Application for a Cable Franchise by Starpower Communications, LLC

Swidler Berlin Shereff Friedman, llp

January 22, 1999

BY HAND DELIVERY

Ms. Jane Lawton

Cable Communications Administrator

Office of Consumer Affairs

100 Maryland Avenue

Rockville, MD 20850

Re: Application of Starpower Communications, LLC for a Cable Franchise

Dear Ms. Lawton:

Pursuant to Section 8A-8, of the Montgomery County Code, Starpower Communications, LLC ("Starpower" or "Applicant") hereby submits this Application for a cable franchise in Montgomery County (the "County") together with a check payable to "Montgomery County, Maryland" in the amount of twenty-five thousand dollars ($25,000) to cover the filing fee. Pursuant to the County Executive’s requirements, we enclose with this original and seven (7) copies of this Application. In addition, we enclose twenty-five (25) copies of this Application with confidential redacted. Pursuant to Section 8A-8(e), Starpower provides the following information in support of this Application:

1. Identification of the ownership and control of the applicant, including:

A. the names and addresses of the 10 largest holders of an ownership interest in the Applicant, and all persons with 5 percent or more ownership interest, including the percentage interest held by all such persons;

Starpower is a joint venture between RCN Telecom Services of Washington D.C., Inc. ("RCN-DC") and Pepco Communications, LLC ("PCLLC"). Each company holds a fifty percent (50%) interest in Starpower.

B. the persons who control the Applicant; all Officers and Directors of Applicant;

As noted above, Starpower is a joint venture between RCN-DC and PCLLC. RCN-DC is a wholly-owned subsidiary of RCN Telecom Services, Inc. ("RCN-TS"), which is, in turn, a wholly- owned subsidiary of RCN Telecom Services of Pennsylvania, Inc., d/b/a RCN of Pennsylvania ("RCN-PA"). RCN-PA, a Pennsylvania corporation, is a wholly-owned subsidiary of RCN Corporation ("RCN Corp."), a publicly traded company organized under the laws of Delaware. Forty-five percent of the stock of RCN Corp. is owned by Level 3 Telecom Holdings, Inc. ("Level 3 Telecom") Level 3 Communications, Inc. ("Level 3") owns 90% of the common stock and all of the preferred stock of Level 3 Telecom. David C. McCourt, Chairman and Chief Executive Officer of RCN Corp. owns the remaining 10% of the common stock of Level 3 Telecom. Walter Scott, Jr. is the only shareholder owning 10% or more of Level 3 (12%).

PCLLC is a wholly owned subsidiary of Pepco Communications, Inc., which is a wholly- owned subsidiary of Potomac Capital Investment Corporation ("PCI"), a wholly-owned subsidiary of Potomac Electric Power Company ("PEPCO"). PCLLC has no subsidiaries. PCI was organized in late 1983 to provide a permanent vehicle for the conduct of PEPCO’s ongoing nonutility investment programs and has been separated from the regulated utility business since inception.

The Officers and Directors of Starpower are as follows:

Directors:

John D. McCallum Co-Chairman

Michael J. Mahoney Co-Chairman

Anthony F. Peduto General Manager

Officers:

There are no officers of Starpower

For the County’s reference, the officers and directors of Starpower’s parent companies are attached as Exhibit 1 hereto.

C. any other business affiliations and cable system ownership of each named person.

Please see the response to Item 1(B), supra. In addition to Starpower, which holds an open video systems certificate to operate in Washington, DC and surrounding areas, RCN Corp. also has several other subsidiaries which operate or have been authorized to construct and operate cable television systems or open video systems in other U.S. jurisdictions. These companies include:

Company Area Served

RCN Telecom Services of Pennsylvania, Inc. Allentown/Bethlehem/Easton, PA

RCN Telecom Services of Southeast New York, Inc. Brewster/Carmel/Mahopac, NY

RCN Telecom Services of New York, Inc. New York, NY

RCN of New Jersey, Inc. Hunterton/Mercer/Somerset/Morris

Counties, NJ

RCN Telecom Services of New Jersey, Inc. Northern New Jersey

RCN-BecoCom, LLC Boston, MA and surrounding

communities

RCN Telecom Services of Philadelphia, Inc. Philadelphia, PA and surrounding

communities

RCN Telecom Services of California, Inc. San Francisco, CA and surrounding

communities

2. A statement addressing whether the Applicant, or any person controlling the Applicant, or any officer or major stockholder of the Applicant:

A. has been adjudged bankrupt;

B. has had a cable franchise revoked; or

C. has been found guilty by any court or administrative agency of a violation of a security or antitrust law, a felony, or any crime involving moral turpitude.

Neither the Applicant nor any person controlling the Applicant, nor any officer or major stockholder of the Applicant, has ever been adjudged bankrupt, has ever had a cable franchise revoked, or has ever been found guilty of a violation of a security or antitrust law, or any crime involving moral turpitude.

3. A demonstration of the Applicant's technical, legal and financial ability, including financing sources and commitments, to construct and operate the proposed cable facility, including identification of key personnel.

Applicant will draw on the technical, legal and financial resources of its two parent corporations, RCN Corp. and PCLLC, in the construction and operation of its cable system. Each company has contributed substantial assets to finance Starpower’s operations. Both RCN Corp. and PCLLC possess the technical, legal and financial ability to assist Starpower in the construction and operation of Starpower’s cable system.

RCN Corp. is a well capitalized publicly traded corporation with 1997 sales exceeding $127 million. In addition, RCN Corp. had $1,890,447.00 in total company assets for the third quarter of 1998 ended September 30,1998, $1,150,992,000.00 in total company assets for the year ended 1997, and $628,085,000.00 in total company assets for the year ended 1996. RCN Corp. and its subsidiaries were among the first facilities-based telecommunications companies to offer a package of competitive local and long-distance telephone, television, and high-speed Internet access to residential and commercial customers over advanced fiber optic networks. It currently provides bundled and unbundled telecommunications services directly or through subsidiaries in California, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Virginia. and Washington D.C. In addition, RCN Corp. operates or holds an interest in numerous cable television and/or open video system providers in Massachusetts, New York, New Jersey, and Pennsylvania, and has a minority interest in Mexico’s largest cable television provider.

Affiliates of PCLLC engage in various energy and telecommunications activities. PEPCO provides electric service to approximately 682,000 businesses and households throughout Washington, D.C. and its Maryland suburbs.

4. The geographic area to be served by the cable system.

A map showing the proposed initial service area and the expanded service area to be covered by the requested franchise is attached hereto as Exhibit 2.

5. If the Applicant seeks a limited franchise under this Chapter, a description of how the proposal meets the requirements for a limited franchise, including the justification for any waiver of the minimum requirements.

Not applicable.

6. A detailed description of the physical facility proposed, including channel capacity, technical design, performance characteristics, headend, and access facilities and equipment.

The Montgomery County system will be designed and constructed using a combination of fiber optics and coaxial radio frequency ("RF") distribution. The system will have an analog passband of 860 MHz and will be designed to meet or exceed NCTA system specifications. The system will have the flexibility to allocate a portion of the analog bandwidth to support digitally compressed video channels to support a significantly higher channel bandwidth with the deployment of digital set-top converters. The system initially will have a minimum analog Channel capacity of at least 94 Channels, downstream to all Subscribers, and a minimum digital capacity of 110 MHz. If the Applicant subsequently decides to change the amount of capacity allocated to analog programming, the Applicant shall notify the County in writing at least sixty (60) days prior to the effective date of the proposed change. The system backbone connections will utilize fiber optic links (headend to hubs, hubs to hubs, and hubs to nodes). The system will be designed and engineered with redundant paths between the headend and all hubs.

The basic system will consist of a combination of 1550 nanometer (nm) and 1310 (nm) optical components connected to an optical node which will convert the optical signals to an RF signal mode type fibers to serve an area no larger than 500 homes. This design will accommodate any further communication needs of area residents. Each optical node and its RF distribution will be powered using a zero transfer standby power supply to minimize interruptions of service caused by power outages. The coaxial cable will be of the jacketed variety for durability and performance in this environment. All splicing and RF connections will use integral sleeve pin type connectors and will be shielded with heat shrinkable tubing for weather protection.

The system will be designed and constructed to be an active two way plant utilizing the return bandwidth of 5-40 MHz to permit such services as impulse pay per view and other interactive services. These return signals will be transmitted back to the primary headend or hub using the optical return laser in the node. The optical return laser has a return passband of 5-200 MHz to allow for additional future bandwidth requirements.

The system will be capable of continuous twenty-four (24) hour daily operation without severe material degradation of signal except during extremely inclement weather or immediately following extraordinary storms that adversely affect utility services or damage major system components, or atmospheric conditions such as sun spots which may impact satellite services.

The system will be capable of operating over an outdoor temperature range of -20 degrees to +120 degrees Fahrenheit and over variation in supply voltages from 105 to 130 volts AC without catastrophic failure or irreversible performance changes. The system will meet all applicable specifications over an outdoor temperature range of 0 degrees to 100 degrees Fahrenheit and over variation in supply voltages from 105 to 130 volts AC.

Applicant will provide standby power generating capacity at the headend and at all hubs. Applicant shall maintain motorized standby power generators capable of at least twenty four (24) hours duration at the headend, and battery back-up power capability of at least four (4) hours duration for all system hubs with automatic dialer response systems to alert the system headend when commercial power is interrupted. The power suppliers serving the nodes and distribution will be capable of providing power to the system for not less than two (2) hours according to manufacturer specification in the event of an electrical outage. The Applicant will maintain sufficient portable motorized generators to be deployed to a hub site in the event that the duration of a power disruption is expected to exceed four (4) hours.

7. A description of the construction of the proposed system, including an estimate of above-ground and below-ground mileage and its location, the proposed construction schedule, a description, where appropriate, of how services will be converted from existing facilities to new facilities, and information on the availability of space on poles and conduits including, where appropriate, an estimate of the cost of rearrangement of facilities to accommodate such use.

The Applicant will construct its cable system a two step process initially building out an initial franchise area and then commencing construction in an expanded franchise area. Each of these service areas are designated on the proposed service map attached as Exhibit 1. Within four years after the effective date of the Applicant’s franchise agreement, the Applicant will complete construction of its cable system in the initial franchise area to provide cable services as described in this Application. In addition, Starpower expects to complete construction of the expanded service area within two years after County approval of the Applicant’s expansion into that expanded franchise area. At present, Applicant does not have an estimate of the projected above and below-ground mileage of its system. At such time as Applicant begins engineering and construction of its system, Applicant will provide such estimates to the County.

Attached hereto as Exhibit 3 is a construction manual detailing Applicant’s construction performance standards.

8. A description of the services to be provided initially, including all broadcast and non-broadcast signals to be carried and all non-television services, and if services will be offered by tiers, identification of the signals or services, or both, to be included on each tier.

Attached hereto as Exhibit 4 is a channel lineup outlining the Applicant’s proposed service tiers.

9. The proposed rate structure including charges for each service tier, installation, converters, and other equipment or services.

Attached hereto as Exhibit 5 is chart detailing the Applicant’s proposed rate stucture.

10. A demonstration of how the proposal will reasonably meet the future cable related needs and interests of the community, including a description of how the proposal will meet the needs described in any recent community needs assessment conducted for the County.

Approval of this Application will meet the future cable related needs and interests of the community for competitively priced, superior quality cable television service in Montgomery County. Application approval will further the County’s policy of bringing cable television competition to Montgomery County. This competition will increase the incentives for the other franchised cable operator to operate more efficiently, offer more innovative services, and provide better cable television services to the citizens of Montgomery County. The increase in competition in the provision of cable services will drive down prices for cable services and facilitate the entrance of a broader and more diverse group of the population to access cable services in Montgomery County. In addition, this competitive landscape will provide both the citizens and governmental entities of Montgomery County with diversified access to cable television service and enable both to achieve increased efficiencies and cost savings.

11. Pro forma financial projections for the first 10 years of the franchise term, including a statement of income, a balance sheet, sources and uses of funds, and schedule of capital additions, with all significant assumptions explained in notes or supporting schedules.

Please see attached confidential Exhibit 6 for pro forma financial projections.

12. An affidavit of the Applicant or authorized officer that:

A. certifies the truth and accuracy of the information in the application;

B. acknowledges the enforceability of application commitments; and

C. certifies that the proposal meets all applicable federal and state requirements.

Please see attached Exhibit 7 for affidavit.

13. If an Applicant proposes to construct a cable system which would constitute an overbuild, the identification of the area where the overbuild would occur, the potential subscriber density in the area to be served by competing cable systems, and other information as necessary for the County to make its determination under section 8A-9(e).

The Applicant will overbuild the existing cable operator throughout the Applicant’s entire build area, as detailed in the map contained in Exhibit 2. In these overbuild areas, Starpower estimates that the housing density will average approximately 90-100 homes per mile.

14. A certification that the Applicant has served a copy of its application on all existing franchisees.

Please see attached Exhibit 7 for the certificate of service.

Starpower looks forward to working with the County to porceed with the requested franchise. Should you have any questions concerning this Application or Starpower’s plans, please do not hesitate to contact me (202-424-7834) or Mr. Tony Peduto, Starpower’s General Manager (202-955-7960).

Respectfully submitted,

Jean L. Kiddoo

Swidler Berlin Shereff Friedman, LLP

3000 K Street, N.W., Suite 300

Washington, D.C. 20007

(202) 424-7834 (tel)

(202) 424-7645 (fax)

Counsel for Starpower Communications, LLC

cc: Mr. Jerry Pasternak

Mr. Al Lister

Nicholas Miller, Esq.

Matthew Ames, Esq.

Mr. Tony Peduto

Mr. Tom Steel

John M. Beahn, Esq.

LIST OF EXHIBITS

EXHIBIT 1 - Officers & Directors of Applicant’s Parent Companies

EXHIBIT 2 - Proposed Service Map

EXHIBIT 3 - Construction Manual

EXHIBIT 4 - Channel Lineup

EXHIBIT 5 - Proposed Rate Structure

EXHIBIT 6 - Pro Forma Financial Projections

EXHIBIT 7 - Affidavit

EXHIBIT 8 - Certificate of Service