Conn. Telco Backing Away From Cable Build-Out Plan

After battling to win the only statewide cable franchise in
Connecticut, Southern New England Telecommunications Corp. now wants to temporarily halt
its system build-out.

SNET -- which got the franchise in 1996, but then sold the
company to cable-averse SBC Communications Inc. last year -- got permission from state
regulators last week to stop building out its statewide hybrid fiber-coaxial cable

The state Department of Public Utility Control concurred
with SNET that its HFC-network design was "commercially impractical," relieving
SNET's Personal Vision Inc. subsidiary of its build-out

requirements for the time being.

The company pledged to the state that it would explore
other technologies and report back to regulators by October 2000 on which hardware it
would install next.

SNET won the statewide video franchise -- which other cable
operators vigorously opposed -- based on a commitment to wire the entire state for video
competition by 2007.

The company will continue to serve the telephony and video
customers it has attracted in the 20 towns where Personal Vision has launched.

SNET has signed up 16 percent of the homes passed in its
3,500 miles of plant, according to information submitted from the state. According to the
DPUC, Personal Vision has more than 24,000 customers.

In many markets, SNET competes with Cablevision Systems
Corp. Its service areas are Farmington, Meriden, New Haven, Norwalk, West Hartford and

Cablevision and the New England Cable Telecommunications
Association both intervened in the docket on SNET. A Cablevision spokesman declined to
comment on the DPUC action last week. The NECTA, in state papers, remained neutral on the
technology issue.

Although SNET won relief, the state attorney general urged
the CPUC to press the company to guarantee continuity to all current customers.

SNET "should have recognized the inherent risks"
related to new product lines, the attorney general said, and the company should be
subjected to sanctions if it backs away from its video customers.

With the notable exception of Ameritech Corp., which keeps
building out cable systems in the Midwest (while a sale of that company to SBC is
pending), most regional phone companies rejected HFC as a multipurpose telecommunications

But they remain hot on the trail of alternative video- and
data-service-delivery methods. SBC, for example, announced that it was pushing ahead with
a bundled offering that includes video from DirecTV Inc. and high-speed-data service over
phone lines using digital-subscriber-line technology.

Meanwhile, cable operators such as Cox Communications Inc.
and MediaOne Group Inc. have aggressively rolled out residential phone service over HFC
networks, and the potential of telephony over HFC was the primary reason why AT&T
Corp. bought Tele-

Communications Inc. and has agreed to buy MediaOne.

SNET was a big believer in HFC technology in the mid-1990s.
While other telcos were funding tests, SNET committed fully to the technology, computing
that the combination of fiber and coaxial cable would generate cost savings on the
telephony side of 18 percent by 1998.

But by 1997, Lucent Technologies -- one of the biggest
boosters of HFC, and SNET's vendor -- dropped its HFC-product line. SNET removed the
Lucent hardware it had already installed and switched to another vendor, but it has been
unable to resolve backup-power issues.

Reliable backup power -- to ensure that phone lines work
even if electricity fails -- is a state franchise requirement.

SNET had fallen behind its build-out schedule by six miles
per month. While it received relief from those milestones, SNET said, it still plans to
connect six more communities while it studies new technologies.

SNET wanted the DPUC to allow it to refuse to install cable
in apartment buildings and residences that require underground cable unless landlords
picked up the construction tab. The company indicated that it couldn't compete against
cable's bulk rates if it had to pay the costs of engineering multiple-dwelling units.

But the state said this had nothing to do with the HFC
issue, and it told the telco it must notify customers in the current service area by Sept.
27 that service requests can't be denied because of MDU

or underground-wire requirements.

SNET said it would submit a new franchise agreement to the
state by Sept. 10.