AT&T Seeks Freedom at FCC

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Washington— In a clash with the cable industry, AT&T Inc. is asking federal regulators to help it compete in video markets by sweeping aside regulations that have traditionally applied to cable companies.

The primary concern for AT&T — the product of the merger of SBC Communications Inc. and AT&T Corp. late last year — is elimination of the franchise requirement, which compels would-be cable companies to obtain approval from local governments to offer service. AT&T, its eye on cable markets with millions of potential homes, believes that process is a relic from a monopoly era that only adds to costs and postpones competition.

“What we’re trying to do is get into the market without having to go through all the entry barriers that were put up to deal with incumbents 30 years ago,” said an AT&T official, who declined to identified by name.

AT&T wants the old cable rules eliminated with regard to Internet Protocol video services, which it says are not the same as cable TV service and thus shouldn’t be regulated the same way.

AT&T has committed to spend $4 billion over four years to deliver its IP video service, called Project Lightspeed, to 18 million homes.

AT&T’s request has been pending at the Federal Communications Commission for nearly a year. It was originally filed by SBC, which opted to keep the AT&T name.

FCC chairman Kevin Martin, who assumed power one month after the petition was filed, has not directly addressed the SBC petition, though Martin has identified broadband deployment as a priority. Instead, Martin has the agency focused on whether local governments are using existing cable rules to stall SBC’s entry.

The effort at the FCC is part of a broad AT&T strategy to enter local video markets on an expedited basis. The company has asked state governments to eliminate franchising requirements, scoring a big win in Texas last year. Bills in Congress effectively creating a national franchise have the company’s support.

Whatever the forum, the cable industry has fiercely resisted regulatory changes that deny incumbents the same relief sought by new entrants like AT&T.

“The old SBC gained little traction in previous attempts to receive special treatment for their video service. Just because the company name has changed, the facts remain the same,” said National Cable & Telecommunications Association spokesman Brian Dietz.

AT&T might not have time to wait for Congress to pass a new law. And state relief, while helpful, would not apply nationally and would fall far short of the sweeping goal outlined in the SBC petition filed with the FCC last February.

In the filing, it asked the FCC to declare that Internet Protocol video service was not “cable service” within the meaning of existing federal cable law for the same reasons the FCC in March 2002 said that cable modem service did fit within the old cable rules.

“In doing so, the [FCC] would be clearing the way for speedy and broader entry into broadband deployment and video competition,” the AT&T official said.

At bottom, AT&T and NCTA are engaged in battle over the interpretation of the legal definition of cable service.

AT&T, on the one hand, has said the interactive features of IP video take it outside the definition.

NCTA, on the other, has said AT&T has failed to demonstrate that the service it intends to offer is so dissimilar from what Comcast Corp. and Time Warner Cable offer that the old rules don’t apply.

If AT&T’s petition were granted, the company could compete without complying with a welter of cable rules, such payment of franchise fees, mandatory carriage of local TV stations, and channel set-asides for public and leased access users.

The AT&T official cautioned that the company’s IP video service would not function in a regulatory state of nature.

“We would continue to comply with state-based right-of-way management and related law, even though as a matter of national classification ours is not a cable service,” the official said.

Moreover, the AT&T official said the FCC had authority to impose requirements on IP video in the same sense that the commission had authority to impose emergency 911 mandates on voice over Internet protocol.

In opposing AT&T, NCTA lawyers have complained that the company was seeking “unwarranted regulatory advantages” based on an erroneous reading of federal law. Just like cable operators, NCTA said, AT&T will be offering loads of “linear video programming” that should be governed by existing cable rules.

Local governments are not disinterested observers of this process, mainly because AT&T’s proposal would cost them money.

Cable law “is technology neutral,” said Cheryl A. Leanza, a top telecommunications lawyer with the National League of Cities. “It’s not dependent on the technology that used to offer the video services. We disagree with AT&T’s analysis. I think their analysis is clearly designed to avoid franchise fees.”

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