Cable Competition Rocks in Boulder

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Denver -- The city of Boulder, Colo., will be a hotbed of
competition this summer when U S West collides with AT&T Broadband & Internet
Services in the local telecommunications market.

As expected, the Boulder City Council voted 7-0 last week
to allow U S West to use its existing phone network to offer cable and Internet services
to 277,000 area residents.

City officials called the Colorado-based telco's entry
into the market "historic," ranking with the issuance of Boulder's first
cable franchise in 1954.

"We've got a competitor in town," Boulder
telecommunications coordinator Richard Varnes said. "For the first time, residents
will be able to say, 'I like this package,' or, 'I like that
price.'"

U S West will launch services via very high-speed
digital-subscriber-line (VDSL) technology, which allows it to leverage its existing
copper-line network. It's currently using VDSL to service a combined 16,000 video and
Internet customers in Phoenix, "and we're looking forward to providing choice to
the citizens of Boulder," spokeswoman Anna Osborn said.

Boulder officials granted U S West a "revocable
permit," which allows it to build its network, but does not require universal service
and limits its PEG-access (public, educational and government) payments.

The telco, which plans to bring its first customer online
within three to six months, can begin construction 30 days after issuance of its permit,
Varnes said.

Meanwhile, the city and U S West have agreed that the
company will seek a declaratory court judgment on whether a full-blown franchise must be
approved by voters. The court's decision will be the basis of future negotiations.

Varnes said he believed AT&T Broadband was not upset
about U S West's permit, since whatever franchise is negotiated with the regional
Bell operating company must be virtually identical to the one the MSO receives.

AT&T Broadband is operating under its own permit, which
was issued after voters overwhelmingly rejected a franchise renewal for the city's
former operator, Tele-Communications Inc. That permit is set to expire in September.

"It would be different if we were granting U S West a
20-year deal, on different and more favorable terms," Varnes said.

AT&T Broadband, however, said it was reserving its
rights, and it would decide what action to take based on the city's ability to
prevail over U S West in court. "We've made known our concerns," spokesman
Matt Fleury said.

In the meantime, the MSO continues to upgrade its local
network, recently switching 5,000 Boulder homes to its new 225-channel programming lineup
and formulating plans to launch Internet and telephony services, Fleury said.

Boulder is the second Colorado community to allow U S West
to enter its local cable market, joining Douglas County, which issued the company a
license that sets up a showdown with AT&T Broadband for 123,000 residents.

Experts, however, predicted that U S West will be fighting
an uphill battle against consumer anger stemming from recent headlines detailing its
service problems in Colorado.

The company was recently slapped with a $12.77 million fine
by the state Public Utilities Commission for ongoing service problems -- the largest such
penalty ever levied against a local utility.

Elsewhere, Business Week reported last week that U S
West is also eyeing other AT&T Broadband markets, including Minneapolis, where it
would compete against its former MediaOne Group Inc. subsidiary, and Seattle, another
AT&T Broadband stronghold.

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