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Since high speed Internet access through cable modem networks has begun to be offered to communities throughout the country, it is not surprising that a dispute would eventually arise over the power of local governments to regulate the delivery of cable modem service. That’s a dispute in which towns are losing. In a decision filed on June 22, 2000, the Ninth Circuit Court of Appeals ruled in AT&T Corporation, et al. v. City of Portland, et al. that the federal Telecommunications Act prohibits local governments from regulating the provision of Internet service over cable modem networks. As the first Court of Appeals to address the issue, the decision will be looked to by other courts throughout the country. The AT&T case grew out of the merger between AT&T, at the time the nation’s largest long distance telephone provider, and Telecommunications, Inc. (TCI), one of the nation’s largest cable television operators. At the time of the merger, TCI also provided Internet access to consumers in certain communities over cable modem networks. Subsequent to the merger, AT&T continued to offer such access as part of its @Home service, which bundles its cable access with Excite, an Internet service provider. After securing antitrust approval for the merger from the Department of Justice and license transferral approval from the Federal Communications Commission, AT&T sought approval from local franchising authorities for the City of Portland, Oregon, and Multnomah County for the purchase of TCI’s cable network franchises. On December 17, 1998, Portland voted to approve the transfer of TCI’s cable network to AT&T, conditioned on AT&T’s agreeing to provide “non-discriminatory access to the Franchisees’ cable modem platform for providers of Internet and on-line services, whether or not such providers are affiliated with the Transferee or Franchisees.” In effect, local approval was conditioned on AT&T opening up its cable modem network to other ISPs and on-line service providers-competitors of Excite, AT&T’s own proprietary ISP. When AT&T refused to agree to that condition, Portland denied AT&T’s request to transfer the franchises. AT&T sued in federal court seeking declarations that the proposed condition violated the Telecommunications Act, the franchise agreements, and the United States Constitution’s Commerce Clause, Contract Clause, and First Amendment. The district court rejected all AT&T’s claims and granted summary judgment to Portland. AT&T appealed to the Ninth Circuit Court of Appeals. WHAT IS CABLE? Since the Telecommunications Act provides that a “cable operator may not provide cable service without a franchise,” the Court began its analysis by examining whether AT&T’s @Home service is a “cable service” as defined in the Act. After examining the statutory definition, the Court concluded that the “essence of cable service, therefore, is one-way transmission of programming to subscribers generally.” The Court then went on to conclude that AT&T’s @Home service is not a cable service. The Court stressed that: “Internet access is not one-way and general, but interactive and individual beyond the ‘subscriber interaction’ contemplated by the statute. Accessing Web pages, navigating the Web’s hypertext links, corresponding via e-mail, and participating in live chat groups involve two-way communication and information exchange unmatched by the act of electing to receive a one-way transmission of cable or pay-per-view television programming.” The Court also analyzed cable modem access in the context of the overall regulatory scheme which governs cable television, concluding that applying the latter scheme to cable modem access would lead to “absurd results.” Having determined that a “cable operator may provide cable broadband Internet access without a cable service franchise” from a local authority, the Court went on to examine whether local authorities may condition a cable operator’s provision of standard cable service upon its opening access to its cable modem network for competing ISPs. To make this determination, the Court analyzed how the Telecommunications Act defines @Home. Based upon the AT&T Court’s interpretation of the Telecommunications Act, it appears that local regulation of cable modem access is foreclosed . Since the period for the filing of an appeal has not elapsed, whether the defendants will take an appeal is not known. Kevin Tighe is an attorney with Reid and Riege in Hartford.

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