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GTE files suit against AT&T in cable access battle

The local telephone and Internet carrier files an antitrust lawsuit against AT&T and Comcast over exclusive deals the cable operators struck with Excite@Home.

Local phone giant GTE today sued cable operators AT&T and Comcast, charging that preventing Internet service providers from using their high-speed networks is illegal under antitrust laws.

The lawsuit is the latest blow in a highly charged fight involving the efforts of America Online, GTE, and others to win the right to offer Net services over cable networks. The battle pits AT&T and other cable operators against ISPs in federal and local courts across the nation.

High speed pipe dreams? Firms like GTE argue that cable companies should provide "open access" to ISPs--essentially allowing any ISP to provide Internet services over cable networks, much like local phone firms are required to share their networks with local competitors. Cable companies, however, say their networks are privately funded and are not subject to the same federal rules as are the public phone networks.

GTE filed suit today against AT&T, Comcast, and their affiliated Net service provider Excite@Home, arguing that antitrust law bars the cable companies from linking cable and Internet services.

"It's clear to us that this does constitute an antitrust violation," William Barr, executive vice president and general counsel for GTE, said during a conference call today.

"We don't say it's improper for a company to have an economic advantage over its competitors," added Henry Weissmann, a Los Angeles-based attorney with Munger, Tolles & Olson, representing GTE. "What we are saying, and what the law says, is that it is improper for them to exploit that advantage to tie it to some other product in which they don't."

The lawsuit came after Congress and the Federal Communications Commission turned a deaf ear to the complaints of GTE and other Internet companies about the cable deals, although a handful of local governments have tried to ban the practice.

GTE has long been one of the leading players in the battle to open AT&T's networks. The phone company kicked off a trial project with AOL last summer, opening its own cable lines to the online service provider to prove that open access is technically possible.

Comcast immediately accused GTE of trying to use the courts to further its own business interests.

"No one should be surprised that GTE, which has sued the [FCC] at every turn to stop local phone competition, should try similar tactics to slow down facilities-based Internet competition," said Joe Waz, Comcast's vice president of external affairs.

AT&T echoed Comcast's concerns. "It is preposterous and ironic for a monopoly like GTE to use the antitrust laws to block emerging competition," added AT&T general counsel Jim Cicconi in a statement. "If the antitrust laws condemn anything, it's GTE's dismal record of closed markets, captive customers, high prices and poor service."

Excite@Home also turned the spotlight on GTE's antitrust record in response to the suit, claiming that the telephone company has "spent millions on lawyers in an effort to prevent consumers from reaping the benefits of competition."

"It would be absurd for the court to find that the antitrust laws should be used to protect an entrenched monopolist, such as GTE, with a greater than 95-percent market share from a new competitor, like Excite@Home, who has less than 2-percent market share."

Court cases and future questions
The city of Portland ruled last spring that AT&T--which inherited the local cable license following its purchase of Tele-Communications Incorporated--should open its networks to outside ISPs. AT&T sued to overturn this requirement, but a federal judge upheld Portland's right to impose the rule.

The company's appeal of that first legal ruling will open in court next Monday.

A ruling against AT&T in either the Portland case or the GTE suit could hasten a decision over the future of Excite@Home. Analysts say Excite@Home's stock could be significantly affected if it is forced to directly compete with other high-speed offerings.

And the Net-over-cable company's largest shareholder, AT&T, recently said it has held talks concerning possible business deals for Excite@Home. The telecommunications giant has made no secret of its desire to offer Net access from ISPs over its cable networks once its exclusive arrangement with Excite@Home expires.

Reuters contributed to this report.