AT&T takes on Google in Austin, offering high-speed Internet service

October 2, 2013, 1:21 PM UTC

FORTUNE — AT&T (T) has announced that it will soon offer ultra-high-speed Internet service in Austin, Texas, going head to head with Google (GOOG), which is doing the same. Finally, it seems the U.S., where the Internet was invented, might be on the way to getting Internet speeds more like those in other developed countries like South Korea and Japan, where gigabit speeds are commonplace. The rollouts are happening slowly, one city at a time, but they’re starting to come a little faster now. This follows years of stasis, due mainly to the lack of desire or incentive for cable companies to offer such service.

Such speeds are needed as more and more business is done online. Not only are movie downloads much faster, but services like telemedicine and online learning depend on ultra-high speeds for full functionality. In businesses like these, much of the world has passed us by.

But while the competition is great, the situation in Austin further solidifies the notion that, when it comes to the Internet, we’ve abandoned the concept of universal service — a concept that made our telephone system the best in the world. There were huge tradeoffs to this: Before it was broken up in 1984, the Bell System was a monopoly that stymied innovation, kept long-distance prices high, and delayed for many years the introduction of technologies like answering machines, fax machines, and email. But nearly every home had a phone, and that phone nearly always worked and worked well.

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In Austin, not everybody will have gigabit Internet speeds, and the ones who do will likely pay a high price, though it’s not yet known just how high. That’s because of the “incentives” offered by the city: Both Google and AT&T will be allowed to decide where to deploy the service. That means they’ll favor neighborhoods where they can command a good price, so poor and rural areas will likely be passed by.

That threatens to further widen the digital divide in Austin, and if the situation there is replicated across the country, it will further widen the class divide in general.

When the phone system was built, and for decades thereafter, there weren’t many complaints about the fact that it was (by force of law) offered to nearly every household in the country. The Bell System accepted this mandate in return for governmental protection of its monopoly. It was the same for other utilities: Rural electrification wouldn’t have happened without a mandate, because it wasn’t cost-effective. The situation for Internet service (and increasingly, for landline phone service as well) is very different now, with lobbyists in Washington fighting hard against regulation in general, and against universal service in particular.

And they have some measure of popular support, nicely exemplified by a comment under the Wall Street Journal‘s article about AT&T’s plans for Austin: “I don’t care if poor areas won’t get the fast Internet service,” wrote Gary Sherman. “I am interested that the technology is going to become available and where it will be available.” Because the article addressed the lack of a universal-service requirement, Sherman concluded that the Journal “is becom[ing] more and more socialistic.”

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AT&T’s service will offer speeds of up to a gigabit per second, 100 times faster than the average broadband speed in the U.S. At first, speeds will be up to 300 megabits per second, with the 1-gigabit service rolling out starting in 2014.

The company plans to launch a website where people can request that their neighborhoods be served, and AT&T says it will use the requests as a basis to determine where to offer the service. But of course, what will really determine who gets the service will be the levels of disposable income in each neighborhood. AT&T understandably doesn’t want to lay expensive fiber lines to homes that won’t subscribe.

Google offers a similar service in Kansas City, where it charges $70. There, too, the company is not bound by universal-service rules and offers the service only in neighborhoods where a sufficient number of people can afford it.