LyncStar: Time Warner Ruined Austin Deal

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Denver -- LyncStar Integrated Communications LLC last week
accused Time Warner Cable of sabotaging its plans for securing a cable franchise in
Austin, Texas.

Company executives said Time Warner crippled the SMATV
operator's bid by pressuring city officials to reject a proposed deal that excluded
the same build-out requirements contained in the MSO's agreement with the city.

In the end, Austin officials decided to alter
LyncStar's agreement to include a provision requiring that it construct a system
capable of serving the entire community.

But that was after holding a first reading on the original
franchise.

"Because of Time Warner's objections, [the city]
came back to us and asked what build-out requirements we could live with," said Jim
Honiotes, LyncStar's vice president of operations. "And we said,
'None.' We didn't want to agree to something if we didn't have a
legitimate chance of living up to it."

As a result, LyncStar withdrew its request for a cable
franchise, instead planning to apply to the Federal Communications Commission last week
for an open-video-system license. An OVS license would not require a franchise, but it
would obligate the company to meet the same must-carry, retransmission-consent and
PEG-access (public, educational and government) requirements as Time Warner does.

The company has OVS systems up and running in 15 states,
serving some 15,000 customers.

In appearing before the City Council to withdraw the
company's franchise request, Honiotes blasted Time Warner for employing tactics that
"preserve its monopoly."

"This tack is consistent with Time Warner Cable's
approach to thwart competition in this and every market that it serves," he said.

Time Warner officials did not return repeated phone calls
requesting comment.

But in an interview with the Austin American-Statesman,
Bill Carey, Time Warner's Austin division president, said the MSO was simply asking
that "the city treat all cable franchisees alike. You just can't have it both
ways."

Under its original arrangement with the city, LyncStar
would have been allowed to install fiber optic plant in the city's rights-of-way in
order to connect local apartment complexes.

But as it expanded to other multiple-dwelling units, it
would have been required to build out its system to include consumers who lived a
predetermined distance from its network.

"I understand the city's issues," Honiotes
said. "It has a relationship with a world-class media conglomerate that isn't
going to let anybody -- no matter how small -- take any of its business. But it's
hard to imagine that Time Warner is afraid of competing against LyncStar in Austin or
anywhere."

Michael D. Parks, Austin's director of
telecommunications and regulatory affairs, said the city proposed a liberal nine-year plan
that limited LyncStar to building out just 10 percent of the community over the first five
years of its franchise.

"But LyncStar indicated that it just wasn't
economically viable for it to do that," Parks said.

Moreover, Parks said, the city rejected Time Warner's
request that LyncStar either match or split the cost of providing PEG-access programming,
as well as the expense of maintaining Austin's institutional network. Instead, it
went with its original plan of basing those costs on a per-subscriber formula, he added.

City officials said LyncStar's request for an OVS
license did not preclude an agreement on a franchise at a later date. The city is
examining other venues where limited franchises have been granted, including Midland,
Texas, and it hopes to come up with a similar ordinance.

"We'll have some kind of license agreement with
LyncStar by the time all is said and done," said Jack Kirfman, Austin's
telecommunications-policy planner.

Despite the fact that it wouldn't have a franchise,
Parks said city officials didn't object to LyncStar entering the local market as an
OVS operator.

"As long as we can ensure that we can continue to
manage our rights-of-way, we're not opposed to anything that benefits our
constituents," he added.

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