AT&T's bid to sell video services and compete with cable television providers suffered a regulatory setback on Monday when Connecticut officials rejected its application to provide Internet-based TV services.

The leading U.S. phone service provider said the decision by Connecticut's Department of Public Utility Control (DPUC) ran afoul of a July state law that simplified the application procedure. It said it would file for emergency action with the state's superior court.

AT&T has already rolled out its new high-speed Internet and video service called U-verse to some areas of Connecticut, but it has been seeking approval to offer services throughout the state.

AT&T pitches U-verse as an alternative to cable television operators' all-in-one packages of video, Internet and telephone.

Its rival Verizon Communications Inc has launched a similar service called FiOS, and both are banking on the new services to ensure long-term growth as consumers shift away from traditional phone plans.

The ruling would force AT&T to follow a more stringent cable franchise application procedure. Supporters of that policy have said it would ensure AT&T follows fair consumer practices, such as offering the video service throughout the state rather than selecting wealthier neighborhoods.

AT&T, however, said the move meant less choice for the state's consumers.

In making this ruling, the DPUC ignored both the spirit and the letter of a brand-new consumer-friendly law and is protecting the cable monopoly, Ramona Carlow, an AT&T official overseeing regulatory affairs, said in a statement.

The company said it would be forced immediately to halt all hiring and new capital investment in Connecticut as a result of the DPUC's ruling. It said it would also have to cut more than 300 jobs in the state and disconnect more than 7,000 Connecticut homes with U-verse.

Consumers should be outraged that just as more than 150,000 local households in more than 40 Connecticut cities and towns gained the ability to choose a video provider other than their local cable monopoly, the DPUC and attorney general have acted to protect cable monopolies by eliminating competition, Carlow said, referring to the 40 cities with U-verse.

(Reporting by Ritsuko Ando)

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