Portland, Oregon, Challenges AT&T-TCI to Open Its Cable Modems to Competitors

By Constance K. Davis

Author’s note: On Thursday, March 11, 1999, I got a large postcard in the mail from TCI @Home. It claims that "The slow-running Internet is history." On the reverse side, it promises that its new service is "Up to 100 times faster than a 28.8 phone modem. Keeps your phone line free. Always on – no dial-up or busy signals. Unlimited usage for one low monthly fee. Intense multimedia experience." In very tiny print at the bottom of that page it admits that the actual speeds may vary and that this service is not available in all locations. In addition, the price and content may also change.

I. Statement of Problem

On June 24, 1998, telecommunications giant AT&T and the cable company TCI announced plans to merge. Not only would that merger give AT&T the access to local telephone markets that AT&T had been seeking, but it would also allow the newly merged company to eventually provide high-speed Internet access over cable modems to as many of TCI’s 33 million cable subscribers as wanted that access.

Franchise agreements in about 940 of the more than 4,000 communities where TCI provides cable service required the local franchising authority to approve the transfer of the TCI franchise to AT&T. Although community after community across the country approved the transfers, apparently with little fanfare, several cities held extensive hearings on the matter and indicated they were dissatisfied with the possible monopoly that would result for high-speed Internet access.

However, only one community actually put a condition on the approval of the franchise transfer – requiring that TCI allow competing Internet Service Providers (ISPs) to pay TCI to use the "last mile" of broadband cable to deliver high-speed Internet service. The Mt. Hood Cable Regulatory Commission in Oregon had recommended to both the city of Portland and to Multnomah County that the franchise transfer be denied after AT&T refused to make space available on its broadband cable for competing ISPs to rent space. Only one of the 10 members on the two boards voted against the transfer denial.

It was the lack of "open access" that had officials in both Portland and Multnomah County concerned. TCI already offers the ISP @Home for those who seek an information provider through cable modem access. Open access would require that cable companies, such as TCI, allow competing ISPs to pay TCI to use the broadband cable TCI has put or will be putting into place. Oregon officials said the lack of competition among ISPs in gaining high-speed access to the Internet through cable modems would create a monopoly and they said their understanding of the Telecommunications Act of 1996 and subsequent statements by the FCC was that competition should be encouraged.

One of the problems facing not only Portland and AT&T, but also the Federal Communications Commission, is that cable modems are a new entity and no one is quite sure if or how they should be regulated, let alone what kind of authority the FCC or the municipality might have over cable modems. Did Portland have the authority to put an open access condition on the franchise transfer from TCI to AT&T? Does the FCC have the authority to preempt such an action by the Portland officials? Should the open access issue be considered a national policy that should be set by the FCC? Or should local communities be able to determine what is best for their area? Will the free marketplace ensure that the proper amount of competition takes place?

What makes those questions even more difficult to answer is the fact that this technology is new and the FCC has not quite figured out how to categorize this medium – if it should be cable, telecommunications or an information service provider – let alone how or whether it can be regulated. In fact, one of the key questions in determining if or how cable modems should be regulated and who has that authority is whether the information and programming provided by cable modems can be or should be considered cable services or video programming through cable systems.

This paper will explore each of those issues as it examines cable modems more closely and considers what Portland’s franchise agreement with TCI originally said, what the FCC has said in various orders and what the courts have found in cases that examine the FCC’s authority to preempt local franchising authorities.

II. Background

After AT&T failed to agree to the open access condition that had been placed upon the franchise transfer, the Portland and Multnomah County authorities sent AT&T a letter on January 7, 1999, officially denying the franchise transfer from TCI to AT&T. AT&T had already warned the local franchising authorities that if open access were to be required, AT&T would bring a suit against them and would not aggressively pursue its upgrade of facilities in the Portland area. On January 20, 1999, AT&T and TCI carried through on their threats and brought suit against Portland, Multnomah County and the eight volunteers who make up the Mount Hood Cable Regulatory Commission claiming they did not have the authority to deny the transfer.

Because the FCC had not yet officially approved the merger, the Mt. Hood Cable Regulatory Commission asked the FCC to make open access a part of its approval of the merger. The FCC declined to do that, for reasons this paper will explore in greater depth later, leaving Portland and Multnomah County still facing the AT&T lawsuit over the denial of the franchise transfer.

Portland and Multnomah County got some support for their open access requirements from consumer groups, ISPs and telecommunications companies, all of which asked for permission to gain access to that last mile of broadband cable that will be available to go to all of the TCI cable consumers’ homes . Among the groups in the consortium seeking open access are America Online, MCI WorldCom, Mindspring Enterprises, and Prodigy.

For awhile it appeared that Seattle, Wash., might also deny the license transfer, but in the end Seattle approved the transfer, in part because AT&T-TCI claims it does offer access to its cable modems. Of course, first consumers have to pay for the AT&T-TCI ‘s own @Home, which will be priced at $39.95 a month, and then consumers can add as many other ISPs on top of that as they can afford. AT&T-TCI has agreed to a six-month study in the Seattle area to determine the best way to work with ISPs. AT&T-TCI will offer a similar arrangement in the Portland area – access to any ISP of the customer’s choice, but only after the customer purchases the @Home services first.

The FCC approved the proposed merger on February 17, 1999, without putting any conditions regarding open access for high-speed Internet service.

III. Why is open access an issue?

When Congress wrote the Telecommunications Act of 1996, it included a section about the Internet, which it defined as "the international computer network of both Federal and non-Federal interoperable packet switched data networks."

However, Congress added that "The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation." It claimed the policy of the United States is "to promote the continued development of the Internet and other interactive computer services . . . to preserve the vibrant and competitive free market that presently exists . . ."

Some definitions from the 1996 Act are in order here. Telecommunications is defined as "the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received." A telecommunications carrier is "any provider of telecommunications services" and those services are defined as the "offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." The Act further states that a telecommunications carrier will be treated as a common carrier "to the extent that it is engaged in providing telecommunications services."

After the 1996 Act was passed, the FCC initiated a plan to help make sure the Act was implemented. Part of that was the FCC’s Local Competition Order, which said the companies that provide both telecommunications and information or enhanced services would be considered telecommunications carriers for Section 251(a) purposes. Another of the FCC’s orders involved universal service, but it expressly said that "the information component of Internet access cannot be supported under section 254(c)(1), which describes universal service as an ‘evolving level of telecommunications services."

More than a year before the AT&T/TCI merger decision was announced, the FCC staff began considering both the regulatory issues they might be forced to confront and policies they might consider in such mergers and concluded that the government "should meet the demand for bandwidth, not restrain it." The working paper suggested the FCC "should greatly limit the extent in which its functions interfere with the functioning of the Internet market."

Open access to the last mile of broadband cable has become an issue for several reasons. Broadband cable, or "fat pipes," have much greater capability for carrying information than current telephone lines do. Cable modems would allow access to the Internet at speeds from 100 to even 1,000 times faster than much of the current technology, depending upon how slow your current telephone modem is, according to industry estimates. A cable modem not only allows access to ISPs at much higher speeds than is available through the traditional telephone modems, it could also include access to numerous other services – such as CD-ROM servers or video servers – that could be made available for subscribers. The possibilities of services that might be available by cable modem continue to grow.

ISPs across the country fear being frozen out of the local cable modem market if open access is not required. Although Internet subscribers who have cable modem capability would still have the option of choosing any ISP they want by the traditional phone modem, many Internet users would want the much faster service that would result from a cable modem. ISPs fear that many of their customers in AT&T-TCI markets could not or would not be willing to pay a monthly ISP subscriber fee of perhaps $20 or more on top of the nearly $40 or so monthly fee they would already have to pay to get @Home before they could gain the Internet service of their choice.

In spite of the possibilities that exist with cable modems, the cable industry fears increased regulation that might slow down the investment it is making in overhauling its infrastructure and especially fears that cable could face regulations similar to those in the telecommunications industry. TCI President Leo Hindery, who had claimed that AOL and other ISPs could have killed the AT&T-TCI merger, predicted that in five years from now "50 to 60 percent of the value created for the cable industry will be driven by revenue from things not done by cable companies today, such as Internet access and telephone services,"

The FCC points out that broadband is not the only possible way to gain high-speed access to the Internet. Access can also be gained through digital subscriber lines, satellite services and wireless cable companies.

IV. Why cable modems are so difficult to figure out

Within months after the announced AT&T/TCI merger, the FCC produced another working paper, this one examining just how its regulatory functions might apply to such a new company. It admitted that the Internet did not fit easily into any of the FCC’s classifications for regulatory authority and that the FCC needed to address the converged broadband result. Repeatedly, the author returns to the theme that the Telecommunications Act of 1996 wanted "to promote the continued development of the Internet . . . to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation."

Although the paper examines key sections of the 1996 Act and the legislative history of specific areas, the author does not reach any firm conclusions about whether the cable modem capability can be classified as a cable service, which is now defined as "the one-way transmission

to subscribers of video programming or other programming service, and subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service." A key question that the FCC and others are focusing on is the meaning the term "or use" in that definition.

Even the FCC’s report approving the merger addressed the question of the legal status of Internet access that would be provided through cable modems. It points out that AT&T-TCI claims @Home’s services are in fact cable services. A key phrase, according to AT&T-TCI is that "or use" phrase. Clearly, AT&T said, Congress meant for such interactive services to be classified as cable services and should include e-mail and browsing the World Wide Web. And because AT&T sees @Home as a cable service, then the FCC has no legal authority to impose any requirements beyond those already spelled out in the 1996 Act for cable services.

According to the legislative history, whether the high-speed Internet services would be considered video programming under Title VI of the 1996 Act would depend upon what content the subscriber receives and how the content is received.

The working paper author seems to believe that if all cable subscribers would generally have access to an Internet service (even if they choose not to actually subscribe to it), then cable Internet-based services could, indeed, be considered as cable services. In support of that, the author goes back to the legislative history of this section and said it may be that Congress intended cable-provided Internet services to be considered a cable service.

In its 1997 working paper, the FCC said that if the information one receives over the Internet is determined to be "video programming," that would not necessarily mean the services would be treated as cable systems. However, it points out, Sec. 602(7)(b) of the 1996 Act says that any facility that does not use the public right-of-way is not considered a cable system. The Internet uses the public right-of-way at least to the extent that telephone and cable companies do. The paper also raises the possibility that

An Internet-based video service might be considered an "open video system," since the Internet itself is an inherently open platform that allows capacity to be shared among all entities with broadcast capabilities. Finally, certain providers of Internet-based video services could be classified as "multichannel video programming distributors" (MVPDs) under 602(11) of the Act.

As for cable, the paper says that the 1984 Cable Act distinguished between a cable service provided over a cable system and a broadband service provided over such a system. The legislative history, the paper says, makes it clear that two-way capacity such as would be provided by cable modems does not fall within the original definition of cable services. But the 1996 Act makes it possible for the FCC to include Internet-based services in their new broader definition of cable services. That, says the paper, could lead to a "parallel universes" of regulation for cable and telephony-provided Internet services.

The companies that sought to stop the merger, or at least put conditions on it, claim that @Home’s services are not cable services, but are information services or telecommunications services. One of the justifications for that argument is that @Home can be offered to subscribers who do not take any TCI basic cable service.

IV. Who has the authority?

The FCC’s jurisdiction over cable was affirmed in 1969 in United States v. Southwestern Cable Co after the FCC had originally declined jurisdiction. That jurisdiction was solidified in United States v. Midwest Video Corp. I in which the Court upheld the FCC’s requirement of original programming by some of the larger cable companies. A few years later, though, the Court was telling the FCC not to exceed its authority to require channels for public, educational and governmental purposes.

The 1992 Cable Act allows municipalities or states the authority to award a cable franchise and to negotiate the agreement with that cable provider. One of the requirements of that act is for the franchisor to make sure that all potential groups of subscribers are ensured access to cable service.

Both the 1984 Act and the 1992 Act allowed leased access to those not affiliated with the cable operator. The working paper raised the possibility that such cable Internet-based services could, in fact, trigger the commercial leased access rules.

The 1996 Act added a section that exempts the provision of telecommunications services by cable operators from some regulation,

but it allowed state and local authority over intrastate communications

services – other than a cable service – that may be provided by a cable system. In addition, the 1996 Act says, "[n]othing in this title shall be construed to affect the authority of any State to regulate any cable operator to the extent that such operator provides any communication service other than cable service, whether offered on a common carrier or private contract basis."

Obviously, before local franchising authorities are quite clear on their ability to set conditions on franchise transfers, a key question they must answer is how to categorize Internet-based services that are offered by cable operators.

V. Cable Modems

The FCC explains that inside the home of a subscriber who uses a cable modem, a splitter will be used to send separate signals over different coaxial cables to the television and to the computers. The cable modem is connected to the coaxial cable that is destined for the computer and is connected to the computer with an Ethernet connection. The more advanced cable modems allow signals to be sent out or received over the coaxial cable, which is constantly open, and in the future may be able to be used for telephone service.

One outcome from the merger is that AT&T has been expected to push for cable modem standards rather than the digital subscriber line (DSL) standards that a number of ISPs currently support. Many of the dial-up Internet providers have used DSL, which uses the traditional copper phone lines for a more rapid transmission of data.

Other issues the FCC must deal with are whether cable modems can be considered multichannel video programming or an open video system. The 1996 Act allows independent programmers to enter the open video system and compete with cable operators, among others.

The video programming question has made it to the courts several times since the 1996 Act was implemented. In a 1996 case, the court looked at a challenge by Time Warner to several sections of the Act. It said that Time Warner’s challenge to the "’program creation’ provision, which neither regulates nor requires the Commission to regulate video programming, is not ripe. Unless the Commission actually imposes limitations, the challenge is not ‘fit for judicial decision.’"

The FCC clearly has the power to preempt state or local regulations, but that does not mean the FCC always does that. In a decision handed down earlier this year, the court said the FCC was correct not to preempt state law as a city had requested. Abilene, Texas, wanted to get into the telecommunications business, but was prevented from doing that by Texas law. Abilene then appealed to the FCC, specifically pointing to Sec. 253(a) of the 1996 Act. That section specifically says "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." The FCC had declined, saying that Congress, in choosing to use the phrase "any entity" had not made it clear that federal agencies could interfere "with a State’s regulation of its political subdivisions."

In another case decided earlier this year, the 1996 Act’s open video system’s (OVS) provisions and the FCC’s authority to preempt local franchise requirements were put to the test. The court agreed with the City of Dallas, Texas, and the U.S. Conference of Mayors that "the FCC exceeded its statutory authority in granting OVS operators an enforceable right of access to local rights-of-way" and reversed the rule that preempted local franchise requirements for OVS’s.

The court added that the FCC’s "preemption of local franchising requirements is at odds with the Act’s preservation of state and local authority and with a ‘clear statement’ principle the Supreme Court has articulated."

In fact, the Fifth Circuit court takes the FCC to task in its assumption that it has broad powers to preempt local franchising authorities and, like the Abilene court, cites Gregory v. Ashcroft for the proposition that Congress needs to make it very clear when Congress intends to preempt a power previously held by a state or local government. The court here says Congress made no such statement in the 1996 Act.

The FCC, as it began to survey the landscape after nearly a year with the 1996 Act, addressed the leased commercial access provision of the Act. It said it believed:

VI. Where Portland gets its authority

Oregon, in fact, has specifically sought to provide affordable telecommunications for every community in the state and in 1995 the Oregon Telecommunications Forum Council was created by Oregon Senate Bill 994. One of its strategies has been to work with the legislature to seek investment in the infrastructure, and "regulatory and legislative action that will enhance access to and ability to use telecommunications resources for all Oregonians.

A Portland city commissioner said he believes the cable system should provide access to any ISP that is willing to pay TCI for that access and to compete with other ISPs for the Portland area subscribers. "The only true competition is one in which the rules are equal. AT&T’s cable technology should have the same open access requirements as the telephone line if it is going to compete," Erik Sten said. He added that the issue is a national one and should be decided at a national level.

An AT&T spokesperson agreed that the issue was a national one and that Portland was not the place to be deciding this question; the FCC was the place to decide policies that have a national impact.

In deciding to tell AT&T that the giant company had to open up access to its broadband cable and allow competitors to provide Internet service if they chose, Portland officials looked mostly to its franchise agreement, to the Cable Act of 1984 and to the Telecommunications Act of 1996 as the sources of that authority.

Section 613(d) of Cable Act (Title VI of Communications Act) authorizes local authorities to impose pro-competitive conditions.

In Spokane, an ISP sought space on the TCI cable system under the leaved provision terms of the Telecommunications Act, but was denied that access.

However the Act also speaks to general franchise requirements in Part III of Title VI and may give AT&T some leverage there. The franchising authority cannot impose requirements that have the "effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator of an affiliate thereof." However, another section of the Telecommunications Act may again seem to give the Portland folks a way to legitimize their authority. Franchising authority may "enforce requirements contained within the franchise for the provision of services, facilities, and equipment, whether or not related to the establishment or operation of a cable system."

In fact, one whole section of the Telecommunications Act targets increased competition "to promote the public interest, convenience and necessity." It does not just want to increase the competition in video programming, which AT&T says it is not involved in, anyway, it also wants to look at satellite programming, and to "spur the development of communications technologies."

To support its belief that it had the authority to put a condition on the license transfer, Portland also looked to its franchise agreement with TCI that was signed in February 1993 and was to be in effect through December 31, 2007.

The franchise agreement states, among other things, that TCI does not have an exclusive franchise, one of the reasons Portland has regulatory authority over a franchise agreement is that TCI uses the city’s public resources to establish its distribution network and "if the market for cable services becomes competitive in the future, the City may revise its regulatory role."

The franchise agreement also specifies that the required upgrade "obligates Franchisee to activate Bi-directional capability that can support two-way, high-speed Internet access via the Cable System." Under the terms of the agreement, TCI faced a March 31, 2001, deadline for completing the cable system upgrade.

Portland’s agreement with TCI was one of about 940 around the country that requires the city’s consent to any transfer of the franchise. and the agreement allows the city to put legal, technical or financial conditions on any transfer. In Sec. 17 of the franchise agreement, the city spells out its regulatory authority, citing the "public interest" and regulatory authority present in the Cable Television Consumer Protection and Competition Act of 1992.

VII. The FCC approves merger with no conditions

Prior to the FCC’s approval of the merger, it sought comments from the public. A number of the telecommunications companies and ISPs were among those who offered their reasons why the merger should not be approved, or at least not approved without some conditions being placed upon the new company.

America Online’s concerns centered on its fears that if the FCC did not require open access now, it would "likely require policymakers to pursue broader, more detailed intervention in the future in an effort to undo the more entrenched interests that will develop in the coming years." If the FCC acted now to make sure high-speed Internet access is competitive, AOL executives said, that "should ultimately require far less government intervention or oversight in the future."

MindSpring Enterprises, another ISP that sent along comments against the proposed merger, said that Internet access should not be considered a cable service. "The transport of data packets between a customer location and an ISP is certainly not one-way and it is not the provision of a programming service. It is the provision of basic telecommunications. . ."

The telecommunications company US West spelled out nine conditions it believed AT&T-TCI should be required to meet before the merger was approved. Among its proposed requirements were that AT&T-TCI should "provide capacity on its local broadband transmission facilities to other carries on an unbundled basis at a reasonable, cost-based price" and that it "be required to provide competitive multichannel video programming distributors with nondiscriminatory access. . ."

Ralph Nader, as a representative of the Consumer Project on Technology, wrote to the FCC shortly after the merger was proposed to voice his concerns. He especially took issue with AT&T’s proposed bundling, which will come at one price, but each service purchased separately would be more expensive. He wrote that one should expect the "bundling strategies to be used in anticompetitive ways against rivals" and he urged the FCC to give that some consideration.

When the FCC gave its blessing to the AT&T-TCI merger on February 17, it did not make open access to TCI’s broadband pipes a requirement. FCC chairman William Kennard had signaled that response less than two weeks earlier during an impromptu press conference. He said the FCC agrees that open access is a serious issue and that the Commission would monitor and study it in the coming months.

Kennard said, "because the Internet is still in its infancy, we decided it was not appropriate for us to today write rules that are going to govern how this network should be developed." A short time later he added, "ideally, consumers will have choice. We want to have these high speed broadband services deployed to consumers. We want to have it done in a procompetititve way." A concern of his, Kennard said, was what the delay might cost. "If we do not act immediately in this area, will it be difficult or impossible to go back later and ensure that there is access to these networks?"

As to why open access-unbundling issue was not considered as part of the AT&T-TCI merger, Kennard said that imposing such a condition on the parties in this merger would pose problems for other cable operators who are also considering such mergers. Kennard said he felt the FCC needs to look at open access across the entire industry, not just in the light of the AT&T-TCI merger, and to also see what the marketplace may demand.

Kennard, in other speeches he has made lately, has also spoken about choice and letting the consumers decide. At a gathering to celebrate the first three years of the Telecommunications Act of 1996, Kennard said "monopoly has been replaced with competition, where uniformity of service has been replaced with a multitude of choices, and where the technologies enjoyed by the privileged are available to us all." But he added that this competition model is not always met by the market forces. Therefore, Kennard said, "we must have a strong, independent regulatory system to pry open markets and keep them open."

Just two days later, on February 10, 1999, he told members of the National Telephone Cooperative Association that when Congress was drafting the Telecommunications Act of 1996, it wanted to let individuals have more of a choice, let the free market system work and bring competition to the telecommunications world. He added that it was "time for consumers, not lawyers, to shape the outcome in this marketplace."

In approving the merger, the FCC spoke to many of the issues raised by those who commented on the proposed merger, including the limited access to broadband. AT&, though, said that the 1996 Act prohibits treating cable systems like common carriers.

In the document approving the merger, the FCC explains why AT&T did not believe the arguments against the merger and for open access should stand up. Among AT&T’s arguments are that the broadband Internet access services do not compete in the same market as other Internet access services and that if such open access would be required, the public interest would be harmed because broadband services would be delayed.

The FCC pointed to AT&T’s contention that @Home has very little market penetration even in the areas where it is available and that "@Home has no market power because these services are ‘in their infancy.’"

The FCC found nothing in all of the comments and responses to the proposed merger that it felt would cause problems in gaining access to the Internet content of the subscriber’s choice. And, because the FCC believes that a number of other methods of providing high-speed Internet access are becoming available, that subscribers will have other avenues of Internet access. But, it added, it will monitor the deployment of broadband.

Commissioner Harold Furchtgott-Roth had criticized the FCC previously when he had spoken at a panel discussion sponsored by the Federalist Society, a criticism he repeated after the FCC approved the AT&T-TCI merger. He said the amount of attention the license transfers receive seems to depend in part in whether a merger is involved, although he said that is not a part of the statutes or the FCC’s rules.

FCC Commissioner Gloria Tristani dissented in part of the merger approval. She had wanted to see the FCC put some kind of a reporting requirement into the merger approval so it could monitor the rate at which AT&T was upgrading TCI’s cable facilities. "At this point, however, the plans for this to happen are just plans," Tristani said.

As the FCC heads into this new world, it has said it would like to let the market forces sort things out and let the Internet mature a bit before it decides what kinds of regulations might be required. When the FCC issued its first report on the rate at which broadband is being introduced around the country, it claimed that the "deployment of broadband appears reasonable and timely today." One of the reasons it did not take action on the open access issue with this merger was that the FCC believes "multiple methods of increasing bandwidth are or soon will be made available to a broad range of customers."

However, Montana Sen. Conrad Burns has criticized the FCC for not taking its responsibility to make this inquiry about broadband deployment seriously. According to a letter Burns sent the FCC, if the FCC finds that deployment is not proceeding in a timely fashion, then the FCC is required to take steps to accelerate the arrival of broadband around the country. The FCC, as it had begun its inquiry on broadband, had stated that it did not believe it had "an independent grant of authority" to do more than encourage the deployment of broadband.

Burns, who released his letter to Kennard about two weeks before the FCC’s report on broadband deployment was released, anticipated that the FCC would find no reason to take any additional steps to accelerate the deployment of the advanced telecommunications capabilities in a more timely manner. "Less than 2% of American households are currently being served by high-speed capability such as cable modems and ADSL. This is a far cry from ‘all Americans’ as required under the Act. In fact, it’s doubtful that advanced telecommunications capability as defined in Section 706 is being deployed at all."

VIII. Discussion and Conclusions

Does Portland actually have the authority to deny a cable franchise transfer if its conditions are not met? That question has no easy answers because the technology has not been categorized so that it falls into one of the areas the FCC and those it regulates are used to dealing with.

Is the service provided by cable modems a cable service or not? Even the FCC’s staff members could not come up with a definitive answer on that question. It depends upon the content.

The monopoly that Portland, Multnomah County, ISPs and other telecommunications companies fear if open access is not required is a legitimate fear. Although the FCC promises to monitor the deployment of broadband and advanced telecommunications capability, at least one Congressman fears that the FCC does not take that seriously. He seriously disagreed with the FCC’s assessment that broadband deployment was proceeding in a timely manner.

And some can’t help but point to the FCC’s history in regulating cable, which the FCC at first said it wouldn’t or couldn’t do. But when it appeared that broadcasters might actually be hurt by this new way of bringing television to the American people, the FCC jumped right in and began to regulate.

Is that where the FCC is headed this time?

Portland has made a case that it does, in fact, have a right to decide what to do in its own community. It has a computer-related industry and one of the reasons it cites for its open access requirements is that it wants to protect the people in its community. It has a very carefully crafted franchise agreement with TCI and that agreement does allow Portland to put conditions on the transfer of a franchise, such as is the case here. In fact, the city’s concern over the issue of open access to the Internet was just one of nine concerns spelled out by the Mt. Hood Cable Regulatory Commission as it recommended to both Portland and Multnomah County that the transfer be denied unless AT&T-TCI met certain conditions.

The FCC, on the other hand, has been getting its hand swatted by the courts that said the FCC is finding authority in the Communications Act where that authority does not actually exist.

Portland appears to have a case for having the authority to take on a telecommunications giant and force them to play by Portland’s rules.