AT&T appeared to be making a political point to highlight the heavy regulations that encumber traditional phone companies, analysts said.
Google promised to begin connecting homes in Austin by the middle of 2014 with a 1-gigabit-per-second Internet service, roughly 13 times faster than the speediest service AT&T had previously committed to offering and about three times faster than the zippiest available from Verizon Communications.
The Austin launch would be Google's first move to expand its "Google Fiber" service beyond Kansas City, Missouri, introduced last year. Google says the Fiber Internet service is 100 times faster than today's average broadband performance.
But as Google unveiled its plans at an event in Austin that featured Texas Governor Rick Perry, Austin's mayor and other city officials, AT&T issued a challenge to the city to provide a more level playing field.
"AT&T's expanded fiber plans in Austin anticipate it will be granted the same terms and conditions as Google on issues such as geographic scope of offerings, rights of way, permitting, state licenses and any investment incentives," AT&T said in a statement.
The No.2 U.S. telecommunications firm did not provide a time frame for its own planned Gigabit network, which it said would not materially alter its anticipated 2013 capital expenditures.
"AT&T is making the point that they could make a lot more investments in many of their communities, absent the regulatory burdens which every community puts on providers," said Raymond James analyst Frank Louthan.
While James said he did not know what the terms of Google's Austin deal were, he pointed out that Google received various benefits in Kansas City, including preferential right-of-way access, access to data centers, and reduced pole access rates.
"This immediately puts the city of Austin in a box," said Louthan. "They realize that if they actually give that to AT&T and build it, Google may not come."
Austin City spokesman Doug Matthews had no immediate comment on AT&T's statement, referring calls to Rondella Hawkins, the director of the city's telecommunications and regulatory group, who was not immediately available.
Google, the world's No. 1 Internet search engine, launched its first Google Fiber service in Kansas City in November. The company initially billed the service as a test project to spur development of new Web services and technology but now says it views Google Fiber as a viable business.
The ultra high-speed connections and television offerings are aimed at surpassing those of current providers, such as cable and telecommunications companies, such as AT&T and Time Warner Cable Inc.
As in Kansas City, consumers in Austin will be able to get standalone Gigabit Internet service or a bundle that includes nearly 200 high-definition television channels. Pricing in Austin is still to be determined, Google said.
Google said it will also offer Austin residents free Internet service, at a slower 5 megabit per second rate for seven years, provided they pay a one-time construction fee that was not specified. In Kansas City, the fee is $300.
Google shares finished Tuesday up $2.80, or less than 1 percent, at $777.65. Shares of AT&T closed the session up 14 cents, or less than 1 percent, at $37.76.
(Additional reporting by Corrie MacLaggan in Austin; Editing by Kenneth Barry and Eric Walsh)
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