News

Wyden Tries To Broker @Home Deal

1/17/1999 7:00 PM Eastern

Sen. Ron Wyden (D-Ore.) was trying to broker a settlement
last week between AT&T Corp., Tele-Communications Inc. and Oregon local regulators who
are determined to unbundle @Home Network.

Wyden, an architect of the Telecommunications Act of 1996,
was attempting to break an stalemate precipitated by Portland's and Multnomah
County's demand that the high-speed @Home cable-modem platform be opened to
unaffiliated Internet-service providers.

Wyden's intervention apparently convinced AT&T to
hold off on a lawsuit planned for Federal District Court. The suit would have asked for a
declaratory judgment barring the cities from making ISP access a condition for
transferring their TCI franchises to AT&T.

Nevertheless, AT&T informed the Portland City Council
and the Multnomah County Board of Commissioners last week that it was ready to go to court
over a pair of local ordinances requiring that it unbundle @Home.

Officials in Wyden's Washington, D.C., office said
Oregon's senior senator stepped into the controversy in hopes of heading off an
expected court fight.

"We don't think that the lawyers need to make any
more money," said a Wyden aide, who asked for anonymity.

Sources close to the matter said Wyden had scheduled a
conference call last week with the companies and local officials.

"It's been very challenging," the Wyden aide
said. "Both sides believe that they have the law on their side."

As described to Portland officials, the lawsuit would be a
"narrowly focused" action challenging the city's authority to reject the
transfer, said Marshall Runkel, an aide to City Council member Erik Sten.

Eddie Campbell, an aide to MCBC chairwoman Beverly Stein,
confirmed that the same message had been delivered to the county.

Some municipal attorneys said it's unclear whether
legal action by AT&T would deter other communities that want open-cable-modem
standards of their own.

"If public policy was based on every time a cable
operator threatened to sue, there would be no public policy," attorney Bill
Marticorena said.

However, each community has to decide whether to risk
retribution in court or loss of franchise revenue if their action leads to common-carrier
status for cable-modem service. Moreover, there's a danger that cities will lose
high-speed interconnection service altogether if operators -- faced with competition on
their own platforms -- drop those communities off their deployment schedules.

"The issue is a multiedged sword," Marticorena
said.

Wyden's aide said the senator was concerned about
reports quoting a proxy statement released by AT&T and TCI that seemingly indicated
that the companies were backing away from a promise to introduce local residential
telephone service.

In the proxy, AT&T and TCI said local competition
"may not be realized" because of "risk factors relating to the
merger."

"My boss would very much like to see local
competition," the Wyden aide said. "This makes it sound like they're more
interested in the data business, and that they've been stringing us along."

AT&T responded by calling the statements a standard
practice designed to outline risks for potential investors, noting that elsewhere in the
proxy, it talked of delivering "an array of communications, entertainment and
information services directly to millions of U.S. households, all under the AT&T brand
name."

Meanwhile, AT&T scored major victories last week when
three large TCI jurisdictions voted to approve its franchise-transfer requests.

In Dallas, the City Council voted 9-6 to authorize a
transfer without conditions, despite protests from one-dozen ISPs with representatives
crowded into the meeting. However, officials vowed to revisit the issue when the franchise
expires in September 2000.

In nearby Arlington, Texas, a transfer was approved that
gave TCI exclusive use of its cable lines. This was done in exchange for a clause allowing
the city to fine the company $200 for each day that it receives more than one consumer
complaint, and another $200 per day for each week that the MSO does not produce 15 hours
of original local programming.

In Washington state, the city of Spokane and Spokane County
voted to approve a transfer of their franchise after adding amendments calling for
"competition and consumer choice." There, Internet Ventures Inc. wants to use
leased-access bandwidth to provide high-speed service.

However, the city of Seattle, which had planned to wait for
a Federal Communications Commission decision on the contentious issue, may have had a
change of heart.

City officials were considering a "more aggressive
stance" on ISP access, given TCI's announcement that it will miss this
week's deadline for completing an upgrade of its local network, said Steve Holmes,
director of the Seattle Office of Cable Communications (see story, page 10).

Meanwhile, the Seattle Times weighed in with an
editorial urging the city to boost its leverage with TCI by joining other jurisdictions in
taking the issue before the FCC.

In Denver, where city officials are studying the ISP issue,
AT&T regional vice president Tom Pelto warned that requiring open access would result
in @Home bypassing the market. At the same time, TCI announced that it had launched @Home
to some 75,000 homes in upgraded areas of Aurora, Colo., a Denver suburb.

Elsewhere, Los Angeles regulators were negotiating up to
the last minute on their transfer agreement with TCI and AT&T, apparently using the
threat of an open-cable-modem platform as a bargaining chip.

AT&T and TCI have consistently maintained that
it's up to the FCC to decide the issue, and that Portland and Multnomah County have
overstepped their authorities.

However, some legal experts noted that the Federal
Communications Act allows cities to reject cable-franchise transfers if they would reduce
competition in their market. Moreover, the act presumably allows local governments to
negotiate with an operator to lease channel capacity that can be used for purposes other
than delivering video services.

Want to read more stories like this?
Get our Free Newsletter Here!