FCC TO TAKE STAND

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Washington -- Federal Communications Commission chairman
William Kennard last week promised to help the cable industry win its court battle against
the city of Portland, Ore., in the dispute over municipal authority to pry open cable
wires to Internet-access competition.

According to the text of a July 20 speech to San Francisco
communications lawyers, Kennard said the FCC would file a brief with the Ninth U.S.
Circuit Court of Appeals "so we can explain to the court why it's important that we
have national policy."

Three days later, FCC spokeswoman Joy Howell said Kennard's
comments, which were reported by one national newspaper verbatim, were in fact not spoken
by him, and he dropped that passage at the last minute. Nevertheless, the commission is
still planning to file in support of the cable industry, she added.

"What is true is that we are preparing to file a brief
in that case," Howell said.

On the same day as Kennard's speech, Comcast Corp. fired
back at Broward County, Fla., by filing suit in federal court against a county ordinance
adopted two weeks ago that would require cable operators to provide nondiscriminatory
terms and conditions to competing Internet-service providers. AT&T Corp. also vowed to
sue Broward.

Comcast vice president of external affairs and
public-policy counsel Joe Waz said in a prepared statement that Broward unlawfully
inserted new requirements in its franchise that violate the MSO's First Amendment
free-speech rights and interfere with Congress' authority to regulate interstate commerce.

"Our goal in bringing this challenge to the Broward
County ordinance is to ensure our ability to invest and bring new high-speed Internet
services to localities. There is nothing pro-competitive about this ordinance," Waz
said.

In contrast, AT&T sued Portland when the city required
AT&T -- if it wanted to obtain control of Tele-Communications Inc.'s cable franchise
-- to allow unaffiliated ISPs to reach end-users over its cable wires.

Portland won the case, triggering an instant appeal by
AT&T and a strong reaction by Kennard that a multitude of cities cannot possibly
manage Internet-competition issues individually. Oral arguments will be heard in October.

"We welcome the FCC's participation in this case. We
believe that chairman Kennard and the other commissioners have been exactly right in terms
of letting the market work," National Cable Television Association vice president of
law and regulatory policy Daniel Brenner said.

But exactly what the FCC will say in the brief could be
controversial.

The cable industry will no doubt endorse the FCC's brief
insofar as it states that U.S. District Court Judge Owen Panner, in his June 3 Portland
ruling, erred in finding that cities could use franchise-transfer powers to require open
access to the cable-modem platform.

Yet the cable industry would not have the same reaction if
the commission went further by stating that it had jurisdiction over states and cities to
set Internet-access policies and pinpointing specific provisions in communications law
where it had the authority to order cable operators to open up their data facilities.

Both last week and last month at the National Show in
Chicago, Kennard flatly stated that the FCC has the authority to set national policy. But
he has not outlined the scope of that authority, except to say that the commission
believes that cable-operator provision of broadband services, including Internet access,
should not be regulated at this time.

"As I have said before, it is in the national interest
that we have a national broadband policy. The FCC has the authority to set one, and we
have. We have taken a deregulatory approach -- an approach that will let this nascent
industry flourish," Kennard said in prepared remarks to the Northern California
Chapter of the Federal Communications Bar Association.

Nick Miller, managing director of Miller & Van Eaton, a
Washington, D.C.-based law firm specializing in municipal issues, said Kennard has to
carefully maintain jurisdiction over the open-access issue.

If the FCC's brief argues that local franchising
authorities do not have the authority to impose equal access, and the court agrees, then
the agency also loses jurisdiction, Miller added.

"[Kennard's] dancing on the edge of a razor blade on
this one," he said.

Jane Lawton, president of the National Association of
Telecommunications Officers and Advisors, said she was surprised that Kennard bought into
the AT&T business model without at least seeking public comment or detailing why he
favored the MSO's position over the one advanced by opponents.

AT&T claimed that its $100 billion-plus cable
investments would be devalued if it has to open its network to any ISP that comes along.

"He should open a notice of inquiry and hear from
local citizens, and then go on the record as to why he believes AT&T's business model
is best," Lawton said.

In other flare-ups of the open-access issue last week:

• In San Francisco, combatants used the airwaves to
foster public support for their points of view, while AT&T Broadband & Internet
Services CEO Leo J. Hindery Jr. personally lobbied members of the county Board of
Supervisors while he attended the CTAM Summit. The board will discuss the TCI-AT&T
franchise transfer July 26.

• In Chicago, Ameritech Corp. said it would offer
cable-modem access to America Online Inc. this fall in a trial to show the viability of
multiple ISPs on a cable network.

The technical trial -- announced in conjunction with
Ameritech's plans to begin rapid deployment of digital-subscriber-line service -- will
take place in one of the competitive overbuilder's Chicago-area Americast two-way cable
systems.

Data-over-cable provider Excite@Home branded the
announcement as politically motivated, noting that Ameritech had complained to the FCC
that technical issues related to phone-line sharing will take years to solve.

• In Spokane, Wash., King County executive Ron Sims
filed comments with the FCC in support of Internet Ventures Inc., a California-based ISP
seeking cable-system access under cable leased-access rules.

AT&T Broadband has denied IVI's request for a single
6-megahertz channel that it could use to offer Internet access in Spokane, arguing that
federal leased-access rules do not apply to ISPs.

King County has reopened provisions in the transfer
agreement that sent 100,000 former TCI cable subscribers in the area to AT&T
Broadband. The provision allows the county to revisit the issue if the MSO unbundles its
network elsewhere.

• In Lansing, Mich., state Sen. Mat Dunaskiss (R-Lake
Orion) introduced a bill addressing unbundling of the high-speed-data platform in his
state. But because of a vacation break, lobbyists will have the rest of the summer to peck
away at Senate Bill 667.

• In Los Angeles, academics and consumer groups were
called to testify before the Information Technology & General Services Committee of
the City Council. Committee chairman and councilman Mark Ridley-Thomas said he wanted to
get input on open access from those "without an ax to grind."

But pure points of view were hard to come by, as at least
one of the academics volunteered that he was paid by AT&T, and several consumer groups
counted among their members independent ISPs and competitive telcos.

A bill sunset was a popular concept, but in different
formats. A few speakers urged regulation now, with its sunset in three years, as by then,
other technologies will have taken care of access issues. Others suggested that regulation
was unnecessary now, advising the City Council to "sit back in the tall grass and let
them all fight it out."

Some consumer groups said they are concerned that without
regulation, access costs will remain out of reach of the large population of minority
residents in Los Angeles.

Los Angeles will not act on the issue for at least 30 days.
Despite the fact that professional staff members studied the issue for months, the
subcommittee decided to establish yet another "blue-ribbon" committee to further
study the issue. The committee will report back in 30 to 60 days.

Joe Estrella and Bill Menezes contributed to this story.

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