Summary of AT&T v. City of Portland

This page summarizes both the trial court and appellate proceedings:

This page was last updated on June 23, 2000.

Nature of the Case. This is a federal suit brought by AT&T and TCI, a cable company which AT&T has acquired, for a declaratory judgment that the City of Portland and the County of Multnomah illegally refused to grant AT&T/TCI's request for change of control. At issue is whether local governments have authority to condition the transfer of cable licenses on opening access to Internet access providers. The outcome could have a major impact on the deployment of broadband Internet access to residential customers. AT&T lost in the District Court. The Court of Appeals for the Ninth Circuit reversed.

Plaintiffs. The plaintiffs/petitioners are AT&T, Tele-Communications, Inc., TCI Cablevision of Oregon, Inc., and TCI of Southern Washington.

Defendants. The defendants/respondents are City of Portland and the County of Multnomah, in the State of Oregon.

Intervenors. Several entities intervened in the trial court action, including U S West Interprise America, Inc. (the data networking arm of U S West), the Oregon Internet Service Provider Association, and OGC Telecomm Ltd. All support the position of Portland/Multnomah.

Background. AT&T is a large telecommunications company that is in the process of transforming itself from a long distance voice telephone company into a diversified company providing voice, data and Internet services. One part of its strategy is to acquire cable companies, such as TCI, which have cable lines into millions of homes. AT&T's goal is to use these cable networks to provide not only traditional cable entertainment, but also broadband Internet access to the home, and telephony services directly into the home. Providing cable Internet access puts AT&T in competition with phone companies' DSL service.

Providing cable telephony also enables AT&T to compete in local telephone service. Congress, the Federal Communications Commission, and many consumers are very anxious to see local telephone competition. The main promise of the Telecommunications Act of 1996 was lower phone bills through local competition. This has not yet  happened. AT&T's plan to use cable to enter into local telephony competition is seen by many legislators and federal regulators as a way to provide that competition, and hopefully, lower phone bills.

AT&T will also likely face competition in providing broadband Internet access, mainly from the ILECs (local phone companies, such as U S West), through deployment of DSL technology, but also from electric companies and wireless service providers.

However, Internet access providers, most of whose home customers obtain access via the low bandwidth copper phone lines, are concerned about open access to broadband pipes. There is open access to the phone lines. For example, a local phone company cannot require phone customers to also use the phone company's Internet access service. The rules for cable are different.  And since AT&T is spending much money to acquire cable companies, and upgrade capacity, it does not want to have to provide free access to its cable network. This would greatly decrease its value to AT&T.

See, TLJ Summary of Broadband Access Bills.

Similarly, just as AT&T seeks to maintain control off its broadband cable network, the ILECs have been lobbying Congress to pass legislation that would provide that ILECs that deploy DSL will not have to sell or make available their broadband access services to their competitors.

Internet access providers, such as AOL, Earthlink, and others, want open access to broadband networks, but do not want to pay to develop them. AT&T will bundle Internet access with its own propriety Internet access service, @Home. A customer could purchase AT&T's services, and then also subscribe to another ISP, but many would not, since they would already have @Home service. Also, @Home service would be provided at broadband speeds, while typical Internet service today is provided over slow phone lines at 28 or 56 Kbps. ISPs argue that they will not be able to compete in a broadband world unless they are provided open access to broadband networks.

Excerpts from the Comments of the MHCRC filed with the FCC on 1/29/99.
"... AT&T/TCI intend to do everything possible, including filing litigation, to maintain bottleneck control over the cable customer’s initial entry to the high-speed cable Internet platform. Such control is maintained by requiring each cable customer to enter the high-speed Internet world only through the proprietary platform (e.g. "@Home", "Road Runner") of the incumbent cable operator, before reaching other platforms, ISP’s, and content providers of the consumer’s choice. Without a broad menu of wholesale access through the cable modem, it is not clear to us that the present great variety in narrowband retail access choices (through online providers and ISP’s) will survive ..."

Excerpt from the FCC's Report, 2/18/99
Tele-Communications, Inc. ("TCI") and AT&T Corp. ("AT&T) have applied for our consent to their proposed transfer of control to AT&T of certain licenses and authorizations controlled by TCI or its affiliates or subsidiaries. Based on the record, we find that AT&T and TCI (collectively, the "Applicants" or "AT&T-TCI") have demonstrated that the proposed transfers are in the public interest. We conclude that, with the conditions imposed by this Order, the merger of AT&T and TCI is likely to result in benefits for consumers, including a local telephony alternative to many residential customers now served only by incumbent local exchange companies ("LECs"), without creating competitive harm with respect to other services.

So far, Internet access providers have lobbied both the Congress and the Federal Communications Commission to mandate open access to the broadband networks that are being developed. However, both the Congress and the FCC have rejected their arguments. Neither wants to inhibit local phone competition. Nor does either want to do anything that might slow down the rapid deployment of widespread broadband Internet access.

However, ISPs in Oregon succeeded in inducing the City of Portland, and the surrounding Multnomah County, to do what the FCC and Congress refused.

Summary of the Facts. In June 1998 AT&T announced that it would acquire Tele-Communications, Inc. (TCI) as a wholly owned subsidiary. This provided AT&T with one of the leading cable television companies in the country, with nearly 11 million customers. TCI provides cable service in Portland and Multnomah County.

TCI had previously entered into Franchise Agreements permitting it to provide cable service. Portland and Multnomah County have authority to approve transfers of control. When AT&T entered into the process of acquiring cable company TCI, this entailed a transfer of control.

AT&T and TCI applied for license transfers from Portland/Multnomah. The Mt. Hood Cable Regulatory Commission, which advises Portland/Multnomah, held hearings on the applications, and recommended the mandatory access condition.

Excerpt from City of Portland Ordinance, 1/10/99.
Non-discriminatory access to cable modem platform. Transferee shall provide, and cause the Franchisees to provide, non-discriminatory access to the Franchisees’ cable modem platform for providers of Internet and on-line services, whether or not such providers are affiliated with Transferee or the Franchisees, unless otherwise required by applicable law.

Both the City and the County decided to condition their approval of the applications on AT&T's agreement to provide open access to all ISPs to its cable network in Portland and Multnomah County. AT&T refused. The City and County refused to grant the transfers of control.

After Portland/Multnomah refused the transfer, AT&T, TCI, and TCI's local subsidiaries sued in federal district court in Oregon to compel the City and County to grant the license transfers, without a mandatory access provision. The plaintiffs moved for summary judgment, and the defendants filed a cross-motion for summary judgment.

Legal Issues. While the decisions by the City and County (and the Congress and the FCC) were based in part on policy considerations, the U.S. District Court does not have authority to judge whether mandating open access to broadband cable networks is good policy. The issue before the court is whether the City and County had the legal authority to make the decisions that they did.

In particular, AT&T/TCI alleged the following:

District Court Holding. Judge Panner ruled on the cross motions for summary judgment on June 4. He granted defendants' motion and denied plaintiffs'. He wrote in his Opinion that there was no federal preemption. He also wrote that neither the City nor the County had violated the first amendment, the contract clause, the commerce clause, the Oregon Constitution, or the franchise agreements.

Status. The trial court ruled against AT&T on June 4, 1999. AT&T filed an appeal with the U.S. Court of Appeals for the 9th Circuit. Oral argument was held on November 1, 1999.

Chronology with Links to Related Materials
(All links are to the Tech Law Journal web site, unless otherwise indicated.)

Attorneys

Plaintiffs/Petitioners (AT&T, TCI, et. al.).

Defendant/Respondent, City of Portland. Terence Thatcher and Benjamin Walters, Office of the City Attorney.
• Address: 1221 SW Fourth Ave., Suite 430, Portland, OR 97204.
• Telephone: 503-823-4047.
• Fax: 503-823-3089.

Defendant/Respondent, Multnomah County. Gerald Itkin, Multnomah County Counsel.
• Address: 1120 SW Fifth Ave., Suite 1530, Portland, OR, 97204.
• Telephone: 503-248-3138.
• Fax: 503-248-3377.

Intervenors in the trial court
• U S West Interprise America, Inc., Oregon Internet Service Provider Association (ORISPA), and OGC Telecomm, Ltd. Paul Fortino, Lawrence Reichman, and Chin See Ming, Perkins Coie. PacWest Center, Suite 1500, 1211 SW Fifth Avenue, Portland, OR 97204-3715.

Intervenors on appeal
• ORISPA.
• U S West and GTE.

Amicus Curiae Parties in the Court of Appeals.

Other Resources

Federal Communications Commission.

Portland/Multnomah County.

Federal Courts.

Groups.