The first shot in what has become a national battle over the future of the Internet was fired almost casually.
On a typically rainy Oregon night a year ago, David Olson, a career city bureaucrat, sketched out new rules for AT&T Corp., the company that had just bought the city's cable TV system. If AT&T hoped to sell high-speed Internet access over those cable lines--and that was central to its plans--it would have to allow customers to connect directly to the Internet provider of their choice, essentially allowing its rivals to share the wires.
"It was one of those midnight on a napkin on the kitchen table kind of deals," recalled Olson, 47, who said the requirement seemed like basic common sense. "You don't need a degree in computer science to know that consumers ought to have choices . . . My main thing was to write it up, go to bed and cuddle with the wife."
But in Portland, with its tradition of activist local government and suspicion of large outside interests, what looks like common sense to natives often touches off a national debate. At the next meeting of the citizen's panel that regulates cable licenses, lobbyists for US West Inc., America Online Inc. and AT&T all showed up. Olson said to himself, "Oh. Got something here."
Portland's decision has become a flash point in the furious race over which company will control and benefit from the next generation of the Internet, with the winners likely to claim billions of dollars in profit. The fight is being waged on many fronts by the cable industry, telephone companies, Internet service providers and consumer advocates.
In January, AT&T filed a lawsuit challenging Portland's right to require open access to its cable wires. In June, a federal judge ruled for the city. Today in Portland, a panel of judges from the 9th U.S. Circuit Court of Appeals will hear arguments in the company's attempt to overturn the ruling.
As AT&T portrays it, Portland is an unwitting tool of the company's competitors, especially America Online and GTE Corp., which have urged other jurisdictions, including Fairfax City, to mount similar challenges to the cable industry. AT&T asserts that the consumer freedom arguments are mere rhetoric: The real tension is over profit and market share.
"This has nothing to do with philosophy," said Josephine Martin, a spokeswoman for the National Cable Television Association, a trade group supported in part by AT&T. "This is a business negotiation being played out in public."
But Portland officials say they are making an important stand for the continued openness of the Internet at a time when the medium has come to touch most of modern life, influencing commerce, art and politics. "Portland's changed the national debate," said Erik Sten, 32, the city councilman who has pressed hardest to turn Olson's open access conditions into law. He got himself elected by rolling a revamped milk truck through town blasting Motown--the Stenmobile. "If we don't act, AT&T basically puts this over on the whole country," Sten said.
Sten said he didn't fully grasp the national significance of the city's position until January, when he found himself on a conference call with AT&T's chief attorney and one of Oregon's U.S. senators, Ron Wyden, a Democrat, in an effort to preempt a full-blown legal battle. Wyden devoted the entirety of a 90-minute break in the presidential impeachment trial to the conversation with Sten.
AT&T has snapped up more than half the cable lines in the country in a bid to claim profits by bundling high-speed Internet access with phone service. That Portland stands in the way of those plans seems no accident. The city of 1.5 million has rarely been confined by convention. Oregon and Portland have been among the first to break new ground, on issues such as health care, assisted-suicide and the decriminalization of marijuana.
More than two decades ago, the city adopted the strictest land-use limits in the nation, drawing praise from conservationists while enraging developers who tagged it, "The People's Republic of Portland."
Portlanders express distaste for mass marketers. Some shun Starbuck's coffee, with its mission for global ubiquity, instead flocking to a homegrown chain, Coffee People. The city lays claim to spawning the microbrewery craze, and those who track such things said microbrews hold more than 15 percent of the overall beer market and a third of the draft market--more than five times as much as the typical American city.
"When you think of Oregon, you think of this great libertarian tradition," stockbroker Barnes Ellis, 34, said as he nibbled pumpkin bread inside a bakery in the city's Pearl district, a once industrial enclave with warehouses now morphing into art galleries and eateries. "I see this as kind of a turn of the Millennium extension of that ethic."
Bill Schultz, a transplanted Bostonian who has made Portland home for 20 years, credits much of what he loves about the city--the abundant parks and pedestrian-friendly downtown--to difficult fights waged years ago. If city leaders now see value in protecting the open spaces of cyberspace, so be it.
"Internet access has been such an egalitarian concept," he said. "The opportunity to be exposed to ideas on the fringes, we're not going to have that if a big company takes it all over."
To consumer advocates, the conflict is a choice between keeping the Internet a free-flowing bastion of unlimited possibility, or turning it into something more like television, controlled by a handful of major corporations.
Broad band, as high-speed access is known, is not merely a faster version of the old Internet, consumer advocates argue. It is something altogether new, making possible such services as video-on-demand, downloadable music and video conferencing.
"So much of our political policy and cultural discourse will depend on fast connections to the Internet," said Gene Kimmelman, co-director of Consumers Union. "If the cable industry has too much control over that, it can distort the democratic process."
Nonsense, cable companies say. As they portray it, the open access battle is about economic interests, not civil liberties. With billions of dollars at stake in broad band, cable is racing for early market share against local telephone companies, which are scrambling to offer their own high-speed Internet service called Digital Subscriber Line (DSL). Meanwhile, the dial-up Internet service providers that dominate the present generation of the World Wide Web, particularly America Online, are maneuvering to avoid being left in the dust.
Cable officials said that in some challenges to AT&T's system, the battle lines are hardly pure. GTE Corp., a local phone power, for example, is footing the legal bills for Broward County, Fla., which followed Portland's lead.
AT&T's clash with Portland revolves around Excite at Home, a company that supplies cable customers with high-speed Internet connections and Internet content. When AT&T acquired a controlling stake in the company, it signed a contract that obligates it, through 2002, to hook up its cable customers solely through Excite at Home. Customers can still go from Excite at Home to the Internet service provider of their choice, but they would still have to pay for Excite at Home's service.
AT&T's opponents said local Internet providers could be wiped out if they, too, cannot provide broad-band service over cable.
"We now have about 1,000 non-profits wired up at a 75 percent discount," said James S. Debiele, president of Teleport Internet Services, Portland's largest provider. "That's something you won't see AT&T have an interest in. They're not part of this community."
Mostly, open-access advocates worry that Excite at Home will become the dominant Internet gatekeeper, making deals to steer traffic to its partners, while impeding connections with everyone else.
For years Powell's Books, an enormous store that is perhaps Portland's best-known institution, has thrived despite the encroachment of superstores. Its own Internet business is bringing profit, as readers around the world discover Powell's inventory of hard-to-find, out-of-print and used titles.
"We've sort of become the underground bookstore," said Kanth Gopalpur, who oversees the company's Internet division inside a warehouse across the street from the main store. On this day two dozen well-pierced people, mostly in their twenties, answered e-mail--"Dude, you guys are awesome"--and placed books on carts, bound for the shipping office.
But what if Excite at Home becomes the first stop for all those cable customers? Gopalpur sat in front of his computer and typed "books" into Excite's search engine: A banner ad for Amazon.com beckoned. He clicked on "shopping." Amazon.com again.
"Small businesses that could have competed on price, on quality, on selection, now they're shut out of the market," Gopalpur said.
AT&T rejects such worries as unfounded, arguing that no business would deny its customers the widest array of choice. If AT&T erects electronic fences in cyberspace, their customers would simply find another connection.
Those arguments have won the backing of federal regulators. Federal Communications Commission Chairman William E. Kennard has said broad band is a nascent industry, one best nurtured free of government intervention, thus supplying AT&T an incentive to build out its broad-band network. Then, he said, local companies will roll out DSL in response, giving consumers more high-speed ramps to the Internet.
But open access proponents said that fails to account for the grip cable now holds on broad band. While cable amounts to a tiny slice of overall Internet access, it is the way that about 9 out of every 10 broad-band users now get on the Net.
Dan Sause is thirsting for broad band. His cramped, musty store, Locals Only, sells CDs cut by Portland area bands. The Internet has carried the local music scene across geographic barriers, he said, eroding the grip Hollywood traditionally holds over the tastes of the nation. "One time, I got a call from this woman in New York who wanted a CD from a band called Calobo," Sause said. "At that point, they had never played east of the Rockies."
Now, Sause wants to start selling songs directly off his Web site. In the old-fashioned dial-up world, downloading an hour's worth of music could take five hours. Broad band could cut it to minutes.
Sause worries that if Excite at Home is positioned between him and the customer, he'll be asked to pay a steep price, lest Excite funnel music aficionados elsewhere.
Still, what he mostly wants is for someone--AT&T would be fine--to soon deliver the promise of broad band. He figures the benefits of the new technology will outweigh any changes to the structure of the Internet.
"They're using the Microsoft model: We want it all," he said of AT&T. "As long as they don't start shutting you down, you're okay."
CAPTION: Portland Councilman Erik Sten, left, with James S. Debiele, of Teleport Internet Services, discuss the Internet access issue that has swept the city. "Portland's changed the national debate," Sten says.