RCN Eyes Portland, Seattle, L.A. Area

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The New Year has gotten off to a less-than-auspicious start
for AT&T Corp. in Portland, Ore., where competition is threatening to break out all
over.

Multichannel News learned last week that RCN Corp.
plans to enter the Portland and Seattle markets as part of a push into the Pacific
Northwest.

In both venues, the competition would be AT&T Broadband
& Internet Services, which is battling Portland over that community's demand that
unaffiliated Internet-service providers be allowed onto the company's high-speed network.

On Jan. 24, RCN will ask the Mt. Hood Cable Regulatory
Commission to open negotiations on a franchise authorizing it to offer cable, local and
long-distance phone and high-speed Internet access to 1.5 million residents in six
Portland-area communities.

Talks in Seattle remain "informal," sources said.

The MHCRC advises its member communities on cable-related
issues, and it will recommend whether an RCN franchise should be approved.

"I'm having a good year, even if it is only a few days
into it," said Portland franchising director David Olson, who doubles as director of
the MHCRC.

Elsewhere, AT&T placed a proposed lawsuit against
Madera County, Calif., on hold last week after local officials agreed to wait until the
Ninth Circuit Court of Appeals rules on a lower-court decision upholding Portland's right
to impose open access.

"I think everyone would agree that the Ninth Circuit
will be the controlling venue on this issue," Madera County counsel Jeff Kuhn said.

The MSO filed its lawsuit after the county board of
supervisors voted 4-0 to require that a transfer of two MediaOne Group Inc. franchises
include an open-access requirement.

It challenged the provision in U.S. District Court, arguing
that the amended 1934 Communications Act limits local governments' transfer authority to
reviewing the new operator's legal, financial and managerial capabilities.

Kuhn originally wondered why AT&T would file a lawsuit
identical to the action it filed against Portland. "I guess they feel they're
defending their rights," he said.

But a look at the market offers a clue.

MediaOne had upgraded the two systems in Madera County.
AT&T Broadband would simply have to "flip the switch" to roll out
Excite@Home Corp.'s high-speed-data service. If it did, however, local ISPs could apply
for access under local rules. With a lawsuit on file, AT&T could cite pending
litigation as a reason for blocking those requests.

In Portland, however, RCN appears ready to abide by the
city's open-access ordinance. "We've had some good, frank discussions with people in
Portland," RCN senior vice president Scott Burnside said. "I think we've found a
lot of common ground."

Burnside said RCN will offer the same bundled services it's
currently delivering in Boston; Washington, D.C.; New York; Philadelphia; and outside of
San Francisco.

However, RCN is not the first service provider to indicate
that it wants to take on AT&T Broadband in Portland. MHCRC staffers are already
trading proposals with WideOpenWest LLC, a Denver-based start-up looking to build a $250
million network that will pass some 500,000 homes.

WideOpenWest has said it will also adhere to access
ordinances in Oregon's Portland and Multnomah counties -- requirements that resulted in
AT&T refusing to roll out high-speed Internet access locally, which sent city
officials scurrying for alternative service providers.

"Now we're in overbuilders galore," Olson said.
"And in each case, they've said that not only can they live with open access, they
actually support it."

However, WideOpenWest officials now question the viability
of three service providers in the same market.

"I don't think there's room for a third company,"
said Mark Haverkate, WideOpenWest president and CEO and a former RCN executive.
"Granting a third franchise would weaken the two new companies and play to the
benefit of the incumbent. We're the best choice [for a second franchise]. We named our
company after the [open-access] issue in Portland. It's an important issue, and we're
building our company around it."

Olson conceded that each additional franchise cuts into the
survival rate for each service provider. "These are business decision that will have
to be sorted out in the marketplace," he said. "The city's not in a position to
pick a winner."

AT&T said it was "unlikely" that competition
in Portland will cause it to rethink its opposition to open access, adding that it expects
a decision from the Ninth Circuit before franchises can be issued to RCN or WideOpenWest.
"We're going to stay the course," AT&T spokesman Kevin Mulligan said.

Meanwhile, RCN also made a move last week that left it
poised to expand in the Southern California market.

The company announced a deal with Southern California
Edison, the region's largest electrical utility, under which it will use the power
company's existing fiber backbone and construction expertise to launch service more
quickly.

The deal gives RCN the potential to reach 1.5 million of
SCE's customers. Its business plans call for expansions at a 200-home-per-mile level.

SCE will lay communications cable in areas where RCN is
awarded franchises. The company's wholesale telecommunications-services division, Edison
Carrier Solutions, will provide transport for RCN high-speed-data customers.

Competitors are interested to see how the RCN launch will
play out because one of the larger operators in Southern California is Charter
Communications Inc. Investor Paul Allen's Vulcan Ventures Inc. owns Charter and is an
investor in RCN.

In Madera County, meanwhile, AT&T's decision to hold
off on legal action may not be enough to placate some area residents. In an online
editorial, Madera County Times publisher Jack Porter called on citizens to
retaliate against the media giant by switching their long-distance carrier for six months.

"It's time to tell these bullies to get the hell out
of our county," wrote Porter, who attended hearings at both the city and county and
was irked by the arrogance he witnessed, according to his editorial. A six-month boycott
"will show these bullies that we can fight back. And we don't need no lawyers to do
it."

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