Seattle area takes on AT&T

The Metropolitan King County Council's seven-member Budget and Fiscal Management committee passed an ordinance--on a 6-0 vote--that would deny the transfer of local cable television franchise licenses to AT&T from cable giant TCI as part of their $48 billion merger.

The full 13-member county council is scheduled to vote on the ordinance February 16. Because the proposed ordinance has an "emergency clause," meaning it would take effect immediately, a two-thirds majority is required to pass. Jane Hague, the Republican chairwoman of the King County fiscal committee, is confident the ordinance will pass with the nine votes needed.

"We have a supermajority at this point," she said.

If King County denies the transfer, the county would join Portland, Oregon, its Pacific Northwest neighbor, as the only local governments willing to require open access to cable networks.

Regulators at the Federal Communications Commission, however, declined to address open access in a recent report on the status of broadband deployments. Chairman William Kennard said the commission would watch the cable industry closely, but stressed that currently additional regulatory laws are not needed.

But Portland--and now King County--think the time is right to consider further cable regulations.

"Competition is something you look at while you're setting the parameters, not after it's been lost or taken away," said Hague. "We believe this is our one opportunity to really bring everyone together."

AT&T believes it's offering the county a good broadband deal.

"Our position has been that the @Home service provides a new means of getting to the Internet quickly," said Scott Morris, an AT&T spokesman. "I think that position is entirely consistent with what the FCC is saying."

Cable, once just an alternative to broadcast television, is now being touted as the ideal network to deliver TV, Internet, telephone service, and advanced services such as video-conferencing. Cable operators are upgrading their networks to two-way cable that allows users to send and receive data.

AT&T bought TCI to use the company's broadband wires to deliver local phone service to millions of consumers. But many local governments--which have authority over regional cable systems--have taken a long, hard look at the merger in recent months because of its potential impact on the future of high-speed Internet access.

Critics contend AT&T, which will soon own a controlling stake in TCI's broadband Internet service @Home, will limit choice by requiring consumers to pay for @Home before they can access other ISPs' content. Many ISPs are lobbying hard for the right to piggyback on cable networks to offer their own high-speed services.

AT&T and TCI are adamantly opposed to so-called open access laws that would require them to allow competitors to pay TCI to use its network to deliver Net access. The companies, and some financial analysts, have said requiring open access would stifle investment in expensive cable networks.

AT&T sued Portland over its decision and is likely to do the same if King County denies the transfer.

In an attempt to head off similar litigation, King County officials are continuing to negotiate with the two merging companies. "AT&T and King County would much prefer to have it resolved from the outset," Hague said.

"There is certainly an opportunity in the time that remains to work out a solution," AT&T's Morris said. "We'll see how the next couple of days go."

Similarly, the city of Seattle is considering open access requirements and also will vote on the merger by Tuesday. Talks with the city have been held over the last few weeks.

"We feel like we've made a lot of progress with the city of Seattle," Morris said. "It's perplexing to me that two entities right across the street can react so differently. We think we've made good headway with one; we haven't yet with the other."