Cablevision Systems Corp. has formally dropped its
litigation against RCN Corp. and partner Boston Edison Co., which the cable operator
argued improperly used ratepayer money to move into the telecommunications business.
The dispute began late in 1998, when the incumbent cable
operator sued the upstart competitor and its utility partner, as well as the city of
Cablevision contended that RCN improperly used utility
infrastructure and moved into telecommunications in advance of its regulatory approvals.
Officials in Boston, Cablevision asserted, turned their heads to the competitors'
But an attempt to press the case in federal court went
against Cablevision, and in August, the U.S. Court of Appeals for the First Circuit denied
a request for a preliminary injunction.
There have been substantial changes in the marketplace
since Cablevision launched its challenge. RCN and its utility partner have continued their
build-out. RCN estimated that it will pass 20 percent of Boston's 300,000 homes with its
"Megaband Network" by the end of the year.
Further, the city signaled its support of a competitive
marketplace by signing a 15-year franchise for RCN's telecommunications services.
Meanwhile, Cablevision has decided to sell its properties
throughout Massachusetts, which amount to 354,000 cable homes, along with systems in Ohio
and Michigan, in order to focus on its New York operations.
According to a statement from Cablevision, "We have
decided to forgo further appeals on the case related to rights-of-way. We note, however,
that the Massachusetts Department of Telecommunications and Energy's investigation of the
Boston Edison-RCN partnership and Boston Edison's improper use of ratepayer assets
In May, state attorney general Tom Reilly issued a report
dunning Boston Edison and its nonutility subsidiary, Boston Energy Technology Group, for
the telecommunications partnership. The state gave the utility permission to move into
three specific nonutility businesses, none of which are telecommunications.
Further, the attorney general said, the RCN partnership
exceeded the state's mandated investment cap. He recommended sanctions and suggested that
Boston Edison be compelled to divest its 49 percent share in the telecommunications
venture. His report stated that this could be accomplished without shutting down the
DTE commissioner Gene Sullivan said that docket is still
active. A vote may occur in early 2000. He added that the commission will pursue the issue
whether or not Cablevision is still in the market at that time.
Cablevision's legal tussles with RCN predate the current
dispute. When RCN -- then owned by MSO C-TEC Corp. -- first started offering cable and
phone service over leased lines in Boston in 1996, Cablevision complained that the upstart
was operating without a legally required franchise. The state cable commission agreed with
Cablevision, but RCN persuaded a federal judge that the setup was legal.