Analyst Denies Cable Conflict Charge

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Washington -- A prominent policy analyst here defended
himself last week against charges hurled by the cable industry that his company's large
ownership stake in America Online Inc. is tainting his analysis.

Scott Cleland, head of Legg Mason's Precursor Research
Group, called the allegations "ridiculous," saying that they were indicative of
the cable industry's growing anxiety that his calls are right on target.

"When you don't like the message, shoot the messenger.
I am a big boy, and I can take the heat," Cleland said. "What it tells me is
that they are worried."

Three Legg Mason mutual funds own a combined $712 million
in AOL stock -- an investment that represents 8 percent of all of the money in the
Baltimore-based asset-management company's nine stock funds.

Torie Clarke, vice president of public affairs for the
National Cable Television Association, said the cable industry's concern is that Cleland's
reports have been taking AOL's side without disclosing Legg Mason's large position in AOL
stock.

She said disclosure is important because Cleland's reports
are influential with Federal Communications Commission officials who are refereeing a
major policy battle between cable and AOL.

Legg Mason's AOL holdings, combined with the company's
ownership of Cleland's research group, called into question the assumption that Cleland's
analyses are an unbiased look at telecommunications-policy issues, she said.

"He should disclose where his paycheck is coming
from," Clarke said. "His work has really moved from analyzing to
advocating."

Cleland said he had absolutely no knowledge that Legg Mason
funds owned any AOL stock. He said a third party handles his personal investments, and he
is unaware whether his portfolio includes any AOL shares.

He said Legg Mason is just one of more than 200 clients who
receive his reports, and the company represents about 1 percent of Precursor Group's
revenue.

"What's funny is that I don't know what we hold. Legg
Mason value funds to me are like [those of] any other client," he added.

Clarke said it was implausible that Cleland was unaware of
Legg Mason's AOL stock holdings.

"If he's not, he should be aware of it," she
said.

A Legg Mason source said one of its funds owns $3.5 million
in AT&T Corp. stock, and AT&T is siding with the cable industry against AOL. At
one point, the source added, Legg Mason also owned high-yield bonds issued by Comcast
Corp., the No. 4 MSO.

The Legg Mason source said the AT&T stock ownership
alone was proof that cable's attack on Cleland "borders on the laughable."

The tempest is about two recent client reports in which
Cleland assessed the effort by AOL to convince FCC officials to require cable operators to
unbundle their Internet-content services from the underlying high-speed transport links.

In the second report, issued Oct. 28, Cleland predicted
that AOL would prevail.

"It is no longer a question of if regulators will
eventually unbundle the monopoly cable network, but when and under what
circumstances," Cleland wrote.

He went on to say that he expected FCC officials "to
signal their intent" to pry open cable networks within the next three to 18 months.

In his first dispatch, Sept. 22, Cleland said cable
operators would "eventually" have to open their networks, but he was less
confident about the timing.

Cleland vigorously disputed allegations that he is an
advocate for AOL. He said the FCC has imposed open-network policies on the phone
companies, and the agency would likely extend some or all of those rules to cable
operators that venture into the data-transport business.

"It serves nobody's interest to have a monopoly ISP
[Internet-service provider] on the cable plant," he said. "Anybody that does
their homework will likely come to the same conclusion."

The cable industry is antagonistic toward the imposition of
phone regulations on cable facilities, saying that such a move would be contrary to law
and totally unjustified in light of cable's new-entrant status in the broadband
Internet-access market.

The cable industry has about 300,000 high-speed modem
subscribers, compared with AOL's 13.5 million subscribers, who mostly rely on the
narrowband phone network for access.

Cable sources have said that if the FCC were to order cable
operators to unbundle their networks in the manner sought by AOL and other ISPs, the
proposed merger between AT&T and Tele-Communications Inc. would collapse.

AT&T chairman C. Michael Armstrong said last
week that he would be concerned if the FCC sided with AOL
, but he did not signal
what impact it would have on the merger.

"It would all be in the specifics of what regulations
they impose," Armstrong said.

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