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July 16, 1999

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Subject: Re: Let ATHM Be ATHM
Author: Supertanker

I'll start with the disclaimers, it is in my nature. I don't own any of the stocks under discussion, unless one of the funds in my 401k has it. I'm a municipal attorney, and I handle most of the tech issues that come into the office. I work for a small firm in Los Angeles, and we represent several cities in southern California (which also means things may be done differently in other states from what I discuss). There were a couple of statements I feel compelled to comment upon, if only to offer a different perspective.

First: Eljar

"These local municipalities deciding broadband law makes as much sense as a primary care physician performing open heart surgery. Both are Doctors so why shouldn't the primary care guy be able to perform the surgery?? Because he has certain expertise that limits the type of care he has authority over. Likewise, those of us without the necessary fund of knowledge, have no business deciding law that is crucial to communications."

Eljar, it is underestimation like this that give me a good record against telecommunication companies. City officials are not the bunch of rubes we are cracked up to be. The elected folks have hired people like me to advise them, and I've got bookshelves laden with things like "Siting Telecommunication Facilities" and "Newton's Telecom Dictionary." Cellular phone towers, cable franchises, satellite dishes, you name it, I've dealt with it in detail. When the issues involve public property law (and they will if cable is involved), I'm usually ahead of the telecom folks I've dealt with. Most of the time, there is money to be made on both sides, and so we play very nicely together. Other times,
"City officials are not the bunch of rubes we are cracked up to be...Cellular phone towers, cable franchises, satellite dishes, you name it, I've dealt with it in detail."
someone will try to wave something like the FCC's Meade, Kansas decision around, and the fight is on. The last time I was threatened with Telecom Act litigation, they were citing to Meade and some non-appeals court in the northeast (Vermont, IIRC). We went ahead and denied their application to put an 85-foot cell tower in a residential neighborhood, and then they found a better location. The telecom folks generally don't have much strong law to go on, and don't want to fight about it due to costs and the fear that they will get an adverse decision. If a cable company wants to fight about some aspect of their franchise, I would be quite confident representing the city's interests. Their best chance is probably going to be to try and pre-empt us at the FCC, but that starts to get much more difficult when it starts to entangle the use of public property. As explained below, cable pretty much has to use public property, and even with a favorable FCC rule they could be in for lots of long, bloody fights.

Second comment: mityfowl

"Great point on the wire! And who's wire is it? The PEOPLES! I don't think so. And it shouldn't be!"

No, the wire is not public property, but whose land do they want to put it on? The People's. And if they want to do that, a cable company is going to have to work with the elected representatives, not try to jam it down their throats. Most people don't understand what a "franchise" is in this context. It is simply permission to occupy public property; it is not some right to carry on a particular business like a McDonald's franchise. The cable company needs to run wire to each and every parcel in the city. It is a practical impossibility to do that by negotiating with every single property owner for permission to lay cable over/under his or her land (though I know of two neighborhoods that have a privately owned cable network in them). However, cities happen to own some land that borders on nearly every property in the city: the public streets. Let's make a deal, if we can.

"It depends on the city as to what they will want, and if it turns into a fight, it is probably because one or both sides asked for too much."

It depends on the city as to what they will want, and if it turns into a fight, it is probably because one or both sides asked for too much. Obviously, the decisionmakers in Portland think the residents will be better served by open/forced access. I think of this like California's deregulated electricity system. The owners of the wires, like SoCal Edison, are getting out of the energy generation business, and make their money by "wheeling" the power from the generator to the consumer. From the non-shareholder perspective, what's wrong with that model for cable broadband? The cable owner will make their investment back by charging the ISPs. Sure, you won't make as much since you don't have exclusivity on the ISP business, but you'll still make money. If the city tried to set the rates for wheeling data so low that the company could not make a reasonable return on its investment, we would get sued and lose! That is what has happened with rent control.

It looks like L.A. is shaping up to be the opposite side of the coin. The gossip is that the Mayor prefers to go with an exclusive franchise for broadband, and that has lead three (or more?) members of the committee studying the issue to quit. Apparently, the committee prefers the idea of open/forced access. Exclusive deals can be very lucrative for cities, since you are essentially selling someone a monopoly. This makes exclusivity very common for cable systems. I can't think of more than a few places where you can get competing cable systems on one particular parcel, and that is almost always because there is an exclusive franchise. With the potential for competition from other broadband technologies, I wonder what cable exclusivity would really be worth?

To close, one way comes to mind how a company could get use of the streets without negotiating with the municipal property owner. The company would have to become a public utility and carry out a condemnation for a non-exclusive easement for the wires. This has happened with gas pipeline franchises. If cable does not want to be regulated, the last thing they want to do is become a PU!