## Facts

- TCI held a cable television franchise from the City of Portland and Multnomah County, Oregon, and also offered broadband Internet access over its cable system through the affiliated @Home service.
- AT&T sought to acquire TCI, which would place control of both the cable system and the cable modem broadband platform under AT&T.
- The City and County approved the franchise transfer only if AT&T provided “open access,” requiring nondiscriminatory access for unaffiliated Internet service providers (ISPs) to the cable modem platform.
- AT&T refused the open-access condition, and the City and County denied consent to the franchise transfer.
- AT&T and related entities sued for declaratory and injunctive relief, asserting the condition was preempted by federal law and unconstitutional; the district court upheld the condition and granted summary judgment to the City and County.

## Issues

1. Whether cable modem-based broadband Internet access (the @Home service) qualifies as a “cable service” under the Communications Act.
2. If the service is not a “cable service,” whether a local franchising authority may impose an “open access” condition on transfer of a cable franchise, given federal limits on local regulation, including 47 U.S.C. § 541(b)(3).
3. Whether constitutional claims (Commerce Clause, Contract Clause, and First Amendment) must be reached if the case is resolved on statutory and preemption grounds.

## Decision

- The Ninth Circuit reversed the district court’s judgment.
- The court held that cable modem Internet access is not a “cable service” because it is interactive and individualized rather than a primarily “one-way transmission” of programming with only incidental subscriber interaction.
- The court concluded that the open-access condition regulated broadband Internet access rather than cable television service.
- The court held the condition was preempted by federal law, relying in significant part on 47 U.S.C. § 541(b)(3), which bars local franchising authorities from requiring a cable operator to provide telecommunications services or facilities as a condition of a franchise transfer.
- Because statutory interpretation and preemption resolved the dispute, the court did not need to decide most constitutional challenges.

## Legal Principles

- Cable modem-based Internet access does not fall within the Communications Act definition of “cable service” when the offering is an interactive, two-way service not limited to one-way programming transmission plus minimal interaction for selection or use.
- Local franchising authorities may not use cable-franchise approval powers to impose conditions that function as direct regulation of non-cable services, including broadband Internet access delivered over a cable system.
- Under 47 U.S.C. § 541(b)(3), a local franchising authority may not require a cable operator to provide telecommunications services or facilities as a condition of granting, renewing, or transferring a cable franchise.
- When federal statutory limits expressly restrict local franchising authority in this area, conflicting local “open access” requirements are preempted.

## Conclusion

The Ninth Circuit held that cable modem Internet access is not a “cable service” and that federal law bars local governments from conditioning cable franchise transfers on “open access” requirements that effectively regulate broadband Internet service or compel provision of telecommunications facilities.


AT&T Corp. v. City of Portland, 216 F.3d 871 (9th Cir. 2000)