June 22, 2000 2:00 PM PDT

AT&T wins case to keep rivals off networks

A federal appeals court ruled today that AT&T won't have to let rivals tap into its high-speed cable Internet networks, reversing a closely watched lower-court decision.

A three-judge panel of the 9th U.S. Circuit Court of Appeals overturned a 1998 decision by Portland, Ore.-area officials that would have forced AT&T to lease capacity on its cable-based high-speed Internet access networks to competing Internet service providers. That early ruling, which came as part of city officials' approval of Ma Bell's 1998 acquisition of Tele-Communications Inc., was later upheld by a lower court.

The federal judges today ruled that Portland officials didn't have jurisdiction over AT&T's cable Internet business, reversing the lower court.

The ruling represents at least a short-term win for AT&T, its broadband service Excite@Home, and other cable operators that have argued that the market, not government regulators, should dictate cable Internet access agreements.

Major Internet service providers including America Online and MindSpring Enterprises--now part of EarthLink--had aggressively lobbied local and federal officials for the right to lease capacity on cable operators' high-speed networks.

"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 access over cable," AT&T general counsel Jim Cicconi said in a statement. "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."

An Excite@Home spokeswoman said her company also was pleased with the decision, as it would prevent individual cities across the United States from creating a "patchwork quilt" of different policies on cable Net access.

While the ruling is significant, its effect may be diminished by a series of industry deals and mergers that are expected to produce, in their own way, "open access" to the cable networks.

AT&T and MindSpring agreed last year to work together for cable access. Ma Bell later extended its once-exclusive contract with Excite@Home, though the companies clearly expect that Excite@Home will not be the only service provider AT&T works with after June 2002. Earlier this month, AT&T said it will begin testing third-party cable access in Boulder, Colo.-area trials later this year.

Similarly, with its pending acquisition of Time Warner, which would give AOL access to broadband cable networks, AOL announced it would open its networks to competitors.

Nevertheless, proponents of open access said today's ruling would in fact work in their favor.

In the decision, the federal appellate court judges determined that Internet access should be defined as a "telecommunications service" under the 1996 Telecommunications Act. "Therefore, Portland may not condition the transfer of the cable franchise on non-discriminatory access to AT&T's cable broadband network," the judges wrote in their opinion.

But calling cable Net access a "telecommunications service" means that it should be regulated under the same rules that force telephone companies to share their networks with rivals, AT&T opponents said.

In a conference call with reporters, the OpenNet Coalition characterized the ruling as "a huge victory," saying that cable Net access should now be opened to many competing ISPs just as the phone networks are.

The 9th Circuit ruling will only be valid in that court's jurisdiction, which includes California, Oregon and Washington, among other Western states. But the ruling provides legal precedent for other courts and local jurisdictions to follow when considering cable access regulations.

A handful of communities, including St. Louis and several Boston-area municipalities, followed Portland in passing similar cable access laws. Meanwhile, other cities, including Los Angeles and San Francisco, continue to flirt with open access policies.

Portland city officials said they have not yet decided whether to appeal to the U.S. Supreme Court.

 

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