Calif. Telco Halts Jones System Buy

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A small Northern California telco has ended its attempt to
buy the local Jones Intercable Inc. system, complaining that foot-dragging by the Federal
Communications Commission blew the utility's chance for the deal.

In an angry three-page letter to the commission, Roseville
Communications Co. president and CEO Brian Strom said his company withdrew its request for
a cable-telco cross-ownership waiver because it was frustrated with "bureaucratic
inaction" after 15 months.

The FCC did not return calls for comment.

Mike Campbell, Roseville Communications' executive
vice president and chief financial officer, said the effort to buy the 16,000-subscriber
Jones system in the Sacramento suburbs has cost the 117,000-line local-exchange carrier
between $500,000 and $1 million. It has also killed its plans for cable.

"It doesn't make sense to overbuild," he
said.

The attempted transaction began in 1996, when, during
joint-venture talks with then-Scripps Howard Cable (now owned by Comcast Corp.) and Jones,
the latter company proposed an outright purchase. However, federal law forbade the telco
from buying a cable system in its own market without a waiver, unless the system served
12,000 or fewer customers.

Strategically, it is important for Roseville Communications
to move into cable because 54 percent of its service area is in Comcast's franchise,
and the MSO has indicated that it will launch telephony in the future, the utility
indicated in filings.

The telco had the support of the community of Roseville and
of surrounding Placer County after it vowed to do a system upgrade. The city looked
forward to a locally owned company, and not one with "a local general manager
directed by corporate interests out of state," said John Tarson, Roseville's
community-services manager.

However, the city is confident that Jones will find another
buyer: Roseville is growing by an average of 1,600 housing units per year. Indeed, Jones
added more than 1,000 subscribers while the deal was pending.

Ironically, Roseville Communications withdrew its request
the day before the FCC agreed to extend U S West Inc.'s cross-ownership waiver for
its in-market Minneapolis-St. Paul system. That approval was based on assertions by the
telco that it will have separated its telephony and cable businesses by the time the
waiver expires again in July.

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