## Facts

- Tele-Communications, Inc. (TCI) held local cable television franchises issued by the City of Portland and Multnomah County.
- AT&T agreed to acquire TCI and sought approval to transfer the local cable franchises to AT&T.
- The City and County conditioned transfer approval on an “open access” requirement for AT&T’s cable modem platform.
- The condition required AT&T to allow unaffiliated Internet service providers (ISPs) to connect directly to AT&T’s cable modem platform, rather than limiting subscribers to AT&T’s affiliated ISP service (@Home).
- Plaintiffs sought to operate a closed system in which residential high-speed Internet access over the cable system would be offered only through @Home.
- The City and County found that, without open access, AT&T could obtain substantial market power in residential high-speed Internet access because cable technology offered higher speeds than conventional telephone lines in the area.

## Issues

1. Whether federal cable statutes preempted the City’s and County’s open access condition imposed on the transfer of cable franchises.
2. Whether the open access condition violated the First Amendment by burdening the cable operator’s speech or editorial discretion.
3. Whether the condition violated the dormant Commerce Clause by discriminating against or unduly burdening interstate commerce.
4. Whether the condition violated the Contract Clauses of the U.S. and Oregon constitutions or breached the existing franchise agreements.

## Decision

- The court granted summary judgment to the City, County, and intervenor-defendants and denied plaintiffs’ motion for summary judgment.
- The court held the open access condition was not preempted by federal cable law.
- The court held the condition did not violate the First Amendment because it regulated access to facilities rather than dictating content.
- The court held the condition did not violate the dormant Commerce Clause because it applied evenhandedly and any incidental burdens were outweighed by local benefits.
- The court held the condition did not violate federal or state Contract Clauses and did not breach the franchise agreements, given contractual provisions allowing transfer approval and conditions.

## Legal Principles

- Local franchising authorities retain authority to regulate cable franchises, including approving transfers and imposing transfer-related conditions, unless federal law clearly conflicts or displaces that authority.
- A nondiscriminatory access requirement for network facilities may be treated as economic regulation of infrastructure rather than compelled speech, and may be sustained where supported by substantial governmental interests and reasonably tailored.
- Under dormant Commerce Clause analysis, a regulation that is not discriminatory and imposes only incidental burdens on interstate commerce is valid if local benefits outweigh those burdens.
- Contract Clause claims generally require a substantial impairment; where contracts contemplate governmental approval and potential conditions on transfer, impairment may be absent or justified by legitimate public purposes.
- A franchise agreement is not breached by transfer conditions where the agreement does not grant exclusivity over ISP access and reserves governmental discretion over transfer approvals.

## Conclusion

The district court upheld Portland and Multnomah County’s requirement that AT&T provide unaffiliated ISPs direct access to its cable modem platform as a condition of transferring cable franchises, rejecting claims of federal preemption, First Amendment violations, dormant Commerce Clause violations, Contract Clause violations, and breach of the franchise agreements.


AT&T Corp. v. City of Portland, 43 F. Supp. 2d 1146 (D. Or. 1999)