Why does AT&T want to know what you're downloading?

We previously noted this ridiculously Orwellian proposal, and Joel Johnson's interview with some AT&T flacks, but seems like AT&T is continuing with their scheme.

Chances are that as you read this article, it is passing over part of AT&T's network. That matters, because last week AT&T announced that it is seriously considering plans to examine all the traffic it carries for potential violations of U.S. intellectual property laws. The prospect of AT&T, already accused of spying on our telephone calls, now scanning every e-mail and download for outlawed content is way too totalitarian for my tastes. But the bizarre twist is that the proposal is such a bad idea that it would be not just a disservice to the public but probably a disaster for AT&T itself. If I were a shareholder, I'd want to know one thing: Has AT&T, after 122 years in business, simply lost its mind?
No one knows exactly what AT&T is proposing to build. But if the company means what it says, we're looking at the beginnings of a private police state. That may sound like hyperbole, but what else do you call a system designed to monitor millions of people's Internet consumption? That's not just Orwellian; that's Orwell.

[From Why does AT&T want to know what you're downloading? - By Tim Wu - Slate Magazine]

One more snippet:

But the most serious problems for AT&T may be legal. Since the beginnings of the phone system, carriers have always wanted to avoid liability for what happens on their lines, be it a bank robbery or someone's divorce. Hence the grand bargain of common carriage: The Bell company carried all conversations equally, and in exchange bore no liability for what people used the phone for. Fair deal.

AT&T's new strategy reverses that position and exposes it to so much potential liability that adopting it would arguably violate AT&T's fiduciary duty to its shareholders. Today, in its daily Internet operations, AT&T is shielded by a federal law that provides a powerful immunity to copyright infringement. The Bells know the law well: They wrote and pushed it through Congress in 1998, collectively spending six years and millions of dollars in lobbying fees to make sure there would be no liability for "Transitory Digital Network Communications"—content AT&T carries over the Internet. And that's why the recording industry sued Napster and Grokster, not AT&T or Verizon, when the great music wars began in the early 2000s.

Here's the kicker: To maintain that immunity, AT&T must transmit data "without selection of the material by the service provider" and "without modification of its content." Once AT&T gets in the business of picking and choosing what content travels over its network, while the law is not entirely clear, it runs a serious risk of losing its all-important immunity. An Internet provider voluntarily giving up copyright immunity is like an astronaut on the moon taking off his space suit. As the world's largest gatekeeper, AT&T would immediately become the world's largest target for copyright infringement lawsuits.

On the technical side, if I were an AT&T engineer asked to implement this plan, I would resign immediately and look for work at Verizon. AT&T's engineers are already trying to manage the feat of getting trillions of packets around the world at light speed. To begin examining those packets for illegal pictures of Britney Spears would be a nuisance, at best, and a threat to the whole Internet, at worst. Imagine if FedEx were forced to examine every parcel for drug paraphernalia: Next-day delivery would soon go up in smoke. Even China's Internet, whose performance suffers greatly from its filtering, doesn't go as far as what AT&T is proposing.