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To: Michael Young who wrote (1214)	6/5/1999 3:44:00 PM
From: CanynGirl	Respond to of 2802

Oregon Trial Proves Perilous for Ma Bell By George Mannes and Spencer Ante Staff Reporters 6/4/99 9:40 PM ET The battle over high-speed Internet access just heated up. A ruling issued Friday afternoon by a U.S. District Court judge in Portland, Ore., is good news for America Online (AOL:NYSE) and other Internet service providers. And it's bad news for AT&T (T:NYSE) and Excite@Home (ATHM:Nasdaq). Judge Owen Panner ruled that regulators in Portland and the adjacent Multnomah County were within their rights to tell AT&T it couldn't acquire the franchises to local cable systems without giving third-party Internet service providers open access to high-speed cable connections to local subscribers. The decision came in response to a lawsuit AT&T filed earlier this year arising from its acquisition of cable TV giant Tele-Communications, or TCI. The Oregon officials refused to approve transfer of TCI's local franchises to AT&T unless Ma Bell agreed to the so-called "open access." That wasn't what AT&T had hoped to hear. AT&T has a major stake in Excite@Home, formed last week from the merger of Excite and @Home Network, and is poised to give the firm favored distribution on the cable networks it controls. The ruling is a boost for AOL and other Internet service providers, or ISPs, which have been lobbying to get access to homes around the country via cable on the same terms AT&T gives its home team. Whether the ruling will stick, of course, is unknown. After all, in 1997, a federal judge in Wichita Falls, Texas, threw out an important section of the 1996 Telecom Act -- only to be overturned several months later. And AT&T undoubtedly will appeal. But this case is different, says Scott Cleland, managing director for the Legg Mason Precursor Group. "This is standard, bread-and-butter economic regulation. This is not esoteric constitutional law," says Cleland. "It'll probably be upheld on appeal." Cleland adds that the decision may prompt the Federal Communications Commission to get "more involved, more serious about the issue." The FCC declined to make any moves in the open-access issue when it was raised in the course of AT&T's purchase of TCI. "The assumption right now in the market is that cable has the best pipe and it [the cable industry] doesn't have to share it," Cleland says. "This decision signals the assumption may not be valid." Legg Mason hasn't done underwriting for AOL, AT&T or Excite@Home. Atlanta-based telecom analyst Jeffrey Kagan says AT&T's recently announced deal to acquire MediaOne Group (UMG:NYSE) makes it more likely that an open-access policy will be imposed on AT&T. "The MediaOne deal changed the dynamic of AT&T's position in the market," says Kagan. "When you're a minor player in the industry, you can get away with a lot more. When you're a dominant player in the industry -- and AT&T is the largest in the [cable] industry now -- there's a responsibility that goes along with it." Kagan declined to disclose his clients, but said he works for "everyone" in the industry. Today's ruling follows several months of concern by AOL investors that the company's dominant position as an online service provider could be threatened as it was excluded from gaining access to high-speed cable connections. While AOL has reached high-speed distribution agreements with Bell Atlantic (BEL:NYSE) and SBC Communications (SBC:NYSE), it has yet to reach agreements for carriage with any cable system. Jeffrey Diecidue, managing director of AOL shareholder Unicom Capital, says today's decision changes people's perceptions of AOL's prospects, though he doesn't think the company ever faced a real problem getting access to cable. "Previously people were saying AOL was cooked," Diecidue says. "Now they're realizing it's not so one-sided." The investment community reacted quickly to the news Friday afternoon, sending AOL's stock up 12 1/4 to 118, and dropping Excite@Home 10 3/4 to 94 1/2. Merrill Lynch (MER:NYSE) analyst Henry Blodget published an intra-day special call in response to the ruling. "We believe this decision will be mired in litigation given the high probability of an appeal," wrote Blodget. "We believe these developments may be nascent step towards the opening up of the cable's land-line infrastructure." Blodget currently rates AOL a buy and Excite@Home an intermediate accumulate. Tom Friedberg, an analyst with Janco Partners, says at the very least the ruling will further focus concern on AT&T's "reach-out-and-crush-someone" broadband strategy. "It's most-favored-nation status as the default ISP for cable companies has to be questioned," says Friedberg, who covers telecommunications companies. "It's going to heighten the debate. It goes from a simmer to a slow boil." Janco has done underwriting for @Home. That puts the onus on the FCC to step in. "A balkanized telecom regulatory regime is not in the best interests of public policy," Friedberg says. But, conjuring up another messy overseas military metaphor, consultant Blair Levin questions whether the government should step up its involvement. "You really get into this regulatory Vietnam," warns Levin, who served as former FCC Chairman Reed Hundt's chief of staff and has been retained by Excite@Home as a consultant. "The overwhelming number of people who have considered this issue think regulation is a bad public policy idea," says Levin. AT&T was defiant Friday afternoon. "Today's decision is inexplicable," said Mark Rosenblum, AT&T vice president-law, in a statement issued by Ma Bell. "AT&T raised numerous substantial challenges to these ordinances, going to the jurisdictions' legal authority to adopt these rules as well as the soundness of the rules themselves." See you in court. thestreet.com

To: Michael Young who wrote (1214)	6/5/1999 11:25:00 PM
From: TFF	Respond to of 2802

>>>> but it seems like a non event for the rest of the sector. Broadband rollout will usher in the next stage of the net. Audio/Video and accelerated page views will dramatically impact the viability of E*commerce...yes I'd say it will impact the rest of the sector;)

To: Michael Young who wrote (1214)	6/6/1999 11:14:00 PM
From: Michael Young	Respond to of 2802

Jim Seymour - of PC Magazine and street.com - suggests in a new column that the Portland decision has very bad long run implications for the net. <<But declaring the cable systems of America common carriers would be a disaster for our national telecom policy, for the companies building these systems ... and for those unhappy consumers looking for something better. The debt and equity markets are not going to be willing to finance the huge remaining investments needed to make fast access available everywhere unless they see commensurate returns flowing to the AT&Ts of the business from that capital investment. >>