NCTA, Texas Cities Appeal ECI Decision

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Washington -- As promised, cities large and small are
seeking relief from the courts to overturn a Federal Communications Commission ruling in
June that permitted a Michigan private-cable operator to lease phone-company wires without
a cable franchise.

The Texas Coalition of Cities on Franchised Utility Issues
-- an unincorporated association of more than 100 state municipalities -- was among the
first to file an appeal, going to the U.S. Fifth Circuit Court of Appeals two weeks ago.

The cities of St. Louis and Chicago have filed in the
Eighth Circuit and the Seventh Circuit, respectively. Meanwhile, the city of Meridian
Township, Mich., which had sued private-cable operator Entertainment Connections Inc.,
filed an appeal in the Sixth Circuit.

And a spokeswoman for the National Cable Television
Association said the trade organization was set to file an appeal last week in the
District of Columbia Circuit.

After more than one year of internal debate, the FCC held
that ECI did not need a franchise because its video facilities remained on private
property, while the wires that utilized the public rights of way were the property of
Ameritech Corp.

East Lansing, Mich.-based ECI offers cable service to
multiple-dwelling units, interconnecting the buildings by leasing fiber from Ameritech, a
multistate Baby Bell that is unaffiliated with ECI.

The FCC, in a 4-1 vote, determined that the ECI-Ameritech
relationship was not a cable system providing cable service, as defined under federal
communications law.

FCC commissioner Gloria Tristani, in her lone dissent, said
the decision would undermine the role of cities in managing their streets and collecting
franchise fees.

She added that the decision could be an incentive for
companies to "artificially restructure their ownership arrangement" in order to
escape traditional cable regulation.

Under the FCC's decision, ECI will not have to pay
franchise fees, not have to provide public-access or leased-access channels and not have
to comply with rules that require the mandatory carriage of local broadcast signals. All
of these regulations apply to cable operators with local franchises.

"I think that the fundamental problems are eloquently
outlined in commissioner Tristani's dissent," said William Malone, a lawyer
based here, who is representing the Texas cities. "[The ECI decision] appears to open
the door to evasion of the Cable Act."

Alan Fishel, who represented ECI before the FCC, said the
appeals have "no merit," claiming that the commission was "correct on the
law and policy."

ECI operates a satellite-master-antenna-television (SMATV)
service, hailing from an industry that claims about 2 million subscribers, if some 800,000
motel and hotel units are included.

When ECI announced its plan to interconnect MDUs by relying
on Ameritech's facilities in the ground, the city of East Lansing ordered ECI to seek
a cable franchise. Meridian Township took ECI to court, saying that Michigan law required
a franchise.

It was in response to these local governmental actions that
ECI sought relief from the FCC.

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