AT&T Vows to Appeal Access Loss in Oregon

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AT&T Corp. will fight to the last lawyer to overturn a
recent Oregon court ruling that threatens its proprietary claim on high-speed-data
services offered over its own cable systems.

Experts predicted that the MSO will ferociously challenge a
recent U.S. District Court decision upholding the ability of local franchising authorities
to mandate that cable operators offering high-speed-data services allow subscribers to buy
those services from Internet-service providers other than those designated by the cable
operators.

In AT&T's case, this would mean reselling capacity that
is the exclusive domain of @Home Network, of which AT&T is a part-owner.

The decision came June 4 from a federal judge in Oregon,
who decided that Portland and Multnomah counties could mandate that unaffiliated ISPs be
allowed access to the @Home infrastructure.

The Oregon authorities wanted to stipulate mandatory access
while approving the transfer of Tele-Communications Inc. cable franchises to AT&T.
Federal regulators did not attempt to require open access when they approved the
AT&T-TCI merger, so some local regulators took that tack during franchise transfers.If
the ruling stands, industry experts said, cable could become the equivalent of a common
carrier, with other LFAs falling in line like dominoes to try to force cable operators to
make broadband spectrum available for rival companies to resell.

"If I was a cable operator, I'd fight this to the
bitter end," Paul Kagan Associates Inc. regulatory analyst John Mansell said.

AT&T said last week that barring a stay, an appeal to
the Ninth Circuit Court of Appeals was more than likely.

"We have to appeal," AT&T vice president of
external affairs Scott Morris said, "not only to preserve our rights under the Cable
Act, but to ensure that this becomes a national telecommunications issue with consistent
policies."

Otherwise, cable companies would have to deal with up to
15,000 franchising authorities nationwide, each trying to impose its own policies on
operators' plant, Morris added.

"You're going to have conflicting policies imposed by
adjoining communities served by the same cable system," he said.

Jim Cicconi, AT&T's general counsel and top Washington
lobbyist, said the ruling was an "anomalous decision" that doesn't have much
chance of surviving on appeal.

"We think the ruling is so clearly wrong on the merits
that it is very unlikely that it is going to stand," Cicconi said. "The court
simply ignored a good bit of federal law that says local jurisdictions simply don't have
the authority to do what Portland sought to do."

The ruling also cast a cloud over AT&T's pending
acquisition of MediaOne Group Inc. That 5 million-subscriber MSO has about 1,000
franchises in 14 states, most of which require municipal approval before being transferred
to AT&T.

"This court decision is Portland-specific, and it
can't be applied elsewhere," MediaOne spokesman Rob Stoddard said. "But that's
not to say that some other franchising authority won't try to invoke the same
rationale."

In his decision, U.S. District Judge Owen Panner said
Portland and Multnomah counties' open-access requirements were not pre-empted by federal
statute because "Congress intended to interfere as little as possible" with
LFAs' authority.

Moreover, he added, the courts have "long
recognized" LFAs' rights to promote competition and to determine whether cable
transfers will "eliminate or reduce competition."

Panner also said requiring equal access did not amount to
regulating cable as a common carrier, inasmuch as the ordinances passed by the two
jurisdictions applied only to ISPs, and they did not require that AT&T
"indifferently" offer access to all comers.

And his ruling said AT&T could not argue that it would
be forced to carry ISPs' content since it had already agreed to allow @Home subscribers to
also subscribe to unaffiliated service providers, such as America Online Inc.

As such, AT&T could not maintain that requiring equal
access violated its First Amendment rights, Panner wrote.

Local Portland officials realize that the debate is not
over.

"We won going away," said Portland City
Councilman Erik Sten, a principal behind the push for equal access. "But there are
two things you can be sure of: One, the decision will be appealed, and two, other cities
are going to be interested in this ruling."

Nationwide, local telecommunications regulators were
elated. The Web site for the National Association of Telecommunications Officers and
Advisers referred to the court decision as "July 4 one month early."

But while they were happy to "win one," some
local regulators were quick to note that Panner specifically avoided taking a stand on
high-speed access as a public-policy issue.

"The decision helps with some legal hurdles, but it
doesn't address the issue as good policy," noted Mario Goderich, director of the
consumer-protection division for Dade County, Fla.

Cable's principal trade organization, meanwhile, denounced
Panner's ruling.

National Cable Television Association general counsel Dan
Brenner said Panner "misread" the 1934 Communications Act, which, as amended in
1984, specifically prohibits treating cable as a common carrier.

"Congress very clearly stated that cable is not a
common carrier," Brenner said. "And if somebody is not a common carrier, then
they shouldn't have to hold out their plant to anybody who wants to take it."

Brenner also argued against Panner's opinion that Oregon
regulators had not treated AT&T as a common carrier because the ordinances only
applied to ISPs. "Limiting it to one user doesn't mean you're not being treated as a
common carrier," he said.

Even if the ruling is upheld and LFAs can require equal
access, the forecast is for years of squabbling to resolve unanswered questions -- first
in court, then at the bargaining table.

For example, at what price, and under what conditions,
would ISPs be allowed access, and who would set the terms? Would access be treated under
federal leased-access rules, or under new regulations yet to be promulgated?

"I think this is going to be an ongoing issue -- one
that's going to be around for several years," Mansell predicted.

Some experts compared Panner's decision with the Dec. 31,
1997, ruling by U.S. District Judge Joe Kendall, who held that the long-distance-entry
provisions of the Telecommunications Act of 1996 that applied to regional telephone
companies amounted to an unconstitutional bill of attainder, inflicting legislative
punishment without a fair trial. Kendall's ruling was overturned on appeal.

Excite@Home Inc. consultant Blair Levin brushed aside
speculation last week that the Portland case would prompt the Federal Communications
Commission to initiate a cable-access rulemaking. Levin, a former chief of staff to ex-FCC
chairman Reed Hundt, did say that the commission might act if the ruling inspired other
cities to order cable operators to make room for competing ISPs.

But, he added, cities might not like such an FCC rulemaking
because it would likely result in the agency snatching jurisdiction from local
governments.

"There is a clear consensus that the cities ought not
to be regulating in this way," Levin said, citing off-the-record chats with former
FCC colleagues.

Rep. Billy Tauzin (R-La.), chairman of the House
Telecommunications Subcommittee, said the Portland case could help him to pass legislation
allowing the Baby Bells to provide long-distance data services in competition with cable.

AT&T's new vulnerability, Tauzin added, might force the
company to consider backing a bill barring any regulation of ISPs, whether by AT&T or
by a Baby Bell.

"Either we are going to have regulatory parity, or we
are going to have deregulatory parity," he said.

Open-access proponents got another boost recently when the
FCC State and Local Government Advisory Committee recommended that the agency issue a
notice of inquiry soliciting comment on the issue.

The commission had declined to formally examine the matter
in connection with the since-completed AT&T-TCI merger, although it vowed to monitor
its competitive effects on the market.

A senior FCC official said the agency was studying Panner's
ruling, and it was too early to say whether the decision would prompt the commission to
rethink its broadband-access policies.

Meanwhile, Portland and Multnomah county authorities might
use the franchise transfers' questionable legal status as leverage to get AT&T to
offer @Home locally -- something the MSO refused to do because of the lawsuit.

"If this decision signals that we're not going to have
Internet access in Portland, then we have a major problem," Sten said. "That's
not going to be acceptable."

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