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10-K405
RENAISSANCE MEDIA GROUP LLC filed this Form 10-K405 on 03/31/1999
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 Telephone Company Ownership of Cable Systems
 
   The 1996 Telecom Act makes far-reaching changes in the regulation of
telephone companies that provide video programming services. The new law
eliminates federal legal barriers to competition in the local telephone and
cable communications businesses, preempts legal barriers to competition that
previously existed in state and local laws and regulation and sets basic
standards for relationships between telecommunications providers. The 1996
Telecom Act eliminates the requirement that LECs obtain FCC approval under
Section 214 of the Communications Act before providing video services in their
telephone service areas and removes the statutory telephone company/cable
television cross-ownership prohibition, thereby allowing LECs to offer video
services in their telephone service areas. LECs may provide service as
traditional cable operators with local franchises or they may opt to provide
their programming over unfranchised "open video systems," subject to certain
conditions, including, but not limited to, setting aside a portion of their
channel capacity for use by unaffiliated program distributors on a non-
discriminatory basis.
 
   The 1996 Telecom Act generally limits acquisitions and prohibits certain
joint ventures between LECs and cable operators in the same market. There are
some statutory exceptions to the buy-out and joint venture prohibitions,
including exceptions for certain small cable systems (as defined by federal
law) and for cable systems or telephone facilities serving certain rural
areas, and the FCC is authorized to grant waivers of the prohibitions under
certain circumstances. The FCC adopted regulations implementing the 1996
Telecom Act requirement that LECs open their telephone networks to competition
by providing competitors interconnection, access to unbundled network elements
and retail services at wholesale rates. Numerous parties appealed these
regulations. The Eighth Circuit Court of Appeals in an opinion in 1997,
overturned many of the interconnection rules affecting LECs, including most
aspects of the FCC's pricing rules, intrastate dialing parity rules, certain
rules governing unbundled elements and the "pick and choose" rule on the
belief that the FCC lacked the authority to impose rules upon state
commissions. The government appealed the Eighth Circuit's opinion and on
January 25, 1999, the Supreme Court upheld the FCC's interconnection rules in
all respects relevant to the Company. The ultimate outcome of the FCC's
regulations and the 1996 Telecom Act or any final regulations adopted pursuant
to the new law on the Company or its business cannot be determined at this
time.
 
 Pole Attachment
 
   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 unless state authorities can demonstrate that they
adequately regulate pole attachment rates, as is the case in Louisiana. In the
absence of state regulation, the FCC administers pole attachment rates through
the use of a formula that it has devised. In some cases, utility companies
have increased pole attachment fees for cable systems that have installed
fiber optic cables and that are using such cables for the distribution of
nonvideo 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 and that the Communications Act does
not permit disparate rates based on the type of service provided over the
equipment attached to the utility's pole. The 1996 Telecom Act and the FCC's
implementing regulations modify the current pole attachment provisions of the
Communications Act by immediately permitting certain providers of
telecommunications services to rely upon the protections of the current law
and by requiring that utilities provide cable systems and telecommunications
carriers with nondiscriminatory access to any pole, conduit or right-of-way
controlled by the utility. The 1996 Act amendment increases significantly
future pole attachment rates for cable television systems which use pole
attachments in connection with the provision of telecommunications services as
a result of a new rate formula charged to telecommunication carriers for the
non-useable space of each pole. These rates are to be phased in after a five-
year period beginning in 2001. In adopting its new attachment regulations, the
FCC concluded, in part, that a cable operator providing Internet service on
its cable system is not providing a telecommunications service for purposes of
the new rules. Several parties have requested the FCC to reconsider its new
regulations and several parties have challenged the new rules in court. A
federal district court recently upheld the constitutionality of the new
statutory provision and the utilities involved in that litigation have
appealed the lower court's decision. The Company is unable to predict the
outcome of this litigation or the ultimate impact of any revised FCC rate
formula or of any new pole attachment rate regulations on its business and
operations.
 
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