Cable Objects to SMATV Telco Plan

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Washington -- Hoping to inject competition into cable
markets, the Federal Communications Commission is taking a close look at a video service
that could alter the economics of serving apartment buildings.

The plan seeking FCC endorsement calls for permitting a
company to place a headend atop one building and to interconnect with other buildings by
sending video over wires owned by an unaffiliated telephone company.

By relying on phone-company facilities for transport across
public rights-of-way, the company, Entertainment Connections Inc., claims that it would be
insulated from local cable regulations and federal open-video-system rules.

'Here, you wouldn't have the requirements of OVS
or cable,' said Frank Lloyd, a Washington, D.C., cable attorney with Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo. 'It seems to me that the cities would be apoplectic
if ECI's petition were granted.'

If approved, ECI's plan would pave the way for
satellite master antenna television (SMATV) providers to broaden their reach without
having to buy rooftop equipment for each new property, without having to pay franchise
fees and without having to reserve channels for local TV stations and public-access and
leased-access programmers.

Critics of the proposal -- which include cable operators
and local governments -- said it is illegal, and they want the FCC to reject ECI's
request to go forward in East Lansing, Mich., using transmission facilities provided by
Ameritech Corp.

'To the best of our knowledge, ECI is not providing
service via Ameritech at this point in time,' said East Lansing communications
administrator Judith Tarran, who told ECI a year ago that it needed a franchise after the
local cable operator, Tele-Communications Inc., lodged a complaint.

'Our city attorney agreed with TCI that they [ECI]
were required to have a permit and franchise agreement with the city,' Tarran said.

Inside the FCC -- where senior officials are voicing
increasing alarm over the lack of cable competition -- ECI's proposal is starting to
draw attention as a pro-competitive tool that does not involve the agency in further
attempts at price regulation.

'I think [ECI makes] some pretty good arguments
myself,' a senior FCC aide said.

People following the ECI debate are anxiously awaiting word
from FCC chairman William Kennard, who has been complaining the most about rising cable
rates and the industry's 87 percent market share.

'It kind of goes back and forth,' said the aide,
referring to deliberations in Kennard's office. 'It's not settled
yet.'

FCC commissioner Susan Ness, who could be the swing vote,
recently called in Daniel Brenner, the National Cable Television Association's vice
president of law and regulatory policy, to debate the merits of the ECI petition with
ECI's Washington, D.C., lawyer, Deborah Costlow.

A privately owned company, ECI is a small SMATV provider
that serves about one-dozen apartment buildings in the East Lansing area and that is
looking to expand its operations.

By depending on Ameritech's 750-megahertz
supertrunking lines to link apartment buildings, ECI said it could realize large economic
efficiencies.

Without Ameritech, ECI said that in order to recover the
cost of rooftop reception equipment, it would need to serve a building with at least 400
units (of which there are few in East Lansing); with Ameritech, ECI said it could serve
buildings with as few as 100 units, with the headend costs being spread over several
buildings.

Dave Roberts, president of ECI, said his plan was
pro-consumer, yet he declined to answer questions about his company, referring a reporter
to Costlow.

The legal jousting between ECI and the NCTA is largely a
debate over the definition of a cable operator.

The NCTA said ECI would in fact use public rights-of-way by
leasing channel capacity from Ameritech. In that case, the association said ECI is a cable
operator providing cable service.

Were the FCC to approve ECI's petition, the NCTA
warned that the agency would be blowing a hole in communications law big enough 'to
drive a truck' through, and that it would be adopting an 'anything goes'
standard for the provision of wireline video.

'It is not possible to overstate the significance of
the issues raised by [ECI],' the NCTA told the FCC.

ECI said the critical distinction is between which company
is using public property, ECI or Ameritech. Because its facilities remain solely on
private property, ECI said it is not a cable operator subject to the franchise
requirement.

Costlow said the Telecommunications Act of 1996 authorized
the kind of service that ECI wants to provide, referring to provisions that allow a phone
company to act as a common carrier of video programming.

'It's a different service. Congress said it was
fair,' Costlow said, adding that the law intended for new entrants to try different
regulatory models besides franchised cable service.

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