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AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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nondiscriminatory access and interconnection to potential competitors,
including cable operators, wireless telecommunications providers and long
distance companies.
   Regulations promulgated by the FCC under the 1996 Telecom Act require LECs
to open their telephone networks to competition by providing competitors
interconnection, access to unbundled network elements and retail services at
wholesale rates. As a result of these changes, companies can interconnect with
incumbent LECs to provide local exchange services. Numerous parties appealed
certain aspects of these regulations. In a recent decision, the United States
Supreme Court largely upheld the FCC's interconnection regulations, including
those related to certain pricing and access issues. Despite the need to resolve
other outstanding issues, the Court's decision suggests promise for competition
in local exchange services.
Pole Attachments
   The Communications Act requires the FCC to regulate the rates, terms and
conditions imposed by public utilities for cable systems' use of utility pole
and conduit space. State authorities can assume this role through a FCC
certification process. In the absence of state regulation, the FCC regulates
pole attachment rates according to a formula that allocates costs between the
pole owner and pole users. In some cases, utility companies have increased pole
attachment fees for cable systems that have installed fiber optic cables for
distribution of telecommunications services and other non-cable services. The
FCC concluded that, in the absence of state regulation, it has jurisdiction to
determine whether utility companies have justified their demand for additional
rental fees. The FCC has also concluded that regulated pole owners cannot
impose disparate attachment rates based on the type of service provided.
   The 1996 Telecom Act and the FCC's implementing regulations make significant
changes to pole attachment regulation. Changes include:
  . Requiring regulated pole owners to provide cable systems and
    telecommunications carriers with nondiscriminatory access to any pole,
    conduit or right-of-way controlled by the utility.
  . New regulations to govern the rates for pole attachments used by
    companies providing telecommunications services, including cable
  . New rate regulations go into effect in February 2001. Any increase will
    be phased in through equal annual increments over a period of five years
    beginning in February 2001.
   Although the FCC has issued its regulations, they are subject to changes on
reconsideration or appeal. Some issues that may affect the ultimate rates for
telecommunications attachments to utility poles remain outstanding.
Other Statutory Provisions
   Other federal law potentially impacting our cable systems or our business
   Transactions with affiliated programmers. The Communications Act and FCC
regulations prohibit any satellite video programmer affiliated with a cable
company from favoring an affiliated company over competitors. A satellite video
programmer affiliated with a cable company must sell its programming to
unaffiliated multichannel video distributors on nondiscriminatory terms. These
provisions restrict the ability of program suppliers affiliated with cable
companies to offer exclusive programming arrangements to their affiliates.
   Content regulation. The 1996 Telecom Act required operators to block fully
both the video and audio portion of sexually explicit or indecent programming
on channels that are primarily dedicated to sexually oriented programming or
alternatively to carry such programming only at "safe harbor" time, periods
defined by the FCC as the hours between 10 p.m. and 6 a.m. The U.S. Supreme
Court recently ruled that these restrictions are unconstitutional.