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Time Warner To Offer Phone Services Via Cable

May 18, 1994

ROCHESTER, N.Y. (AP) _ Not only will Rochester residents likely become the first in the nation to make telephone calls over their cable TV systems, they could also save more than $20 million in the process.

Rochester Telephone agreed Tuesday to connect with a new phone system Time Warner Cable is building from its cable TV operation in the city.

Under the pact, signed also by the staff of the New York Public Service Commission, Rochester Telephone would drop its $1.48-a-month charge for Touch- Tone service and freeze basic service rates at $12.96 a month through 2001.

Adding up the projected savings over the seven-year period, consumers would end up about $21 million ahead, the company said.

In exchange for the reductions, the phone company would be freed from state regulations that force it to give rebates to customers if it earns more than a set rate of return.

The agreement is the first of its kind between a cable operator and a major telephone company in the United States.

The commisioners of the New York Public Service Commission must still act on the agreement. If they approve the deal, Time Warner Cable’s phone service could be running next year in Rochester, spokesman Michael Luftman said.

″We’re already there with the basic architecture,″ Luftman said. ″What we need to do is add a switch. What this agreement allows us to do is connect our switch with Rochester Telephone’s switch.″

A telephone switch directs calls to their proper destinations.

Time Warner Cable has 200,000 subscribers in Rochester. Its fiber-optic and cable lines pass an additional 100,000 homes, giving it a potentially broader customer base.

Several cellular phone and long-distance companies were involved in negotiations for the deal but didn’t join in the agreement. They include AT&T Corp., MCI Communications Corp., Sprint Corp. and Rochester-based ACC Corp.

The companies believe the pact ″does not go far enough to open up the Rochester market,″ said Neal Vaupel, a spokesman for AT&T.

AT&T will specify its objections to the Public Service Commission next month, Vaupel said.

Rochester is a rare city for phone service. It is fully served by a locally-run telephone company, rather than one of the seven large regional Bell operating companies.

The so-called Baby Bells are prevented by law from entering the cable TV business in areas where they offer phone service. Because of that restriction, they have no incentive to allow cable competitors to run competing local phone systems.

John K. Purcell, corporate vice president of Rochester Telephone, called the agreement with Time Warner Cable a breakthrough.

″This establishes the framework for Rochester to become the first fully competitive communications market in the United States,″ he said in a statement.

Rochester Telephone has offered to make operator services and directory assistance available to Time Warner Cable and any competitors that may emerge. The agreement also grants access to services such as the 911 emergency line.

Time Warner Cable is the nation’s second-largest cable television operator with 7.2 million customers in 36 states. Rochester Telephone serves 1.5 million customers through 49 telecommunications companies in 22 states.

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