AT&T Cable-Internet Case Looms Large

PORTLAND, Ore., Nov. 1—Is high-speed Internet access delivered over cable television lines just another cable service, or is it a type of telecommunications?

That question -- and the stakes hanging on the answer -- unexpectedly dominated proceedings in a federal courtroom today as a panel of appellate judges considered whether Portland may force AT&T Corp. to share its cable lines with its rivals.

If the high-speed service is considered to be cable, then it could fall under rules established by local jurisdictions that govern cable television as a regulated monopoly -- the kind of regulations that Portland has imposed on AT&T.

By Peter S. Goodman
Washington Post Staff Writer
Tuesday, November 2, 1999; Page E01

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But if the service is categorized as telecommunications, then it could become a federally regulated service.  That's important because the telephone world is full of rules aimed at undoing monopolies.

With that basic difference in mind, AT&T has bet its future on cable, spending more than $100 billion to buy more than half the wires in the country along with a controlling interest in Excite At Home, which connects customers to the Internet via cable. Portland's conditions would force AT&T to allow customers to connect to the Internet service provider of their choice.

In January, AT&T filed a lawsuit challenging Portland's authority.  In June, a federal judge here ruled for Portland.  Today, the attorneys convened anew to present oral arguments to a three-judge panel of the U.S. Court of Appeals for the 9th District.  A ruling is not expected until next year.

From the beginning, AT&T has asserted that the dispute involves a cable service, a fact the city has not challenged.  But the court quickly revealed an interest in revisiting that question.

In an opening statement, David W. Carpenter, an attorney for AT&T, portrayed Excite At Home as essentially another cable channel, one that delivers Internet content.  Congress has specifically avoided saddling cable with regulations in the hopes that the lines would emerge as conduits for new Internet services and competitive local telephone service.

Carpenter was interrupted by Judge Sidney R. Thomas.  The Federal Communications Commission, while declining to regulate high-speed Internet access, has suggested that Excite At Home is really a telecommunications service.  "If the court agrees with the commission," Thomas said, "what else is there for us to decide?"

His face reddening, Carpenter's voice tensed as he continued.  Even if Excite At Home is a telecommunications service, he argued, federal law bars the city from forcing a cable company to provide telecommunications "facilities."  And the equipment needed to comply with Portland's rules to allow other Internet providers to connect to AT&T's lines amounts to precisely that, Carpenter said.

Deputy City Attorney Terence L. Thatcher reprised the argument that carried the day in June: Though Congress has sought to limit regulations on cable, local rules aimed at protecting the public interest always hold sway unless federal law explicitly provides otherwise.

Again, Thomas intervened.  "If this is not a cable service," he asked, "what happens to the argument?"  When Thatcher reminded the court that the city has not challenged AT&T's portrayal of Excite At Home as a cable service, he drew a reprimand from another judge, Edward Leavy.

"Isn't that an avoidance?" he asked.  "It strikes me that everyone is trying to dance around this issue."

"We have to determine what this is, before we can figure out what rules apply to it," Judge Thomas added.  "If we decide that this is a telecommunications service or facility, this case is over, is it not?"

In interviews afterward, both sides sought to paint the unexpected turn in a favorable light.  AT&T said if the court determines Excite At Home is a telecommunications service, it would seal its victory, since cities cannot force cable operators to provide such facilities.

But Portland City Council member Erik Sten said such a ruling could impose federal telephone rules on AT&T's enterprise. Though the FCC has stayed out of it for now, he noted that the agency has left open the possibility it might decide at some point to impose rules on high-speed Internet service.

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