Ga. Town Wins $400K, Promise from Falcon

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The city of Decatur, Ga., is demanding a price for
approving a franchise transfer from Tele-Communications Inc. to Falcon Cable TV Corp. in a
joint-partnership arrangement.

The city demanded, and got from Falcon, a one-time payment
of $400,000, along with a stipulation that the city will retain a portion of the cable
plant for municipal use.

But the operator said the negotiation was actually a
win-win situation, because the city awarded Falcon a 12-year franchise extension, instead
of the two years that were remaining on the TCI contract.

City fathers said they were delighted with the deal, as it
compels, but does not require, Falcon to upgrade the system, while giving the city a chunk
of change with which to launch telecommunications projects of its own. The city did,
however, reach a noncompete agreement with Falcon.

Regulators are also confident that the transfer will not
result in wholesale rate increases: While they were negotiating with Falcon, they approved
an "equal-playing-field" law locally designed to attract cable competitors.

Cities in Ohio and Michigan used similar legislation to
attract franchise proposals from Ameritech New Media. The Decatur measure has already been
a success: An independent hardwire-cable provider, PCL Cable, has begun overbuilding the
TCI-Falcon plant.

Regulators believe that the head-to-head competition will
make Falcon think twice about boosting its rates by the 11.25 percent allowed by the
Federal Communications Commission as a return on its plant investment.

Decatur is just one of the TCI Alabama properties moving
into the Falcon operation column under the terms of the joint venture between the two
MSOs. But Mike Kempf, vice president for Falcon, said the Decatur situation should not be
a trendsetter for other transfers. The community "had issues" with TCI that
don't exist elsewhere, he added.

The issues, according to Rusty Monroe of Monroe Telecom
Associates, Decatur's cable consultant, included significant operating problems.

Monroe said a performance audit -- which the city hopes to
use for leverage in negotiations with Falcon -- revealed more than 30,000
electrical-safety-code violations for the Decatur plant: That's an average of two per
cable home.

The community also charged TCI with underreporting
franchise-fee revenue and with a lack of reporting of any kind on performance issues.

The $400,000 payment includes fines, liability releases and
other payments, and it will be collected over four years, Kempf said.

The new franchise agreement also differs from the norm in
that it did not extract a rebuild promise from Falcon. But it did set minimum standards
for service in municipal law, and it required Falcon to upgrade its plant to reach those
targets.

"The competitive environment will cause us to go in
the direction that the city would like to see. There's no need to put it in an
agreement," Kempf said.

Kempf added that the operator would have rebuilt
immediately, anyway, to deal with the competitive threat. PCL has already reached
one-third of the community, offering a 60-channel basic service at a lower price than
Falcon. Falcon's system offers 47 basic and premium channels.

The competitor has also differentiated itself by offering
interdiction -- the consumer-friendly technology that addresses homes from poles,
eliminating technical interactivity problems.

Kempf said Falcon will initially use digital compression to
add channels to its lineup, pending a digital rebuild to 750 megahertz down the line.

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