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Ops' L.A. Renewals Won't Come Easy

4/07/2002 8:00 PM Eastern

Initial fact-finding hearings during the informal phase of Los Angeles franchise-renewal talks indicate a long and bumpy process ahead for cable operators.

The dominant operators — Adelphia Communications Corp., Cox Communications Inc., Time Warner Cable and AT&T Broadband — will make their cases for renewal while looking to educate a new set of Board of Information Technology Commissioners.

In the past, the mayor-appointed committee members have been a mixed bag of the politically connected and the technologically savvy.

This time, new Mayor James Hahn appointed a board filled with lawyers. One of them — commissioner Melanie Lomax — is a civil-rights attorney who's already become a vocal cable-industry critic.

Operators were summoned to a board meeting April 1 to address their conduct in the city. On the agenda was a chronic problem — rising levels of customer complaints — but the board never got past the discussion of the so-called "digital divide."

OPS GIVE DATA UPDATES

Though executives gingerly attempted to remind new members that the city has no authority over the deployment of high-speed data, they did outline some of the services they voluntarily provide in Los Angeles.

For instance, Cox has established a computer-training lab in Palos Verdes, which to date has taught 4,000 people how to use computers. The lab is available to all comers when classes are not in session, said vice president and general manager Steve Fowler.

The company has also established a cyber café in its core low-income area, San Pedro.

Cable operators also made note of instances in which bureaucracy has stalled the system improvements that are a prerequisite for data deployment.

Because of the surge in competitive telcos and other service providers that require pole attachments, the city declared a moratorium on right-of-way permits until it could set policy. Companies that were slow to upgrade, such as Adelphia, saw their efforts stall.

Adelphia regional government-affairs manger Larry Windsor said the operator had to rework its design for the plant, doubling the electronics in its current vaults so it could move forward with an upgrade.

The moratorium has been lifted, but there is still a 30-day backlog on permits, he noted.

Adelphia must complete its upgrade, he added. It acquired most of its Los Angeles-area systems from Century Communications Inc., and only one had rolled out cable-modem services prior to the moratorium. That was the only franchise that reported growth last year, said Windsor.

SUBS LOST TO DBS

The inability to upgrade has cost Adelphia in terms of potential customers lost to direct-broadcast satellite, Windsor noted. DBS-penetration rates range from 15 percent in Adelphia's West San Fernando Valley system to 25 percent in West Los Angeles, he said. The latter is 9 percentage points above the national average.

"We'll go to 860-megahertz [capacity]. We have to, to stop the bleeding," Windsor said.

Taking note of Adelphia's recent plunge in stock price, commissioners asked Windsor if Adelphia's corporate woes would affect local service. Windsor referred questions to corporate headquarters in Coudersport, Pa., and added, "I'm told, 'Business as usual.' "

Other operators are further along with their upgrades. AT&T Broadband and Time Warner Cable are moving forward, and Cox is 99 percent finished, according to executives. Planning has moved on to the product-development stage, they said. A possible future option: tiered high-speed data service.

Cox's Fowler said 30 percent of the MSO's franchise area consists of low-income neighborhoods, and the company may introduce a less-expensive, lower-speed data service some time this year. AT&T Broadband also proposes to offer Internet service at multiple price points, based on bandwidth.

Other products in development are video-on-demand, interactive services, gaming, personal video recorder functionality, high-definition television, home networking, voice-over-Internet protocol telephony, home-energy management and conference calling, executives said.

Regional upgrades enable Los Angeles operators to offer all of those products at the same time, executives said. But operators won't launch all of those services at once just because they can, they noted.

Operators also subtly suggested that the city should be on cable's side in the battle against DBS incursion. Cable operators pay $20 million a year to the city in franchise fees, so every customer gained by DBS costs the city $32.40 per home per year, the executives said.

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