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Excite@Home, AT&T Gain From FCC's Battle to Overturn 'Open Access' Policy

In a legal brief filed Monday, the government agency argues it should retain responsibility for determining broadband policy.

SAN FRANCISCO -- Score another half-victory for AT&T (T) and Excite@Home (ATHM) in the war over high-speed Internet access.

On Monday, the

Federal Communications Commission

filed an amicus brief with the

Ninth Circuit Court of Appeals

in San Francisco in the case of

AT&T vs. the City of Portland

. The brief argues that the FCC retains the responsibility for determining so-called broadband policy. The lawsuit has significant implications for high-speed Net provider Excite@Home, of which Ma Bell holds a large piece.

"It is an important signal that the FCC is asserting jurisdiction here," says Pat Brogan, an associate analyst with the

Legg Mason Precursor Group


The amicus brief, a rare move by the FCC, introduces a new legal argument that undercuts the reasoning of both the phone giant and the Portland City Council, which is trying to force AT&T to open its cable networks to rivals.

As its primary argument, the FCC urges the court to "support a narrow judicial resolution of the dispute" because the FCC hasn't decided whether broadband Net service is more like a cable service or a telecommunications service. Both Portland and AT&T have argued that Internet access via cable is a cable service.

"If the Commission were to treat cable-modem service as 'advanced telecommunications capability,' it would have the opportunity to develop a coherent regulatory policy that took into account the full range of broadband service providers, including cable systems," the FCC writes.

Unlike any local government, the FCC oversees all broadband areas, from wireless to cable. "Local franchising authorities would have no such opportunity because they have no regulatory authority over broadband-service providers other than cable systems," the brief says. Thus, the FCC concludes, local regulation would pose a "significant risk of regulatory disparity" with respect to all other broadband service providers.

Analyst Brogan says this distinction is significant. "How you classify the services in the end determines how the service is or is not regulated," he argues.

The lawsuit has become the main battleground for the Net's hottest policy issue. The fight began this past January, when the Portland City Council denied the transfer of local cable franchise licenses to AT&T from

Tele-Communications Inc.

unless the phone giant allowed competing services such as

America Online


to use its cable lines to offer high-speed Internet access.

AT&T sued to overturn the city's ordinance, but in June, U.S. District Judge Owen Penner upheld the authority of Portland to require the condition. AT&T appealed the decision, fearing that if the lower court ruling stood, more cities would consider imposing open access.

The Portland trial still has a ways to go. Right now, many parties in the suit are filing briefs. AT&T, for instance, filed a brief on Aug. 10 urging the appeals court to reverse the lower court's decision. Oral hearings are likely to begin this October, and a final decision is expected early next year. But the FCC says its brief is likely to receive special treatment by the courts.

"The one thing that an agency has going for it is that the Commission's interpretation of an act is generally entitled to deference in the courts -- at least to the extent that a statute is unclear," says FCC counsel Jim Carr, who helped author the brief.

The amicus brief is the latest move by the FCC that supports Ma Bell more than it does her rivals. Under Chairman William Kennard, the FCC has adopted a "don't fix it if it ain't broke" philosophy with regard to the Internet. In fact, Kennard has vowed that as long as he's chairman, the FCC won't regulate the Internet.

In January, the FCC told Congress no regulatory action was needed to speed the deployment of high-speed Net services. In February, the agency handed a victory to AT&T when it declined to force Ma Bell to let rivals gain access to its cable networks as a precondition of its $61 billion purchase of cable giant TCI.

In June, Kennard bashed the Portland decision, telling a cable-industry conference that handing broadband authority to local governments would lead to chaos. And this past week, Kennard rejected a request from state and local regulators to investigate the nascent market for broadband services, saying it would "chill investment in cable modem service."