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Friday, June 23, 2000

Associated Press
Portland City Commissioner Erik Sten discusses the
9th Circuit Court of Appeals ruling yesterday regarding
authority over Internet cable access.

Cable ruling
could open Internet

Portland officials and isle
execs say the authority given
the federal government should
benefit the industry

From staff and wire reports


PORTLAND, Ore. -- Despite losing the fight to regulate AT&T Corp.'s cable network, city officials say their battle will nevertheless open up competition among Internet service providers. Internet executives in Hawaii also applauded the ruling.

The 9th U.S. Circuit Court of Appeals in San Francisco decided yesterday that the AtHome cable Internet service offered by AT&T was really a telecommunications service -- meaning it is subject to Federal Communications Commission control, not the city's.

The court rejected a federal judge's ruling last June that Portland had the right to regulate the cable TV system AT&T acquired with its purchase of Tele-Communications Inc., known as TCI.

AT&T had sued Portland, claiming it was still a cable TV service that could close access to competitors because it was simply delivering information.

At the time, AT&T was transforming the system to a two-way interactive system that can also accommodate telephone service.

"I think the irony is that AT&T suing us forced open access," City Commissioner Erik Sten said. "Had we not stood up to AT&T, competitors probably would not have bothered to come to Portland."

AT&T said it got the ruling it was seeking all along -- namely, that cities and counties had no authority to regulate its cable system.

"It simply validates our conclusion about what the law says," said Jim Cicconi, AT&T general counsel. "We won the case."

But Greg Simon, co-director of the openNet Coalition, which was backing Portland, said AT&T was trying to avoid federal regulation and ended up putting itself squarely under the thumb of the FCC.

"If you read their press release they say they won because Portland can't regulate them as a cable company and their stock went up two dollars," Simon said.

"But I don't think their stock will go up when they give the rest of the story," he said. "They lost. The 9th Circuit has said, "You're open now!' "

Kit Grant, vice president of LavaNet Inc., a Hawaii Internet service provider, was encouraged by the ruling.

"This ruling is a good thing," Grant said "We're cautiously optimistic. But we're certainly not dancing on the tables."

Telecommunications services are regulated at the state and federal level.

As a result of the ruling, she said, local ISPs will ask the state Public Utilities Commission to begin regulating cable Internet, just like the commission does with other telecommuniations services.

If cable Internet comes under PUC jurisdiction, Oceanic Cable's digital network on Oahu will be accessible to competitors, providing consumers with more choice for Internet hookups, Grant said. But she does not expect that to happen any time soon, partly because of the slowness of the regulatory and political process.

"There's still a long ways to go," she said.

A PUC spokeswoman said the commission has yet to review the court ruling and therefore could not comment.

Oceanic spokesman Kit Beuret said the opening of cable Internet should be left to the marketplace, not to government mandates.

He noted that Oceanic's parent New York-based Time Warner Inc., the nation's second-largest cable provider, and America Online Inc. already have indicated they plan to open Internet access to other ISPs after their planned merger.

A spokeswoman for AOL, which initially was one of the most ardent lobbyists against AT&T in this debate before backing off, praised the decision, likewise saying the matter should be left to the industry.

"The debate about open access regulation has been overtaken by the tremendous progress in the marketplace, with AT&T and AOL and Time Warner all committed to providing open access and choice for consumers," said Kathy McKiernan.

FCC Chairman William Kennard issued a statement saying that federal policy will continue to "promote choice" and that consumers "should be able to point, click and choose their Internet service provider."

The FCC has been leery of creating rules that might stifle this emerging technology. As AT&T argued in its appeal, the FCC has deliberately taken a hands-off approach to regulating cable access to the Internet after the Telecommunications Act of 1996.

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