From: owner-cablereg-l@netcom.com Date: Sun, 30 Apr 1995 10:51:31 -0700 Subject: Cable Regulation Digest 5/1 Reply-To: higgins@netcom.com - CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 5/1/1995. Vol.2, No.18 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 "One year it was fiber-to-the-home, the next year it was video dialtone, last year they were going to buy the entire industry and this year we're dead because they're going to overrun us with wireless cable. So we just have to stick to our strategies and plow ahead with our incremental approach to rebuilding systems and offering new products." Comcast president Brian Roberts on the telcos' push into cable. BELL ATLANTIC PUTS BRAKE ON VDT NETS Washington -- In a move that left the cable industry pleased and a bit puzzled, Bell Atlantic Corp. last week withdrew major video dialtone applications from the Federal Communications Commission, claiming it needed time to evaluate new video delivery technology. Bell Atlantic asked the FCC to cease consideration of VDT applications to serve about 3 million households in and around northern New Jersey, Philadelphia, Baltimore, Washington, D.C., and Hampton Roads, Va. Bell Atlantic executives cited the rapid pace of technological change -- and, specifically, cost and availability breakthroughs in fiber-to-the-curb (FTTC) and switched-digital video (SDV) equipment -- as the reason for the request for regulatory pause. "When we filed these applications, we specified HFC [hybrid fiber/coaxial] technology because at the time it looked like the best choice for us," said Joan Rasmussen, a Bell Atlantic spokesperson, who added that "it looks like we're fairly sure now that switched-digital video will be a component in our next move." "The FCC may have shot itself in the foot with the 214s," noted William Deatherage, a telecommunications analyst with S.G. Warburg & Co., adding that if the FCC had approved those applications sooner, Bell Atlantic and other telcos would be well on their way to building HFC networks to compete against cable, he said. Instead, Bell Atlantic now wants to consider waiting an extra couple of months -- a relative blink in time, said Rasmussen -- for SDV gear, estimated to be ready in production quantities by the end of 1996. HFC components, like digital set-tops, are sch eduled for mass volumes by the middle of next year. In a terse letter to Common Carrier chief Kathleen Wallman -- who had already recommended approval of the applications -- Bell Atlantic asked for a suspension "until further notice." On April 25, Wallman gave the telco 30 days to make its evaluation of the technology. Two schools of thought quickly emerged. Some said Bell Atlantic knew it could not make its network cost accountable to the satisfaction of FCC brass, while others suggested the Baby Bell was merely pressuring FCC chairman Reed Hundt into s peeding review of VDT applications and tariffs. "They didn't withdraw or dismiss," cautioned John Seiver, an attorney with Cole, Raywid & Braverman in Washington, D.C., which represents numerous cable operators and state cable associations opposing Bell A tlantic's VDT plans. "I don't consider it a victory. I consider it a vindication of our position." Seiver said it was entirely possible Bell Atlantic could come back with the same applications or submit new ones. He said it was also possible that, given B ell Atlantic's loud protests against VDT rules, the telco was bullying the FCC into rubber stamping its VDT applications so Hundt could take credit for the construction of the information superhighway, rather than representing its roadblock. National Cable Television Association president Decker Anstrom last month called on Bell Atlantic to withdraw its VDT applications after reading a letter Bell Atlantic chairman Ray Smith sent Hundt bitterly complaining about VDT rules. "We have had from the outset a series of questions about the technology that the telephone companies have said they are going to deploy," Anstrom said. He added that Bell Atlantic "got wrapped up in their own socks" and "called time out." Some FCC offic ials were angry because Bell Atlantic had pressed the FCC to act on the applications for nearly a year and tied up FCC resources -- only to pull the plug at the last minute. Other FCC sources criticized Bell Atlantic for being arrogant and constantly criticizing the FCC. "Not only did they abuse the Commission, but they accused us of delaying them," an FCC source said, adding that if Bell Atlantic were right about the FCC h aving caused delays, maybe it was a good thing. "It appears Bell Atlantic was racing ahead precipitously with a costly mistake," the source said. Bell Atlantic spokesman Eric Rabe said the telco has not given up on VDT. The telco will push ahead with its VDT systems in Dover Township, N.J., the first commercial VDT system approved by the FCC. He said Bell Atlantic has no plans to pull its 12,000-home VDT application in Florham Park, N.J. It also has under way a 2,000-home video-on-demand trial in Fairfax, Va., which the telco might try to expand to 20,000 households. He said Bell Atlantic was not contemplating any moves to enter cable. SNET SEEKS TO EXPAND CONN. VDT SERVICE While some telcos are rethinking video dialtone, Southern New England Telecommunications Corp. wants to expand a 150,000-home VDT trial into a commercial VDT service throughout Connecticut. SNET last Friday asked the FCC to approve the plan for VDT service on a hybrid fiber/coaxial (HFC) cable network passing 1.5 million homes -- its entire Connecticut territory. SNET is the first telco to propose a commercial VDT service throughout its service area. Relatedly, SNET has asked the FCC to let it provide programming directly to consumers in the trial; In an April 20 filing, Cablevision Systems Corp. said the FCC should refuse because SNET has not won court relief from the 1984 Cable Act's ban on that service. Ron Serrano, SNET's senior vice president of corporate planning, told reporters that SNET is "very comfortable" with the VDT common-carrier formula but will react as the rules change over time. Ameritech Corp. said recently it may abandon VDT and go the franchised cable route. In the trial, SNET plans to offer a combination of analog and digital programming, with the digital programming coming on line in 1996. The analog service will have 76 channels, including 23 channels of enhanced pay-per-view. Planned digital offerings include movies and other videos-on- demand, interactive shopping and games and various educational services. Serrano said the full commercial service also would combine analog and digital channels. After winning FCC approval, which could take six to nine months, SNET's construction schedule would see the network pass 500,000 homes by mid-1997 and 1.5 million homes by 2009. Serrano said SNET was satisfied that the HFC architecture would be adequate to provide most services consumers might expect and said the design is flexible enough to drive fiber deeper than current 400-home nodes -- all the way to fiber to the curb (10-home nodes). Bell Atlantic Corp., in withdrawing its pending VDT requests, said it wanted the flexibility to abandon HFC in favor of fiber to the curb. Last November, SNET won approval to expand a 400-home video-on-demand test in West Hartford into a VDT trial passing 150,000 homes in Hartford and Fairfield counties by year's end. SNET also has state regulators' backing for a $4.5 billion statewide fiber optic network. SNET's contractors include AT&T Corp., Hewlett-Packard Co. (video servers) and Scientific-Atlanta Inc. (set-top terminals). CAI Wireless Systems Inc., the Albany, N.Y.-based wireless cable MSO, will supply analog programming. CAN JOHN MALONE AFFORD TO DO IT ALL? New York - Wall Street is hardly a nurturing environment, but investors are taking a very paternal attitude toward Tele-Communications Inc., asking a question you would ask a seven-year-old: Are John Malone's eyes too big for his stomach? In recent days the answer being screamed on the Street is "yes!" With the MSO committed to spend almost $9 billion in the next three years on such obligations as existing operations and pushing into telephony plus additional billions on acquisitions, investors are panicked. They fear that TCI president and CEO Malone is trying to gobble up too much. Investors have savaged the company's shares over the past five weeks, slicing 23 percent from TCI's price. But TCI executives counter that the MSO is up to its delicate balancing act, even as competition in its core video business threatens to make life -- and earnings -- much more erratic. The company has the support of many Wall Street analysts and bankers, but investors' lack of confidence is pronounced. At $24 per share last December, Malone was already troubled that the stock was too low and unveiled elaborate financial gimmicks aimed at propping it up. Now TCI's price hovers around $17, hurting the company's ability to raise money and execute deals. The share downdraft two weeks ago threatened to scuttle one critical deal, the $570 million acquisition of Chronicle Publishing Corp.'s cable unit. Sources familiar with the talks said TCI's sudden April 19 price drop led Chronicle CEO John Sias to try to pull the deal -- about half of which was to be paid in TCI shares. After a few tense days of negotiations, sources said the deal was back on track but at new terms giving Chronicle more TCI stock. The stock has been pivotal in a number of TCI's recent deals, from the $1.4 billion acquisition of TeleCable Corp. to the $125 million investment in The Microsoft Network, both paid for with TCI common shares, not cash. Malone will take a stab at turning things around this week, as several hundred securities analysts and money managers congregate near TCI's Englewood, Colo., headquarters to hear the company's pitch. The stock bounced back last Thursday when Bell Atlantic Corp. announced a delay in its video dialtone operations, dimming the specter of immediate competition from telcos. But no one is expecting a complete and rapid stock turnabout without some sort of dramatic event. "It's going to have to be quite a performance," said one money manager. "I think people want some level of comfort that John is as focused on the near term as he is on the 10-year horizon," said Bear Stearns & Co. media analyst Raymond Katz. TCI treasurer Bernard Schotters contends the company has a compelling argument to make about the prospects of the telephone business, the company's ability to manage its spending and the surprising strength of its core cable business in the face of reregulation. "I think we're going to have great things to talk about and not much that's nettlesome other than the government," Schotters said. Schotters compared investors' treatment of cable and future telephone revenues to problems being faced by many technology stocks. "There is only a receptivity for companies that are producing extremely good results right now," Schotters said. "People want to sit out and wait and see some results." The list of TCI's spending obligations is long. By 1997 the MSO has to funnel $1.2 billion into the Sprint Cable venture to fund the launch of PCS phone services in 29 markets, with $800 million of that coming due this year. Katz estimates that spending to upgrade cable systems for telephony and near-video-on-demand will rise 20 percent this year to $1.2 billion, and another 36 percent next year to $1.7 billion before falling back to $1.2 billion. The company is committed to international ventures in Argentina and Japan plus the funding of numerous technology ventures, including several startups. In programming, a $200 million-a-year hole is opening up in its Starz! and Encore movie channel operations as high-cost license deals with Hollywood studios kick in. Further, Malone yearns to own Viacom Cable and Time Warner Inc.'s $1 billion-plus stake in Turner Broadcasting System Inc. TCI is seeking to recut a $2.3 billion takeover of Viacom Cable that stumbled when congressional Republicans nuked a key tax benefit. TCI was initially backing a venture acquiring the systems with $600 million in cash. None of this includes upgrading systems for full interactivity and video- on-demand, which could easily cost $700 to $1,000 per subscriber if TCI decided to push ahead. Those bills are huge, but not beyond the MSO's reach, Wall Street executives said. Part of the coping is already under way. TCI's TeleWest Communications Group Ltd. operation went public last year, raising enough cash to be self- sustaining for a while. TCI's whole international operation is slated to go public, hopefully raising $300 million to $400 million. Further, Katz estimates that in 1995 TCI's can cover 70 percent of its spending on required items like system upgrades and the big Sprint Cable payment. Additional borrowing and the sale of $375 million in equity earlier this year will cover the rest. But increasing earnings and moderating spending should allow TCI to cover around 90 percent of that spending out of cash flow in 1996 and 1997. By 1999 cash flow should exceed spending requirements by 48 percent. And none of that includes telephone revenues from Sprint Cable. "They're in investment mode," Katz said. "It's `financeable' without issuing any more equity, probably." PRODIGY TAPS CABLE VET BENNETT AS CEO White Plains - Edward Bennett, a former Viacom Inc. cable executive, is Prodigy Services Co.'s new CEO, the online service said last week. Bennett, 48, replaces Ross Glatzer, also 48, who retired on Monday, the company said. Prodigy said Bennett will be expected to bring in new, compelling content and help Prodigy broaden its appeal to a younger demographic group. The possibility of the switch first came up when Scott Kurnit, Prodigy's former executive vice president and another former Viacom executive, left a month ago to run MCI Communications Corp.'s new Internet business. "They're hoping this guy can help them in terms of partnerships with entertainment companies and marketing," said Lorraine Sileo, an online analyst with Simba Information Co. in Wilton, Conn. The average age of Prodigy's users is slightly outside the 25- to 35-year-old group the service wants to go after in the future, she said. Bennett said he was hoping to bring a measure of "hipness" to Prodigy, which prides itself on appealing to two-car, three-kid families. "I think that one of the major opportunities for Prodigy is to reinvent and redefine itself to be more appealing to the newer generation of users," he said in an interview. At Viacom, Bennett headed MTV Networks' VH1 music video network and launched the HA! TV Comedy Network, which eventually was folded into Comedy Central. Before his stint at MTV he was COO of Viacom Cable. Bennett takes over Prodigy at a crucial time. It has surged recently, capitalizing on being the first proprietary online service to offer a means of navigating through the Internet's World Wide Web. But H&R Block Inc.'s CompuServe recently launched its own Web browser and America Online's browser will be up soon. A potentially bigger challenge looms this fall with the expected introduction of Microsoft Corp.'s new Windows 95 operating system and the built-in Microsoft Network. Prodigy and the other services also are struggling to find their place in an environment that increasingly revolves around the Web, which adds multimedia features to the Internet. Some analysts even think the Web's open architecture will overpower all of the proprietary online services in a couple of years, after browsers and Web content improve. Prodigy has lots of internal challenges as well. There are recurring reports that IBM Corp. is trying to wrest control of the service from co- owner Sears Roebuck & Co. Prodigy is introducing a new Windows-based interface (P2) and is changing over from a proprietary operating system to one based on the Web's hypertext markup language protocol. "This is a big, big challenge," Bennett said. BELLSOUTH KICKING CABLE OP OFF VDT SYSTEM Washington -- In another sign the video dialtone model might be cracking up, BellSouth Corp. wants to boot the local cable operator off its trial VDT network in Chamblee, Ga. Under Federal Communications Commission rules, VDT networks are supposed to be open pathways to which all programmers can gain access on equal and reasonable terms. But BellSouth is telling the FCC that its VDT rules are skewed in favor of certain programmers and should be changed to prevent cable operators from reserving channel space on VDT networks that serve the same market. "It's somewhat hypocritical that [cable] would be trying to slow down VDT deployment and at the same time take the lion's share of the platform capacity," a BellSouth spokesman said. According to documents filed last week with the FCC, BellSouth executives have met twice in April with FCC officials to express their concerns about Scripps Howard Cable's decision to request 35 analog channels -- half the analog capacity -- in Chamblee. Scripps has a 53-channel system and 27,000 subscribers in Chamblee. In recent weeks, BellSouth executives have been telling FCC officials that local cable operators that reserve VDT capacity could be violating antitrust laws as well as undermining the goal of two-wire competition between telcos and cable. In its FCC filing, BellSouth outlined at least two antitrust concerns: Firstly, that the cable operator thwart competition in the market and secondly, the operator "through joint action with other customer programmers" could restrain competition between itself and other "customer- programmers through anti-competitive agreements." Daniel Brenner, vice president of law and regulatory policy for the National Cable Television Association, said excluding Scripps Howard would violate VDT common carrier rules. He dismissed as unfair BellSouth's anti- competitive concerns. "Why can't Levi's sell their lines in their stores and Sears?" Brenner argued. BellSouth officials might take their complaint to the Justice Department's antitrust division headed by Anne Bingaman, although no decision has been made, according to industry sources. Neal Fondren, Scripps Howard's director of administration and business affairs, said BellSouth's aggressive stance at the Commission "contradicts every discussion we have had with them thus far." BellSouth vowed to treat Scripps like any other programmer, Fondren said. In Chamblee, BellSouth has FCC permission to conduct a technical and market trial for VDT service consisting of 70 analog channels, 160 digital broadcast channels and 480 digital switched channels. SEC SUES, SETTLES WITH SKYPIX Washington -- Principals of the bankrupt Skypix direct-broadcast satellite venture were sued by the Securities and Exchange Commission last month and settled the suit the same day, according to the agency. The civil action charged violations of antifraud and registration provisions of federal securities laws. The suit named Northwest Starscan L.P., SkyPix Corp., SkyPix Joint Venture L.P., A. Frederick Greenberg, Richard Greenberg and Brian J. McCauley. The SEC complaint said the Greenbergs sold about $38 million in securities between April 1989 and July 1992, by saying SkyPix was on the verge of launching "a technologically complete satellite television venture." In fact, SkyPix was a development-stage venture with many obstacles to overcome, the SEC said. SkyPix misrepresented or failed to disclose technology limitations, manufacturing capabilities, prior capital and litigation against the ?Greenbergs, the SEC said. The suit was settled with a consent order, which waived civil penalties and reimbursement orders against the Greenbergs because of their demonstrated inability to pay, the SEC said. SBC VIDEO STRATEGY EMERGING San Antonio, Tex. - Suddenly, sleepy SBC Communications Inc. is a player to watch in the broadband race. SBC, the renamed parent of Southwestern Bell Telephone, has been the Baby Bell with the most blase attitude toward video. It is the only one of the big eight regional phone companies (including GTE Corp.) to not have filed for permission to build a video dialtone network in its region. True, the San Antonio, Texas-based firm was the first Bell to complete a deal to buy cable systems outside of its region, namely the Hauser Communications Inc. systems in suburban Washington, D.C. But SBC has been quietly shopping those systems, and it has shelved plans to upgrade the Montgomery County, Md., system, which will be needed for SBC to carry out its plans to offer local phone service there. The $650 million Hauser deal was more about expanding phone service out of its region than about cable, anyway. A year ago, SBC scrapped plans to merge with Cox Cable Communications, blaming cable reregulation. But recent events have combined to shift attention to SBC's only broadband telephone and video network -- a 47,000-home, fiber-to-the-curb trial in Richardson, Texas, near Dallas. SBC is working with Microsoft Corp. and Lockheed Martin Corp. on that trial, which will feature asynchronous transfer mode (ATM) video switching. On March 28, U.S. District Judge Sidney Fitzwater ruled for SBC that the 11-year-old ban on regional phone companies providing video services to their customers was unconstitutional. SBC -- the last of the regional Bells to win such a ruling -- promptly asserted its right to directly provide video programming to Richardson homes next year. According to Cindy Browne, head of video content arm SBC Video Services, SBC can now approach the Richardson project either as a phone company offer- ing an open platform to all content providers or as a cable operator controlling access to the network. SBC has that flexibility because it never filed for a Federal Communications Commission construction permit for the Richardson network. Browne said SBC will apply for either an FCC permit (issued under Section 214 of the Communications Act) or a cable franchise, depending on which way it decides to go. "There's still a lot of regulatory uncertainty that has to be brought to a close before that will be determined," she said. SBC also took a significant step toward acquiring programming. Along with Ameritech Corp., BellSouth Corp. and Walt Disney Co., SBC will spend more than $500 million over the next five years to get programming and to develop the on-screen navigator that will guide viewers through the service. The SBC trial will run in two phases. The first phase is a technology test, where signals go from laboratories to "friendly" customers, who are employees of SBC. That part of the trial has already begun. Two lab sites have been established -- one at Lockheed Missiles and Space Co.'s Media Systems Integration site in Sunnyvale, Calif., and another at an SBC site in Richardson. The second phase is the marketing test. According to James Durkin, lead product manager of interactive broadband network testing at Microsoft, the aim is to sign up about 20 percent of the 47,000-home trial area, or between 9,000 and 13,000 subscriber homes. The test is one of three key trials for Microsoft, all using ATM switching. The transport architectures differ. A trial with Tele- Communications Inc. in Seattle will use a hybrid fiber and coaxial architecture, and a trial with NTT in Japan will use fiber-to-the-home. Microsoft will supply what it calls an "end-to-end" software product for the switched digital network, which includes a distributed operating system that connects video servers and resident applications with set-top boxes. BroadBand Technologies Inc. will supply the fiber-to-the-curb network, with AT&T Corp. acting as the integrator for that portion of the project, the "level 1," regulated plant side of the telco line. Lockheed's role, like that of Microsoft and future video servers and set- top boxes, falls under the "level 2," unregulated side. "They've put a lot of thought into the level 2 aspect of the trial," said J. Richard Jones, executive vice president of BroadBand Technologies Inc. "A lot of the other phone companies are firing before they aim," he said, while SBC is carefully designing the interactive services that it will offer while building the broadband network. "Southwestern Bell is being quiet about all this, but they're making progress," Jones added. MINNESOTA CLOSE TO OPEING UP LOCAL TELEPHONE COMPETITION St. Paul - Minnesota will be the eighth state this year to open its local telephone exchange to competition, perhaps as early as this week, according to sources familiar with the legislation. Consensus telecom reform legislation had passed the Senate and was expected to go to the floor of the House of Representatives late last week. The House, which reportedly made some minor changes, will send the package back to the Senate, but that body is not expected to delay passage of the bill. The plan is the result of two years of negotiations between U S West Communications, cable operators, long-distance companies and resellers of telephone service, said Michael Martin, executive director of the Minnesota Cable Television Association. "This bill is going to pass," Martin said. "That's as sure as any [legislative] process can be sure. The governor supports it, and his aides have been very involved." Cable operators will be offered the usual litany of competitive measures, including a mandate that the Public Utilities Commission draft guidelines for interconnection, number portability, resale of service and funding of Universal Service. U S West, in turn, can petition the PUC for price cap regulation, which would provide an incentive for launching new services in the state by allowing the company to keep more of its profits, said U S West spokeswoman Mary Hinsley. The PUC is expected to begin rulemaking this summer, with full-scale competition scheduled to begin in 1997. However, should U S West, or any of the state's 87 local exchange carriers, apply for alternative regulation before the PUC finishes writing its rules and regulations, certified cable operators in the LEC's service area could apply for immediate interconnection with that company's local phone network. The two sides would have 60 days to negotiate a temporary interconnection agreement. Failing that, the PUC would step in and make the decision on what constitutes a reasonable rate. "All parties involved would tell you that this is not a perfect bill, if they had their own choice," Hinsley said. "But we think it represents fair and reasonable competition." Minnesota's 87 telcos service a total of 2.5 million access lines. U S West serves 1.9 million of those access lines, or 76 percent of the market. The reform bill survived its biggest hurdle when the Minnesota League of Cities proposed an amendment extending a municipality's ability to collect franchise fees. It also would have forced cable operators to set aside 10 percent of their channel capacity for local access programming. The amendment failed 99-32. Instead, a provision was included in the bill mandating that the PUC undertake a study to document the contributions cable operators already make to the cities where they operate. "This means that the issue can come back next session, " Martin said. "The big concern is a level playing field, and I think this addresses that concern." -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- HOT NETS: Networks Subscribers Like the Most Percent of Respondents Rating Sevice a 4 or 5 On 5-Point Interest Scale Mid-Sized Nets The Learning Channel 36% Encore 28% ME/U 26% Comedy Central 25% Bravo 25% The Sci-Fi Channel 23% ESPN2 22% The Travel Channel 22% Top-Ranked Emerging Networks The History Channel 35% Turner Classic Movies 34% Home & Garden Television 26% CNN International 24% Independent Film Channel 22% Outdoor Life Channel 22% Source: Beta Research -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- CABLEVISION SETTLES PRICING DISPUTE Washington -- Cablevision Systems Inc. of Boston and the Federal Communications Commission have reached agreement and settled an a la carte package dispute that erupted last December. Following a year-long investigation, the FCC declared that Cablevision's 12-channel, a la carte offering was in fact a regulated tier of expanded basic service. However, Cablevision, which had added five channels to the package in July as the FCC probe continued, resisted the FCC's ruling and tried to get the agency to reverse course. But the April 20 settlement ended the battle. Under the deal, Cablevision will be required to offer the 12 channels as a regulated tier and market it along with a 21-channel basic tier and a second, 30-channel, expanded basic tier called Metro. As of May 14, the combined price for the three tiers must be reduced by 2.6 percent, from $27.13 to $26.41. Cablevision is required to keep the price at $26.41 until Jan. 1, 1997, but it may pass through increases in programming costs, inflation and regulatory fees to its 139,000 Boston subscribers. Cablevision is also required to refund basic and Metro subscribers $750,000 with bill credits, not with in-kind products like pay-per-view movies. The settlement offers Cablevision some flexibility with the five channels added during the investigation. The FCC said Cablevision may create a Migrated Product Tier (MPT) with the five channels. MPTs came into existence last month in Continental Cablevision Inc.'s $1.35 billion Social Contract with the FCC. Under MPT rules, Cablevision's five new channels -- Bravo, Television Food Network, MTV Latino, MuchMusic and Gems -- will be price-capped at $2.57 per month. But the FCC said Cablevision may add any number of new channels to the MPT at 20 cents per channel in addition to license fees, and it can offer all channels a la carte. Beginning Jan. 1, 1997, Cablevision may convert the MPT to a New Product Tier, a non-price-regulated level of service created under the FCC's going- forward rules. "We agreed to this because we thought it was fair and reasonable and it gives us certainty going forward as to what our rates will be," said Norm Fein, Cablevision vice president for press relations. State and local regulators said they were pleased with the deal but need time to study the details. The FCC is allowing 30 days to file comments. "I think in general these types of arrangements are necessary given the complex web of rules and the overwhelming number of cases that we as regulators have found ourselves with," said John Patrone, Massachusetts Cable Television commissioner. "I haven't seen anything yet that is particularly disturbing about this deal." Under a pilot program, Patrone's office has allowed five cities -- including Boston -- to regulate basic rates. "I feel somewhat positive about [the deal], but I don't want to be wholeheartedly positive about it. I do need time to digest it," said Scott Dunlap, director of the Office of Cable Communications for the mayor of Boston. CABLE OP OFFERS DBS TO FRINGE HOMES Los Angelees - A Los Angeles cable operator, under fire from the city to honor service requests by three homes located in an unbuilt commercial area, has agreed to a novel and cost-effective solution: It will pay to install PrimeStar dishes at the homes. The agreement will save small BuenaVision Telecommunications of Boyle Heights Inc. in East Los Angeles more than $22,000 in construction costs. "It saved us money we didn't have to throw away in the first place," said Benjamin Ochoa, vice president and general manager. Had the operator been forced into the construction project, it would have required a rate increase of 75 cents per home for every other BuenaVision subscriber to subsidize the project, system executives estimated. The operator was relieved to find a solution short of construction. The city "wasn't going to give an inch" on its line-extension demand, Ochoa said. BuenaVision officials even went to their city councilman in hopes that he'd side with the company against the city telecommunications department on the issue. BuenaVision will pay $450 to install 24-inch direct-broadcast satellite dishes at three locations. The build-out cost was estimated by the company at $22,901. Occupants at the three sites will then pay PrimeStar's monthly $29.95 service charge. Officials at the DBS service said they believe this is the first time PrimeStar has been used to satisfy an operator's line-extension requirements. However, some of PrimeStar's five MSO owners have been using the DBS product creatively, but apparently on a shorter-term basis, to solve problems for their cable systems. For instance, in Baltimore, Tele-Communications Inc., which still operates there as United Artists Cable, temporarily installed PrimeStar dishes on schools in the city in order to satisfy local regulators' desires that schools be "connected" as soon as possible. The dishes were removed as the system was built out. Only four or five schools remain connected to PrimeStar, pending build-out, according to the city. Local regulators, questioned about PrimeStar as a line-extension remedy, said franchise language would dictate whether the Los Angeles solution could be used in other communities. Officials' first choice remains a conventional cable line extension, because cable carries local broadcast and public-access channels. Also, it's murky whether cities can collect franchise fees from the use of DBS. Local signals are not such a concern in Los Angeles, which has good broadcast reception. The city also recently passed an ordinance under which it will attempt to capture fees from alternate delivery technologies. Ochoa seemed pleased with the solution, which was actually suggested by city officials, and indicated that BuenaVision and another local affiliated property, Liberty Cable in El Monte, might be interested in becoming distributors for PrimeStar. -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=- He called, saying he wanted cable installed right away and rushed right down to the local Multimedia Cable office to pay and sign up. He was very interested in CNN, but even on the day after the Oklahoma City bombing he said he didn't know anything about it. That surprised the Herington, Kan., system office manager at the time, but it was even more startling when new subscriber Terry Nichols turned out to be a chief suspect in the massacre that killed more than 100 people. "He was very concerned about being installed that day," said Roberta Erickson, who took Nichols' order. She found Nichols very odd and was nervous as he lingered to watch CNN's coverage on her TV. When the 1,600-subscriber system's chief technician, Chad Albin, heard Erickson's description he half-jokingly wondered whether Nichols was one of the FBI's "John Does." Albin said he handled the install Friday morning without any snag and saw nothing unusual in Nichols' house. "I turned to CNN, then he came out. I said, `Now you can watch the bombing,'" Albin reported. Yes, Virginia, there are some people in America not glued to the O.J. trial. The few hundred citizens of the borough of Ohiopyle, Pa., are not watching it, or anything else on cable, either, and they pleaded with their state representatives to do something about it. The hamlet is totally surrounded by the Ohiopyle State Park, and state law prohibits cable from being laid across state property. But the borough council president, Leo Smith, who also owns the general store, convinced Rep. Lawrence Roberts, (R-Fayette), to sponsor a special resolution in the Pennsylvania House to allow the community a hookup. ------------------------------------------------------------------------- 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--*