AT&T Battles Attorney General’s Ruling on U-verse Video Service

Published December 1, 2007

A Connecticut Superior Court is considering an AT&T appeal of contradictory state policy decisions that kept the telecom company from using a legal fast-track for introduction of U-verse, an Internet Protocol-based television (IPTV) service.

The complicated series of decisions has put in limbo AT&T’s plan to invest at least $336 million in video facilities that from December 2006 to October 2007 had already reached more than 135,000 homes in 40 Connecticut municipalities.

The appeal, filed in October, involved a convoluted case in which a new state law and a compliant state regulatory decision paved the way for easier introduction in Connecticut of AT&T’s U-verse service, a multichannel video offering designed to compete with incumbent cable TV services. Opposition from the state attorney general resulted in a countermanding federal court ruling, followed by an equally compliant regulatory reversal of the state’s earlier approval of AT&T’s video plan.

Competition, Innovation Quashed

The legal quandary prompted AT&T to complain that it’s now being required to offer U-verse under an older Connecticut cable franchise law with burdensome network build-out requirements and marketing restrictions.

“There definitely have been some missteps along the way on this,” remarked Diane Katz, a policy director at the Mackinac Center for Public Policy in Midland, Michigan. She suggested state and federal laws could be conflicting on the definitions of which services (including U-verse) constitute cable franchise systems versus competitive providers.

“Irrespective of the definitions, the state legislature wrote a law specifically intended to invite competitors into the market,” Katz said. “The Connecticut attorney general is substituting his judgment for that of the legislature.”

State Law Nullified

The controversy surrounds the Connecticut General Assembly’s passage and Gov. Jodi Rell’s (R) signing of “An Act Concerning Certified Competitive Video Service.” Hailed by AT&T, the measure established a looser, speedier fabric for companies to compete against established cable franchises.

The statute became effective October 1, 2007. Accordingly, the state Department of Public Utility Control (DPUC) granted AT&T a certificate as a “competitive video provider”–not a cable franchise–for the U-verse service under the new law.

Attorney General Richard Blumenthal (D)–backed by the Office of Consumer Counsel and consumer advocacy groups–then filed suit against the DPUC action in federal court. In mid-October the suit won a quick favorable decision from U.S. District Court Judge Janet Bond Arterton, who ruled that under federal law, U-verse must be regulated by the state just like cable franchisees.

Accordingly, DPUC complied with the federal court by ordering AT&T to stop marketing U-verse and to apply for a traditional cable franchise–essentially reversing its previous certification decision. As it appealed in state Superior Court, AT&T threatened to hold up its U-verse rollout and lay off some 300 employees in the state.

Attorney General Draws Fire

The move by Blumenthal drew fire from Rell as well as state Sen. John Fonfara (D) and state Rep. Steve Fontana (D), legislators who co-sponsored the disputed new state law.

Rell called on DPUC to reverse the adverse ruling. She doesn’t have the authority to order DPUC to change its decision. The lawmakers wrote a letter of protest to DPUC and outlined their legislative intent.

In late October Blumenthal slightly softened his stance, saying AT&T should be allowed to resume marketing the service. He filed a request with DPUC to reopen the case and, while it does so, to place a stay on its decision so AT&T can continue to sign up customers. DPUC won’t comment on the developments, pending a review of Blumenthal’s latest request.

Blumenthal said his office isn’t backing off its fight to require AT&T to provide its TV service across the state and will continue to push in federal and state court for AT&T to be forced to provide the TV service as widely as possible.

More Court Fights Ahead?

Blumenthal held out the possibility of continuing to fight AT&T in court, maintaining that in the “highly unlikely” chance AT&T prevails in state Superior Court, his office would push for an appeal. On October 26 both sides made arguments before Hartford Superior Court Judge Robert McWeeny, who had not rendered a decision by press time.

AT&T said in a statement it was confident the state court will allow the company to continue offering U-verse in Connecticut, including under the new law’s certification status. A stay would only confuse customers further, according to the company.

Katz found Blumenthal’s new tactics somewhat muddled and disingenuous.

“Why should AT&T or any other company commit to something with a legal sword hanging over their heads?” Katz remarked. “The attorney general can’t have it both ways, and it doesn’t make any sense. He is wrong, and it doesn’t change the fact that he is trying to impose his will over the legislature’s.”

Frank Barbetta ([email protected]) writes from Little Falls, New Jersey.