From: owner-cablereg-l@netcom.com
Date: Sun, 26 Feb 1995 06:22:36 -0800
Reply-To: higgins@netcom.com

 CABLE REGULATION DIGEST
 Summary of regulatory news from Multichannel News 2/27/1995. Vol.2, No.9
 Copyright 1995 Multichannel News. Reproduction/distribution is permitted 
so long as this document is left fully intact. NO CHANGES are to be made 
to this document without the written consent of Multichannel News.
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 Refer questions to John Higgins (higgins@dorsai.dorsai.org or 
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 For Multichannel News subscription information: 800-247-8080. A bargain 
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 Multichannel e-mail contacts:
Marianne Paskowski, editor: Mpcable@aol.com
John M. Higgins, finance editor: higgins@dorsai.dorsai.org
Kent Gibbons, new media editor: kentgibb@well.com
Leslie Ellis, technology editor: Ellis299@aol.com
  
  QUOTE OF THE WEEK

  "Somehow I have an intuitive feeling that AT&T and John Malone and Bell 
Atlantic will somehow survive."
       Sen, Robert Packwood on worries that some companies will face 
unfair competition under his scenario for deregulation.

  "I just want an opportunity to change the rules a bit."
       Former CBS preisdent Howard Stringer on his new gig leading an
       entertainemt venture for three telcos

  PACKWOOD SAYS TELECOM REFORM FACES LONG WAIT
  Washington -- Senate Republicans and Democrats remain far apart on
 telecommunications reform, probably dashing hopes of passing legislation by 
mid-year.
  That was the bleak assessment of Sen. Bob Packwood (R-Ore.), an influential 
member of the Senate Commerce Committee who is pushing for the rapid 
deregulation of cable television.
  "I don't think there will be a bill before Labor Day out of both Houses that 
is agreed upon in conference, and sent to the President," Packwood said in 
remarks to the Media Institute here last week.
  Packwood said the Senate was deadlocked for now because "there is no 
consensus on this bill and there isn't going to be a consensus."
  However, Packwood later predicted in his speech that at some point enough 
Democrats would swing around to help the GOP-controlled Senate pass a bill.
  "My hunch is that when this bill is done, it's going to have pretty broad 
support and we're going to reach the compromises we need to," he said. "My 
guess is that when we finally draft a bill, half the Democrats will agree with 
it; there will be four or five that won't."
  Commerce Committee chairman Sen. Larry Pressler (R-S.D.), who wants to pass 
legislation before the July 4, declined to comment when asked if he agreed 
with Packwood's timeframe that pushed Pressler's top legislative priority off 
until the fall.
  Senate sources said they were surprised by Packwood's comments because 
progress was being made in talks between Senate Republican and Democratic 
staff members.
  Sources said Senate staff had nearly reached agreement on universal service 
and interconnection rules. The sides, however, have not been able to patch 
differences on cable rate issues.
  In draft legislation last month, Pressler called for cable price 
deregulation one year after his bill passed. Senate Democrats, led by Sen. 
Ernest Hollings (D-S.C.), refused to budge on cable rates and permitted telco 
entry into cable immediately, while Pressler kept the telcos out for a year.
  Packwood said repeal of the 1992 Cable Act was still "a high, high priority 
for me in the bill." He voiced disappointment that the cable industry favors 
deregulation of upper tiers but not of the basic tier.
  "I wish they wouldn't give up so easily," Packwood said.
  Packwood said he would be willing to compromise on cable rates if others 
give a little on opening all telecommunication markets at the same time -- 
what he calls "the Le Mans start ... gentlemen, start your engines."
  Packwood said he wasn't concerned about unfair competition taking place 
under his scenario for deregulation.
  "Somehow I have an intuitive feeling that AT&T and John Malone and Bell 
Atlantic will somehow survive," he said.
  Senate sources said they felt Democrats would agree to some amount of cable 
rate relief. In the House, Telecommunications and Finance Subcommittee 
chairman Rep. Jack Fields (R-Texas) wants to introduce bipartisan legislation 
that includes upper-tier rate relief as a consensus position.
  If, in fact, the telecommunications reform debate pushes past Labor Day, 
Packwood said passage of a new law was still possible this year but probably 
unlikely because the crowded Senate calendar toward the end of the session 
gives opponents an advantage.
  "It becomes easy for anybody to hold up a bill in the Senate, not so much in 
the House," he said. "The leader just doesn't have four or five days to spare 
on any bill of any kind."
  
  U S WEST FLESHES OUT OMAHA MENU
  Perhaps showing that if you build a broadband network the content will come, 
U S West Inc. last week named a long list of program suppliers for its Omaha, 
Neb., video-on-demand service.
  Because the programming will be part of U S West's own TeleChoice service, 
the telco was able to assemble a balanced lineup of movies, games, pay-per-
view events and specialized videos such as travel and cooking how-to's. It was 
not forced to take on any programmers that stepped up to lease space on a 
"common carrier network." That packaging power is part of U S West's 
unregulated, "enhanced gateway" service, the telco said.
  Audley Webster, executive director of U S West Communications' TeleChoice 
Video Services, said he managed to accommodate all interested suppliers. 
"Obviously, we went into this thing consciously" trying to create a marketable 
mix, Webster said.
  Content suppliers will choose what programming to provide and how much to 
charge subscribers, except for video games, which U S West said it will price.
  Film suppliers that have signed deals with U S West include Metro Goldwyn 
Mayer Inc., Universal Pay Per View Development Inc., New Line Television Inc. 
and Graff Pay-Per-View. The telco has agreements in principle with Columbia 
TriStar International Television and Video-On-Demand Distributors, 
representing Warner Bros. films.
  U S West has agreements in principle with Sega of America Inc. to supply the 
Sega Channel, which distributes Sega Genesis games to subscribers with 
adapters on Genesis players, and with The 3DO Co. to provide 3DO games. U S 
West's Omaha trial features Scientific-Atlanta Inc. set-top decoders using 
3DO's operating system. NTN Communications Inc. will supply its interactive 
football and trivia programming.
  Other suppliers either with signed deals or agreements include: Showtime 
Event Television Pay-Per-View (events and movies), Jones Educational Networks 
(educational programming), National Geographic Television (nature and travel 
shows), Reuters Newmedia Inc. (news and documentaries), RSVP (patient-specific 
health information)
  Two other U S West interactive services, the GOtv entertainment information 
service and USAvenue shopping forum, also will be part of the telco's 
offering. The 18-month trial in Omaha is scheduled to start this spring.
  Content providers will choose their own prices, except in the case of video 
games, which U S West will price.
  Webster said content providers will be paid along traditional lines. Movie 
suppliers will get a revenue split, which he would not disclose. Others will 
be paid in a "variety of arrangements," including on a per-subscriber basis, 
Webster said.
  The range of providers under U S West's own brand stands in contrast to the 
scarcity, so far, of video providers planning to lease analog or digital 
channels to go against U S West in the 45,000-home, $37 million trial.
  So far, only one other programming packager has firmly decided to compete 
against U S West for digital television service in Omaha. That rival is a 
startup company in New York called Telephone Video of America. USA Interactive 
Video Corp. initially said it was interested but has given mixed signals in 
recent weeks.
  Telephone Video president Simon Naparstek said the U S West list showed that 
getting programming is not going to be a problem for broadband networks. 
"Right now, content is not the problem," he said. "It's the computer people -- 
getting their technical act together."
  Naparstek also said he was confident he could assemble enough content to 
make a go against the host telco. "We'll get the same content," he said. 
"Maybe they have a marketing advantage, but we'll have the same content. It's 
going to be a question of how we package it and price it."
  U S West's dominant presence on its own digital platform could also fuel the 
cable industry's argument that only the telcos are well-positioned to play on 
their own ground, said Peter Price, chairman of the Video Dialtone Association 
and president of Liberty Cable Television in New York.
  
  ME/U CENTER OF GINGRICH COMPLAINT
  Washington -- A Jones Intercable Inc. education network has been thrust to 
the center of a new Capitol Hill storm swirling around House Speaker Newt 
Gingrich (R-Ga.)
  An ethics complaint filed Thursday by three House Democrats charges that 
Gingrich illegally accepted up to $200,000 in free air time from Mind 
Extension University, a Jones affiliate. ME/U is broadcasting the GOP leader's 
two one-hour college lectures every Saturday between Jan. 7 and March 11.
  Reps. Pat Schroeder (Colo.), Cynthia McKinney (Ga.) and Harry Johnston 
(Fla.) say the deal violates House rules and federal law and asked the ethics 
committee to investigate.
  Gingrich, who has been hit with other allegations of misconduct, angrily 
rejected the latest charges and accused Democrats of mounting a smear campaign 
out of vindictiveness and political desperation.
  Jones spokesman Jim Carlson termed the charges "political," and said the 
broadcast of Gingrich's lectures are "certainly nothing dark or sinister." He 
called the charges "so misleading you don't know where to begin to start 
correcting all the inaccuracies."
  The $200,000 figure, he said, "is fabricated out of thin air."
  Schroeder spokesman Dan Buck said the estimate came from cable sources 
quoted in news reports. He added that some cable buyers had independently 
confirmed such air time would be worth about $7,500 to $10,000 an hour.
  But Carlson said that those estimates can't be applied to the arrangement 
struck with Georgia's Reinhardt College, where Gingrich lectures, and that 
even Jones can't assign a value.
  "Of course we don't have a figure," Carlson said. "We don't charge 
universities."
  "It would be hard for them to argue the air time has no value," countered 
Buck. "What's improper here is them giving the time."
  "This is not a gift," responded Carlson. "We're an education network. We 
have to program that time anyway."
  Carlson said that Jones is attempting to work out a deal to continue 
carrying Gingrich's lectures in which it would split the tuition fees with 
Reinhardt for students enrolled in the course over the network. He said Jones 
has such agreements with 35 universities around the country for other courses 
carried over ME/U, which reaches 26 million homes.
  
  SMALL OPS REQUEST EMERGENCY RELIEF
  Washington -- Citing prohibitive costs, small cable operators have warned 
the Federal Communications Commission that many in their ranks will go out of 
business if forced to participate in the new Emergency Alert System.
  The FCC had solicited comments on whether EAS requirements should be waived 
for certain "small" systems.  The filing deadline was Wednesday.
  Three cable trade associations recommended that all cable systems with
  5,000 subscribers or fewer be exempted from mandatory EAS participation, 
which will require equipment costing an estimated $10,000 to $15,000 per 
headend. They argued that certain other operators be allowed to seek EAS 
waivers on a case-by-case basis.
  Cable groups said that EAS requirements should be extended to video dialtone 
systems -- among others -- an idea that telephone companies opposed in 
separate filings.
  Meanwhile, the National Association of the Deaf asked the FCC to require 
cable systems to provide video warnings on all channels, something the 
industry opposes for being even more costly. The current rules only mandate 
video warnings on one channel, though systems must be able to provide audio 
warnings on all channels.
  
  SPRINT-CABLE STILL PCS BID LEADER
  Washington, D.C. -- Bids on broadband wireless licenses came close to $6.5 
billion in total last Friday with the "Sprint-cable" group still the biggest 
bidder.
  Some auction watchers suspect the bidding finally is winding down, having 
grown in increments of tens of millions, instead of hundreds of millions, in 
total bids the past week.
  Others, though, say players such as Craig McCaw's ALAACR Communications Inc. 
still have money left and have not grabbed their target markets.
  William Bane, of Mercer Management Consulting Inc. in Washington, D.C., said 
the 30-MHz licenses are already overpriced. "I'm actually quite concerned that 
it's not over, and that macho has reared its ugly head," he said.
  Slow bidding in the early going gave rise to skeptics who said the auction 
would fall short of the government's goals. But deep-pocketed bidders such as 
McCaw, the Baby Bells and long-distance calling giants AT&T Corp. and Sprint 
Corp. have sent values rocketing, especially in the biggest markets.
  The biggest bidders are still WirelessCo L.P., the consortium of Sprint and 
MSOs Tele-Communications Inc., Comcast Corp. and Cox Enterprises Inc.; AT&T 
Wireless PCS Inc.; and PCS PrimeCo L.P., the venture of Bell Atlantic Corp., 
Nynex Corp., U S West Inc. and AirTouch Communications Inc.
  The bidding levels already have priced seven companies or groups off to the 
sidelines, including MSO Century Communications Corp., a Comcast telephony 
services affiliate and a partnership between Continental Cablevision Corp. and 
Cablevision Systems Corp. that was bidding on Boston and Cleveland markets.
  
  NEXT PITCH: WANT SPRINT WITH YOUR STARZ!?
  New York - Tele-Communications Inc. subscribers will soon be getting 
discounts on their monthly cable bills by saying they want Sprint along with 
their Starz! and Encore.
  While the connection between a long-distance calling plan and a premium 
cable channel may not seem obvious, Tele-Communications Inc. sees a way to add 
a new source of income, boost its own pay channels and learn a few lessons 
about marketing new services.
  Along with TCI, which has been quiet up until now about its plans to pitch 
Sprint Corp. long-distance plans, other MSOs are moving into non-cable 
communications services. Time Warner Inc. has begun reselling cellular phone 
service in Rochester, N.Y., and Adelphia Communications plans to offer paging 
services to cable subscribers in parts of Florida within a couple of months.
  Analysts think the moves are logical ones that, if marketed properly and 
supported with customer service, can expand the cable base as well as add new 
sources of income.
  "The market research we do shows: Customers will buy bundled services," said 
Joseph Kraemer, managing director of communications industries consulting at 
EDS Corp. in Washington, D.C. The key is to convince customers they will save 
money by switching their long-distance or cellular service over to the cable 
company, he said.
  The main goal of TCI's big joint venture with Sprint Corp. -- which also 
includes MSOs Comcast Corp. and Cox Enterprises Inc. -- is to build a 
nationwide wireless communications network. But a quiet and more immediate 
side effect is that the MSOs will begin selling Sprint service as a sort of 
premium channel.
  Will Gardenswartz, director of market development for TCI, said that the 
Sprint resale venture will launch in April in these TCI systems: Biloxi, 
Miss.; Brookhaven, N.Y.; Hartford, Conn.; Topeka, Kan., and Tacoma, Wash. He 
said those systems were chosen for operational reasons, not because of 
subscriber demographics.
  "They have really good customer service and sales representatives" and the 
most flexible billing systems, he said.
  The long-distance business is known for cut-throat marketing, so it is hard 
to impress an AT&T Corp., MCI Communications Inc. or Sprint customer with free 
minutes or other discounts. Instead, TCI plans to offer the discounts on cable 
services, Gardenswartz said.
  Specifically, new Sprint customers will be offered, for a year, $4.95 per 
month off TCI's typical $14.95 package of Starz! and Encore along with one 
premium service such as Home Box Office or Showtime, Gardenswartz said. "It's 
the equivalent of getting Starz! and Encore for free," he said.
  Sprint is subsidizing the discount, the TCI official said, to the extent 
that the offer "is interesting to us." So the Sprint offer becomes a way to 
promote the TCI house brands of the two mini-pay services.
  TCI subscribers who don't take the Starz!/Encore package will get a $2 
monthly cable discount by taking Sprint, Gardenswartz said. The offer applies 
only to subscribers who are new Sprint customers or who have switched back to 
Sprint. Other offers will be made to TCI subscribers who already have Sprint, 
he said. The plan is to offer Sprint throughout TCI by late summer.
  Kraemer, the EDS analyst, said the caveat to offering these unrelated 
services is "it will require some real talent to price, to position, to 
package, to sell. It's not going to be something where you put an ad in the 
paper and the phone rings. It's going to require some sophisticated selling."
  
  BIG THREE NETWORKS DISBANDING NTVA GROUP
  New York -- Faced with a changing environment, the Big Three broadcast 
networks last week announced they were pulling the plug on the Network 
Television Association, the group they created in 1990 to jointly promote 
themselves to Madison Avenue.
  In a terse two-paragraph press release, ABC, CBS and NBC said that the New 
York-based NTVA would be disbanded effective March 31. "Responding to the 
evolving network broadcasting landscape," the Big Three networks said they had 
agreed "to develop alternative mechanisms to promote the value of network 
television for advertisers and viewers." For example, they plan to host 
conferences for senior ad officials.
  "Different times have different needs," said Marcella Rosen, the NTVA's 
president and CEO. "It's a changing world, and this doesn't fit today's world 
the way it once did."
  She noted that since the NTVA (originally called the NTA) was founded the 
Fox, UPN and Warner Bros. networks have come on the scene.
  According to an ABC spokeswoman, "We'd be better served if we did our 
marketing as a unit, rather than through that organization, that structure. We 
wanted a more hands-on, direct approach."
  According to ad agency officials, the NTVA had lost its direction in recent 
years.
  "It lost focus about what its mission was, and has not been fulfilling its 
function," said Allen Banks, media director at Saatchi & Saatchi Advertising. 
"There was a real role for it to play: reminding people who brought them to 
the party, national broadcast, which is very important for mass consumption 
products."
  In its initial years, when it was headed by Peter Chrisanthopoulos, the NTVA 
was very aggressive in it its advocacy of broadcast television, and its 
benefits over cable. It did a number of studies on topics such as commercial 
clutter and out-of-home viewing, and held periodic press conferences.
  
  STRINGER WILL LEAD BELLS VIDEO VENTURE
  New York - The Baby Bells finally roped their Stringer.
  Howard Stringer, the 53-year-old president of the CBS Broadcast Group, last 
week was named to head the new technology and content-acquisition venture 
created by Bell Atlantic Corp., Nynex Corp. and Pacific Telesis Group. CBS 
said Peter Lund, who was Stringer's chief lieutenant, will replace him.
  Stringer becomes the first star brought to the Bells' fold by Creative 
Artists Agency, the Hollywood talent shop run by Michael Ovitz. CAA is 
consulting the Bells and has had close ties to Stringer since he hired CAA 
client David Letterman.
  Industry observers said Stringer's big-name status among programmers and 
advertisers could help the Bells establish credibility in a hurry.
  Craig Gugel, senior vice president of interactive media and research at 
advertising agency Bates USA, said it will matter to Madison Avenue and to 
Hollywood that Stringer knows both of those worlds.
  Stringer's signing means the Baby Bells "have finally arrived in the video 
programming market. I think he'll be a force to be reckoned with."
  PacTel chairman Philip Quigley said in a conference call on Thursday that 
Stringer, who rose from a clerk at CBS 30 years ago, had "the creativity and 
the relationships" in the media industry to make the new venture a success.
  Stringer's availability prompted the Bells to combine what had been two 
separate ventures, one developing joint technology standards for a digital 
platform and the other acquiring "branded" content for the networks. Quigley 
said "we were very much headed" toward combining the two anyway, but 
Stringer's status clinched the decision.
  "I don't think you can produce interesting offspring unless you marry 
technology with the content," Stringer said in the call.
  Stringer made clear that interesting content was much on his mind in moving 
to the new company, which still has no name but does have 100 to 150 
employees, home bases in four cities and $300 million in startup funds from 
the Bells.
  He said interactive technology was exhilarating and spoke of having the 
chance to target audiences in an uncynical and "innocent" way. That doesn't 
mean producing just "good-for-you" programming, he said, but rather that 
television can be targeted to audiences (a la Home Box Office) without always 
having to generate massive ratings.
  "I just want an opportunity to change the rules a bit," he said.
  The three Bells have stated plans to build video networks throughout their 
territories, which include more than 30 million homes and six of the seven top 
media markets.
  Stringer did not say who is being considered for the operating chief jobs at 
the two units. He also would not say whether he will have an equity stake in 
the new venture.
  
  -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=-

  NO MATTER THE SECURITY, PIRATES KEEP ON TRUCKIN'
  Seems like every move against cable pirates creates its own problems. 
Breaking into installers' trucks to snatch converters has long been a popular 
source of supply for converters in need of boxes to "chip." (Hit 'em in the 
morning on techs' first call of the day when their load is highest.) As a 
result, some systems and contractors have turned to "hard" trucks looking like 
mini-armored cars -- heavy steel cargo areas, high-end locks plus another 
tough lockbox bolted down inside just to store the converters. The good news 
is that the protection really does keep thieves from breaking in. The bad news 
is that now they're stealing the whole truck. System executives around New 
York City estimate that two dozen high-security trucks were stolen off the 
streets last year. Rick Thomas, a partner in installation contractor RTK 
Corp., said he recently recovered one of his trucks that thieves had obviously 
spent hours trying to crack open. "They must have just wailed on it with 
sledgehammers," Thomas said.
  
  Welcome to telco land...  FutureVision of America, the outfit that will 
program much of Bell Atlantic's Toms River, N.J., broadband network, had what 
it thought was a nifty sales office in a brand-new mall in town. Light, airy, 
cathedral ceilings, prominent signs, decent rent -- everything you need to 
establish a presence as a high-tech overbuilder. Only one problem: It was 200 
yards beyond the local area calling boundary to which Bell Atlantic can 
transmit video signals. FutureVision CEO Robert Schena said CSRs wouldn't have 
been able to turn on a TV to show off its service. FutureVision will be in a 
former electronics store in the center of town, instead.
  
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