Next Challenge: Leased Net Access

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Washington -- With America Online Inc. and the cable
industry still at odds on key Internet-access issues, a small Internet-service provider is
planning to open a new line of attack that could result in cable operators being forced to
sell bandwidth to third parties at regulated rates.

Last week, Internet Ventures Inc. president Donald Janke
said he is planning to file an unprecedented petition with the Federal Communications
Commission calling for a critical change in the agency's cable leased-access rules.

Specifically, IVI wants the FCC to declare that Internet
video streaming falls within the legal definition of "video programming," which
the Communications Act defines as "comparable to programming provided by a television
broadcast station."

If the FCC were to agree, IVI believes that the decision
would pave the way for ISPs to lease channels from cable operators and compete directly
with cable-affiliated ISPs @Home Network and Road Runner, and maybe even with
cable-programming networks.

"We have a verbal invitation [from the FCC] to state
our case in a more legally refined format," Janke said in an interview last week.

In a world of 5,000 ISPs, an FCC decision favorable to IVI
could open up the broadband market to vendors that likely saw themselves shut out of that
promising new market, which is being pioneered by the cable industry.

The same decision, however, could have a devastating impact
on cable. Under FCC rules, cable operators with 36 to 54 channels have to set aside 10
percent of them for leased access, and operators with 55 channels or more have to allocate
15 percent.

Many MSOs run cable networks on currently unused
leased-access channels. Those networks could get bumped if ISPs become eligible to lease
channels.

The IVI challenge comes just two months after the FCC --
under intense pressure from AOL and others -- declined to condition AT&T Corp.'s
$48 billion acquisition of Tele-Communications Inc. on some kind of equal-access
requirement allowing competing high-speed Internet access to cable networks.

The issue remains a chief concern of AOL. Last week, about
one-dozen members of the House Commerce Committee visited AOL headquarters in Dulles, Va.,
to meet with chairman and CEO Steve Case and president and chief operating officer Bob
Pittman and discuss broadband-access issues, among other things, sources said.

Case also spoke at an investment conference in New York
last week, where he said Internet innovation would be stifled if broadband access were too
costly for consumers.

"When we talk about cable broadband, I urge you to
stay focused on what this debate is really about," Case said. "It's about
preserving the openness and competition that have made the Internet industry great."

Cable-industry lawyers said last week that when Congress
passed leased-access provisions in 1984, the purpose was to give cable networks an outlet
just in case carriage talks collapsed.

"It absolutely does not in any way apply, nor was it
intended to apply, to Internet access," said Jim Cicconi, AT&T's general
counsel and top Washington lobbyist.

Howard Symons, a cable attorney with Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, added, "I think that it is a stretch to say that video
streaming that you might get as part of Internet access makes Internet access a
video-programming service. Leased access doesn't say, as IVI would suggest, that all
cable services have a right of access."

IVI has hired Washington, D.C., law firm Gurman, Blask
& Freedman to prepare the petition, which Janke said he expects to file in April.

Janke expects the cable establishment to pounce on his
petition at the FCC. And he said he is not trying to win backing from AOL.

"There is a value in a David and Goliath
approach," he added.

IVI, based in Redondo Beach, Calif., is turning to the FCC
after failing at the local level to convince operators that it qualifies for leased-access
carriage.

It began by applying for carriage in four markets served by
three MSOs: Century Communications Corp. in Ventura, Calif.; MediaOne Group Inc. in
Stockton, Calif.; and TCI (now AT&T Broadband & Internet Services) in Durango,
Colo., and Spokane, Wash.

TCI rejected IVI's Spokane request, arguing that FCC
regulations governing leased- access only cover video programming. It has not indicated
what action it will take on IVI's Durango request. There has been no official
response from MediaOne or Century.

IVI has also shown that it's willing to play rough. It
recently said it would complain to local regulators in Grants Pass, Ore., after Falcon
Cable TV Corp. refused to furnish details concerning requirements for leased-access
carriage on its local system.

Falcon officials said the matter has been turned over to
their attorneys.

Joe Estrella and Kent Gibbons contributed to this report.

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