AT&T will file a lawsuit challenging the Connecticut Department of Public Utility Control’s decision not to grant the company a statewide video franchise for its U-verse service, a company spokeswoman confirmed today.

The company admitted surprise Monday when the CDPUC ruling was announced, since the state has a video franchise law, and AT&T expected to be able to continue providing its U-verse IPTV service, which it launched in three Connecticut markets earlier this year, under a statewide franchise. Instead, the DPUC said AT&T’s offering is a cable TV service and therefore requires cable TV franchise agreements with individual municipalities.

AT&T also is threatening to immediately eliminate 300 jobs in the state, cancel plans to fill 1000 other positions, redirect its investment to other states and disconnect its more than 7000 current U-verse customers in the state.

Connecticut’s attorney general, Richard Blumenthal, told the Associated Press that AT&T is illegally operating a cable franchise in his state and needs to be stopped. Acquiring a video franchise would enable the company to serve only certain areas and would not impose quality standards. In July, a federal judge ruled that AT&T’s U-verse service is a cable TV service and subject to those rules. The ruling came in a lawsuit filed by the state’s cable association, Cablevision and a state consumer group.

AT&T maintains Connecticut is the only state not to allow its IPTV service to be marketed under a video franchise law.

“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,” said Ramona Carlow, AT&T state president overseeing regulatory and external affairs, in a prepared statement. “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.”