From: owner-cablereg-l@netcom.com Date: Sun, 16 Apr 1995 06:41:07 -0700 Subject: Cable Regulation Digest 4/17 Reply-To: higgins@netcom.com - CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 4/17/1995. Vol.2, No.16 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. Listserver, Gopher, FTP info attached at bottom. Refer questions to John Higgins (higgins@dorsai.dorsai.org or 212-887-8390) For Multichannel News subscription information: 800-247-8080. A bargain at $78/year. Multichannel e-mail contacts: Marianne Paskowski, editor: Mpcable@aol.com Andy Grossman, news editor andyg474@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 EDITOR'S NOTE: Back in action. Good vacation all around. Went to see Lucious Jackson, an awesome white girl sorta rap, sorta funk act. Run to get the CD. And today it's my birthday. Oh joy, another one. I'm not getting older, I'm still getting better, right? QUOTES OF THE WEEK "I think these guys see the handwriting is on the wall and they're going to have to go against the telcos, so clusters of 50,000 subs aren't enough." Mark Riely, partner in New York securities firm Media Growth Research, on TCI and Time Warner's talks to swap $1 billion worth of systems. TCI, TIME WARNER TALKING $1B MEGA-SWAP New York - In a sign that cable operators may be getting serious about trading systems, Tele-Communications Inc. and Time Warner Inc. are discussing a wide-ranging swap with a value approaching $1 billion. Other than the sheer size of the possible swap -- involving several hundred thousand subscribers -- the talks are unique because both sides seem willing to trade even large, well-clustered operations for more properties in even more favorable markets, all in the name of clustering. Sources cautioned that no deal is imminent. The two largest MSOs have been dickering since late last year and have still not agreed on which systems to throw into the deal. While one investment banker familiar with the talks said, "they're heating up," another cautioned that "there's been talks about a mega- swap forever. It's an annual thing." A Time Warner executive said exiting regions of little strategic importance to the MSO has become a high priority for the company, particularly with the acquisition of Cablevision Industries Inc. and KBLCOM Inc. plus its joint venture with Newhouse Broadcasting Corp. The executive confirmed the TCI discus sions but noted "there have been many swap ideas, but a lot of them don't materialize." For years, swapping systems has been a chess game in which cable players would only sacrifice pawns. For example, TCI recently agreed to trade a few systems around Wichita, Kan., to get Multimedia Cablevision's systems in sub urban Chicago. The latter is a huge priority for TCI but a marginal one for Multimedia, which has a big Wichita-area cluster. But Time Warner, at least, may now be willing to part with knights and rooks, ceding some prime markets coveted by TCI in order to bulk up top- priority regions in which the Englewood, Colo.-based MSO has midsized operations. Sources have said the pieces Time Warner is proposing to trade away include its 240,000-subscriber Houston operation and the Portland, Ore., system that it will gain as part of the MSO's acquisition of KBLCOM Inc. TCI, in turn, is willing to cede part of its Florida operations in Daytona Beach, Vero Beach and Titusville, plus properties in upstate New York -- in cluding Buffalo -- near Time Warner's Rochester system, one of the latter's highest-priority markets. Time Warner is aggressively pursuing upstate New York and its other core markets because of its desire to offer wide-ranging telephone services. "Anything in New York state, North Carolina and Florida, Time [Warner] wants," said one source familiar with the discussions. "I think these guys see the handwriting is on the wall and they're going to have to go against the telcos, so clusters of 50,000 subs aren't enough," said Mark Riely, partner in New York securities firm Media Growth Research. DOLAN DECLARES VDT WAR ON ADELPHIA IN N.J. Washington -- Following through on threats to invade other MSOs' territory, Cablevision Systems Corp. has asked to lease 192 channels on Bell Atlantic Corp.'s video dialtone facility in Dover Township, N.J. Chris Levesque, a spokeswoman for Cablevision's Rainbow Program Holdings Inc., Friday confirmed the request but added the company had not received a formal reply. The 192 channels would be half the capacity of the Dover system. She would not provide further details about Cablevision's Dover plans. Bell Atlantic won permission to build the 38,000-home network last July -- the first commercial video dialtone system ever approved. Video providers (known as VIPs) cannot sign up subscribers until the Federal Communications Commis sion approves a tariff outlining charges to the VIPs. Under FCC rules, the MSO could offer a vast array of cable programming on the telco network without needing a local franchise. Cablevision chairman Charles Dolan made headlines last July by declaring he might invade other operators' turf, either by overbuilding or by leasing space on telco video dialtone networks. Cablevision provides a service -- video programming -- and doesn't necessarily have to own the wires that carry the programming to customers, Dolan said. The Woodbury, N.Y.-based MSO later wrote to Bell Atlantic, seeking VDT channels. Bell Atlantic said in a press release Thursday that 302 of the 384 channels had been reserved during a one-month open enrollment. The remaining 82 channels will be allocated on a first-come, first-served basis. Bell Atlantic released the names of three VIPs but did not disclose Cablevision's interest because of a confidentiality agreement. FutureVision of America Corp., a software company in West Conshohocken, Pa., previously had signed up for 96 channels. Graff Pay-Per-View signed up for a single channel. And International Telecommerce Corp., an interactive home shopping network, was assigned 12 channels. The Rainbow lineup includes American Movie Classics, Bravo, Independent Film Channel and Prime Sports Channel Networks. Martin Lafferty, executive vice president at FutureVision, said he was glad other video providers want to be on the network because "it validates our view that successful businesses can be built" on that basis. Cablevision's VDT venture could be costly. The channel reservation fee, re quired up front, would be $345,600 for 192 channels. Lafferty said digital en coders needed to convert analog programming into digital signals run about $100,000 per channel, or about $19 million for 192 channels. Other costs would be for in-home wiring, digital set-top terminals, trans porting video to Bell Atlantic's headend and tariffed costs for channel rent al. Adelphia Communications Corp. is the incumbent cable operator in Dover Township. Adelphia spokesman Jerold R. Clark would not comment on Cablevision's plans. Adelphia has an 80-channel-capacity system in Dover, with 24,000 subscribers. SUBSCRIBERS' LAWSUIT STAYS ALIVE A federal court judge has kept alive a consumer's lawsuit against Chambers Communications in Novato, Calif., over the operator's decision to dump the local ABC affiliate from its lineup for seven months while a must-carry agree ment was negotiated. The attorney for Chambers had requested that the lawsuit be moved to federal court in San Francisco, arguing that the plaintiff's charges constituted a violation of the 1992 Cable Act. Chambers attorney Richard Harmon earlier predicted that all actions would be thrown out at the federal level, but instead U.S. District Court Judge Sandra Armstrong ordered that the class action by subscriber Greg Lerigo be sent back to state court to be heard. The superior court judge could still throw out the case, but a hearing on a motion to certify the class has been set for May 4, according to Lerigo's attorney, Max Hopkins. Harmon was out of his office for the week and unavailable for comment. The plaintiff, who is soliciting money from consumers in Novato, has col lected about $4,000 from other subscribers to pursue the suit, Hopkins said. "We think it will be a tough battle," Hopkins said of the suit. Hopkins will argue that each channel on a cable system has a monetary value and that if one is unavailable, subscribers are entitled to a refund of that value. If a judge buys that argument, Chambers could face refunds of up to $107, plus interest, for each of the 17,400 subscribers that fit the class. A similar case, which was removed to federal court on a challenge, centers on a $95 small claims court judgment won by a Chambers subscriber against the system. That plaintiff, Phil Schlenker, argued that he spent that money running up a bar tab as a result of traveling to a nearby town to watch Monday Night Foot ball when the ABC station was darkened. That Chambers challenge has not had its court date. GTE GOES TO COURT OVER LONG DISTANCE Washington -- GTE Corp., the largest regional telephone operator in the United States, filed suit in federal court last week to wipe out a 1984 consent decree that bars GTE from interexchange calling services. GTE wants to offer its local-phone customers long-distance services as well as to deliver video signals across local-calling boundaries. Brian Blevins, a company spokesman, said GTE would continue to seek Federal Communications Commission permission to build video networks. According to GTE, the decree, which is separate from the decree that broke up the Bell System, was based on "facts that no longer exist." Last year, GTE sold Spacenet, a satellite transmission service, and three years ago it divested its holdings in Sprint Corp. Both were acquired when GTE bought Southern Pacific Communications Co. in April 1984, and entered into the con sent decree to get Justice Department approval. Bell Atlantic Corp. and Pacific Telesis Group, two of the seven "Baby Bells" created from the AT&T breakup, recently won permission to receive and transmit video signals across local-calling areas. OPS PROTEST TELCOS' WIRELESS CABLE DEAL Washington -- Before Bell Atlantic Corp. and Nynex Corp. plunge into the wireless cable business, the Federal Communications Commission should careful ly scrutinize the deal for possible cross-ownership violations. That was the warning being broached by the Atlantic Cable Coalition, the multistate group of cable operators aggressively resisting Bell Atlantic's in road into video programming. The ACC, in an April 10 letter filed with the FCC by Cole, Raywid & Braverman attorney John Seiver, said the telcos' investment could contravene the 1992 Cable Act's ban on cable operator ownership of an MMDS system within the same franchise area. Last month, Bell Atlantic and Nynex announced they planned to invest $100 million in CAI Wireless Systems Inc., eventually taking a 45 percent stake in the multichannel business. Bell Atlantic spokeswoman Shannon Fioravanti dismissed ACC's letter as an other attempt by the cable industry to avoid competition. "It's like, here we go again," Fioravanti said. "The cable industry is using the regulatory process to block competition in any form." CAI, following its absorption of ACS Enterprises Inc., would be able to of fer MMDS in Washington, Pittsburgh and Baltimore in Bell Atlantic's region, and in Albany, Rochester and Buffalo, N.Y., and on Long Island in Nynex's territory. "It sounds like the cable guys are concerned we found a good strategic part ner," said Robert Schmidt, president of the Wireless Cable Association. GEORGIA OPS LOSE BELLSOUTH RULING Washington -- A federal court last week dismissed a request by the Cable Television Association of Georgia for expedited review of a video dialtone ap proval for BellSouth Corp. The U.S. Court of Appeals for D.C. Circuit said it could not step in until the Federal Communications Commission had made a final decision. Under an order from the FCC's Common Carrier Bureau in March, BellSouth won approval to offer VDT to 12,000 subscribers in Chamblee, Ga., for an 18-month trial as well as the ability to program the network, without requiring a cable franchise. The National Cable Television Association has appealed the bureau's action to the five FCC commissioners for review. -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=- Even cable systems can't escape the foul-mouthed bigotry of Howard Stern. Time Warner's Houston system is facing a storm of protests from Latinos furious over Stern's radio parody of weeping fans of slain singing star Selena. Backed by˙Tejano music and punctuated by gunshots, the bit was so tasteless that even Stern repented on the air. Not good enough. The Houston system has been deluged with hundreds of calls from Selena fans demanding that Time Warner block Stern's daily show on E! "I've taken 16 calls this morning here in my office," said system president Ron McMillan. A few subscribers have terminated service. One city councilman even drafted a resolution asking McMillan to block Stern's show or the whole network. McMillan told the council that he personally finds Stern "repulsive," but said the system had no control over individual programs on any network and further couldn't simply drop E! (That Time Warner owns 50 percent of E! didn't help him before the council). The resolution passed 13-1. He's gotten warmer receptions at cable conventions ... Folks at the mucho-conservative Heritage Foundation got all hissy when Reed Hundt pulled out of a seminar "Do We Still Need the FCC?" on just 24 hours' notice. Heritage president Ed Feulner responded by slamming Hundt, keeping his seat empty at the table with a name plate present and refusing to let FCC chief economist Michael Katz substitute. "Sounds like censorship," a Hundt aide said. There's history here. It seems Hundt took exception to the decidedly free-market orientation of telecom reform papers drafted by Heritage policy analyst Adam Thierer and gave him a scolding that included remarks "question ing [Thierer's] intellectual integrity and even his patriotism," Feulner sniffed. ------------------------------------------------------------------------- HOW TO GET THE CABLE REGULATION DIGEST: E-MAIL - To: listserv@netcom.com Subject: Ignored Body: subscribe cablereg-l FTP - ftp.vortex.com/tv-film-video/cable-reg GOPHER - gopher.vortex.com/*** TV/Film/Video*** WWW - http://www.vortex.com/pn/cable1.html *--30--*