RCN Seeks Calif. OK as OVS and CLEC

6/07/1998 8:00 PM Eastern

RCN Corp. announced last week that it is seeking regulatory
authority to enter the California market. The company eventually intends to deliver phone,
cable and Internet services to select California markets over its own fiber optic network.

RCN filed an OVS (open-video-system) application with the
Federal Communications Commission last Friday, said Michael Mahoney, the company's
president and chief operating officer. The approval process is expected to take 10 days,
he added.

RCN also has a CLEC (competitive-local-exchange-carrier)
application on file with California. A decision is expected in three to six months,
Mahoney said.

The company said it will focus its network construction on
the San Francisco-to-San Diego corridor, which represents approximately 8.6 million homes,
and where Internet usage is 50 percent higher than the national average.

John Mansell, an analyst with Paul Kagan Associates Inc.,
said San Francisco is a great market demographically. He added that it would be
interesting to see whether RCN partners with a utility company to help fund construction
in its California markets, as it has in Boston and Washington, D.C. Mansell predicted that
a complete overbuild, including single-family homes and apartment buildings, would require
a partner with "pretty deep pockets."

An RCN spokesman said the company has no specific plans to
partner with a utility company, although he did not rule it out.

Mahoney said construction in California could start late
this year or in early 1999. He added that the company is pre-funded for its East and West
Coast construction through 2000.

While RCN may also add markets in and around Los Angeles to
its lineup, official plans for that area are not yet under way.

RCN already serves customers in Boston, New York and
Washington, D.C., which also boast high population density and heavy telecommunications

Mahoney said RCN has no immediate plans to expand into
markets between the two coasts, preferring to keep its focus on its two main clusters,
rather than entering a "hodgepodge" of areas across the country.

"We're focused very heavily on Internet
traffic," Mahoney said. "That's one of the factors that we look at in
targeting new markets."

RCN has purchased the leading Internet-service provider in
each of its three markets in the East, but Mahoney said the company has no current plans
to buy a California ISP.

"That's not in any way necessary for our business
strategy," he said, although he wouldn't rule out the possibility. RCN could
also import the design from one of its current ISPs and take it to the West Coast.

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