City of Milwaukee Sues to Treat IPTV Like Cable

Published May 1, 2007

AT&T’s Internet Protocol television (IPTV) service will get a federal court test in Milwaukee as to whether it requires a separate cable TV franchise.

The city of Milwaukee claims AT&T’s video service, called U-verse, requires a conventional cable TV franchise agreement. AT&T argues that since its video service runs over its existing telephone network, which is already covered by a spate of city franchise rules, the additional cable agreement is not necessary.

The city initially sought an injunction in February against AT&T’s launch of U-Verse from the U.S. District Court for the Eastern Division of Wisconsin, Milwaukee division, but the court did not issue one. At the end of February, AT&T started offering U-verse in the city and in Racine, a smaller city about 30 miles south.

Milwaukee is demanding AT&T pay an extra franchise fee, in addition to what it currently pays for its telephone service franchise, because data containing video programming, rather than phone calls or e-mails, is being transmitted over the network, which the city is interpreting as a cable-type service. The city’s suit also demands attorneys’ fees and other costs associated with the case.

“It [the service] is cable, according to the terms of the law,” said Vince Moschella, deputy city attorney. “AT&T needs to comply with the cable ordinance.”

Not Cable, Firm Says

AT&T disputes Milwaukee’s claim that U-verse is a multichannel cable television service. The firm states the service relies on the same technology–Internet Protocol –that connects users to the Internet and the World Wide Web.

Unlike cable, IPTV programming is not received at a local satellite center and aggregated down a cable hundreds of channels at a time. Like all Internet content, it is downloaded in a data stream from a server.

The IPTV model allows for innovative pricing and packaging schemes, including a la carte programming that many consumers want but is not cost effective under the conventional cable model.

Despite these differences, AT&T officials said they have agreed to pay the city of Milwaukee similar fees as the cable companies, typically 5 percent of the monthly fee, for the video portion of the service. But AT&T does not want to be forced into a municipal franchise agreement, which can include other restrictions or stipulations.

Statewide Franchising Sought

Instead, AT&T wants to see a statewide franchise agreement, much like it has in Indiana and Michigan and other providers have in other states.

“We’ve also agreed to provide PEG [public, educational, and government channels] just like cable, and don’t want any changes in any rights-of-way or anything else,” said AT&T spokesman Jeff Bentoff.

These offers are similar to those the company has made in other cities where the U-verse service has already gone live.

While Milwaukee wants to put the AT&T service under the franchise law, it hasn’t issued any injunctions to stop the build-out of the service–at least not yet, Moschella says. The city is continuing to closely monitor the development of the service.

“We’re still seeking further permits that will let us expand our service,” Bentoff said. “The city is aware of what we are doing. They are continuing to meet with us in an attempt to work out an out-of-court agreement.”

Claim Contradicts Federal Law

“It’s not a cable operation if you read the statute; it’s not cable as the FCC defines cable,” said Diane Katz, director of science, environment, and technology policy at the Mackinac Center for Public Policy in Midland, Michigan. “The city or state may have its own interpretations, but it’s the federal law that’s the controlling law.”

Lawsuits or the threat of lawsuits have inhibited the progress of this type of service in several communities, according to Katz. She’d like to see the case go to court–where she feels it will be ruled the service isn’t cable–in order to set a precedent.

If that happens, Milwaukee would be the first instance of a court ruling IPTV is not cable. Other authorities, including the Connecticut Department of Public Utilities and the Oklahoma Attorney General, have ruled IPTV is not cable in their respective states. The FCC has not taken an explicit position on the issue.

Moschella predicted it would be 12 to 18 months before the case goes to court.

The U-verse service is part of AT&T’s Project Lightspeed, a multiyear, $4.6 billion investment in and build-out of fiber in the 13 (pre-BellSouth merger) states where AT&T offers service.

Phil Britt ([email protected]) writes from South Holland, Illinois.