Brentwood Renews TCI Deal, But Seeks Competitor

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Even though Tele-Communications Inc.'s refranchising
proposal came up short in the eyes of regulators in Brentwood, Calif., the City Council
decided to drop all of its system-improvement demands and to give the MSO a new,
three-year franchise.

During that short extension, city officials said they will
negotiate with out-of-state utility providers, including RCN Corp., to build a municipal
plant capable of video and data delivery. That appears to be the only way to compel TCI to
improve its system to the level of technical expertise that the regulators believe
citizens deserve.

The MSO initially indicated that it would attempt to fight
the city's position, but it has since sent Brentwood -- a town of 17,000 in affluent
Contra Costa County in Northern California -- a letter accepting the three-year franchise
grant.

"There were no grounds for [TCI] proceeding [legally
against the city]. We're not requiring them to do anything. We did our legal homework
in advance," city manager Jon Elam said.

The city settled on its strategy after "particularly
unsatisfactory negotiations" with TCI. The operator proposed a 750-megahertz rebuild
as part of its last, best offer, Elam conceded, but by then, relations between the
negotiating parties had been poisoned.

TCI argued that it needed a 10-year franchise in order to
have time to depreciate the cost of the improvements. Elam said officials believe that
this is true, "but it's also true that one doesn't willy-nilly throw cable
companies out of town. If they have confidence in the Brentwood marketplace, they should
upgrade."

Consultants said more cities are considering municipal
overbuilds, or other competitive prompts, as tools to prod recalcitrant incumbents.

"The presence of a competitor looming at refranchise
is an incredible benefit. It's the most powerful tool that a municipality can
have," said one consultant, who asked not to be identified.

Elam said Brentwood solicited proposals from TCI
competitors such as Cox Communications Inc. and Marcus Cable, but to no avail. However,
the city is talking to companies including Northern States Power and RCN in hopes of
sealing a deal by year's end.

The partner would manage cable plant built with city funds,
and Brentwood would retain control over a portion of the capacity for its own
telecommunications use or to sell to third parties, Elam said.

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