Disney to Reach Out to Phone Industry

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Boca Raton, Fla. -- The Walt Disney Co. plans to work more closely with the
local phone industry on shaping the federal government's broadband policies.

Preston Padden, Disney's executive vice president of worldwide government
relations, staked out a potential deal in which Disney would agree to support
deregulation of digital-subscriber-line service in exchange for phone-industry
support for federal rules that protect Internet piracy of Disney's filmed
entertainment.

'We look forward to working, to a much greater extent in the future, on how
we can both encourage the deployment of broadband and make sure our investments
and your investments have the ability to make a market return,' Padden told
attendees Tuesday at the United States Telecommunications Association convention
here.

The local phone industry contended that the Federal Communications Commission
requires them to lease network elements to competitor at below-cost rates.
Phone-industry officials claimed that FCC policies have directly contributed to
the telecommunications meltdown.

In his remarks, Padden suggested that the economic consequences of the FCC's
phone-competition rules were the same ones Disney faced when its products are
stolen on the Internet. He noted that the federal government, through compulsory
licensing, also hurts Disney by requiring it to distribute its local ABC TV
signals at regulated rates.

'We both face threats to our ability to earn a market return on our
investments. In your case, it's . the government telling you to license the
elements of your network at what you may believe are uneconomic prices to
competitors,' Padden said. 'In our case, it is either the outright theft of our
[intellectual property] or, almost as bad, something called a compulsory
license.'

Padden indicated that Disney's cooperation with the phone industry would come
after some phone companies (which he did not name) stop encouraging support for
compulsory licensing.

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