SAN FRANCISCO - Handing an important victory to AT&T Corp., a federal appeals court Thursday ruled that Portland, Ore., cannot force the company to open its cable network to competing Internet service providers.
Officials in Portland, as well as San Francisco, Broward County, Fla., and other communities, have argued that high-speed access to the Internet through cable should be subject to local regulation, just as cable TV franchises are.
But the 9th U.S. Circuit Court of Appeals ruled that AT&T, which has spent billions buying cable companies to create a national network for local telephone and high-speed Internet service, does not fit the legal definition of a cable TV network. Instead, it is a telecommunications service, and therefore subject only by federal law, the court said.
The ruling is a setback for other Internet service providers such as America Online, which have argued that AT&T should be forced to open its cables to other competitors.
In a statement, AT&T said it is pleased with the ruling ''because it clarifies decisively the limits of local authority when it comes to the provision of high-speed Internet access over cable.''
ExciteAtHome, which is partially owned by AT&T, has exclusive rights until 2002 with AT&T - and agreements with several other cable systems - to sell high-speed Internet access.
ExciteAtHome stock climbed $1.688 on the news to $20.625 on the Nasdaq Stock Market. AT&T rose 75 cents to $35.688 on the New York Stock Exchange.
AT&T bought Tele-Communications Inc. in 1998, thereby receiving a stake in the AtHome cable network, which later merged with Excite. Since then, it has invested heavily in cable networks, betting that they will be the dominant way of providing people with high-speed access to the Internet.
AT&T told the appeals court that it should be able to control Internet access to the cable TV network it purchased and that the city and surrounding Multnomah County have no right to make it do otherwise.
Local officials countered that they were simply protecting the city from a monopoly when they voted to force AT&T to open up its network to competitors.
U.S. District Judge Owen Panner ruled last June that the city and county had the authority to pass the ordinance.
But the 9th Circuit disagreed, ruling that AT&T is a telecommunications network and is regulated solely by the Federal Communications Commission.