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SEC Filings

S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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competitive disadvantage if the delivery of video services by LECs becomes
widespread. Issues of cross-subsidization by LECs of video and telephony
services also pose strategic disadvantages for cable operators seeking to
compete with LECs which provide video services. Ameritech Corporation
("Ameritech") has obtained cable television franchises in southeastern Michigan
and has overbuilt some cable operators thereby creating a competitive
environment. To date, Ameritech has not applied for cable franchises in the
areas served by us, including after giving effect to the Additional Michigan
Acquisitions. We cannot predict the likelihood of success of video service
ventures by LECs or their impact on us.
 
   We face additional competition from private satellite master antenna
television ("SMATV") systems. SMATV systems offer both improved reception of
local television stations and many of the same satellite-delivered programming
services offered by franchised cable television systems. SMATV operators often
enter into exclusive agreements with building owners or homeowners'
associations to provide cable programming to condominiums, apartments, office
complexes and private residential developments. Cable operators are, therefore,
generally required to obtain the approval of the building owners or homeowners'
associations to provide cable programming. However, some states have enacted
laws to provide franchised cable systems access to such private complexes and
the 1984 Cable Act gives a franchised cable operator the right to use existing
compatible easements within its franchise area under certain circumstances.
These laws have been challenged in the courts with varying results. The
Telecommunications Act of 1996 broadens the definition of SMATV systems not
subject to regulation as a franchised cable television service. A July 1998 FCC
decision allowed SMATVs to interconnect facilities using common carrier
facilities located in public rights of way without obtaining cable television
franchises. This decision could spur growth of SMATV systems. In addition, some
companies are developing and/or offering packages of telephony, data and video
services to these private residential and commercial developments.
 
   We also compete with wireless terrestrial program distribution services such
as multipoint, multichannel distribution service ("MMDS") which use low-power
microwave frequencies to transmit video programming over-the-air to
subscribers. There are MMDS operators who are authorized to provide or are
providing broadcast and satellite programming to subscribers in areas in the
Michigan Cluster and the New England Cluster. Additionally, the FCC recently
adopted new regulations allocating frequencies in the 28-GHz band for a new
multichannel wireless video service similar to MMDS. We are unable to predict
whether wireless terrestrial video services will have a material impact on its
operations.
 
   Other new technologies, including Internet-based services, may become
competitive with services that cable television systems can offer. Pursuant to
the Telecommunications Act of 1996, the FCC adopted regulations and policies
for the issuance of licenses for digital television to incumbent television
broadcast licensees. Digital television is expected to deliver high definition
television pictures, multiple digital-quality program streams, as well as CD-
quality audio programming and advanced digital services, such as data transfer
and subscription video. In July 1998, the FCC commenced a rulemaking to
determine the extent to which cable operators will be required to carry these
digital signals. The FCC also has authorized television broadcast stations to
transmit textual and graphic information useful both to consumers and
businesses. The FCC also permits commercial and non-commercial FM stations to
use their subcarrier frequencies to provide non-broadcast services including
data transmissions. The FCC established an over-the-air Interactive Video and
Data Service that will permit two-way interaction with commercial and
educational programming along with informational and data services. LECs and
other common carriers also provide facilities for the transmission and
distribution to homes and businesses of interactive computer-based services,
including the Internet, as well as data and other non-video services. The FCC
has conducted spectrum auctions for licenses to provide personal communication
systems. Personal communication systems will enable license holders, including
cable operators, to provide voice and data services.
 
   Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environment are constantly occurring. Thus,
we cannot predict the effect that ongoing or future developments might have on
the cable television industry or on our operations. As other companies begin to
provide cable television services, we will face additional competitors, many of
which will have substantially
 
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