In June 1998, long-distance telephone company AT&T announced its intent to buy TCI, one of the country's largest cable companies. The City of Portland and Multnomah County, Oregon agreed to transfer of control of local TCI franchises to AT&T only if AT&T allowed unaffiliated Internet service providers (ISPs) to lease capacity on the cable network. This would permit subscribers to use an ISP of their choice, and non-affiliated ISPs would pay AT&T a wholesale rate for the use of its lines.

TCI and AT&T did not accept the condition, and the city and county denied AT&T /TCI their requested franchise transfer. In January 1999, AT&T and TCI filed a lawsuit against the city and county, seeking a declaratory judgment that the non-discriminatory access requirement was unlawful and unconstitutional.

On June 4, 1999 the U.S. District Court for Oregon upheld the local ordinance of Portland and Multnomah County, requiring AT&T to open up its cable lines to third-party ISPs. While AT&T had argued that federal law regulating cable franchises preempted local authority, the judge in the case concluded that the open access requirement is within the authority of the city and county to protect competition.

This was a triumph for local authority, but it did not last long. On June 22, 2000 the U.S. Court of Appeals for the Ninth Circuit overturned the lower court’s ruling.

The court's reasoning, however, was unexpected. The court ruled that Excite@Home, AT@T's affiliate ISP, is not a cable service, but rather a telecommunications service. This means that Internet service over cable is not subject to regulation by the city (as are cable services), but by the FCC.

Many analysts interpreted the result as a dubious victory for AT&T. "AT&T won the battle but lost the war," Scott Cleland, a regulatory analyst with Legg Mason, a market research group, told the New York Times. If Internet services over cable lines are defined as a "telecommunications service", there is a strong chance that the federal government will require cable operators to open their lines, as other providers of "telecommunications services" are required to do.

Mr. Cleland was half right. AT&T lost the war. Excite@Home filed for bankruptcy in 2001. AT&T sold its cable business to Comcast in 2001 for a fraction of what it paid in 1999. After several rough years, SBC agreed to purchase what remained of the company.