Kennard: Local Rules Would Be Net Chaos

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Washington -- Federal Communications Commission chairman
William Kennard went to Chicago last week and said exactly what the cable industry wanted
to hear: Cities, keep your paws off the Internet.

"I want a national policy. I believe that 30,000 local
franchising authorities going off in different directions is a recipe for uncertainty and
chaos," Kennard said in a National Show speech that could end up being his most
important as FCC chairman.

Kennard spoke to a room packed with cable executives,
lobbyists and lawyers eager to learn whether he would back the federal judge in Portland,
Ore., who ruled that cities may force cable operators to open their networks to competing
Internet-service providers.

When they got their answer, they stood and applauded.
Kennard drew his biggest hand after saying Internet-access policy had to be set in
Washington.

"It was a courageous, generous speech," said Leo
J. Hindery Jr., president and CEO of AT&T Broadband & Internet Services. "I
couldn't be more thrilled."

"He hit the one right note that I cared about, and
that was the access issue. I think he was right on the money," Cox Communications
Inc. president James O. Robbins said.

"They need to let us develop this business," said
Robert Miron, president of Advance/Newhouse Communications.

Bear Stearns & Co. cable analyst Ray Katz said
Kennard's speech would "absolutely" help cable stocks, which got beat up
after U.S. District Judge Owen Panner's ruling in the Portland case.

"The reaction to [Portland] has been decidedly
negative," Katz added.

Once again, Kennard promised to monitor whether
cable's bundling of Internet content and access proves to be anti-competitive.

Yet he declared that the broadband-access market is wide
open today, and that regulators must stay on the sidelines to make sure they "do no
harm." He called it his "high-tech Hippocratic oath."

The only odd note came when Kennard noted that AT&T
Corp. chairman C. Michael Armstrong promised in his own speech the day before that
AT&T's networks would be open in terms of content and conduit.

"I am not sure exactly what he means, but we are going
to be watching," Kennard said.

Armstrong, speaking to reporters the day before
Kennard's speech, used nearly the same language as Kennard in assessing the
implications of the Portland case.

"If indeed jurisdiction for telecom policy in America
is to be embedded in municipality license-transfer review, the outcome will be
chaos," he said.

Armstrong came out with that statement immediately after
Hindery, at the same press conference, suggested that the media exaggerated the scope of
Panner's ruling.

"[Panner] never opined on bundling or
unbundling," Hindery said. "It was reported widely that he approved or consented
to the concept of unbundling. He did not."

Kennard said he was surprised that no one from the cable
industry had a filed a petition seeking a policy pronouncement from the FCC that federal
law prohibited cities from regulating cable Internet services.

National Cable Television Association president Decker
Anstrom said the NCTA had no plans to file with the FCC. And a Time Warner Inc. lobbyist
said the matter needed to be discussed within the company -- especially whether Time
Warner had standing to make such a filing.

AT&T vice president of law Mark Rosenblum said his
company's response to Kennard would have to await the results of a study of the legal
issues by FCC general counsel Christopher Wright.

As expected, AT&T filed an appeal last week in the U.S.
Court of Appeals for the Ninth Circuit, saying the Portland ordinances upheld by Panner
violate numerous provisions of federal cable-television law and the First Amendment.

AT&T asked the court to expedite its review and to
produce an opinion by the end of the year to coincide with its planned rollout of
high-speed-data service @Home Network in the Portland market.

AT&T general counsel Jim Cicconi said Portland violated
federal law by requiring AT&T to provide telecommunications facilities and by imposing
common-carrier regulation on AT&T in forcing cable networks open to any requesting
ISP.

"That's exactly what the law says a municipality
cannot do," Cicconi added.

Portland violated AT&T's First Amendment rights by
forcing it to provide the content of other ISPs, he said.

Rosenblum said AT&T declined to seek a stay of
Panner's ruling because expedited review by the Ninth Circuit would provide "a
quicker, more effective resolution" to the dispute.

"We would just rather get it reversed," he added.

The cable industry is unlikely to take up Kennard on his
implied invitation to take on the cities by filing a petition with the FCC. Cable sources
said the cities have too much political power to expect the FCC to produce a policy that
is favorable to cable.

At the commission, cable would also run the risk that the
assertion of FCC jurisdiction over access to cable-broadband facilities would be the first
step down a slippery slope toward regulation.

"[Kennard] mentioned the possibility of an FCC
proceeding. This also raised some difficult questions for [cable]," Wright said.
"Here's the problem for [cable]: We can't pre-empt [the cities] unless we
have authority. [Cable] has to tell us we have authority in this area."

FCC commissioner Susan Ness, who attended Kennard's
speech, indicated for the first time that she agreed with him that the FCC has
jurisdiction over cable provision of high-speed Internet access.

"I don't have a problem with the general thrust
of what he said," Ness said.

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