AT&T, TCI Reach Ore. ISP Deal

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Oregon regulators last week reached a tentative agreement
with AT&T Corp. and Tele-Communications Inc. that may ensure that area
Internet-service providers get spots on @Home Network.

The settlement -- a possible blueprint for other local
franchisers eyeing the ISP issue -- preserves language in two proposed transfer ordinances
that assures ISPs "nondiscriminatory" access to the high-speed @Home cable-modem
platform.

Specifically, the companies would grant access to their
network under federal commercial leased-access rules, which require operators to set aside
up to 15 percent of their channel space for unaffiliated programmers.

"That's a big turnaround for AT&T. Up until
now, it had refused to accept any such language whatsoever," said David Olson,
director of the Mt. Hood Cable Regulatory Commission, a local cable-advisory body that
drafted the controversial transfer ordinances for Portland and Multnomah County, Ore.
AT&T was "adamant that no cable-modem provision would be acceptable."

In exchange for dropping their opposition, AT&T and TCI
get language included in the ordinances making ISP access contingent on all applicable
federal, state and local laws -- an indication that they feel that the Federal
Communications Commission will ultimately accept their argument that access should be
negotiated, rather than mandated.

"In their view, this [language] makes the FCC the
final arbitrator," Olson said. "And we don't have a problem with that. This
preserves the policy issues that we think needed to be preserved."

TCI spokeswoman LaRae Marsik said the agreement assures
that the MHCRC won't impose additional restrictions on the companies in exchange for
assurances that they will abide by all appropriate laws.

Moreover, it means that the two sides can "get on with
the work at hand," while waiting for the FCC to potentially have the final word, she
said.

"We can't predict what the FCC will do,"
Marsik said. "But this is the kind of agreement that says, 'Let's go
through the trial, rather than summarily trying to decide who wins and who
loses.'"

The MHCRC is expected to review the new language Dec. 14.
It then goes to the Portland City Council and the Multnomah County Board of Commissioners
Dec. 17. Historically, those bodies generally uphold the MHCRC's recommendations.

Barry Orton, a professor of telecommunications at the
University of Wisconsin-Madison and a municipal consultant, said that by agreeing to go
along with the proposed ordinances, AT&T was in "cover-your-ass" mode.

"This sets up the FCC as the trump card," Orton
said. "If [AT&T] wins at the federal level, there's nothing that Portland
can do about it, and it costs AT&T nothing. And if AT&T loses at the federal
level, they've already agreed, and it costs AT&T nothing. AT&T is not
fighting the little fights: It's fighting the big fights."

The two sides have been at war since the MHCRC, which
advises six area jurisdictions, proposed last month that Portland and Multnomah County
order that the transfer of TCI's cable licenses be contingent on ISPs being allowed
on @Home.

That sparked a furious round of lobbying by AT&T and
TCI representatives.

Most recently, the companies delivered a joint letter to
Portland Mayor Vera Katz, blasting the city's proposed ordinance as "unlawful
policy" and again arguing that cities are limited to examining the prospective new
operator's legal, technical and financial qualifications when considering a transfer.

In addition, they warned ominously that passage of the
measure would "jeopardize the implementation of Internet cable-modem service in your
community,"

The MHCRC responded with an internal staff memorandum in
which it recommended for the first time that Portland and Multnomah County deny the
transfers if "AT&T refuses to accept the conditions."

The memorandum added that AT&T would be required to
provide ISP access only "unless otherwise required by law." It also acknowledged
that the FCC may ultimately side with "AT&T's and TCI's narrower
view" on the issue.

Led by America Online Inc., ISPs have been approaching
local regulators nationwide and asking that they use the franchise-transfer process to
force AT&T and TCI to open their network to outside competitors.

While the ISPs have met with limited success, the MHCRC is
not the only local jurisdiction exploring ISP access.

At the urging of AOL and locally based Earthlink Network
Inc., the Los Angeles Board of Information Technology Commissioners has scheduled public
hearings on the matter for mid-December. The board's action had some industry
followers speculating that other larger jurisdictions may be prepared to follow suit.

Marsik said that while the ISP issue has cropped up in a
couple of locations, TCI had seen the exact opposite in municipalities where 239 transfers
-- or 24 percent of the 987 being sought -- had been approved as of last week. That total
includes TCI's largest system, Chicago, which approved the transfer last week.

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