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NEW TWIST ON OREGON TRAIL TCI, AT&T Throw @Home Issue Back to Regulators

AT&T Corp. and Tele-Communications Inc. threw anunexpected curve last week at Oregon regulators who want to open @Home Network to outsideInternet-service providers.

In tossing the issue back into the laps of area franchisingofficials, the companies agreed to abide by all provisions contained in recently enactedordinances that would transfer TCI franchises in Portland and Multnomah County to AT&T-- all except for the one requiring ISP access.

AT&T said it would not abide by that provision, whichgrants ISPs nondiscriminatory access to the @Home cable-modem platform under federalcommercial leased-access rules.

"It's now in the hands of the cities," one TCIofficial said.

News of the qualified acceptance came just hours before adeadline requiring AT&T to sign off on the ordinances by midnight Dec. 29, or thetransfers would have been considered denied.

The Mount Hood Cable Regulatory Commission -- a localregulatory advisory group that crafted the ordinances -- reacted predictably.

"The ordinances require unqualified acceptance,"MHCRC director David Olson said. "There's no spin that anybody can put on this. Thelanguage is very straightforward. What they've offered is a modified acceptance.

"On the face of it, this seems to trigger the denialof the franchises. But we'll seek legal confirmation of that."

Olson said he expects to have a legal opinion within twoweeks.

In a prepared statement, AT&T said the access provisionwould require that it "act contrary to federal telecommunications law," and thatit was "outside of the scope of local review" and it threatened to underminecompetition.

"With our acceptance of the ordinance, minus a singleprovision, we look forward to providing an alternative for local phone service andexpanding the portfolio of video and data services for Portland customers," saidLaura Imeson, AT&T's state director for government affairs.

TCI officials, meanwhile, said the companies continue toview the two ordinances as "unlawful."

"Our position hasn't changed," TCI spokeswomanLaRae Marsik said. "There are a lot of things that we'll accept, but this isn't oneof them."

AT&T's sleight of hand comes at a time when ISP accessappears to gaining momentum elsewhere, with some large TCI jurisdictions at least lookingat the issue.

In Denver, for example, the Public Works and AmenitiesCommittee -- which has until Jan. 31 to craft an ordinance transferring 112,000 TCIcustomers to AT&T -- has delayed any action while it seeks a legal opinion thisweek on whether the city has the authority to require the unbundling of @Home.

"There are a lot of questions that need to beanswered," Denver City Council legislative analyst Debra Bartelson said, "likewhether the city has the authority, possible cross-subsidization and the impact onconsumers."

Denver telecommunications officials have come out againstany such ISP requirement.

"I'm not convinced that we have the statutoryauthority to condition the transfer in the manner that U S West and AOL [America OnlineInc.] have been advancing," said Dean Smits, director of the Denver Office ofTelecommunications. "And in the absence of clear statutory authority, we're courtinglitigation."

Smits noted that more than 400 local franchisingauthorities have already approved transfers requested by AT&T, including Chicago,TCI's largest system.

However, one industry source speculated that most weresmaller venues that allowed the 120-day period for acting on the requests to lapse.

Moreover, the Chicago franchise expires in March, whichcould open the way for city officials to address the issue during a renewal, rather thanduring the transfer process, the source said.

AT&T and TCI continue to maintain that authority togrant access to their network rests with the Federal Communications Commission, and thatcities considering transfers are limited to reviewing the new operator's technical,financial and legal qualifications.

"Which AT&T meets on all counts," accordingto their statement.

But some industry followers said federal law is"unclear" as to a city's power to order AT&T to unbundle @Home, leaving bothsides with "compelling" legal arguments.

As a result, Ken Fellman, an attorney for the GreaterDenver Cable Consortium -- a group that represents some 500,000 TCI customers --said the FCC will likely rule on the merger, then open a separate rulemaking proceedingthat will decide the matter industrywide.

Meanwhile, in King County, Wash., which has some 100,000TCI subscribers, the staff for the King County Council this week will propose a transferordinance that will at least "address the [ISP] issue."

"It would be hard to ignore after what Portlanddid," said Chris Jaramillo, King County's cable-compliance officer.

In nearby Seattle, however, ISP access has become secondaryto TCI's announcement that it will not meet the Jan. 20 deadline for upgrading service for60,000 local customers.

The news prompted an angry City Council to bring inrepresentatives from Tacoma, Wash., for a briefing on how that community launched amunicipally owned cable service.

"The rebuild issue is much bigger now," said RonaZevin, Seattle's director of interactive media, "so the ISP issue is not getting muchprominence."

Nevertheless, Zevin said, any transfer of TCI's franchisewill include language allowing the city to revisit the issue, depending on what the FCCdoes.

In Bellevue, Wash., a transfer will also include languagecalling for "modifications" to the franchise when @Home is introduced to thatmarket, spokesman Tony Perez said.

"Before they can offer that service, we'll have toreopen the franchise," Perez said. "And if it's an issue of access to broadbandservices, I think that we would have a look at the access issue."

An ally of the ISPs has been U S West, which is pushingaccess throughout its 14-state region, including Portland, King County and Seattle.

U S West is arguing that AT&T and TCI are seeking tocreate a "digital Panama Canal," similar to the one that "citiesexperienced with traditional bottleneck monopoly cable service."

Tim Sandos, U S West's director of public policy, said thetelco is also seeking "regulatory parity," since AT&T and TCI would be ableto use @Home to offer identical data and telephony services, but under less stringentregulation.

"You can't allow AT&T to use the regulatory systemto gain unfettered access to the market, while we're heavily regulated," Sandos said.

Sandos added that the 1934 Communications Act providescities with the power to regulate cable services, especially if consumers may be affectedby a reduction in competition.

Moreover, he called AT&T's insistence that the fedsdecide the issue a "shell game," with the company telling local authorities thatjurisdiction rests with the FCC, while telling the agency that the authority belongs toCongress.