Judge Says Local Officials Can Force AT&T to Share Cable Lines
By MATT RICHTEL -- June 5, 1999
In a decision that could have far-reaching
implications for consumers and the
telecommunications industry, a Federal judge in
Portland, Ore., ruled yesterday that a local
government could force the AT&T Corporation to
share its cable lines with competing Internet service
providers.
The case has represented one front
in a battle that pits AT&T against a
coalition of Internet service
providers and consumer groups
that assert that an emerging source
of high-speed Internet access, cable
modems, faces monopoly control.
The decision yesterday, involving
Portland and the county of which
it is a part, may not have any
immediate practical effect because
AT&T does not offer cable modem service in
Portland and the ruling does not bind AT&T or other
cable operators elsewhere. But analysts called it a
blow to AT&T and said other cities could be
prompted to follow Portland's lead.
Mark C. Rosenblum, vice president for law for
AT&T, called the decision "inexplicable," arguing
that Portland and the county are beyond their legal
authority in requiring open competition. He said the
company intended to appeal the ruling, which was
issued by Judge Owen M. Panner of the United
States District Court.
A parallel battle is being waged in Washington,
where America Online and other Internet providers
have been lobbying regulators and Congress to
require cable companies to offer high-speed Internet
subscribers a choice of service providers, without
advantage to any one.
The Federal Communications Commission has taken
a wait-and-see attitude, but some analysts said the
Oregon ruling would force regulators to act.
"The court's decision is going to force the F.C.C. to
admit there's a pink elephant in the parlor," said
Andrew Jay Schwartzman, president of the Media
Access Project, a public interest law firm.
About 30 million American homes have Internet
access over conventional phone lines, called dial-up
access. About half a million gain access over cable
or phone lines that are 10 to 80 times faster than
typical phone connections, and research firms project
that the number of such high-speed subscribers will
grow to 10 million to 16 million by 2002.
The Portland dispute had its genesis in June 1998,
when AT&T announced its intention to acquire
Tele-Communications Inc., then one of the largest
cable companies in the nation, with 14 million
subscribers.
In a seeming rubber-stamp maneuver, hundreds of
municipalities around the country needed to
authorize the transfer of TCI cable franchises, which
had been granted locally, to AT&T. But in the
Portland area, consumer groups and Internet service
providers urged politicians to challenge the deal.
They asserted that AT&T should not be allowed to
use TCI's cable lines to offer Internet access
exclusively through the At Home Network, a cable
modem service provider that is partly owned by
AT&T. The Portland City Council and the
Multnomah County Commissioners voted in
December not to approve the franchise transfer
unless AT&T agreed to allow competing providers
to offer high-speed Internet access over its lines --
just as local phone companies must connect to a
variety of long-distance providers.
Cable companies argue that there is little incentive
for them to undertake the considerable capital
expense of upgrading their lines for high-speed
Internet connections if they are merely to become a
pipe through which others deliver service.
But in his ruling yesterday, Judge Panner wrote that
AT&T had "no contractual right under the franchise
agreements to exclude competitors from the cable
modem platform."
Scott C. Cleland, managing director of the Legg
Mason Precursor Group, a Washington-based firm
that advises institutional investors, called the
decision "very significant" and said it could
embolden other cities.
"While the marketplace was looking at Congress and
the F.C.C., the grass roots caught fire," he said.
Matt Richtel at mrichtel@nytimes.com welcomes
your comments and suggestions.
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