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City May Sue AT&T In PEG-Fee Dispute

The city of Petaluma, Calif., has retained special counsel
to pursue litigation against AT&T Broadband for refusing to bow to a city-mandated
hike in PEG-access (public, educational and government) support fees.

"We've tried the negotiations route," said
Gene Beatty, assistant city manager and member of the PEG advisory board. "It sounds
like we're done talking."

Beatty added that the cable executives made their final
compromise offer and the City Council rejected it.

Last August, the City Council of the town north of San
Francisco voted to increase PEG support from 50 cents per subscriber, per month to $2. The
increase is enabled by the franchise, according to the city, and it will help the access
corporation to program three channels and staff up to five positions.

But AT&T Broadband responded with a threat to send out
a separate bill for $2 to its 17,000 subscribers in the city, with a notice that cable
service will not be severed if subscribers don't pay the PEG tab.

AT&T Broadband offered to hike the PEG line item on the
bill to 75 cents from the current 50 cents.

Beatty added that the offer included future hikes
commensurate with the inflation factor set by the Federal Communications Commission. The
company would also note on the bill that the fee was caused by the city mandate. That
offer was rejected.

If the city insists that the operator collect the $2 fee,
it will appear on the standard cable bill as a separate line item marked
"optional," said Andrew Johnson, executive director of public affairs for
AT&T Broadband in California.

Cable service will not be cut if consumers decline to pay
the line item. But, he added, the company is still in "wait-and-see" mode.
Meanwhile it continues to collect 50 cents per month for PEG support.

Cable executives said they rejected the hike because they
promised their customers no rate hikes for at least one year. That argument is dulled now
because AT&T Broadband has announced that it will take its FCC-approved rate hike in
June. Bills for basic and expanded basic will increase $1.89 per month.