Federal Judge Rules AT&T Must Open Cable Lines To Internet Providers
WASHINGTON -(Dow Jones)- AT&T Corp. has no right to exclude competing Internet-service providers from its cable systems, a federal judge in Oregon ruled Friday in a case that could help shape the rules for competition in the lucrative market for high-speed
Internet service.
In a blow to the telecommunications giant, Judge Owen Panner upheld the right of cable regulators in Portland and the surrounding Multnomah County to condition their approval of AT&T's $55 billion purchase of cable-TV giant Tele-Communications Inc. on opening up access to its pipes. AT&T fought off efforts to impose such
conditions on a national level during a review by the Federal Communications Commission.
Shares of several Internet-access providers rose on the news. MindSpring Enterprises Inc. (MSPG), PSINet Inc. (PSIX), EarthLink Network Inc. (ELNK) all posted impressive gains Friday. Shares of America Online Inc. (AOL), which operates the No. 1 gateway
to the Internet and has fought to open up the TCI lines, finished up $11.25,sor 11%, at $117. Shares of At Home Corp. (ATHM), an AT&T cable arm, fell $11.25, or 11%, to settle at $94. Shares of AT&T (T) fell $1.8125 to $53.4375.
"This probably signals a turning of the tide in this debate," said Legg Mason Precursor Group analyst analyst Scott Cleland. "It's a very significant legal decision.
Now, the FCC has to decide if it wants to have open access imposed city by city, set national rules, or rescue AT&T from the cities."
Cleland said federal pre-emption, however, would be unlikely. A number of other cities also want open cable access, including Seattle, Los Angeles, San Francisco, Oakland, Washington, D.C. and Miami.
However, the judge's decision is likely to be appealed. And the National Cable Television Association, cautioned against reading too much into the decision. "If you'll recall, it wasn't too long ago that a federal district judge in Texas ruled that the Telecommunications Act of 1996 was unconstitutional," said a spokesman
for the cable-industry group, a decision that was eventually overturned. "That's why we have the appellate courts, and we would expect AT&T to appeal."
Companies itching for open access include America Online and other Internet service providers. Cable companies, including TCI, own most of At Home Corp., which sells high-speed access to the Internet via devices called cable modems. AOL has criticized At Home and the cable TV companies for denying it access to their high-speed
networks. Almost all of AOL's 14 million customers now reach the online service, and through it the Internet, using relatively slow dial-up phone modems.
The cable franchise transfer between AT&T and TCI in Portland, and in many other cities around the country, is necessary in order for the two companies to offer cable-modem service in those cities. Being able to offer cable, voice, data, video and Internet service through a high-speed modem is at the core of the acquisition.
AT&T, Microsoft Corp. and billionaire investor Paul Allen believe cable lines will be the best way to quickly deliver interactive services to consumers. In particular, they are racing to introduce cable modems, which deliver data at high speeds to homes. |
