WSJ online edition- mostly what you have already read in other pieces with a little additional:
Judge Rules AT&T Can't Exclude
Internet Providers From Network
By MARK WIGFIELD
Dow Jones Newswires
WASHINGTON -- 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, U.S. District 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 lines.
"The mandatory-access condition does not
substantially impair the plaintiff's contractual
rights under the franchise agreements," the
judge said. AT&T fought off efforts to impose
such conditions on a national level during a
review by the Federal Communications
Commission.
"This probably signals a turning of the tide in this debate," said Legg
Mason Precursor Group 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."
Mr. 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 certain to be appealed.
Companies itching for open access include America Online Inc. and other
Internet service providers.
Through its acquisition of TCI, AT&T owns a 26% stake in the recently
formed Excite At Home Corp., which sells high-speed access to the
Internet via devices called cable modems. Other cable providers have
stakes in Excite At Home as well, created by the merger of portal site
Excite with Internet provider At Home. (Shares of Excite At Home
dropped $10.75, or 10%, to close at $94.50 on Friday in the wake of the
decision.)
AOL has criticized At Home and the cable-TV companies for denying it
access to their high-speed networks. Almost all of AOL's 18 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
was the essential reason for AT&T's acquisition of TCI.
Wait for the Appeal
Scott Broyles, a spokesman for 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
Mr. Broyles, citing a decision that was then overturned by the Supreme
Court. "That's why we have the appellate courts, and we would expect
AT&T to appeal."
Following the merger, AT&T planned to upgrade the TCI cable so it could
provide high-speed Internet service over At Home. But in its investigation
of the merger, the Mt. Hood Regulatory Commission, which advises the
Portland-Multnomah County area, determined that other Internet-service
providers wouldn't be able to compete with At Home's speed, and would
likely be driven out of business.
Consumers wanting to use their current Internet-service provider at the
higher speeds available over cable lines would have to subscribe to At
Home as well -- something few consumers would do, the commission said.
The commission recommended that AT&T's cable-modem platform be
open to competitors so subscribers of unaffiliated Internet-service
providers wouldn't have to pay twice to use the TCI cable to deliver
high-speed Internet access.
The city and county adopted the mandatory-access provision, which
AT&T immediately challenged in court. AT&T said the requirement was
pre-empted by federal cable statutes, was a violation of the First
Amendment's protection of free speech, and a violation of interstate
commerce. Judge Panner disagreed on all counts.
Mark Rosenblum, AT&T's vice president for law, called the Portland
District Court's decision on cable access "is inexplicable."
The actions of Portland and Multnomah County "are beyond the legal
authority municipalities have to review cable-franchise transfers," he said.
"Clearly we will continue to pursue our legal case."
Mr. Rosenblum said cable laws don't give municipalities the authority to
decide how broadband services should be rolled out. And while
municipalities can consider competition issues when reviewing a transfer of
control, the AT&T-TCI merger itself had no impact on local competition
for Internet services.
"Whether or not that system was owned by AT&T or TCI, the situation is
the same," he said. In other words, TCI could have decided to provide
high-speed Internet service through At Home even without the merger,
with the same effect on competitors.
Mr. Rosenblum downplayed the decision as one affecting only two
franchises out of hundreds nationwide that reviewed the merger. And in the
Portland area, it will only affect rollout of cable-Internet service, not the
combination of AT&T and TCI in general.
An FCC spokesman said agency attorneys were still reviewing the
decision and had no comment.
AOL Wants In
AOL fears that AT&T's new strategy could succeed and leave AT&T
with control of the nation's cable pipelines. Indeed, Mr. Rosenblum said
AOL and U S West Inc. both lobbied Oregon authorities for the
open-access provision.
AT&T warned regulators eager to encourage the rollout of technologies
offering high-speed Internet access that imposing a national open-access
condition on the TCI merger would be a deal-breaker. Such a condition,
the company said, would have limited company's potential to recoup its
investment in upgrading cable systems to provide high-speed Internet
service.
But Friday's decision is just another example of how courts and regulators
are groping for answers about how to exercise their powers with respect
to the Internet, particularly broadband services, said Paul Glenchur,
telecommunications analyst with the Schwab Washington Research Group.
Statutes governing cable and telephone service "are not equipped to deal
with this," he said.
"Do you use cable regulation to protect competition in the Internet
market?" he asked. "It's what happens when technology runs way ahead of
the law."
Gene Kimmelman of the Consumer Federation of America said the
decision, if upheld, will benefit consumers and commerce. Moreover, it's
likely to catch Congress' attention.
"It will stimulate debate on what is a fair standard for entry to the Internet,"
he said. |
