Closure for open access?

In the tennis match that is the open cable access fight, AT&T won the equivalent of Wimbledon last Thursday when the 9th Circuit Court of Appeals decided that Portland, Ore., cannot require AT&T Broadband to open its cable system to competing ISPs.

A U.S. district court ruled little more than a year ago that Portland's cable commissioners had jurisdiction in the case. But the appellate court found that providing Internet service over broadband cable is a telecom service, therefore regulated by the FCC.

"That is probably the single biggest objective we were seeking to vindicate," said Mark Rosenblum, chief litigator for AT&T in the case. "If the thousands of local and municipal cable authorities in this country have the right to make individual decisions about the kinds of services we offer or the technology we use or how we configure the networks, it's going to be very expensive - and possibly impossible - to deploy the kinds of new services we intend to offer to provide competition for all consumers."

The ruling is a victory for AT&T and Excite@Home, currently the only ISP carried on AT&T's network. While the decision only applies in the 9th Circuit - which includes California, Oregon and Washington - Rosenblum expected the ruling to affect lawsuits against other open access rules in Culver City and Madeira County, Calif.

The appellate court's ruling has no direct impact on a suit filed against an open access ordinance passed by Broward County, Fla. But district courts sometimes note higher court rulings elsewhere, and the Portland verdict may strengthen the arguments for AT&T and the other plaintiffs in the Broward case.

The ruling is an apparent blow to ISPs wanting assurances that they will be carried over cable operators' hybrid fiber/coax networks in a way - and at a price - that will make them asattractive to end users as the multiple systems operators' favored access provider. The FCC has made it clear that it is unwilling to require open access if cable providers seem to be opening their systems to competition voluntarily. ISPs hoped to avoid the FCC by bringing county and municipal cable officials into the fold.

Erik Sten, the Portland city commissioner who heads its cable authority, said he is uncertain whether Portland will appeal the decision to the Supreme Court.

Still, those groups - and representatives of Portland - said the decision constituted a win of sorts because it classified cable Internet as a telecom service, making cable Internet subject to the same compulsory interconnection rules governing telephone service.

"We have said from Day One that this is something the FCC needs to resolve," Sten said. "The FCC ignored the issue and allowed AT&T to bring in, under the guise of a cable service, what was clearly a telecommunications service."

Indeed, the ruling still could serve the goals of open access advocates, said David Baker, EarthLink's vice president for law and public policy. "The worst thing you can say about Portland is that we lost the battle, but we still won the war," he said.

But the 9th Circuit decision acknowledges the FCC's right to apply telecom standards to cable Internet if the commission thinks the public will benefit. The right not to regulate appears to make it less likely that FCC Chairman William Kennard will reverse past pronouncements and remove access from the workings of the commercial marketplace.

After the ruling, Kennard said that the FCC's policies "will continue to promote choice among providers for content and conduit while fostering an environment of investment and innovation."

"Our opponents saw the lower court ruling as a victory," said AT&T general counsel James Cicconi. "Now they say the reversal of that ruling is a victory. They can't have it both ways."

But momentum regarding open access has shifted during the 18 months since Portland created its ordinance. AT&T has agreed to bring competing ISPs onto its network - although not until its exclusive contract with Excite@Home expires in two years - and has announced a small, multiple-ISP trial in its Boulder, Colo., system. Cox Communications and Comcast have made the same commitments in principle. And America Online has gone from a cable opponent to a potential cable owner with its bid to merge with Time Warner.

AT&T will proceed with the suspended upgrade of its cable network in Portland. Three or four other cable operators have applied for permission to build their own systems in Portland and to offer consumers a choice of ISPs. So far, Portland has not approved any of those overbuilding proposals.

Ironically, the same day that AT&T won its long-awaited right to offer only Excite@Home, the carrier apparently agreed to delay its plan to take control of that ISP by buying the interests of Cox and Comcast. AT&T said in March it would pay the other two MSOs as much as $3 billion to amass a 70% voting stake in Excite@Home.

But Cablevision, the largest operator in the New York metro area and another Excite@Home investor, filed a lawsuit last Monday, maintaining that it must have a voice in any share buyout.

According to Cablevision, the parties have agreed not to consummate the deal until its suit has been disposed. It also requested a fast-track procedure so deliberation can begin by Sept. 6.