CITIES PREP FOR AT&T SIEGE

Coming soon to a city near you: the fight to ride AT&T's cable network.

As the new top cable power does the legal spadework to take over its latest purchase - MediaOne - opponents who want high-speed cable access in homes are taking their case to local authorities that must approve cable franchise transfers.

In the latest tussle, Los Angeles' Information Technology Agency produced a report recommending that AT&T be allowed to take over the former Tele-Communications Inc. franchise without unbundling the network to Internet service providers competing with its @Home service. The report release, however, was tainted by the resignation of three of the agency's five board members who cited pressure from Mayor Richard Riordan. "The city should not...kowtow to the wishes of an industry seeking monopoly power," said board member Robert Duggan in his resignation letter.

Other cities are debating the access issue, energized by a June 3 court ruling that allowed local authorities in Portland, Ore., to force cable operators to unlock the gates to competitors. The Broward County, Fla., government voted to reconsider open access, and a Seattle ordinance would let that city require open access if the Portland decision is upheld.

Last Wednesday, San Francisco's Public Utilities Committee refused to approve a TCI franchise transfer, opting instead for closed-door hearings on July 6. Board of Supervisors President Thomas Ammiano said before the decision that he wants AT&T to open its network to unaffiliated ISPs.

"Portland stood up to AT&T," said Greg Simon, co-director of the OpenNET Coalition, a group of about 70 ISPs advocating open access. "It looks like San Francisco is showing similar courage."

But AT&T Senior Vice President Scott Morris displayed some moxie, too, by appearing with Simon last week at CompTel during its business conference in Chicago.

Morris maintained AT&T should benefit fully from risking its capital on assembling a cable network and upgrading it for phone service.

"To say cable is a precious resource and we need to appropriate it for others to use is clearly a disincentive to further investment," Morris said.

Chris Maturn, outside counsel for Internet Ventures, an ISP trying to get its Internet service onto cable networks in four markets, including Portland, said his company did not want free access but the ability to lease capacity as an alternative provider of video and audio programming over the Internet with telco return. "With leased access, 5000 service providers can run service over cable immediately," he said. "The technology is proven, and it works today."

Qwest Communications' fiber network needs last-mile connections not just from telcos but from "the second local loop, cable," said Genny Morali, senior vice president of Qwest. She asked Morris why investment would be discouraged if competing providers agreed to pay for cable access.

"At what rate?" Morris asked. "Price regulation assumes monopoly control, but what's going on in cable right now is all risk money. It's not clear how much of the telephony or broadband marketplace will be secured by any cable operator."

OpenNET's Simon scoffed at that argument. "AT&T has the money to make this happen and the FCC is their law firm," he said. "If you believe that the broadband industry is just a theory, then it's a theory Mike Armstrong spent $100 billion on."