from: The New Times [1]

How are You Plugged In?
The courts may determine whether you can get Internet-based TV

By Robert Miller Staff Writer
NewsTimes.com

Since the 1950s, the American quest for TV perfection __ lots of channels coming in, a big screen to show them on, and no snow, static or interruptions __ has taken people from rabbit ears to roof antennas to cable TV. After cable, there were giant satellite antennas, which shrank to dish antennas the size of a large pizza.

Now there's a new contender __ the telephone company.

In Connecticut, Southern New England Telephone Co.__ the local branch of AT&T __ wants you to watch U-verse, a multi-channeled system that will come to your house over the telephone lines AT&T already owns.

AT&T claims it can do this at a much lower price, while offering customers all kinds of extra services.

"The cable companies own the TV market in Connecticut," said Seth Bloom, AT&T's spokesman in the state. "They control 90 percent of the market. All we're trying to do is to create a market in the TV side that the cable companies are trying to develop on the telephone side."

But it's not happening without a fight.

There are two lawsuits __ one in federal court, one in state court __ to try to determine whether U-verse is a completely new animal, or simply a cable system coming in over a different set of wires.

"We can do things the others can't do," said Bloom, noting that U-verse viewers can bring Yahoo and other Internet services directly to a home TV screen, and record four programs simultaneously on a DVR.

Obviously, state cable companies __ afraid of losing customers to a new technology __ say a cable is a cable.

"The definition of cable is technically neutral," said Paul Cianelli, president of the New England Cable and Telecommunication Association, which represents the state cable companies. "It doesn't matter what kind of wires the signal is carried on."

The state Department of Public Utility Control has blocked the company __ which now serves about 7,000 homes in 40 communities in the state, including Danbury __ from expanding its services further.

Attorney General Richard Blumenthal has sided with the DPUC, while two lawmakers who wrote legislation to allow "certified competitive video providers" to serve the state __ Sen. John Fonfara, D-Hartford, and Rep. Steve Fontana, D-North Haven __ have sided with AT&T, writing to the DPUC that they "strongly disagree" with its decision.

Several cities, including Danbury, also filed suit to halt AT&T from placing its U-verse relay boxes along city streets, saying the boxes interfered with pedestrian traffic. On that score, the city won __ AT&T has moved the boxes in question and promised to consult Antonio Iadarola, Danbury's public works director, whenever it adds more.

"A victory at last," said Mayor Mark Boughton. "It proves you can fight a multi-national corporation."

The reason for all this legal positioning __ not to mention AT&T's pledge to spend $336 million in the state __ is simple: There are about a million people in Connecticut who now watch TV over cable or with a satellite dish. Get a sizeable portion of them to sign up and you make some serious money.

"It's billions of dollars," said Tim Pollard, an assistant professor in the department of telecommunications at Ball State University in Muncie, Ind.

Pllard said the nation's cable TV infrastructure is now 20 to 30 years old and it was not made for things like high-definition TV. "The phone company, or anyone else who gets in there with new technology, will be at an advantage," he said.

For that reason, Pollard said the cable companies will do everything they can to stop U-verse.

The central issue in the dispute is about what AT&T and U-verse offer consumers. AT&T calls U-verse an Internet protocol video system. Because it transmits digital signals over telephone lines, the company claims U-verse is not cable TV. Therefore, it believes it does not have to apply for a traditional cable TV franchise with the DPUC.

"We operate in several states now and we have never applied for a cable franchise," Bloom said.

Rather than do so, Bloom said, AT&T will simply abandon Connecticut.

However, Blumenthal said he thinks this is just posturing.

"This is the most affluent state in the country," Blumenthal said. "It's also small, densely populated, and easily accessible. The prospect of walking away from a one of the most lucrative markets in the country seems unlikely."

Until now, U-verse's fortunes in the state have followed a leap-frog game of commission rulings, court decisions and legislative actions.

The DPUC first ruled in June 2006 that U-verse was different from cable TV. AT&T then began offering it to its telephone customers, first in a few towns and now in 40.

But this July, federal court Judge Janet Bond Arterton ruled, in effect, that U-verse was at its essence a cable system and should be regulated like one. A number of parties __ including cable companies, Blumenthal, and the state Department of Consumer Counsel __ brought the suit, which claimed allowing U-verse to set up shop in the state without first getting a cable franchise gave it an unfair competitive advantage.

"They would not be subject to any state customer service regulations," said Cianelli of the New England cable association. "They would also receive a $50-million tax break over three years.''

And, Cianelli said, without a cable franchise, AT&T would be exempt from build-out requirements __ the agreement to expand its service over a certain number of years.

That's mirrored in Blumenthal's claims that AT&T wants to cherry-pick the most affluent communities, while ignoring people who might only be able to afford U-verse's basic package, which costs about $59 per month for 50 to 100 channels.

Bloom said AT&T can't quite understand why Blumenthal, in the name of protecting consumers, wants to stifle U-verse's growth in the state.

"What he's doing is perpetuating the cable monopoly in Connecticut," Bloom said.

Meanwhile, the General Assembly entered the picture. In 2007, it passed legislation to encourage more competition in the cable TV business in Connecticut. This legislation, which went into effect Oct. 1, allows for "certified competitive video service providers" to offer service to state residents without the need for a traditional cable franchise.

Using that legislation, AT&T applied to the DPUC to be certified as a video service provider on Oct. 1 __ the day the legislation went into effect

On Oct. 15, however, the DPUC ruled that it cannot ignore Arterton's ruling in federal court because federal law supersedes state law. It ordered AT&T to stop signing up new customers, although it can continue to provide service to the 7,000 customers it now has. If AT&T wants to build a U-verse network in the state, the DPUC said, it must apply for a cable franchise by the year's end.

In turn, AT&T filed a suit in state court asking the DPUC to follow state law and give it a license as a video provider.

Despite all the claims and counter-claims, all sides in the dispute __ AT&T, the cable companies, the DPUC, and Blumenthal __ insist they all want more competition in the cable market in Connecticut.

"We welcome competition," said Cianelli. "We just think there should be the same rules for everyone. There shouldn't be a two-tiered system."

And Blumenthal said if AT&T means what it has said __ that it wants to expand throughout the state, that it will offer the same community-access programming that cable must offer __ then the sides in the dispute are not that far apart.

"I'll reach out to them and see if we can find a solution," Blumenthal said. "We want them to provide this service to the people of Connecticut. We need this service."

Contact Robert Miller

at bmiller@newstimes.com

or (203) 731-3345.

U-verse

New television service offered by AT&T.

Now reaches about 7,000 customers in 40 Connecticut towns and about 100,000 viewers nationwide.

Transmits Internet protocol signals over fiber optic lines to neighborhoods, then over copper phone lines to individual homes.

Allows subscribers to record four shows simultaneously on DVR.

Allows other features -- an individualized scroll bar at the bottom of the screen, access to the Internet, video games and the Yellow Pages sent directly to the TV screen.

AT&T claims U-verse's packages -- which cost between $59 and $129 a month -- will be less expensive than comparable cable offerings and give people more features.

Cable

The dominant TV provider in the country.

In Connecticut, provides TV to 80 to 85 percent of existing market of about 1 million TVs.

In recent years, has faced new competition from satellite stations.

Sends signals over cable lines strung along power lines.

Has greatly expanded the use of digital cable services. By 2009 must be entirely digital.

Now offers Internet and telephone service, packaging three services together.

Cost for Danbury's Comcast cable TV service begins at about $58 a month. Prices rise as subscribers add more features.

The controversy

Is U-verse a new form of technology -- a "video service provider" -- or simply another form of cable TV? Does it need to be regulated as a cable TV franchise, or can it operate as a different type of company entirely?

In July, a federal court judge ruled U-verse is a cable company.

On Oct. 1, new state legislation allows for video service providers; AT&T applies for state certification as one.

On Oct. 15, state Department of Public Utility Control, following federal court decision, rules AT&T must apply for a cable franchise and stop expanding U-verse service until it does.

On Oct. 16, AT&T goes to state court, asking for a ruling that the DPUC must follow state law and grant U-verse a license as a video service provider.