roundtable: Cable Regulation Digest (fwd)

roundtable: Cable Regulation Digest (fwd)

Cable Regulation Digest (fwd)

James Love (
Mon, 7 Feb 1994 12:51:42 -0500 (EST)

Date: Mon, 7 Feb 1994 12:51:42 -0500 (EST)
From: James Love <>
Subject: Cable Regulation Digest (fwd)
Message-Id: <Pine.3.85.9402071242.B8623-0100000@essential>


  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 (, SUBSCRIBE
TELCOMREG). You may also finger No FTP archive
is available.
  For questions, contact John Higgins ( 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--

  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.
  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.
  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
  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.

  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.
  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
  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
  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,
ailed to disclose that it owned five TV stations that would benefit from
the law.
  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
  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.
  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
  InterMedia estimated that digital component decoders (which must execute
demodulation, demultiplexing, descrambling and decompression) will cost
approximately $300 each.
  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."

  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
  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
  "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.
  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
  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.
  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.
  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.
  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."

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