Jury: TCI Owes San Jose $1.5M

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A California jury has ruled that Tele-Communications Inc.
must pay $1.5 million in back taxes to the city of San Jose, but the verdict is unlikely
to settle that dispute or other rate issues brewing between the parties.

The city sued TCI in 1993, arguing that revenue from the
sale of cable-programming guides and equipment rental should be included in computations
of gross revenue.

The battle is not a new one; San Jose unsuccessfully
pressed the issue with two previous owners of the 240,000-subscriber system that is now
known as TCI Cablevision of San Jose.

Although the dispute has been ongoing for 12 years, the
statute of limitations allows computation of back taxes to 1986 through 1989, when the
formulation changed.

TCI argued unsuccessfully that gross revenues applied to
programming sales, and not to the guides. However, the jury, convened in Santa Clara
County Superior Court, voted 10-2 in favor of the city's tax formula.

TCI executives were disappointed by the verdict, and they
were mulling the possibility of an appeal.

While city officials said they were pleased by the court
ruling, they were not optimistic about their chances of collecting soon. After all, noted
Pamela Stone Jacobs, assistant to the city manager, the community is still waiting for TCI
to acknowledge rate-rollback orders dating back to 1996. The city has three rate appeals
pending before the Federal Communications Commission.

Jacobs expressed hope that a recent FCC ruling in a
rate-stay case in Richardson, Texas, also involving TCI, will result in some rate relief
for San Jose residents. There, the FCC ruled that while a stay is pending, the operator
may not proceed with a rate hike.

"We'll look into our ability to enforce our order
under that ruling," she said, adding that the FCC often treats each rate appeal as
unique.

The city is also awaiting the conclusion of its
relationship with its other, short-time operator, Pacific Bell Video Services. The telco
shut down its hardwire-cable operation there last year, when it merged with SBC
Communications Inc.

The telco issued a request for proposals to sell off the
hybrid fiber-coaxial system and related hardware, but the sale and a subsequent settlement
with the city have yet to be completed, Jacobs said.

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