Date: Mon, 7 Feb 1994 12:51:42 -0500 (EST) From: James Love <firstname.lastname@example.org> Subject: Cable Regulation Digest (fwd) To: email@example.com Message-Id: <Pine.3.85.9402071242.B8623-0100000@essential> ------------------------------------------------------------------------------- CABLE REGULATION DIGEST: A summary of regulatory news from Multichannel News 2/7/1994 Copyright 1994 Multichannel News. NO CHANGES are to be made to this document without the written consent of Multichannel News. Reproduction/distribution is permitted so long as this document is left fully intact. The best way to obtain CABLE REGULATION DIGEST each week is subscribing to the TELECOMREG mailing list (firstname.lastname@example.org, SUBSCRIBE TELCOMREG). You may also finger email@example.com. No FTP archive is available. For questions, contact John Higgins (firstname.lastname@example.org or 212-887-8390) For Multichannel News subscription information: 800-247-8080. A bargain at $65/year. EDITOR'S NOTE: While I can get the digest out, I'm largely off the net until my net node undergoes some renovations. (Maybe there's something to be said for this universal service stuff...) Call me by voice if you want me real bad. --John M. Higgins-- FCC CANCELS FEB. 10 MEETING ON RATES WASHINGTON -- The FCC will not hold a meeting on Feb. 10, the expected date for cable rate rules to be examined. Officials still want to hold the meeting in February, a spokesman said. Cable sources said the FCC is eyeing the following two weeks or a dae in March. Sources said the agency needs more time to refine its rate rules. The FCC is expected to extend a rate freeze before it expires Feb. 15. BELL ATLANTIC DENIES TCI DEAL IS IN TROUBLE NEW YORK -- Bell Atlantic Corp. and Tele-Communications Inc. dismissed speculation that their mega-deal is in trouble, but sources said the two companies are likely to revise the terms of TCI's sale. For the past two weeks Wall Street, has been buzzing that the deal might be in trouble because TCI and Bell Atlantic missed deadlines to convert their letter of intent into a definitive merger agreement. The companies had set Dec. 15, then Jan. 31, as te deadline; they have missed both dates. Executives involved in the deal said both companies are practically drowning in the lengthy due diligence process required to sort through TCI's tangled finances and the web of regulations covering the deal. However, the two companies are also hung up over the terms. Bell Atlantic has agreed to pay the equivalent of 11.75 times running-rate cash flow for TCI's cable systems. But that valuation creates problems. "As they got further along in the process, they realized the way they had structured it caused people to get people to act in unproductive ways," one money manager said. HOLLINGS BILL MARCHES TO HOUSE, ADMIN. DRUMBEAT WASHINGTON -- The Senate varoomed back onto the superhighway last Thursday, when a core group of communications lawmakers offered a comprehensive telecommunications package that tries to blend two major House bills and administration proposals. Backed by the majority of his panel -- 11 committee members from both sides of the aisle -- Senate Commerce Committee Chairman Ernest Hollings (D-S.C.) offered the measure, which draws upon another Senate telecommunications bill offered last year, S. 106. Committee hearings will be held after Feb. 21 and prompt Senate consideration is expected. Under Hollings' bill, not more than two years after universal service requirements are created, state barriers would be pre-empted, allowing cable companies to provide telephone services, aides said. Pre-emption would not be conditioned upon universal srvice under a pending House bill. These telephone services would be regulated on a common-carrier basis. Cable companies providing telephone service and telephone companies would be required to open their networks to competitors, aides said. The administration has called for all cable cmpanies to open their networks. The nation's regional Bell companies would be allowed nearly immediate entry into the long-distance and manufacturing businesses if they pass a competition test administered by the Federal Communications Commission. All telecommunications providers woul have to share the responsibility for universal service, either through funding or through certain service obligations. As in S. 1086, telephone companies would be permitted to offer cable services through a separate subsidiary, would not be permitted to buy out existing cable systems inside their service areas and would be barred from using telephone revenues to subsidie cable operations. Telcos' cable operations would be regulated under current cable laws. This is different from the approach taken by Rep. Edward Markey (D-Mass.). His bill imposes many more restrictions on telco provision of cable services, including a requirement that video services be offered through a video dial tone platform and a 25 prcent limit on the number of channels a telco can fill with affiliated programming, aides said. NESS MAY GET DUGGAN FCC SLOT WASHINGTON -- Momentum is building for attorney Susan Ness to be nominated to replace Democratic Federal Communications Commissioner Ervin Duggan, who left the commission on Jan. 31. Ness, a communications attorney, worked for Bill Clinton's presidential campaign and is a friend of FCC Chairman Reed Hundt. Ness' nomination, if it comes, is likely to be paired with the expected nomination of San Francisco attorney Rachelle Chong, a Rpublican. CCTA MAY INTERVENE IN PACTEL SUIT OAKLAND, CALIF. -- The California Cable Television Association wants to intervene in the federal court lawsuit Pacific Telesis Group filed to challenge the prohibition against telephone companies providing video services within their service areas. PacTel filed suit in the U.S. District Court for the Northern District of California on Nov. 29 on behalf of itself and its wholly owned subsidiaries, Pacific Bell and Nevada Bell, challenging the ban's constitutionality. In its brief, the CCTA argued that the cable industry can provide the court data and "a unique perspective on the economic purposes and effect of the challenged provision that the government may lack" in responding to PacTel's assertions. The CCTA noted that PacTel, with more than $22 billion in assets, is larger than the entire cable TV industry. With that kind of economic power, the utility would be uniquely positioned to engage in predatory practices against competitors, including cros-subsidizing its expansion into video by using telephone ratepayer money or discriminating against non-affiliated cable operators as they seek access to poles and conduits, the association alleged. WHOOPS! SORRY ABOUT THE BAD PRESS, GUYS NEW YORK -- Forbes' new quarterly journalism magazine -- Forbes Media Critic -- takes particular aim at the media's coverage of cable regulation, particularly on the way they misled readers about whether rates generally went up or down on Sept. 1. An aricle noted that local and national media sensationalized reports that the Cable Act had backfired and then had to "back off that story when it appeared the true picture was more ambiguous." Separately, the Columbia Journalism Review criticized The New Yor Times for an editorial supporting retransmission consent. The Times, CJR pointed out, f ailed to disclose that it owned five TV stations that would benefit from the law. MSOS RESPOND TO TV VIOLENCE CONCERNS IRVINE, CALIF. -- Two MSOs are promoting national programs to foster media literacy and "critical viewing skills" among children. "Viewer empowerment is the ultimate answer to the TV violence issue," Trey Smith, executive vice president of operations for Times Mirror Cable, said in a prepared statement. That company has developed a 20-page pamphlet, Dimension in Education Parent Gide, which it offers to 157 secondary schools in 13 states. The booklet provides parents with information and exercises to help children actively and critically select television programming. In addition, the company is scheduling local workshops for parents and teachers, led by educational experts in media. The booklet is incorporated into the company's Dimension in Education school support program, which provides scholarships, academic contests and commercial-free programming to selected secondary schools in Times Mirror's markets. Continental Cablevision Inc.'s program, "A Different View," is kicking off with the distribution of a 32-page Better Viewing guide through libraries, parent-teacher organizations and schools in Continental's 650-plus markets. FIVE MSOS LOBBY ON COMPATIBILITY WASHINGTON -- Five top MSOs urged the Federal Communications Commission not to force the bundling together of cable decoder and programming costs into general, benchmarked rates. As currently proposed, the FCC's cable-consumer electronics equipment compatibility rules due in April would forbid operators from billing separately for "setback decoders" (tunerless converters plugged into "cable-ready" TVs), even to recover actual cots. Filing comments in the rulemaking, Cablevision Industries Inc., Continental Cablevision Inc., Cox Cable Communications, Newhouse Broadcasting Corp. and InterMedia Partners argued that they must be allowed to recover actual costs without burdening non-cale-ready-equipped rate-payers. InterMedia estimated that digital component decoders (which must execute demodulation, demultiplexing, descrambling and decompression) will cost approximately $300 each. FCC BLAMED IN FALCON'S STOCK DELAY; WILL IT STING OTHER OPS? NEW YORK -- Falcon Cable Holdings L.P.'s troubles in selling its initial public stock offering has some financiers worried about whether other operators will be able to tap the public markets for badly needed capital. At this point, Falcon's delay may only be temporary. The MSO postponed the offering until after a Federal Communications Commission meeting on rates. That meeting, which had been scheduled for this Thursday, may be postponed. News that the FCC is likelyto toughen restrictions on cable rates has investors jittering and sent MSO share prices tumbling. But if Falcon has to shelve the deal, that could be a bigger problem for a number of other operators worried about their own financial flexibility. Executives hoped that a successful offering could open the door for other MSOs, much as Tele-Communicatios Inc. essentially opened up the bond markets for large operators two years ago. Falcon chairman Marc Nathanson said he is prepared to restart his road show for investors. But he added that he's annoyed that the FCC's plans disrupted his attempt to comply with the commission's policy goals by raising money to upgrade Falcon's system, offer new services and prepare for competition. "All they did was close down the information highway to the companies that were trying to go public," Nathanson said. Marcus Cable president Jeff Marcus, who has been studying whether to go public, said he believes the delay is temporary and Falcon will come back to the market. "No, clearly with the FCC's intention to do something again, Marc was prudent to postpone it," Marcus said. "It's another example of how the regulators affect our business." TCI DROPS SPICE IN CINCINNATI 'BURBS CINCINNATI Citing signal-security problems rather than pressure from community groups, TCI of Ohio has indefinitely dropped Graff Pay-Per-View's Spice adult service until it upgrades its scrambling capabilities. A community group that opposed the initial launch of Spice last December said it will fight the system if it decides to relaunch the adult service. TCI last week decided to "suspend" carriage of Spice in its 60,000-subscriber system in the suburbs of Cincinnati in the wake of complaints from subscribers that the service could be seen and heard through the scrambled signal. Robert Thomson, senior vie president of communications and policy planning for parent Tele-Communications Inc., said the system will employ a "double scrambling" system that will filter out all scrambled audio and video, even with the aid of signal enhancers. He added that the system's general manager, Jeff Heinrick, as well as state and division TCI executives, have worked closely with local officials to tackle the problem. Thomson said the scrambling system should be in place within the next couple of week and Spice may be back on the system by the end of the month. "We have to feel comfortable that we have the best signal security for our subscribers, and we should have it ready in a couple of weeks," Thomson said. The removal of Spice was good news for the Citizens for Community Values Group, which initially protested the launch of Spice on the grounds that it violated local community statues concerning obscenity, said Phil Burress, the group's president. He saida local city council had voted to revoke TCI's cable contract if the company didn't provide better scrambling of the signal. "We're pleased that TCI chose to cancel it, but [during] the 45 days that it was on, we really don't know how many children were exposed to the obscene broadcast or how they were affected," Burress said. He also said the group will fight against TCI if it decides to relaunch the service even if it's sufficiently scrambled. Burress said the community does not want the adult service, which he believes violates several local obscenity laws. AMERITECH TARGETS 1.2M HOMES FOR VDT CHICAGO--Ameritech Corp. took its first official step toward launching a $4.4 billion, 6 million-subscriber video network construction plan last week, filing the nation's most expansive regional Bell operating company video dial tone proposal yet with te Federal Communications Commission. The plan spelled out in the Section 214 VDT application would overlay a 750 MHz fiber/coaxial cable network to 1.2 million customers in 134 communities in and around cities across its five-state service area: Chicago; Cleveland; Columbus, Ohio; Detroit;Indianapolis; and Milwaukee. Given FCC clearance, as well as "the clearing of other regulatory hurdles" (mostly related to content ownership), Ameritech would begin construction in late 1994. The RBOC proposes to extend the overlay network to 1 million additional homes per year, reching 6 million (half of its phone customers) by the year 2000. Ameritech estimates that it will spend "slightly under $400" per home to build the video network, which it emphasized would be physically separate from Ameritech's "core local communications network." Ameritech has proposed to spend another $24.6 billio improving the "core" network over 15 years. That network separation, an Ameritech official said, makes allocation of video versus telephony costs "a non-issue," since the video network would share no facilities with the core network. Apparently, 100 percent of video network construction costs would be allocated to video only, while 100 percent of core network improvement costs would be allocated to other services. In contrast, Pacific Bell -- which proposes to pass 750,000 homes with a single broadband network (delivering telephony, video and all other services) in four major California markets by late 1995 -- would assign about 13 percent of construction costs t video and the remainder to voice and other services. LAWMAKERS ASK FOR SMALL-OP RELIEF WASHINGTON -- Federal Communications Commission Chairman Reed Hundt is expected to receive a flurry of letters from lawmakers requesting rate-regulation relief for small operators, cable sources said. Rep. Jack Fields (R-Texas), meanwhile, is preparing an amendment to telecommunications legislation to provide small operators with rate relief, cable sources said. Visits last week to Capitol Hill and the FCC by roughly 150 small cable operators prompted all this activity. Fields' amendment is expected to direct the FCC to account for population density in its rate-regulation formula, sources said. Lawmakers will also ask the FCC to permit small operators to raise their rates to regulated benchmark levels, something not allowed under the current rules. They also will ask the commission to let small operators recapture capital costs. Not allowing small operators to recover those costs discourages them from providing schools and other community institutions with broadband links. The band of small operators in town planned to meet with Hundt last Wednesday afternoon. If the FCC further reduces the benchmarks, the result for small operators will be "tragic," one operator said, predicting that some systems would be forced out of business. HARRIS POLL: MOST WANT COMPETITION WASHINGTON -- A National Consumers League poll released last Tuesday found that 73 percent of people polled support competition between telephone and cable companies to provide cable services. The poll also found that 50 percent of those polled said they pay more for cable service since rate regulation took effect, 30 percent pay the same amount and 15 percent pay less. Thirty-four percent of the people polled said they think cable operators would provide the best cable service and 34 percent said cost is the primary reason for not subscribing to cable. The NCL is a non-profit consumer advocacy organization that lobbied for cable regulation in 1992. Louis Harris and Associates conducted the telephone poll of 1,252 people, subscribers and non-subscribers, between Nov. 24 and Dec. 5. NYC SUBURB BRINGS IN TCI COMPETITOR NEW YORK -- Liberty Cable Television has obtained a limited, 10-year agreement with the Westchester County, N.Y., community of Greenburgh to offer 73-channel cable service to two condominium complexes that Liberty will tie together with Nynex Corp. fibe. Greenburgh and other nearby towns are in the midst of renegotiating long-term franchises with Tele-Communications Inc., which has been severely criticized for providing poor service. While Liberty and Greenburgh officials in a joint press release touted their agreement as "the first competitive cable TV system to use telephone lines," Liberty currently has no transmission contract with Nynex and intends to wire the interior of the cndominium buildings itself, said Liberty president Peter O. Price. The agreement Greenburgh officials signed off on last month requires Liberty to conclude a transmission agreement with Nynex within six months, and contains a 3 percent payment to the city similar to a franchise fee. It further stipulates that if Liberty wants to expand service to other areas, it must first obtain a standard cable franchise. The plan will provide roughly 1,000 households will have a choice of cable providers starting this summer. Greenburgh town supervisor Paul Feiner said, "We're hoping that this will expand townwide."