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No Joy in Naperville

AT&T Inc. officials said they are reviewing their options after a breakdown in negotiations with Naperville, Ill., over a city ordinance that would have enabled the telephone company to launch its U-verse video service.

Following five months of talks, Naperville’s City Council was ready to vote on a competitive video service ordinance when AT&T objected. According to a letter, sent to the city attorney and senior assistant city attorney by AT&T lawyer Richard J. Quist, the telephone company did not see the terms of the operating agreement until they were posted in the Aug. 15 agenda.

The agreement poised to go before the city council was never discussed with AT&T Illinois, the attorney wrote.

According to the city’s report, the two parties were at odds especially about a community buildout. The staff report said AT&T made a verbal agreement to provide U-verse to 93% of the locality, with the remainder served by direct-broadcast satellite. City officials said the lack of a complete buildout might leave the city vulnerable to lawsuits by incumbents Comcast Corp. and Wide Open West LLC, which are required to serve the whole city.

In Quist’s letter, the attorney said AT&T never made the 93% commitment.

AT&T offered to indemnify the city against lawsuits, but city officials felt that would give too much power to the telephone company, according to city documents.

AT&T tried to mute concern about level-playing field challenges, because that language applies to cable operators and AT&T is not a cable operator, the attorney stressed. AT&T’s position has been that its Internet Protocol television service is not a cable service.

If there were a lawsuit, AT&T’s promised $2.7 million prepayment of franchise fees would protect the city against any “baseless cable company action,” Quist wrote.

Given the company’s refutation of information in the city staff report, the City Council did not approve an agreement with AT&T.

AT&T has sued other Illinois communities — including Wheaton, Itasca, North Aurora, Wood Dale, Geneva, Roselle and Carpentersville — in federal court when they either refused to approve company-specific siting permits or put a moratorium on issuing permits.

AT&T Illinois director of public affairs Rob Biederman said the company had reached agreement with Naperville on many points. But the city sought to include a “poison pill” in the agreement (the buildout and other franchise-like elements) that prevents AT&T from deploying competitive video services. The company is reviewing its options, he added.