OVS Co. May Overbuild Prime in Md.


When Prime Communications Potomac LLC takes over Cable TV
Montgomery Co. (Md.) this month from SBC Communications Inc., it may find itself settling
into a competitive landscape.

Communities including Gaithersburg, Md., confirmed that an
open-video-system provider has approached them to compete with Cable TV Montgomery for
video services and with Bell Atlantic Corp. for telephony services.

The applicant is Star Power Communications, a partnership
of Potomac Electric Power Co. Communications (PEPCO) and RCN Telecom Services of
Washington, D.C., Inc. Local officials said the communities of Rockville and Takoma Park
have also been approached by Star Power.

Calls to multiple offices of the two partners failed to
locate the designated spokesman for the OVS venture.

So far, there's no indication of the size of the build
anticipated by Star Power in Gaithersburg, said Tony Tomasello, the city's
economic-development director. Star Power is not required to build out the entire city, so
it could "cherry-pick" the most profitable areas.

"They're very touchy about that phrase,"
Tomasello said. He added that cherry-picking may not be much of an issue in his town. The
area of densest population of all income levels is clustered around the edge of town,
where PEPCO's lines enter the community.

Initial proposals indicated that Star Power would build a
330-channel system, 110 of which will carry video. Of those, up to 86 would be basic
channels, compared with the 39-channel basic package offered by Cable TV Montgomery.

But the playing field will be changing soon. During its
transfer and refranchising negotiations, Prime pledged a $140 million fiber optic upgrade.
The improvements will allow Prime to vastly increase its basic-cable offerings, as well as
to add high-speed Internet capability and digital pictures. The improvements are
anticipated beginning in 1999.

Tomasello believes that Star Power approached his city
because Cable TV Montgomery's franchise still has two years to run. The city will
discuss a draft proposal with the OVS company later this month, he said.

Star Power representatives told city officials that its
cable rates will be lower than those of the incumbent, although it has not gotten more
specific. Price is a hot issue throughout the county. SBC hiked its rates by 9.52 percent
last year, and it applied for another 7.5 percent increase this year.

The increases prompted a letter from the office of the
county executive to congressional representatives, complaining that the 1996
Telecommunications Act has failed to curb basic-cable rates.

The OVS applicant will have to be franchised, and it will
have to pay the same level of fees as the incumbent, city officials said.