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from regulation as "cable systems," some SMATV systems previously regulated as
"cable systems" are now exempt from regulation under the Communications Act
(including regulation under the Cable Acts). Exemption from regulation may
provide a competitive advantage to certain of our current and potential
     - WIRELESS DISTRIBUTION.  Cable television systems also compete with
wireless program distribution services such as MMDS. MMDS uses low-power
microwave frequencies to transmit television programming over-the-air to paying
customers. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology is likely to increase significantly the channel capacity of their
systems. However, most MMDS operators continue to program in analog technology
due to the significant capital cost in upgrading to digital technology, combined
with a high disconnect ratio for this service. Analog MMDS is limited to
approximately 33 channels. Additionally, both analog and digital MMDS services
require unobstructed "line of sight" transmission paths. While no longer as
significant a competitor, analog MMDS has impacted our customer growth in
Riverside and Sacramento, California and Missoula, Montana. Digital MMDS is a
more significant competitor, presenting potential challenges to us in Los
Angeles, California and Atlanta, Georgia.
     - OPEN-VIDEO SYSTEMS.  The 1996 Telecom Act established the open video
system ("OVS") as a new legal framework for the delivery of video programming.
Under the statute and the FCC's rules, a LEC or other entrant (other than a
cable system operator) may distribute video programming to customers, without
the requirement to obtain a local franchise, although the OVS operator must
provide non-discriminatory access to unaffiliated programmers on a portion of
its channel capacity. The FCC has to date certified several different companies
to provide OVS in various parts of the United States. The Fifth Circuit Court of
Appeals, however, recently invalidated certain of the FCC's OVS rules, including
the FCC's rule preempting local franchise requirements. The Fifth Circuit
decision may be subject to further appeal.
     - PUBLIC UTILITY HOLDING COMPANIES.  The 1996 Telecom Act also authorizes
registered utility holding companies and their subsidiaries to provide video
programming services, notwithstanding the applicability of the Public Utility
Holding Company Act. Electric utilities have the potential to become significant
competitors in the video marketplace, as many of them already possess fiber
optic and other transmission lines in areas they serve. In the last year,
several utilities have announced, commenced, or moved forward with ventures
involving multichannel video programming distribution. See "Regulation and
     Our principal physical assets consist of cable television plant and
equipment, including signal receiving, encoding and decoding devices, headend
reception facilities, distribution systems and customer drop equipment for each
of its cable television systems. Our cable television plant and related
equipment are generally attached to utility poles under pole rental agreements
with local public utilities and telephone companies, and in certain locations
are buried in underground ducts or trenches. The physical components of our
cable television systems require maintenance and periodic upgrading to keep pace
with technological advances. We own or lease real property for signal reception
sites and business offices in many of the communities served by its systems and
for its principal executive offices. We own most of our service vehicles.