Starpower Faces Franchise Fight Near D.C.

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Starpower Communications may be just weeks away from
obtaining a franchise that would allow it to cherry-pick cable customers in the
nation's eighth-wealthiest county.

Officials in Montgomery County, Md., have until the end of
May to act on county executive Douglas M. Duncan's recommendation that Starpower be
allowed to operate in competition against Prime Communications, which owns incumbent
operator Cable TV Montgomery.

The proposed franchise authorizes Starpower -- a joint
venture between RCN Corp. and power utility Potomac Electric Power Co. -- to build a
network capable of delivering cable, Internet and telephone services to 14 of 20
municipalities inside the county.

There's the rub, said CTM executives, who oppose any
deal limiting Starpower's network to just 40 percent of the county's territory,
but allowing it to reach 60 percent of its 900,000 residents, while CTM has a franchise
that calls for a build-out and upgrade of the entire county.

"Our position is simple: We understand the desire for
competition," Prime Communications senior vice president Harris Bass said. "But
we'd like to see a level playing field on issues of competitive franchises."

Cable administrator Jayne Lawton admitted that Starpower
would not be required to serve some less densely populated areas. But she insisted that
CTM would not lose money by continuing to service those customers.

"Our financial surveys show that even those areas are
profitable," Lawton said. "And I don't think that you have to guarantee a
company maximum profits."

Moreover, Lawton said, "Accommodations had to be made
to encourage competition" in a county where cable costs have skyrocketed by 43
percent in the past three years, including an announced 7 percent hike in basic rates set
for July.

"There's been no holding back, no
restraint," she said. "It's absurd to think that we wouldn't do
everything that we could to get competition in here."

Lawton said CTM is being "disingenuous" in its
arguments, since its own franchise allows it to negotiate a reduction in its franchise
fees if a competitor comes in and captures 10 percent of the market while paying less than
Prime.

"And they knew that Starpower was coming" when
they negotiated that language, she added.

However, Bass contended, an unbalanced playing field would
result in price increases in the less densely populated portions of the county -- areas
historically subsidized by higher prices in the parts of Montgomery County that Starpower
will now be targeting.

"As competition develops, those subsidies will go
away," he said.

And while the company may pursue the provisions in its
franchise granting it financial "relief" in the face of competition, Bass
admitted that the county did bow to the MSO's arguments on issues ranging from
construction-performance bonds to property and liability coverage.

"They listened and realized that we made some good
points," he said.

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