AT&T Cable Wins Round Two

U.S. Court of Appeals rules localities cannot mandate open access to cable networks, but open access advocates foresee further legal hurdles for the telco.

by Patricia Fusco
of internetnews.com
[June 23, 2000]

Champagne bottles might be popping throughout AT&T Corp. headquarters as the much awaited ruling on the "Portland Decision" was handed down late Thursday.

The 9th U.S. Circuit Court of Appeals reversed the decision of a lower court, stating that the city of Portland had overstepped its authority and could not require AT&T to open its high-speed cable network to competing Internet services.

The three-judge panel unanimously decided that the 1996 Telecommunications Act prohibits a local franchising authority from regulating cable Internet access since the regulation of telecommunications services is under the jurisdiction of the federal government, not local municipalities.

Corporate smiles
Jim Cicconi, AT&T general counsel, said the firm was pleased with the ruling because it clarifies the limits of local authority when it comes to the provision of high-speed Internet access over cable.

"Now that the court has made clear Congress' intent to bar ordinances like the one enacted by Portland, AT&T and other cable companies will be able to get on with investments that will bring advanced services to millions of Americans," Cicconi said. "In particular, AT&T looks forward to bringing our high-speed service to the people of Portland as soon as possible."

Cable Broadband service provider and AT&T partner Excite@Home also applauded the 9th Circuit Court of Appeals ruling.

The firm released a statement on the decision that noted similar decisions in state courts and legislatures have rejected calls for regulation of cable access, "hopefully this will end the forced access debate."

Dissenting opinions
While AT&T was quick to champion the ruling, "open access" proponents say that the top U.S. cable and telecom company's celebration may be short-lived, due to the language the 9th Circuit Court used in stating its decision.

The Court order read in part, "We hold that subsection 541(b)(3) prohibits a franchising authority from regulating broadband Internet access because the transmission of Internet service to subscribers over cable broadband facilities is a telecommunications service under the Communications Act."

Because the court labeled cable broadband access akin to digital subscriber line (DSL) service, "Open Access" proponents are calling on the Federal Communications Commission to enforce the same laws that apply to DSL line sharing in the context of broadband cable networks.

Portland City Commission Erik Sten said the municipality would carefully review the ruling before it would file for an appeal the court's decision.

"We may have lost the battle but may have won the war," Sten said. "The City must fully consider the implications of the court's ruling before we appeal the decision."

Ramifications
Initially, the decision marks a defeat for Internet service providers like GTE Corp., and others, which argued that AT&T must give rivals access to its high-speed connections just as local telephone companies must open their telephone networks to competitors.

Greg Simon, OpenNet Coalition cofounder said in order for AT&T to benefit from the decision, it must prove to the FCC that there is competition in the cable access market.

"The court ruled that cable broadband is similar to DSL access," Simon said. "If the FCC has to forbear for one broadband service, then they have to forbear for both, and enforce open access as the law of the land for high-speed communication in the U.S."

Rich Bond of the OpenNet Coalition added that the FCC has the authority, but not the disposition, to create a consistent open access system for all high-speed services in the nation.

"The FCC made sure people can choose their ISP and their telecom service provider, bur cable is under different rules," Bond said. "Clearly the FCC now has the authority and as a matter of policy must treat Internet access over cable in the same manner."

The group is calling on the FCC to take action and enforce the same statutory laws of the telecom industry on cable firms, making interconnection rules that apply to DSL apply equally to cable modem service.

Endgame
AT&T avoided taking a stance as to whether its Portland cable franchise was a cable or a telecom service. According to the OpenNet Coalition, until the FCC takes a stance that differs from the 9th Circuit Court ruling, it is essentially the law of the land that cable services be treated as telecom service and have all applicable regulations apply across the communications industry.

The FCC has not responded to the 9th Circuit Court ruling at this time. But the federal regulatory agency has taken bold steps to ensure that consumers have a competition choice for telecom services. It remains to be seen whether the same will apply to high-speed cable services.

Pending play
In related news, AT&T agreed to put a hold on its plans to pull the operational strings of cable-access partner Excite@Home.

AT&T will wait until the end of a trial set for September to determine if it can continue with its scheme to gain greater control of Excite@Home.

The deal set in March between AT&T, Excite@Home, Cox Communications, Inc., Comcast Corp., and Cablevision Systems Corp. has been scrubbed until the court determines the fate of cease and desist order that alleges breach of contract.

In a statement released Wednesday, Cablevision executives said the deal "would significantly change the corporate governance of Excite@Home and constitutes a clear breach of Cablevision's stockholders' agreement."

Free-for-all
An AT&T spokesperson said that the company does not believe it needs Cablevision's consent to take control of Excite@Home. Meanwhile, Excite@Home issued a statement declaring that the there is no legal merit to the suit and that the firm would defend the Master Distribution Agreement Extension as agreed upon with its cable partners earlier this year.

The Cablevision lawsuit comes as AT&T is attempting to use Cablevision's last-mile delivery systems in New York.

Scott Cleland, Legg Mason Precursor Group managing director, said Cablevision's lawsuit is odd.

"It's a strange lawsuit because AT&T and Cablevision have cooperated in the past. With AT&T owning one-third of Cablevision, it's odd to see them file suit," Cleland said. "It's hard to say weather communication broke down due to the March agreement with other cable firms, or a competitive factor over New York cable services."

—End