ISPs Take Case To The States

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Stymied at the federal and local levels, Internet service
providers are asking state lawmakers to support their bid to gain access to cable's
broadband pipe.

In recent weeks members of the OpenNet Coalition, a group
headed by America Online Inc., have been the force behind bills in the Texas, New Mexico
and Missouri legislatures calling for cable operators to open their broadband networks to
unaffiliated ISPs.

The bid for state legislation comes after the ISPs hit a
wall earlier this year in their bid to persuade local and federal regulators to make
unbundling of the @Home Network a condition for approving the $48 billion merger between
AT&T and Tele-Communications Inc. -- a demand AT&T ferociously resisted.

"This is just more of the same," said Bill
Arnold, president of the Texas Cable Telecommunications Association, which is nevertheless
mobilizing to fight identical bills in the state House and Senate.

"From their standpoint, it keeps the debate alive, and
(gets) John Q. Public all pumped up."

Under the Texas proposal, operators would have to offer
broadband access to "any other Internet access transport provider," at rates
"at least as favorable as those on which it provides such access to itself, to its
affiliates, or any other person."

Arnold said cable operators are particularly galled that
SBC Communications Inc., the state's dominant local exchange carrier and a company
that has an agreement with AOL to provide access over ADSL lines, is pushing separate
legislation that would exempt it from having to open its own phone network to outsiders.

So far, attempts to push legislation in the three states
have met with mixed results.

While the Texas bill remains alive in both the House and
Senate, similar legislation sponsored by U S West Inc. in New Mexico died on an unanimous
vote in the Senate Judiciary Committee.

"We convinced the committee that expecting us to open
our network to them (U S West) was inappropriate," said Ray Davenport, executive
director of the New Mexico Cable Telecommunications Association. "We're
investor-owned companies that are risking capital on these networks, only to be asked to
turn them over to a giant predator."

In Missouri, legislators have relegated a bill virtually
identical to the Texas measure to a study by a joint House and Senate Committee on
telecommunications. Although that effectively ends its chances this session, it
doesn't prevent the measure from resurfacing next year.

"Obviously, it's the intention of AOL, and its allies
in the shadows, to sidetrack cable's superior technology and, at the same time,
competition,' said Charlie Broomfield, executive director of the state cable

Veteran industry observers were not surprised that the ISPs
were approaching state lawmakers.

"They're just taking the fight to every conceivable
front," said John Mansell, regulatory analyst with Paul Kagan Associates.
"That's going to include Congress, the local renewal and transfer process, and on to
the states."

However, Mansell predicted that OpenNet will find little
support among state lawmakers as long as the Federal Communications Commission remains on
the sidelines and AOL sits atop the organization's member list.

"Lawmakers are going to say, ‘If the FCC is not
getting involved, why the hell should we?'" he said. "And when confronted
with the ISPs' arguments, they'll ask, ‘How many hundreds of thousands of
high-speed Internet access customers does cable have? And doesn't AOL have 16

Moreover, he said, AOL is likely using the issue to try to
gain leverage for a private deal it may be seeking to negotiate with the cable industry.

In Washington D.C., officials with OpenNet, which is still
lobbying Congress for legislation prohibiting cable operators from signing exclusive deals
with affiliated ISPs, said the push at the state level was initiated by coalition members
in each state.

"It's a grassroots movement that we're very
supportive of, but that is essentially being driven by the members," said spokeswoman
Kristin Van Hook. "As far as OpenNet is concerned, our goal is not to go back to the
states. It's the opposite."

Attempts to contact individual members of OpenNet were

OpenNet was formed in early February, a few weeks before
the FCC announced it would not look at the open access issue as part of its review of the
AT&T-TCI merger.

Other state associations said the open access topic has
occasionally surfaced, possibly at AOL's urging.

Bill Cologie, president of the Pennsylvania Cable &
Telecommunications Association, said he is aware of AOL customers receiving mail from the
ISP seeking grass roots support for open access.

Apparently, the plea convinced one customer to approach
legislators in New Hampshire. The user raised the issue during a legislative hearing on
other telecommunications matters, said Bill Durand, executive vice president and chief
counsel for the New England Cable Telecommunications Association. The testimony lead to a
"heated exchange," he said.

"We argued that we invented a better mousetrap, and
now (AOL expects) us to give it away," Durand said. The matter died following the

A Vermont state agency also noted the issue, but nothing
became of it, Durand added.

Ted Hearn contributed to this report.