Silicon Valley Capital Wants Modems

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Cable modems will finally appear in some homes in San Jose, Calif.-the Silicon Valley's capital-by the middle of 2002.

AT&T Broadband would have deployed its Excite@Home Corp. there sooner had it not been for the demise of Pacific Bell's cable operation. PacBell had deployed cable service in 25 percent of the city and attracted 8,000 customers before it sold out to cable-adverse SBC Communications Inc.

San Jose officials demanded PacBell either dismantle its infrastructure or sell the plant to a "valid franchise holder." In 1998, incumbent operator Tele-Communications Inc. agreed to buy the PacBell cable plant for $25 million.

Then TCI sold out to AT&T Corp. Ma Bell told San Jose it didn't need municipal approval because the acquisition was a change of control, not an ownership change.

The city disagreed and held up more than 40 permits for hub sites and other infrastructure improvements needed for cable-modem service, questioning AT&T Broadband's status as a "valid franchise holder."

The city does want cable-modem service and also wants its aging cable plant to be upgraded. But officials also want franchise terms reworked in an effort to guarantee improvements throughout the city.

AT&T Broadband didn't want those issues tied to its PacBell plant buyout, even threatening to sue before the parties agreed last year to put franchise issues aside for a while.

AT&T Broadband wants to launch modem service in the former PacBell territory in a hurry. Cable plant with 750-megahertz capacity is already in place, and improvements enabling modem service to the 50,000 homes there will be finished within the next 18 months.

The MSO will improve its plant in the other 75 percent in town to 860 MHz during the next 5½ years.

The city may then ask for the former PacBell plant to be upgraded to 860 MHz, if technological improvements warrant such a move.

"We've been chomping at the bit for some time to get into that market," said Andrew Johnson, vice president of communications for AT&T Broadband in California. The operator has submitted applications for two hub sites, which appear on the City Council agenda for Tuesday's meeting (Feb. 20). That approval will start the 18-month clock.

AT&T Broadband's franchise expired in December, but the council extended the operating agreement until the end of March.

"We still have very significant issues on the franchise, and we are not hopeful based on what we have heard from AT&T," said Tom Manheim, public-outreach manager for the city. The disputes involve public-access channels and institutional networks.

"There's some ornaments on their Christmas tree that will cost consumers a lot of money," Johnson said. "We get the impression they don't want to look back in 15 years and find they've been left behind. But they're Silicon Valley. We don't want them left behind, either."

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