AT&T Corp. v. City of Portland

• Decision Date: 01 November 1999
• Docket Number: No. 99-35609,TELE-COMMUNICATION,INC,99-35609
• Citation: AT&T Corp. v. City of Portland, 216 F.3d 871 (9th Cir. 1999)
• Parties: (9th Cir. 2000) AT&T CORPORATION; TCI CABLEVISION OF OREGON, INCORPORATED; TCIOF SOUTHERN WASHINGTON, Plaintiffs-Appellants, And, Plaintiff, and US WEST INTERPRISE AMERICA, INC.; OREGON INTERNET SERVICE PROVIDER ASSOCIATION; OGC TELECOMM, LTD., dba Integra Telecom, Intervenors, v. CITY OF PORTLAND; MULTNOMAH COUNTY, Defendants-Appellees. GTE INTERNETWORKING, INC., Intervenor
• Court: U.S. Court of Appeals — Ninth Circuit

Page 871

216 F.3d 871 (9th Cir. 2000)

AT&T CORPORATION; TCI CABLEVISION OF OREGON, INCORPORATED; TCIOF SOUTHERN WASHINGTON, Plaintiffs-Appellants And TELE-COMMUNICATIONS, INC., Plaintiff and US WEST INTERPRISE AMERICA, INC.; OREGON INTERNET SERVICE PROVIDER ASSOCIATION; OGC TELECOMM, LTD., dba Integra Telecom, Intervenors, v. CITY OF PORTLAND; MULTNOMAH COUNTY, Defendants-Appellees.

GTE INTERNETWORKING, INC., Intervenor.

No. 99-35609

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted November 1, 1999--Portland, Oregon

Filed June 22, 2000

David W. Carpenter (argued), Sidley & Austin, Chicago, Illinois, for plaintiffs-appellants AT&T Corp., Telecommunications, Inc., TCI Cablevision of Oregon, Inc., and TCI of Southern Washington.

Terence L. Thatcher (argued), Deputy City Attorney, Portland, Oregon; Joseph Van Eaton, Miller & Van Eaton, Washington, D.C., for defendants-appellees City of Portland and Multnomah County.

William T. Lake (argued) and William R. Richardson, Jr., Wilmer, Cutler & Pickering, Washington, D.C., for intervenors-appellees US WEST Interprise America, Inc., GTE Internetworking Inc., and OGC Telecomm, Ltd.

Janis C. Kestenbaum, Jenner & Block, Washington, D.C., for intervenor-appellee Oregon Internet Service Providers Association.

David J. Newburger, Newburger & Vossmeyer, St. Louis, Missouri, for amici curiae American Council of the Blind, Missouri Association of the Deaf, Missouri Council of the Blind, Oklahoma Able Tech, Paraquad, Inc., and National Silver Haired Congress.

Howard J. Symons, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, Washington, D.C., for amicus curiae At Home Corp.

Robert C. Fellmeth, University of San Diego School of Law, San Diego, California, for amicus curiae Center for Public Interest Law.

Bruce J. Wecker, Furth, Fahrner & Mason, San Francisco, California, for amici curiae Citizens' Utility Board of Oregon, Consumer Action, Consumer Federation of America, The Utility Reform Network, and Utility Consumers' Action Network.

James M. Carr, Office of General Counsel, Washington, D.C., for amicus curiae Federal Communications Commission.

Christopher Wolf, Proskauer Rose, Washington, D.C., for amicus curiae Hands Off the Internet.

Bruce D. Sokler, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, Washington, D.C., for amicus curiae National Cable Television Association, California Cable Television Association, Oregon Cable Telecommunications Association, and Washington State Cable Communications Association.

Paul Mogin, Williams & Connolly, Washington, D.C., for amicus curiae openNET Coalition.

Jayne Chong-Soon Lee, Office of City Attorney, San Francisco, California, for amici curiae U.S. Conference of Mayors, National Association of Counties, National League of Cities, National Association of Telecommunications Officers and Administrators, Jefferson County, King County, Montgomery County, Michigan Coalition to Protect Public Rights of Way from Telecommunications Encroachments, Sacramento Metropolitan Cable Television Commission, San Mateo County Telecommunications Authority, Bell-Cudahy Cable Television Authority, and the Cities of Arvada, Atlanta, Baltimore, Boston, Dearborn, Los Angeles, New York, Rancho Palos Verdes, San Diego, San Francisco, San Jose, and Walnut Creek.

Appeal from the United States District Court for the District of Oregon; Owen M. Panner, Senior District Judge, Presiding. D.C. No. Cv-99-00065-OMP.

Before: Edward Leavy, Ferdinand F. Fernandez and Sidney R. Thomas, Circuit Judges.

THOMAS, Circuit Judge:

This appeal presents the question of whether a local cable franchising authority may condition a transfer of a cable franchise upon the cable operator's grant of unrestricted access to its cable broadband transmission facilities for Internet service providers other than the operator's proprietary service. We conclude that the Communications Act prohibits a franchising authority from doing so and reverse the judgment of the district court.

I

Distilled to its essence, this is a struggle for control over access to cable broadband technology. In broadband data transmission, a single medium carries multiple communications at high transmission speeds. The allure of broadband technology is that it allows users to access the Internet at speeds fifty to several hundred times faster than those available through conventional computer modems connected to what is commonly referenced in the telecommunications industry as "plain old telephone service." Broadband allows transmission, or "streaming," of live video and audio communications, as well as video and audio data files. To satisfy consumer demand for broadband Internet access, cable television operators have replaced coaxial wires with fiber-optic cable, telephone companies have initiated high-frequency digital subscriber line ("DSL") services over standard twistedpair copper wires, fixed wireless providers have upgraded their microwave transmission capacities, satellite providers have launched global two-way digital networks, and researchers have explored the use of quantum communication methods.

The race to acquire broadband transmission systems has, in part, prompted a number of corporate mergers. This appeal concerns the merger between AT&T, at the time the nation's largest long distance telephone provider, and Telecommunications, Inc. ("TCI"), one of the nation's largest cable television operators. In addition to providing traditional cable television programming, TCI provided cable broadband Internet access to consumers in certain geographic areas. Since acquiring TCI, AT&T has continued to offer cable broadband access as part of its "@Home" service, which bundles its cable conduit with Excite, an Internet service provider ("ISP") under an exclusive contract. Like many other ISPs, @Home supplements its Internet access with user e-mail accounts and a Web portal site, a default home page gateway offering Internet search capabilities and proprietary content devoted to chat groups, interactive gaming, shopping, finance, news, and other topics. @Home subscribers also may "click-through" to other free Web portal sites, and may access other Internet service providers if they are willing to pay for an additional ISP; however, subscribers cannot purchase cable broadband access separately from an unaffiliated ISP, and have no choice over terms of Internet service such as content and bandwidth restrictions.

The @Home cable broadband infrastructure differs from that of most ISPs. A typical ISP connects with the Internet via leased telecommuncations lines, which its consumers access through "dial-up" connections over ordinary telephone lines. @Home operates a proprietary national "backbone, " a highspeed network parallel to the networks carrying most Internet traffic, which connects to those other Internet conduits at multiple network access points. This backbone serves regional data hubs which manage the network and deliver Excite's online content and services, including multimedia content that exploits broadband transmission speeds. Each hub connects to local "headend" facilities, cable system transmission plants that receive and deliver programming, where "proxy" servers cache frequently requested Internet data, such as Web sites, for local delivery. Each headend connects to cable nodes in neighborhoods, each of which in turn connects via coaxial cable to the user's cable modem and computer.

To effect the merger, AT&T and TCI sought three types of regulatory approval. The Department of Justice approved the merger on antitrust grounds, subject to TCI's divestiture of its interest in Sprint PCS wireless services. See United States v. AT&T Corp. and Tele-Communications Inc., No. CIV. 98 CV03170, 1999 WL 1211462 (D.D.C. Aug. 23, 1999) (final judgment). The Federal Communications Commission ("FCC") approved the transfer of federal licenses from TCI to AT&T, after addressing public interest concerns in four service areas, including residential Internet access. See Application for Consent to the Transfer of Licenses and Section 214 Authorizations from TCI to AT&T, 14 F.C.C.R. 3160 (1999) ("Transfer Order").

One of the issues that the FCC considered forms the undercurrent of the present controversy: whether to impose a requirement of open access to cable broadband facilities. A variety of interest groups and competitors argued that allowing AT&T to restrict cable broadband access to the proprietary @Home service would harm competition and reduce consumer choice. In its order approving the license transfer, the FCC rejected any open access condition, citing the emergence of competing methods of high-speed Internet access, and @Home customers' "ability to access the Internet content or portal of his or her choice." It found "that the equal access issues raised by parties to this proceeding do not provide a basis for conditioning, denying, or designating for hearing any of the requested transfers of licenses and authorizations." Transfer Order at P 96. The FCC concluded that "while the merger is unlikely to yield anti-competitive effects, we believe it may yield public interest benefits to consumers in the form of a quicker roll-out of high-speed Internet access services." Transfer Order at P 94.

The last regulatory hurdle that AT&T and TCI faced was the approval of local franchising authorities where required by local franchising agreements. See 47 U.S.C.S 537 (permitting franchising authority approval of cable system sales when the franchise agreement so requires). TCI's franchises with Portland and Multnomah County (collectively, "Portland") permitted the city to "condition any Transfer upon such conditions, related to the technical, legal, and financial qualifications of the prospective party to perform according to the terms of the Franchise, as it deems appropriate. " This language parallels the text of 47 U.S.C. S 541(a)(4)(C), which describes the conditions a locality may...