AT&T claimed that a state-wide franchise it got from Kentucky in 1886 — to build and use "telephone lines, exchanges and systems" — gave it the right not only to furnish Bluegrass Staters phone service but also to provide them cable TV. And the district court agreed.

The Sixth Circuit did not. The panel ruled that the Court Below made two mistakes:

First, the court failed to apply the appropriate standard of review for a motion to dismiss, improperly assigning the burden of proof to the non-moving party, Mediacom.  Second, the court relied on self-serving facts written by AT&T in a stipulated agreement—facts that conflicted with the well-pleaded facts in the complaint—to make findings about the nature of the U-verse service, and its applicability to AT&T’s telephone franchise. 

Mediacom Southeast LLC v. BellSouth Telecommunications, Inc. d/b/a AT&T Kentucky, No. 10-6117, slip op. at 4-5 (6th Cir. Mar. 2, 2012).

The case started when a city, Hopkinsville, sued AT&T for selling U-Verse cable service without a local franchise. The city and AT&T settled, but before the case could go away the existing cable firm, Mediacom, jumped into the case and started making the same claims that the now-happy city wanted to drop. AT&T moved to dismiss, and the district court obliged.

The Sixth Circuit judges felt that their colleague went too fast by reaching the question of whether sending "IP video signals is within the scope of AT&T Kentucky's existing franchise" on a motion to dismiss. Mediacom alleged in its complaint that the franchise allowed "two-way" phone service, not "one-way" cable service. The Lower Court also erred by giving credit to an AT&T document — the settlement agreement with Hopkinsville — on the one-way/two-way question over the contrary allegations in the Mediacom pleading.

The fact that AT&T had called its U-Verse service "one-way" in another case didn't help. See id. at 8 (quoting Office of Consumer Counsel v. Southern New England Tel. Co. d/b/a AT&T Connecticut, 515 F. Supp. 2d 269, 276-77 (D. Conn. 2007)).

Blawgletter doesn't see the outcome as a plus for consumers. AT&T might have a hard time showing that U-Verse looks more like two-way phone service than one-way cable TV. In any event, if AT&T loses on the issue, that could make the cable incumbents' job of fending off competition easier.

We can't believe we hope AT&T wins.