U.S. District Court Judge Owen Panner granted the motion for summary judgment sought by city and county officials in Portland and surrounding Multnomah County, effectively putting an end to the court case.
The Oregon lawsuit was brought by AT&T and the former TCIin January after Portland officials required the firms to allow competitors to use their cable networks to offer Internet service. AT&T argued that city officials did not have the authority to force such a provision, following the firms' multibillion-dollar merger that transferred TCI's cable franchise to AT&T.
"The decision today is a hands-down victory," said Erik Sten, a Portland city commissioner who heads the office of cable communications and franchise management.
At issue is whether AT&T, already the nation's largest long distance company and soon to be the biggest cable operator, should be forced to open its networks to ISP competitors to offer their own broadband services. Critics have said AT&T could effectively hold a monopoly on broadband Net access with its proprietary cable modem service Excite@Home.
Ma Bell has said that allowing competitors to use its cable networks removes the incentive to invest in costly upgrades required to offer high-speed Net access.
Although the case addressed whether the city had the authority to impose the open access requirements on AT&T, Panner also wrote in his decision that AT&T and the former TCI "have no contractual right under the franchise agreements to exclude competitors from the cable modem platform."
Panner did not specifically address the merits of open access as a policy, however.
"The issue is whether the city and county have the power to require access to the cable modem platform as a condition of approving AT&T's takeover of the cable franchises. To resolve the legal issue, I don't need to consider whether the open access requirement is good policy," he wrote. "I conclude that the open access requirement is within the authority of the city and county to protect competition."
"Today's decision is inexplicable?We continue to believe strongly in the merits of our legal arguments," Mark Rosenblum, AT&T's vice president of law, said in a prepared statement. "The actions taken by officials of Portland and Multnomah County are beyond the legal authority municipalities have to review cable franchise transfers. Clearly we will continue to pursue our legal case.
"In the meantime, the real losers are likely to be the citizens of Portland and Multnomah County," he added. "This decision can only have the potential to delay and reduce the new services that companies like AT&T will be able to offer them."
Yet critics of the long distance giant's policies cheered the decision. "AT&T sued the people of Portland for requiring a level playing field. The judge's ruling sends the message that thousands of communities have that jurisdiction and that they can make their own decisions in favor of a competitive Internet future," said Sydney Rubin, a spokeswoman for the OpenNet Coalition. The coalition is an ISP lobbying group that includes America Online and MindSpring Enterprises, among others.
Wall Street reacted markedly to the court's decision. Stock in @Home slipped more than 10 percent to close at 94.5. ISPs Mindspring and AOL both posted significant gains today, largely coming late in the afternoon following the news. Mindspring gained more than 21 percent to finish at 79.3125, while AOL added more than 11 percent to end the day at 118.
More cities to challenge
The decision is likely to spark a slew of open access requests from other cities and local jurisdictions across the country.
The city of Los Angeles is currently studying the issue, while San Francisco officials are seeking what they have called a "Portland clause" that would entitle ISPs in San Francisco to equal cable access if any other local municipality is granted open access.
A commission of the San Francisco County Board of Supervisors is weighing its options with regard to the AT&T-TCI merger and negotiations are ongoing between city officials and the companies, sources say.
Seattle also adopted a clause that would let the city's cable franchise require open access if the Portland ruling is upheld, Sten said. Portland city officials said they believe AT&T will appeal the decision.
AT&T will need to get approval from of hundreds of cities across the country to transfer cable franchise licenses from MediaOne--just as it had to do when it acquired TCI. With today's federal court ruling, open access proponents hope other cities will continue the cable access fight.
Earlier this year, the Federal Communications Commissiondeclined to rule on the controversial issue, stating that its was premature to decide whether cable companies are exerting too much control over the high-speed Net access market.
But the issue has continued to gain steam in Washington. Two proposals are circulating in Congress that would give unaffiliated ISPs the right to access cable companies' infrastructure.
The FCC's State and Local Government Advisory Committee, which represents state and municipal government interests, earlier this week recommended that the commission reopen the cable access issue. Regulators aren't required to act on this recommendation, but it does add new weight to arguments from OpenNet and others.
News.com's John Borland contributed to this report.