its restrictions on voice-over-Internet calls. Apple iPhone users will now be able to use Internet-calling applications like Skype on AT&T's data network, in addition to making calls using Wi-Fi networks.

AT&T's move comes on the eve of the annual wireless industry conference amid a flurry of action in the mobile space. It represents a major reversal for the mobile giant, which is under Federal Communications Commission scrutiny for its role in Apple's decision to restrict the Google Voice application from its app store.
A Google spokesman said the company had not been informed of any change in Apple's policy regarding Google Voice. Apple did not immediately return a request for comment.

Prior to today's reversal, AT&T had resisted allowing applications like Skype on its data network, saying such services would clog up its network. But on Tuesday, AT&T notified the FCC that it was reversing course and would now allow Internet voice services like Skype, which users had previously been able to use only with access to a Wi-Fi hotspot.

"IPhone is an innovative device that dramatically changed the game in wireless when it was introduced just two years ago," said Ralph de la Vega, the chief executive of AT&T's consumer and wireless unit, in a statement. "Today's decision was made after evaluating our customers' expectations and use of the device compared to dozens of others we offer."

AT&T's decision comes as the FCC, under the leadership of new Chairman Julius Genachowski, is plunging head first into wireless broadband policy with its recently announced net neutrality rules, which aim to prevent broadband carriers from blocking certain types of web traffic in favor of their own data. Genachowski hopes to formalize existing net neutrality policies and add two more, including a rule which would extend the principle to wireless networks.

"When AT&T indicated, in response to the FCC's inquiry, that it would take another look at permitting VoIP on its 3G network I was encouraged," Genachowski said in a statement late Tuesday. "I commend AT&T's decision to open its network to VoIP. Opening wireless services to greater consumer choice will drive investment and innovation in the mobile marketplace."

AT&T has maintained that it was Apple's decision to reject Google Voice, but many industry watchers believe that AT&T's role in the rejection may have been more significant than then company is saying. For its part, Apple has maintained that it is still evaluating whether to allow Google Voice.

One explanation for AT&T's timing may be that the mobile giant is trying to preempt Genachowski's push for wireless net neutrality, which the commissioner is sure to emphasize during a speech Wednesday at the CTIA Wireless Association conference in San Diego. Now that AT&T has reversed itself on Internet calls, it can argue that net neutrality rules aren't needed in the wireless space and the market will advance consumer interests without the need for government regulation.

AT&T has been fiercely opposed to net neutrality regulations, especially in the wireless space, and recently engaged in a bitter round of sniping with Google over the issue.

Skype, the eBay owned company currently at the center of a billion-dollar tug of war, has complained for years about being blocked from wireless data networks, but its arguments never gained much traction under the Bush Administration. But under Genachowski, a former Harvard law school chum of President Obama, the FCC has taken up the cause of network neutrality and openness on both wired and wireless with vastly more vigor.

"All of us at Skype applaud today's announcement by AT&T (in an FCC filing to be published shortly) that it'll open up its 3G network to Internet calling applications such as Skype," Skype said in a statement. "It's the right step for AT&T, Apple, millions of mobile Skype users and the Internet itself. Nonetheless, the positive actions of one company are no substitute for a government policy that protects openness and benefits consumers. We're all looking forward to further developments that will let people use Skype on any device, on any network."

The FCC is currently investigating Apple's decision to reject Google Voice, which is different from pure voice-over-IP services like Skype because it routes calls through the user's existing cell phone or land line. Pure VoIP services like Skype only require an Internet connection.

Google declined to comment on AT&T's announcement other than to say that it had not been been notified by Apple of any change in the status of its Google Voice iPhone application.

AT&T's move comes just hours after Google and Verizon Wireless announced a plan to introduce phones equipped with the web giant's Android smart phone, which until now had only been available on T-Mobile smart phones.

Importantly, Verizon said it would allow Google Voice on two new handsets. In a dig at arch-rival AT&T during a conference call with reporters Tuesday morning, Verizon Wireless CEO Lowell McAdam said, "Either you have an open device or not. This will be open."

Hours later, AT&T reversed course on Internet voice calls, but as of 6 p.m. Tuesday, Google had not been notified by Apple of any change in the status of its Google Voice iPhone application.

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