From: John Higgins Subject: Cable Regulation Digest 6/20 Date: Sun, 19 Jun 1994 16:18:57 -0400 (edt) CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 6/20/1994. Vol.1, No.25 Copyright 1994 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 $65/year. CABLE REGULATION SOUNDTRACK: I'm so damn busy on a project that I haven't prowled the record stores in weeks. But I'm cranking Hole's "Live Through This" in honor of bass player Krisin Pfaff, who overdosed on heroin last week. Hole, of course, is fronted by Courtney Love, the wife of the late Kurt Cobain. I've listened to this album 50 times and I still love it. Jeez, all these people are extremely talented and put out fantastic music. Why are they so hoplessly screwed up? QUOTES OF THE WEEK "I think demand will continue to exceed supply over the next year, even with the best efforts of industry suppliers." Tom Carbaugh, president of cable equipment distributor Jerry Conn Associates, on a sudden national shortage of coaxial cable because rebuilds by MSOs and telcos. "I'll make a commitment to [Gore] OK? Listen, Al, I know you haven't asked for it, but we'll make a commitment to complete the job by the end of 1996. All we need is a little help ... you know, shoot Hundt! Don't let him do any more damage, know what I' m saying?" TCI president John Malone, who later apologized but insisted the remark was "obviously not a serious one". "At a minimum, operators should be allowed to realize the same margin on new channels that the FCC's rules allow for existing channels on regulated tiers." Continental Cablevision senior vice president Robert Sachs asking for improved regulatory incentives to add new programming. COMCAST GETTING MACLEAN-HUNTER'S U.S. SYTEMS FOR $1.3 BILLION Philadelphia -- MSO Comcast Corp. won the bidding for Canadian operator Maclean-Hunter's U.S. systems. The $1.3 billion price, however, values the properties at just 10.6 times running-rate cash flow, far lower than other recent deals, notably the plann ed Cox purchase of Times Mirror Cable. Sources said that Comcast beat out Continental Cablevision, Cablevision Systems Corp. and a partnership between Tele-Communications Inc. and Knight-Ridder Inc. The systems were already up for sale even before Maclean-Hunter agreed to sell out to another Canadian MSO, Rogers Communications Corp. Maclean-Hunter is best known as a Canadian newspaper and magazine publisher while Rogers dominates cable and cellular in its home country. The MSO's premier property is Suburban Cable, a giant 230,000 subscriber cluster in suburban New Jersey. The company also owns 49 percent of Barden Cable's Detroit system and properties in Broward County, Fla. TCI and Comcast were the most eager bidders for the U.S. systems, sources said, because Maclean-Hunter's clusters fit so tightly with their existing operations. TIME WARNER AKRON MOVE GETS PANNED Time Warner Cable's ambitious plan to roll out two-way addressable boxes to all its subscribers in 12 markets has met political and consumer resistance in its Akron, Ohio pilot system. The company sees its "full addressability" rollout plan as an interim step before advanced interactive technologies being developed in its Orlando, Fla., system laboratory are ready for application. Time Warner has drawn up a list of 12 markets where it plans to roll out new addressable boxes to as close to 100 percent of its subscribers as possible. In addition to Akron, the list -- dated May 25 -- includes divisions in Memphis, Tenn.; Kansas City , Mo.; Illinois/Indiana; western Pennsylvania; New England; Cincinnati; Charlotte, N.C.; Houston; and Rochester, N.Y. as well as other systems in the southwest and northeast. But the first step, in its northeast Ohio division based in Akron, has elicited a strong backlash from local politicians and subscribers. Akron Councilman Don Mittiga has led a protest against Time Warner because subscribers who take anything above stripped down broadcast basic must now pay $3.45 for the new Pioneer 9510 set-top plus 15 cents for a remote control. When the system began it s addressable rollout on Jan. 24, it scrambled all channels above broadcast basic, so subscribers wishing to receive channels such as MTV: Music Television, Cable News Network and USA Network had to take the boxes. Michael Luftman, corporate spokesman for Time Warner Cable, had no comment about any aspect of the MSO's full addressability plans because he said they were not final. Kevin Leddy, Time Warner Cable's senior vice president of marketing, who is spearhead ing the rollout, declined to be interviewed. While scrambling the broadcast basic tier is illegal, scrambling tiers above it is currently legal. But the Federal Communications Commission has expressed a desire to force systems not to scramble any regulated tiers, said Alan Stillwell, assistant to the chief engineer of the FCC. COAXIAL CABLE SHIPMENTS BACKLOGGED UNTIL NOVEMBER St. Louis -- Operators not yet in line for the coaxial part of hybrid fiber/coax design may have to wait until Thanksgiving for shipments. In almost textbook style, the demand for hardline trunk and feeder coaxial cable has exceeded supply, causing price increases and long delivery times for operators not already in line. New orders for coaxial trunk and feeder could be backlogged until Th anksgiving, said an executive with Comm/Scope at last week's SCTE Cable-Tec Expo here. "I think demand will continue to exceed supply over the next year, even with the best efforts of industry suppliers," said Tom Carbaugh, president of Jerry Conn Associates, an East Coast-based distributor. Carbaugh cited increased interest in hybrid fib er/coax design as the reason for the shortage. The ripe market conditions could point to at least two non-traditional hardline coax players by year's end, said one operator who requested anonymity. To temper the situation, coax manufacturers including Comm/Scope Inc., Trilogy Communications and Belden Wire & Cable last week announced plans to expand manufacturing capacity, in some cases by as much as 75 percent. Times Fiber Communications also said at the show that it was expanding capacity 55 percent by September. BELL ATLANTIC DETAILS INITIAL VIDEO NETWORK PLANS Bell Atlantic Corp.'s latest plans for building a video network show how the telephone company plans to assert its court-ordered right to control the programming. In a pair of filings with the Federal Communications Commission last week, the Philadelphia-based telco outlined more than just the dozens of neighborhoods in six mid-Atlantic markets that will be the first to get the video services. Bell Atlantic wants to pass 3 million homes and businesses in three years with its services to Baltimore; Washington, D.C.; Northern New Jersey; Philadelphia; Pittsburgh and Hampton Roads, Va. One new wrinkle is a "will-carry" plan. If the FCC approves, Bell Atlantic would insist that video suppliers offer customers a free basic package of local broadcast stations and public, educational and government channels. Under video dial tone rules, the network provider cannot tell video programmers what to offer customers. So the company's plans would require a change in the rules by the FCC, Bell Atlantic spokesman Eric Rabe said. Rabe also said Bell Atlantic, through its Bell Atlantic Video Services subsidiary, intends to have sway over how customers are charged for video services. He said the company was leaning toward letting subscribers buy only the channels they want. Rabe said the video programmers would market the service and then contract with Bell Atlantic to wire a subscriber's home. New subscribers would pay between $8 and $12 for a hookup, which would include a digital set-top and remote, he said. Subscribers would not need a set-top for the 23 to 37 analog "will-carry" channels. Bell Atlantic plans to build a broadband network using a hybrid fiber and coaxial architecture, with AT&T Corp. and General Instrument Corp. as lead contractors. The company also plans to use Asymmetric Digital Subscriber Line technology, a method of se nding video over conventional copper phone lines. Bell Atlantic said it will offer 188 digital broadcast channels and between 272 and 464 channels of "pointcast" programming, which would largely be movies at first but could also include specialized health or educational shows, Rabe said. CONTINENTAL LOBBIES FCC ON INCENTIVES Washington -- Continental Cablevision Inc. last week urged the Federal Communications Commission to adopt a plan that would give cable operators more incentive to add channels to regulated tiers. The MSO said the FCC's current plan of providing operators with a 7.5 percent markup on programming costs in addition to charging a penny or two per month per subscriber was an inadequate incentive package. Continental told the FCC to consider a plan in which cable operators that have added new channels "would be allowed to recover the cost of the programming plus the operator's average margin on programming on other channels on that tier." "At a minimum, operators should be allowed to realize the same margin on new channels that the FCC's rules allow for existing channels on regulated tiers," said Robert J. Sachs, Continental's senior vice president for corporate and legal affairs, in a statement. "Permitting the same margins going forward would protect consumers, simplify the rules, provide incentives to add new channels and put high cost and low cost programmers on an equal footing," Sachs added. MSOS RESPOND TO FCC ALLEGATIONS Washington -- Time Warner Cable has told the Federal Communications Commission that it did not violate agency rules by rearranging programming lineups in response to the agency's rate regulations. In a letter to the FCC's Cable Services Bureau sent March 24, Time Warner denied allegations that its Harrisonburg, Va., system started charging for a special pay-per-view service without having the prior consent of the subscribers. Time Warner said its Home Theater Movie Club was simply a new name for an old service. Since late last year, the FCC has been probing whether cable systems attempted to violate the agency's rate freeze by restructuring tiers, offering a la carte packages, or engaging in negative option billing. The FCC sent out letters of inquiry to local cable operators in response to consumer complaints and letters from Capitol Hill lawmakers. In a reply sent March 24, Monmouth (N.J.) Cablevision Associates said that its sale of remote controls to subscribers was consistent with the agency's negative option billing rules. "The offer was accomplished in a fair, subscriber-friendly fashion, and there have been very few subscriber complaints relating to MCA's remote control policy," Monmouth's attorney James F. Ireland said. Ireland added that Monmouth has not heard back fr om the FCC since filing its response three months ago. CHONG ESPOUSES 'SIMPLE' REGULATION Washington -- Federal Communications Commissioner Rachelle Chong said last week she will study the agency's cable rules to determine whether they are in accord with her belief in streamlined regulation. "I think what I would like to do in the next month especially is to take a hard look at where cable is and see if our current regulations fit in with my view of the world on how I think things should be regulated," Chong said. Meeting with reporters for the first time since being sworn in last month, Chong admitted she needed to study cable-related laws and regulations before she could make up her mind. "I will be honest with you. I really don't know a lot about cable. That has not been an area of my practice at all," said Chong, a California Republican who represented cellular phone companies. In outlining her philosophy, Chong said she favors "pragmatic, simple regulation." Chong said she is looking forward to applying her philosophy to the FCC's cable rules. "I think that one thing I care about is simple regulation, regulation that helps cable operators compete on the trendy information superhighway," Chong said. JUSTICE BACKS RBOCS ON LONG DISTANCE Washington -- The Justice Department last week backed the regional Bell telephone companies' bids to carry long-distance calls through their cellular subsidiaries. If approved by U.S. District Judge Harold Greene, who oversees the 1984 decree that broke up the Bell System, the action could make it easier for Bell wireless operations to compete against non-Bell cellular firms such as Macaw Cellular Communications C orp., and against cable companies planning new personal communications services (PCS). The judge generally follows Justice Department recommendations on changing the breakup terms. ----------------------------------------------------------------------- HOW TO GET IT: The best way to obtain CABLE REGULATION DIGEST each week is subscribing to the TELECOMREG mailing list (listserver@relay.adp.wisc.edu, SUBSCRIBE TELECOMREG YOUR NAME). Available by finger with the command: FINGER -l higgins@dorsai.dorsai .org. Anonymous FTP and Gopher archives are now graciously made available at Vortex Technology. To FTP, head for ftp.vortex.com, change directories to "/tv-film-video/cable-reg". By Gopher, head for gopher.vortex.com and select the "*** TV/Film/Video ***" menu item. --30--