As Rival Makes Gains, AT & T Grows in Texas

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Just days after obtaining a franchise in Houston, Western Integrated Networks last week added Dallas to its growing list of major markets under contract.

Officials there voted unanimously last Wednesday to authorize a 15-year deal allowing WIN to compete for AT & T Broadband cable and Internet access customers, and ultimately against AT & T and Southwestern Bell in telephony.

City officials, who would like federal regulators to overturn AT & T's latest basic-cable rate increase, also voted to renew the MSO's franchise for 15 years, effective Jan. 1.

News of the emerging competition came as AT & T strengthened its grip on the Metroplex through a swap of 82,000 area subscribers for 98,000 Time Warner Cable subscribers, most in the Dallas suburbs.

"Basically, it gives us a larger footprint in the Metroplex," said AT & T spokeswoman Angel Biassati.

Texas Cable Partners, which is owned equally by AT & T and Time Warner, will receive an undisclosed amount of cash to cover the difference in the number of customers exchanged.

WIN's Dallas franchise highlighted a flurry of overbuild activity last week, with communities in Oklahoma, Wisconsin, Kansas, Minnesota and California jumping on the bandwagon.

"We are extremely pleased that Mayor [Ron] Kirk and all of the members of the Dallas City Council have shown their confidence in our plans to build a new broadband communications network, and for the first time create an environment wherein residents will have a choice for all of their telecommunications service needs," said WIN chairman James Vaughn.

Dallas' city charter requires an incoming cable operator to activate its first customer within six months. WIN will start construction immediately, with a 60-month completion target, said spokesman Bill Mahon.

On the AT & T front, Dallas officials said the MSO's new franchise contains 17 pages of customer-service requirements, compared to two in its previous agreement.

"We more clearly defined certain things, and added [financial] penalties for specific violations," said Nick Fehrenbach, Dallas' manager of regulatory affairs and utility franchising.

A $150 million upgrade of the Dallas system will improve network reliability and picture quality, said Biasatti. It will also allow the company to easily detect outages.

"We won't have to wait for customers to call in and tell us about an outage," she said.

Elsewhere, Tulsa, Okla., passed a rights-of-way ordinance last week that moved Everest Connections Corp. one step closer to competing with Cox Communications Inc.

The company will use the ordinance to enter the telecom market, rather than pursue a traditional franchise. Under Oklahoma law, such a franchise is subject to voter approval.

Everest is also talking to officials in nearby Broken Arrow, Okla., although additional franchises may have to wait.

"Obviously, our operations in Oklahoma will grow-but in manageable bites," said Michael Roddy, president and COO of Everest. "We have a lot on our plate right now."

Everest announced that Spalj Construction, a Minnesota-based subsidiary of Quanta Services Inc., has been awarded a contract to build 15,000 miles of plant in the Twin Cities.

Digital Access Corp. last week signed last week with Brookfield and Hales Corner, Wis., and Mission, Kan.

Despite its status as a second-tier market, Milwaukee's demographics are ideal in terms of household income, education levels, home density-per-mile, computer penetration and discretionary income, Digital Access CEO Joseph Cece said.

The overbuilder could score a major coup this week if Indianapolis approves a request to serve 350,000 of its homes and businesses.

In Minnesota, Seren Innovations Inc., added to its local cluster with a franchise in the town of St. Joseph., a community currently served by U S Cable.

And on the West Coast, RCN Corp. added a franchise in the San Francisco Bay area, signing on the city of Burlingame.

However, overbuilders are facing a pair of potential setbacks.

A report from a Lehman Bros. analyst last week touched off rumors that Qwest Communications International Inc. may scrap the VDSL-based video strategy it inherited from U S West Inc.

Analyst Steven Levy indicated that plans for introducing very-high-speed digital-subscriber-line service in Denver and Tucson may have stalled. The report caused shares in VDSL vendor Next Level Communications, a spinoff of the former General Instrument Corp., to plummet last Thursday.

In response, Next Level CEO Peter Keeler issued a statement that said his company has not been informed of any change in Qwest's VDSL plans. Qwest officials said VDSL was just one piece of the post-merger company under reevaluation.

Meanwhile, Louisville, Ky., delayed a vote for an overbuild by Georgia-based Knology Inc.

At a recent meeting, officials questioned the company about financing, construction schedules and the franchise term.

Should Knology win approval, it will battle head-to-head with Insight Communications Corp., which is lobbying for franchise terms that would allow the two companies to compete on equal footing.

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