Market Reacts with Caution

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Cable stocks took a beating in the immediate aftermath of
last week's ruling in Oregon that could open cable-plant access to outside
Internet-service providers.

The downturn was thought by many analysts to be temporary
-- several cable stocks recovered losses in the days following the June 4 ruling.

But many on Wall Street also believe the repercussions
could be severe if the decision stands and other municipalities join the fray.

Impacts could range from delayed deployment schedules for
high-speed-data services to shrinking valuations for cable operations, some analysts said.

Janco Partners analyst Ted Henderson said the Portland
ruling could cause some operators to pull back on their plans for high-speed Internet
services.

"The impact could be to delay [the rollout] at a point
in time when time to market is essential," Henderson said.

AT&T Corp. helped to make that point, issuing a
statement by vice president of law Mark Rosenblum, who said the decision had the
"potential to delay and reduce the new services that companies like AT&T will be
able to offer [citizens of Portland and Multnomah counties]."

Investors reacted: At Home Corp., parent of the Excite@Home
high-speed-data-over-cable service, dropped by $10.75 per share to $94.50 June 4. The
stock bounced back, but it then dipped to $96.88 June 9.

Cable operators also suffered. Adelphia Communications
Corp. lost $4.25 June 4, dipping to $69.63 and then to $66.75 June 9. Cablevision Systems
Corp. closed at $70.63 June 9, down $4.06 since June 3. And Jones Intercable Inc. lost
$3.37 per share over four days, closing at $48.63 June 9.

Meanwhile, at least two MSOs declared that they had no
intention of slowing down data rollouts.

"Why would anyone in the cable industry hand this
opportunity to the RBOCs [regional Bell operating companies]?" asked one MSO
executive who requested not to be named. "I think it would be a little like handing
the telcos something on a silver plate for us to slow down."

But another MSO source issued a word of caution. "If
the city position prevails and becomes a matter of policy, it will be more difficult for
cable operators to invest the money required to develop the high-speed-data
business," that source said.

Cable valuations, which are at all-time highs, also could
be affected, an analyst said. "One could certainly assume that this has an impact on
valuations," ING Baring Furman Selz LLC cable analyst Frederick Moran said. "If
it is upheld and the rule is in favor of open access, it hinders the economic potential
for new Internet offerings via cable, and it puts some of the consolidation potential
under scrutiny."

Excite@Home downplayed the impact. "This is a local
issue, not a national issue," spokesman Matt Wolfrom said. "We don't believe it
will have any impact on Congress or the FCC [Federal Communications Commission]."

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