Portland, Ore., will not challenge a 9thU.S. Circuit Court of Appeals decision that presumably handed AT & T Broadband a major victory in the open-access wars, officials said.
After months of speculation, lawmakers last week pronounced themselves "satisfied" with the court's ruling, even though it struck down a local ordinance that required AT & T to allow unaffiliated Internet-service providers onto its network.
"We're satisfied with [the court's] analysis," Portland commissioner Erik Sten said.
But Sten fired off a letter to the Federal Trade Commission last week in support of the agency's reported plan to make open access a major factor in its consideration of the proposed America Online Inc.-Time Warner Inc. merger.
In his letter, Sten argued that the FTC "clearly" has the authority to impose open access and prevent consumers from being forced to buy Internet access from the same company that provides their cable service. That, he wrote, violates antitrust laws that prohibit tying the purchase of one product to the purchase of another.
Analyst believe Portland did not have to challenge the appellate court's decision because it had already received what it needed: a declaration that AT & T's Excite@Home data-over-cable product is a tele-communications service, which theoretically subjects it to the Federal Communications Commission's common-carrier rules.
"The decision was one that AT & T wishes it didn't win," said Scott Cleland, chief executive officer of the Precursor Group, a Washington, D.C., research outfit. "Cable didn't want anything to do with a common-carrier designation. Portland lost the case, but won the issue."
AT & T officials declined to comment on Portland's decision to drop the case.
Sten said he believes FTC support for open access will force the FCC to finally address the issue, something it's been trying to avoid.
"What leaves a sour taste is the FCC," Sten said. "We've said from the beginning that the best way to handle this was through a federal policy. But I don't have a lot of faith that the FCC will move forward, so I think most people welcome the FTC stepping into the breach."
Sten said that by labeling Internet-over-cable as a telecom service, the court stripped away AT & T's argument that it "shouldn't be subject to cable law, or to national telecom policy.
"They can't have it both ways," Sten said.
Finances were also part of the equation. Portland spent about $100,000 battling AT & T on open access.
"That's real money to cities," he said. "But it's not going to break us."
Portland triggered the access debate two years ago, when it adopted an ordinance that required AT & T to unbundle its local network in order to obtain a cable franchise from Tele-Communications Inc. AT & T sued in U.S. District Court and lost. In June, the 9thCircuit overturned the Portland ruling.
Cable industry executives have speculated that Portland realized it had little chance of winning on appeal, and there was no guarantee the Supreme Court would hear its case.
But if the U.S. District Court for the 4thCircuit overturns a lower-court decision striking down an access ordinance in Henrico County, Va., the Supreme Court would have to settle the resulting split.
Not that it would matter, said an executive with a leading MSO, who insisted "the handwriting was on the wall" for cable's opposition to open access when the FTC took up the fight.
AOL Time Warner will accept open access "because they're going to get this deal done at any cost," said the executive. "That may be the death knell, right there."
Meanwhile, Portland is trying to settle another controversy arising from the open-access issue.
As soon as it won at the 9thCircuit, AT & T immediately began rolling out Excite@Home in areas of Portland where an upgrade had been completed. The city then argued the company was selling a telecom service without the appropriate franchise.
Portland officials refused to try and stop the launch, fashioning a license agreement with the same features as a franchise but allowing AT & T to claim it did not knuckle under to the city's demands.
"I think they can see it's not in their best interest to start another dogfight," Sten said. "I don't think another round of litigation is necessary. But if we can't resolve some significant problems, we probably will end up in court."