In Ore., TCI Told to Open @Home Platform

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In a groundbreaking decision, municipal regulators in
Oregon will try to force AT&T Corp. and Tele-Communications Inc. to open their @Home
Network cable-modem platform to Internet-service providers.

The Mt. Hood Cable Regulatory Commission, which advises six
area communities, recommended last week that the city of Portland and Multnomah County
make ISP access a condition for transferring their TCI franchises to AT&T.

As such, the commission proposed a pair of transfer
ordinances granting local ISPs "nondiscriminatory" access to the @Home platform
under federal commercial-leased-access rules. These require that cable operators set aside
up to 15 percent of their channel space for unaffiliated programmers that are willing to
pay for access.

The ordinances passed despite vociferous opposition from
TCI and AT&T, which argued that the transfer process limits the commission to
examining AT&T's overall qualifications for operating the TCI systems.

"The leased-access rules apply only to video,"
TCI spokesman David Krone said. "And it's questionable whether a city has the legal
authority to impose something like this."

MHCRC director David Olson disagreed.

"By no means do we think that we overstepped our
authority," Olson said. "The ability to operate a company includes following the
law. And the leased-access rules are still part of cable law."

The MHCRC is the first local franchising authority to wade
into the contentious access battle, which, until last week, was being fought at the
Federal Communications Commission.

Its recommendation is a victory for ISPs, which -- in
addition to asking the FCC to force AT&T to unbundle the @Home network -- have been
maneuvering behind-the-scenes to convince LFAs to make access to the high-speed pipe a
condition for a franchise transfer.

The most aggressive has been America Online Inc., which
began by lobbying at the recent National Association of Telecommunications Officers and
Advisors annual conference in San Diego.

Success, however, has been problematic.

In Denver, for example, local officials considered AOL's
request legally shaky, while in St. Louis, municipal telecommunications executives called
the idea "not entirely ripe yet," because it raises the specter of treating
cable as a common carrier.

Following the vote to forward the ordinances to the
Portland City Council and the Multnomah County Commission, AT&T and TCI
representatives issued a thinly veiled warning.

"They told me, 'We hope you have a large
budget,'" Olson said. "I took that to mean that they're threatening
litigation."

If accepted by the two regulatory bodies, but not by the
two companies, the municipalities would deem the transfer of the two systems to be
rejected. The process would return to square one, but without the 120-day deadline imposed
on cities for acting on transfer requests, Olson said.

Pointing to the 1934 Telecommunications Act, Krone said
that by imposing "common-carrier" requirements on cable, franchising authorities
are "saying that they don't expect to be paid franchise fees."

"The law does not talk about unbundling and
interconnection under Title 6. It clearly addresses it under Title 2. And it says that
those companies don't pay franchise fees," Krone said.

Nevertheless, if other jurisdictions follow the MHCRC's
lead, it could pose a problem for AT&T and TCI, which are seeking franchise transfers
from more than 900 municipal governments nationwide.

Meanwhile, the companies filed comments with the FCC last
week in which they claimed that there "is no basis in law or fact" for the
conditions sought by the ISPs, warning that imposing them would "severely
jeopardize" the TCI-AT&T merger.

TCI spokeswoman LaRae Marsik labeled the commission's
decision "unlawful" and "unacceptable."

"We're in discussions with ISPs, including America
Online," Marsik said. "But this should be the subject of a business negotiation,
and not an onerous imposition of government regulations."

Marsik said the MHCRC recommendation removes the incentive
for the MSO and AT&T to invest in the @Home infrastructure, while relieving Baby Bells
like U S West from the need to push competing asymmetrical-digital-subscriber-line
services in Oregon.

Apart from possible legal action in the MHCRC matter, one
option open to the companies is to ask the FCC to pre-empt the Oregon commission's
recommendation.

Marsik said the companies will initially make their case
before the PCC and the MCC -- the two regulatory bodies that will take up the new
ordinances at their December monthly meetings.

Legal experts, meanwhile, said the ISPs might have a leg to
stand on.

Joe Van Eaton, a partner with Washington, D.C.-based law
firm Miller & Van Eaton, said local regulators can deny a franchise transfer if they
think that it will curtail competition.

"What the ISPs are asking people to look at is
something that would be hard to characterize as out-of-bounds," Van Eaton said.

Oregon ISPs believe that the issue must be attacked at all
regulatory levels.

"Grassroots lobbying is the most effective way to make
change," said Richard Horswell, president of the Oregon State Internet Services
Provider's Association. "We need to make all levels of government aware of the
necessity of choice for consumers."

Horswell's company, Europa Communications Group, and the 40
other ISPs that make up the OSISPA successfully argued their case before the MHCRC, but
they have met with resistance elsewhere.

The organization approached officials in nearby Vancouver,
Wash., where the cable advisory board considering the TCI-AT&T transfer listened
politely, then passed.

"Our legal counsel said it is not appropriate for us
to take a position," said Donna Mason, director of information services for the city
of Vancouver.

The attorney advised that under federal telecommunications
law, city officials may only assess the technical, financial and legal ability of the new
operator. Modem access does not fall into those classes, Mason said.

Other communities that are currently considering the
TCI-AT&T transfer, such as Los Angeles and Chicago, said ISP providers have not
contacted them.

Most declined to offer opinions on the Portland strategy,
but they said they're keeping their options open.

However, Ken Fellman, an attorney for the Greater Metro
Cable Consortium, a coalition of local regulators in metropolitan Denver, warned against
"taking the lead" in what's shaping up as a "legal battle between the ISPs
and the cable industry."

"It's almost like the Internet people are asking us to
carry the ball for them," Fellman said. "Let them fight their own battles."

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