In a statement Thursday, Jim Cicconi, AT&T’s senior executive vice president for external and legislative affairs, said Mr. Martin’s proposal was an “interesting and creative balance” that would not change the business models of AT&T and others. He said Google would now have to “put up or shut up.”

“If they are serious, they will be able to bid and test their model in the marketplace against the business models of companies already enjoying widespread consumer acceptance,” he said.

There's no question that part of Google's strategy is to be a last mile player. Whether this is by design or by threat is up for debate. I myself am marveling at this, since I spent a good 5 years trying to wrestle control of the network from the telcos. Unfortunately, the Telecom Reform Act of 1996, which spurred the largest infrastructure build out in US history, didn't have enough support at the FCC after Bush took office in 2000. This allowed the CLEC that sprang up after 1996 to flounder and die. Even the mighty AT&T fell. Now all we have is another oligopoly that replaced it and no real competition. Oh and higher prices. All of the CLEC's took the risk and created the roadways which are now generating an estimated $41B a quarter in revenue.

I like Google's chances of arresting this revenue stream from the oligopoly. They are not dependent on the oligopoly itself to generate their cash flow like the CLEC's were. There's much less ability to throttle their growth. But my advice to Google is that you will need all of those PhD's to make sure that you don't get outfoxed. Ma Bell is a mean and cunning adversary.