AT&T Wins Open-Access Case In Virginia

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Washington—The Federal Communications Commission seems to have been given the power to decide whether cable operators are forced by federal law to provide access to rival Internet service providers.

Last week, cable secured yet another legal victory on the broadband-access dispute at the local level when a federal appeals court in Richmond, Va., ruled that, unlike phone companies, AT&T Broadband was not required to open its facilities to ISPs.

A three-judge panel of the U.S. Court of Appeals for the 4th Circuit said Henrico County, Va., violated federal law by requiring AT&T to open its cable-modem facilities to rival ISPs.

The court held that federal law protected cable operators from having to provide a "telecommunications facility" to unaffiliated data providers.

"Because the open-access provision is inconsistent with the federal Communications Act, it is pre-empted and superceded," the court said, in an opinion written by Circuit Judge M. Blane Michael.

Although the decision was 3-0 in AT&T's favor, Circuit Judge H. Emory Widener, Jr. filed a concurrence stating that Henrico's ordinance should have been struck down under Virginia law.

In voiding the Henrico ordinance, the court refused to rule on whether Internet access offered by cable operators is a cable service, a telecommunications service or an information service, claiming those questions had to be decided by the FCC. AT&T won in lower court, partly because cable Internet was deemed a cable service.

"The FCC has diplomatically reminded us that it has jurisdiction over all interstate communications services, including high-speed broadband services," the court said. "For the time being … we are content to leave these issues to the expertise of the FCC."

The classification issue is of paramount importance because if cable Internet is found to be a telecommunications service, cable operators would be exposed, in the absence of regulatory forbearance, to a host of open-access regulations shouldered by phone companies.

Henrico — egged on by Verizon Communications Inc., Virginia's dominant phone company, which is chafing under open-access rules — sought to impose access mandates on AT&T Broadband as a condition for obtaining the franchise held at the time by MediaOne Group Inc.

AT&T sued in federal court and won last May, causing Henrico to appeal to the 4th Circuit.

Last week's ruling applies to the five states within the 4th Circuit's territory: Maryland, North Carolina, South Carolina, Virginia and West Virginia. Within those states, only Fairfax, Va., has enacted an open-access ordinance.

"We hope this puts an end to the argument that municipalities should mandate forced access for cable companies. Federal law prohibits it," said AT&T's vice president of law Mark Rosenblum.

Henrico is entitled to appeal. The county's attorney Joe Rapisarda said a decision on whether to "fold the tent" would likely have to wait until the Board of Supervisors meets on July 24.

But the two immediate options are not very encouraging, he said. The county could ask for a rehearing by the 4th Circuit, or take the case directly to the U.S. Supreme Court.

Given the unanimous decision by the 4th Circuit, a rehearing appeared to be the less likely alternative.

"When it's 2 to 1, at least you have a chance, because one of the judges already agrees with you," Rapisarda said. "We could go to the Supreme Court, but it's awfully hard to get them to hear a case."

Rapisarda said the board of supervisors may be influenced by AT&T's decision to resume local installation of cable modems after Henrico's defeat last May in U.S. District Court.

"Obviously, there is no open-access provision," he said. "But the board could decide that since the citizens are already getting the service, why spend more money on further litigation?"

The board could also decide that further legal action is not needed now that some cable operators, including AT&T, already have been conducting open-access trials and appear ready to embrace the concept.

Verizon, having lost its bid to have the court classify cable Internet as a telecommunications service, also has the right to appeal but hasn't made a decision.

Responding to the defeat, Andrew McBride, Verizon's outside counsel who argued the case, indicated the company wanted the FCC to set a new broadband policy marked by light regulatory obligations on cable and phone companies.

"The FCC needs to come up with a coherent regulatory regime for all broadband providers. Frankly, I don't think it should be common carrier for any of them. It should pare back regulation for all of them," McBride said.

The FCC — which began studying open-access policies related to cable under former chairman William Kennard — can claim victory because the court ruled precisely in the manner requested by the agency.

In its court brief, the FCC urged the court to resist deciding that cable Internet was a "cable service." Instead, the FCC said, Henrico's ordinance should be voided because it required AT&T Broadband to provide "telecommunications facilities" to ISPs in order to gain MediaOne's franchise. Federal law bans such a franchise-transfer condition, the agency said. The FCC also noted that it was actively engaged in the cable access debate.

FCC chairman Michael Powell has ordered the Cable Services Bureau to take the first crack at writing a report based on comments received in a cable open-access inquiry begun last year. That report is many months from seeing the light of day and it is unclear whether it would represent the launch pad for a rulemaking geared toward mandating MSOs to open up to other ISPs.

Local governments want to see cable Internet established as a cable service, which would preserve their franchising authority and powers to collect franchise fees on cable-modem revenue.

"We believe the FCC should decide this. And we're going to press our case that it's a cable service, delivered over a cable platform," said Ron Mallard, president of the National Association of Telecommunications Officers and Advisors.

The 4th Circuit decision was cable's third major court victory. But the judicial findings have contained legal shadings that might prompt the FCC to fill in some gaps or cause some to seek U.S. Supreme Court resolution.

TWO OTHER BIG CASES

AT&T Broadband has been a party in two other major open-access cases.

Last November, U.S. Judge Donald M. Middlebrooks held that Florida's Broward County violated the First Amendment with an ordinance requiring that AT&T Broadband and Comcast Corp. carry unaffiliated ISPs. However, that ruling did not venture into the arena of regulatory classification of cable Internet access.

And last June, a three-judge panel of the U.S. Court of Appeals for the 9th Circuit in San Francisco tossed out an open-access law that Portland, Ore., attempted to impose on AT&T Broadband in a franchise transfer.

That decision found that the company's provision of Excite@Home Corp.'s high-speed-data service was not a cable service, but rather a combination of telecommunications and information services. Consequently, Portland was barred by federal law from requiring AT&T Broadband to provide telecommunications services to unaffiliated ISP as a franchise-transfer condition.

Cable operators, including AT&T Broadband and Cox Communications Inc., reacted to the ruling by insisting the court's key legal finding was that cable Internet was not a cable service. As a result, Cox suspended the collection of franchise fees on revenue derived from cable-modem services within the 9th Circuit until the regulatory landscape had cleared up.

Cox officials last week said the MSO would continue to collect franchise fees in the 4th Circuit. Cox has 400,000 subscribers in Hampton Roads, Va., and another 250,000 in Fairfax County, Va.

"What happened in the 4th Circuit is different from what happened in the 9th Circuit," said Cox spokeswoman Amy Cohn. "We'll continue to collect the franchise fee, but we're happy with the decision."

Last April, the U.S. Court of Appeals for the 11th Circuit in Atlanta — in a case ostensibly about rate regulation of cable attachments to utility poles when cable commingles video programming and Internet traffic — produced yet another interpretation of cable-provided Internet service.

The court held that cable Internet service was neither a cable service nor a telecommunications service. The court noted that the FCC had classified Internet traffic as an information service, which the agency does not regulate.

The Supreme Court has agreed to decide the pole dispute between the National Cable & Telecommunications Association and the FCC against numerous power companies. Both NCTA and the lead power company in the case have asked the high court to allow the FCC to decide the regulatory classification of cable Internet.

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