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Inside the Lines

Accusations of 'electronic redlining' may land a major telecom provider in court.

Are citizens who reside in low-income neighborhoods entitled to the high-speed Internet connection their counterparts in middle-class neighborhoods across town enjoy? Is a telecom company legally liable if it only offers broadband services to privileged neighborhoods? If so, who should act as a watchdog to make sure those services are delivered indiscriminately?

A lawsuit filed by two Broward County, Fla., residents will attempt to answer those questions.

The suit accuses AT&T Broadband of "electronic redlining" - systematically excluding lower-income communities when building out the company's modernized cable network. The plaintiffs seek class-action status and will ask the court to block a planned merger between AT&T Broadband and Comcast; the companies hope the merger will finalize this year.

Because Broward County commissioners made broadband build-out a condition for the approval to transfer AT&T's cable franchise license to Comcast, the merger is part of the lawsuit.

Exclusionary Tactics?
"AT&T completely rejects any claim of redlining and will vigorously oppose this lawsuit," said Rick Bailey, senior vice president and general counsel of AT&T Broadband, in a statement on the company's Web site. "We are confident that this lawsuit will have no impact on the expected close of our merger with Comcast."

At issue is whether AT&T purposely excluded lower-income neighborhoods in an attempt to focus its resources on neighborhoods that could yield a higher return on investment. Also at issue is if engaging in such a practice is a violation of the Telecommunications Act of 1996.

Chris Larmoyeux, counsel for the plaintiffs in the Broward County case, said the act clearly calls for indiscriminate access to telecom services; the practice of redlining is unquestionably illegal and AT&T is guilty of doing it, he said.

"You want to find out if they redlined? Go pick an address in an inner city where AT&T has a franchise agreement and find out if they offer high-speed digital access," Larmoyeux said. "When you look at the statistics, it's appalling to see that the neighborhoods that are predominantly - 98 percent - African American don't have the service, whereas neighborhoods that are 98 percent white, do."

If that's the case, and county officials said survey results and GIS mapping of those results by the county's Office of Information Technology will show that it is, then the question is: Why are the more affluent areas built out while the others are not?

"M-O-N-E-Y," said Larmoyeux. "They were building out, and their demographics were telling them where they were likely to make the most money."

Larmoyeux said the way broadband is delivered results in communities receiving segmented franchise agreements. Each community wants the revenues from license fees and deals individually with the cable companies, which puts them at a disadvantage because they don't have as much knowledge of how broadband is delivered in other communities as they could have.

He said the areas that have avoided redlining are the ones in which the political powers demanded the poor neighborhoods get upgraded first.

"It doesn't take a genius to figure this out," he said. "The digital divide has been a disgrace of the industry. It's pretty obvious that they were avoiding urban areas, and the sad thing is that, for years, until you start looking at recent corporate scrutiny, no one really got all that upset about it."

Merger Tactics
The suit acknowledges that building out in the lower-income areas would have meant spending billions of dollars to upgrade the areas, but asserts that AT&T avoided making the infrastructure investment in such areas to create an appearance of profitability prior to the merger.

Under terms of the merger, Comcast would pay about $33.5 billion in stock and assume about $20 billion of AT&T debt.

"If your goal is to sell yourself for that much money, you want to make yourself look pretty darn good," Larmoyeux said.

AT&T spokeswoman Tracy Baumgartner said it's not that simple.

She declined to comment specifically on the Broward County suit, but said that in general, several factors determine which areas are built out first, including franchise agreements and economics.

"We have to literally go in and add fiber-optic cable neighborhood to neighborhood, mile by mile," she said. "It takes billions and billions of dollars to do that. You can't do everything all at once."

She lauded AT&T's track record, citing the urban city of Watts in Southern California as an inner city that is built out, and her neighborhood in northwestern Denver, a relatively affluent neighborhood that was rebuilt two years after less affluent neighborhoods in the area had been rebuilt.

The suit was filed in late August, several weeks after AT&T and Broward County reached an agreement to bring broadband service to all unincorporated areas by 2004. The suit seeks to block the AT&T merger with Comcast until those promises are fulfilled.

At the time of the filing of the suit, Leslie Stout, assistant to the CIO of Broward County's Office of Information Technology, told AFX News Ltd. that "a good majority of the low-income areas had yet to be rebuilt. Looking at what area of the county had not been rebuilt caused us great concern."

She later told Government Technology magazine, "All I can say is that in July, the county signed an agreement with AT&T to rebuild unincorporated areas of the county. We feel it's a good deal and that AT&T has agreed to complete the rebuild of all the unincorporated areas by the end of March 2004. We're happy with that, and we're going forward."

Complaints Are Real
Broward County Commissioner Josephus Eggelletion Jr. said his office was bombarded with calls from angry constituents complaining of poor service or no service at all.

Eggelletion said parents of children who live in lower-income neighborhoods were questioning why they didn't have the same access to school-related programs on the Internet that others in the public school system had.

"People had a right to be angry," Eggelletion said. "It was more than just a cable issue. It was the economic and educational future of our children."

Eggelletion said he was unaware the two plaintiffs in the case were on his staff until he read it in the newspaper.

"I advised them not to talk to me about it; I don't want to know about it," he said.

He said he, too, lives in a minority community where service was poor, if not nonexistent, with no access to broadband.

"This was clearly germane to minority communities," he said. "When we started to sit down and pay attention to this and advised AT&T of the problem, it was like we weren't even alive."

It's not the first claim of redlining in the area. Similar accusations were made against cable companies in southern Florida in recent years, including against TeleCommunications Inc., which was the largest cable provider in the country at the time it was purchased by AT&T in 1997.

"[It] happens all the time," said Marc Cooper, head of research at the Consumer Federation of America. "The question is, do people notice it? And is there a legal lever to make it go away?"

People may start to take notice, in part because some alternatives expected to provide options fizzled with the dot-com crash.

"With the wireless people and everyone else, you were expecting so many shopping lists of alternatives for people that it didn't really matter if there had been redlining," said Larmoyeux. "It didn't happen that way."

A Murky Question
So what are the alternatives of communities that find themselves in this position? It's unclear, according to Cooper.

"Discrimination might or might not be illegal," he said, adding that the crucial question is whether broadband is defined as a telecom or a cable service.

He said if the definition of broadband as a telecom service is used, then deploying broadband in a discriminatory manner would be illegal under the Telecom Act of 1996. If broadband is defined as a cable service, there are also certain obligations about uniform deployment.

"If it's something in between, which the FCC seems to think, then you know what? Discrimination may be legal," he said. "The FCC didn't want to interfere with the business plans of cable operators, and they don't care about discrimination."

Larmoyeux said he will argue that it's up to the cable operator to provide the service in a nondiscriminatory manner.

"Do you expect the county to ride around and look at trucks to see where they're building and where they're not building?" he asked. "When somebody is digging up the street, are they running fiber-optic cable? Whose responsibility is that?"

He claims that when granted a franchise, a cable operator becomes a monopoly, and therefore assumes that responsibility.

"As a monopoly, they have a higher obligation than just the market forces," he argued. "It's like running the public school system. If you said, 'We're going to supply books only to middle-class neighborhoods because they're the only ones who read them,' you'd have a revolution."