Draw Declared in AT&T Broadband Case

In what is being described as a victory by both AT&T and open access advocates, the 9th Circuit Court of Appeals ruled Thursday that the city of Portland, Oregon has no authority to force AT&T to open its broadband infrastructure to competitors because the operation comes under the purview of federal regulators.

The decision, which reversed a ruling by a federal judge in Portland that the company must lease its high-speed Internet connections to rivals, has potentially far-reaching implications in the rapidly emerging broadband industry.

A three-judge panel of the 9th U.S. Circuit Court of Appeals ruled that the city of Portland had overstepped its authority in regulating AT&T’s Excite@Home cable broadband network by using laws that govern cable TV franchises.

“Distilled to its essence, this is a struggle for control over access to cable broadband technology,” Justice Sidney Thomas wrote in the decision.

Local Authority Limited

The court said the 1996 Telecommunications Act prohibits a “franchising authority” from regulating cable Internet access because the federal government has jurisdiction over telecommunications services.

“We’re pleased with today’s ruling because it clarifies decisively the limits of local authority when it comes to the provision of high-speed Internet over cable,” said AT&T general counsel Jim Cicconi.

Consumers Benefit

By contrast, others believe opening up AT&T’s broadband service to federal law means opening up competition for smaller Internet Service Providers (ISPs).

“Today’s ruling clarifies that cable Internet services are subject to the same requirements as telephone company-delivered Internet services and will open the door for other Internet service providers to gain access to upgraded cable systems,” said Greg Simon of the openNet coalition, a group of ISP providers.

The decision could be beneficial to consumers, who will be freer to pick and choose their services. “This scenario [could] be a very big positive for ISPs seeking access to cable customers,” industry analyst Scott Cleland said in January, “because common carrier law and regulatory/legal precedents strongly support mandatory open access, interconnection, and interoperability. It would be a very big negative for @Home, AT&T, Time Warner, and the rest of the cable industry.”

An Aggressive AT&T

AT&T shares — once highly prized — have lost about 36 percent of their value in the past year, though the company’s court victory Thursday triggered a slight rise.

Once considered the most stable of utility conglomerates, AT&T has become one of the more aggressive telecommunications firms since its court-ordered breakup in 1984.

The company has spent more than $100 billion (US$) to buy and upgrade its cable television systems — including a $44 billion acquisition of MediaOne earlier this month — making it the largest cable television operator in the United States, with 16 million subscribers.

Analysts say the company plans to use its cable operators to sell both high-speed Internet access and long distance. The company is forced to pay hefty sums to the “Baby Bells” for the right to connect its customer phone calls to its own long distance network.

Predictably, the smaller Baby Bells applauded the part of the ruling that opened up AT&T’s cable modem service. “Today’s 9th Circuit decision is a clear indicator that cable lines should be made open to competition,” Pacific Bell said in a statement. “As such, their lines should be open and available to other providers, as mandated by the Telecommunications Act.”

About Face for AOL

In the past, giant online service America Online, Inc. had joined the other Internet service providers in their fight for open access, but AOL, which is merging with media giant Time Warner, has done an about face. AOL now contends that government action is no longer needed to open broadband networks.

The debate “has been overtaken by the tremendous progress in the marketplace with AT&T, AOL and Time Warner all committed to providing open access and choice for consumers,” said AOL spokesperson Kathy McKieman. “Today’s decision is good news because it will continue the momentum for open access.”

The decision affecting Excite@Home — which has exclusive rights until 2002 with AT&T to sell high-speed Internet access — was well received by its shareholders. Its stock was up 1 15/16 to 20 7/8 after the ruling was released Thursday afternoon.

In a statement, the Redwood City, California company said it “has always been confident that this issue would be resolved by the market, rather than by regulation. This decision should lead everyone else to the same conclusion.”

AT&T acquired a stake in AtHome cable network through its purchase of Tele-Communications, Inc. in 1998.

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