Adelphia Still Has Vermont Woes

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The Federal Communications Commission freed Adelphia
Communications Corp. from rate regulation in Vermont, but the company still has to satisfy
state regulators that it doesn't deserve to be assessed more than $5 million in
fines.

Adelphia applied earlier this year to the FCC for
recognition of effective competition in Vermont. The company argued that penetration of
direct-broadcast satellite systems is broad enough to offer consumers there a choice of
video providers.

"We applaud this ruling," Adelphia regional vice
president William Kent said in a prepared statement. "It will allow the marketplace
to determine rates. The ruling will have little impact on our customers, since the rates
we have charged for basic service have always been below the maximum established by the
FCC."

In its petition to the FCC, Adelphia said DBS carriers have
about 69,000 subscribers in Vermont, or around 30 percent household penetration.

Under federal law, cable competitors need a combined 15
percent household penetration in a franchise area for the incumbent cable operator to
claim "effective competition" and ask the FCC to bar basic-rate regulation by
local franchising authorities

Following a spate of acquisitions, Adelphia serves 80
percent of the cable customers in the state.

But the company has perhaps a larger regulatory hurdle to
clear: The state is in the midst of a proceeding that will determine whether it will be
refranchised. That hearing has been combined with a state examination of the
operator's past performance.

Some of the commissioners of the state's Department of
Public Service believe Adelphia has shown a "pattern and persistence" of
franchise noncompliance.

The operator has fallen afoul of rules big and small. State
officials were angered that it did not respond in a timely manner to Vermont's Year
2000 readiness inquiry. The company also dropped, without notice, one FM radio station for
the duration of a two-way, 750-megahertz rebuild that will upgrade 70 percent of the
state.

A chasm remains between the provider and the state over the
inclusion of small communities in Adelphia's rebuild schedule. Vermont wants cities
such as Rochester, Pawlet and Reading to be upgraded, but the company argued that
communities with 175 connections or fewer can't financially support a rebuild.

The DPS is collecting testimony from the operator defending
itself against charges that it has violated dozens of franchise requirements. Hearings are
scheduled Oct. 12 through 21.

The FCC action will not alter the state schedule. "We
don't see any significance to these two proceedings," DPS director of consumer
affairs and public information Deena Frankel said. "It affects rates only."

State law allows regulators to impose fines of up to
$40,000 per violation, plus $10,000 for each day that the violation persists. The fine is
capped at $100,000 or one-tenth of the company's Vermont revenue.

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