Venezuelas Telco Aims for Cable License

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Caracas, Venezuela -- The country's National
Telecommunications Commission (Conatel) said it will announce Wednesday (June 30) whether
it will award a cable-TV license to the country's top phone company, Compañía
Nacional de Teléfonos (Cantv).

The decision is widely seen as dependent on Conatel and
Cantv reaching an agreement that is beneficial to both parties.

Under the agreement being discussed, Cantv will be able to
provide cable service in exchange for its support in bringing forward the deadline for
deregulation of the country's national telephone business.

Under Venezuela's 1991 privatization agenda, Cantv
must end its monopoly in local and long-distance telephony by November 2000.

But the country's cash-strapped government is keen to
bring this date forward, enabling it to begin telco deregulation as soon as possible.

Venezuela's government stands to earn at least $400
million through the sale of new telephone licenses, Conatel director general Diosdado
Cabello said.

Cantv officials have made it clear that they are willing to
talk about bringing the date for telephony deregulation forward in return for certain
conditions.

They have asked for a cable-TV license, plus licenses to
provide other communications services, such as personal-communications services and
multichannel multipoint distribution service (wireless cable).

The negotiations between Cantv and Conatel have not always
run smoothly, however. At one point earlier this month, they broke down after Cabello
accused Cantv of demanding too much. "Negotiations consist of [Conatel] giving and
giving," he said. "It can't be that only one side wins."

Talks have now resumed, but their outcome is far from
certain. Venezuela's government could dearly use $400 million in license fees. But if
negotiations drag on, it may simply decide to wait until Cantv's monopoly agreement
expires next year. In that case, Cantv will have a national fiber optic network, but no
cable-TV business.

Meanwhile, Venezuela's cable industry has not raised
any objection to the prospect of Cantv entering cable.

Alberto Arape, president of the Venezuelan Chamber of
Subscription TV, said he is not afraid of the competition. However, he added that when
cable companies are eventually allowed to offer telephony, as anticipated, he wants some
kind of guarantee from the government that they will not be steamrollered by Cantv.

Tensions between Conatel and Cantv have also spilled over
into other negotiations, such as the ones governing telephony rates.

Cantv officials expressed shock a few weeks ago when
Conatel refused to give the phone company its requested 5 percent average rate increase
next month to cover inflation.

Defending that decision, Cabello said in a prepared
statement that Cantv offered "unsatisfactory service, and it had too many customer
complaints."

In response, Cantv said its service record is about the
same as it was last year, when the government rated it as satisfactory.

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