Court Limits Cities’ Control of Internet Lines

A federal appeals court ruled Thursday that local governments cannot force cable TV companies to open their lines to Internet competitors.

Both sides said the ruling will benefit consumers--but for different reasons. Cable companies maintain that they now will be able to invest in better service. But Internet companies say an unexpected twist in the ruling ultimately could lead to the opening of all cable lines.

The ruling by the U.S. 9th Circuit Court of Appeals was a milestone in the raging national contest to dominate high-speed Internet services.

On one side of the battle are cable companies, including AT&T; on the other are Internet service providers, most notably America OnLine. The fight is over who will pay for and profit from the growth of broad-band service, which offers rapid transmission of material over the Internet--in some cases, hundreds of times faster than over conventional telephone lines.

At stake potentially are billions of dollars and dominance of the fast-growing, ever-shifting, high-speed Internet access market. With so much at risk, the lobbying--locally as well as nationally--has been intense and expensive.

The ruling had immediate impact in Los Angeles. The City Council today had planned to consider requiring cable companies to open their lines to Internet service providers as a condition of receiving franchise approvals. That proposal by City Councilman Alex Padilla now is on hold for 30 days while city lawyers study the decision.

Advocates of so-called open access argue that consumers would have more choices and pay less if competing firms could provide Internet service over the same cable lines. But cable companies, which call the idea “forced access,” contend that they need sole use of the lines to recover their huge investments in preparing their cable wires for Internet use.

Both sides claim to have consumers’ best interests at heart, and both claimed the court ruling was a victory.

The 9th Circuit reversed a ruling by a federal judge in Portland, Ore. That judge had said the city could require cable companies to allow Internet competitors onto their lines. Portland claimed that power because cities control cable franchises.

AT&T;, which owns cable systems across the country, hailed the court ruling, saying that it bars other cities from following Portland’s lead. Because of it, AT&T; said, “cable companies will be able to get on with investments that will bring advanced services to millions of Americans.”

However, the court also ruled that broad-band is a telecommunication service, not a cable service. As such, it should be governed by federal communications laws, not local cable franchise rules.

Paradoxically, Internet service providers say, the telecommunication service designation means cable companies must open their lines in the same manner as phone companies-- exactly what they have fought.

“The court has ensured that the broad-band on-ramps to the Internet will remain open,” said John F. Raposa, a lawyer for GTE, which backs open access requirements.

That’s not a given, however.

Despite the court’s new service designation, it is by no means certain that the Federal Communications Commission will require open access. The cable industry has so far won a string of regulatory rulings favoring its right to control who uses their lines.

Andrew Schwartzman, president of Media Access, a public interest law firm, said Internet service companies probably will turn to the FCC in their campaign to claim a right to cable lines.

“Internet service providers will be lining up to ask for connections and will be filing complaints with the FCC,” he said.

At stake in the nationwide battle are 30 million residential subscribers who connect over phone lines to the Internet through 6,000 service providers, such as AOL. Those customers form the mammoth potential market coveted by service providers and cable companies.

The Portland case began when AT&T; applied for local approval of a change in its cable franchise, resulting from its merger with Tele-Communications Inc.

Portland and Multnomah County officials then enacted laws requiring that, as a condition of acquiring TCI, AT&T; allow competing Internet providers access to its network. The requirement prompted AT&T;’s lawsuit.

In Los Angeles, Councilman Padilla has proposed that all the franchise agreements be altered as a condition of their scheduled renewals in 2003. Under his proposal, any company that wanted a renewal would have to agree to provide open access and meet other conditions, such as agreeing to connect public hospitals to the high-speed service.

That, according to proponents, would make Los Angeles’ approach fairer, since it would affect all the companies at once, rather than singling out just those that were sold.

Still, the underlying issue of whether cities have the right to impose any such requirements is similar in both areas. Virtually all observers agree that the matter is headed for the U.S. Supreme Court for a final decision.

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Times staff writer Sallie Hofmeister contributed to this report.