From: John_Higgins Subject: Cable Regulation Digest 9/12 Date: Mon, 12 Sep 1994 10:41:42 -0400 (edt) CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 9/12/1994. Vol.1, No.37 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 $78/year. Multichannel e-mail contacts: Marianne Paskowski, editor: Mpcable@aol.com John M. Higgins, finance editor: higgins@dorsai.dorsai.org HOT NEWS: * Telcos Taking Cable Fight To Court * Survey Finds Subs Surprisingly Open to Telephone By Cable * GI Fighting New Tech Piracy Scheme USTA SEEKS END OF TELCO-CABLE BAN Washington -- Hoping to scuttle cable's legislative achievements, the United States Telephone Association today is planning to ask a federal court to block enforcement of the telco-cable cross-ownership ban. The ban has been in legal effect since 1984, although prior to that time Federal Communications Commission rules prohibited telcos from offering cable-style services within their service areas. The USTA is planning to file in federal district court here on behalf of its independent companies that combined have about 20 percent of the local phone market. "The little guys really don't have the wherewithal to litigate this," said Mary McDermott, the USTA's vice president and general counsel. National Cable Television Association vice president and strategic counsel Torie Clarke said NCTA's position has not changed: It believes the ban is constitutional. "If the telephone industry has a problem with it, they ought to work harder, as we are working very hard, to get some very clear rules of the road via the legislative process," Clarke said. Pending House and Senate legislation would do away with the ban. Significantly, the bills lay down a host of preconditions to be fine-tuned by the FCC that the telcos must respect before offering cable service. The telcos are "using the courts to circumvent Congress," said Stephen Effros, president of the Cable Telecommunications Association. The 1,000-member USTA is rushing into court to get a decision as quickly as possible, hopefully before Congress enacts sweeping communications reforms that include removal of the telco-cable ban. The House has passed legislation sponsored by Rep. Edward Markey (D-Mass.) and Rep. Jack Fields (R-Texas); a Senate bill sponsored by Sen. Ernest Hollings (D-S.C.), recently passed by committee, could reach the Senate floor next week. But there's a catch. In both the House and Senate bills, telcos that have already won court cases lifting the ban -- Bell Atlantic Corp. and U S West Inc. so far -- do not have to comply with the new law's cable entry preconditions. However, they would have to comply retroactively once the FCC rules have been promulgated. NEWCHANNELS BEATS TELCO FOR ALABAMA NETWORK JOB Alabama has tapped NewChannels Corp. to provide broadband facilities in the first phase of a statewide advanced network. The MSO was a clear winner on price over BellSouth Corp. in the competition for the contract to build an interactive distance-learning network in Elmore County, said Ned Butler, project developer for the state. "We made the decision to go with cable because they already had fiber all over the county, which made it much cheaper for them to provide service," he said. "BellSouth only had one fiber link, which runs from Elmore County to Montgomery." While it remains to be seen what entities will supply all the network facilities for the planned Alabama "information superhighway," the state's selection of a cable company rather than the telephone company for the first leg of the digital broadband system marks a departure from trends elsewhere. "North Carolina is paying the phone company $4,600 per month, per school for 16 hours per week of broadband fiber service," Butler said. "NewChannels will charge us $1,280 per month for 24-hour per day service." SURVEY: PUBLIC OPEN TO CABLE TELEPHONY NEW YORK - Given cable operators' low regard by much of the public, consumers have shown a surprising willingness to try telephone service from cable companies, a market researcher said last week. Detailed surveys to be done later this month, funded by cable MSOs and phone companies, should give a better sense of what package of video and phone services consumers want, and who they will buy them from, researcher Jim Heisler said. The data should be publicly available by the end of October, he said. Heisler is senior vice president at Princeton, N.J.-based Opinion Research Corp. In June, the company surveyed 1,010 adults on the subject of cable companies offering phone service. Opinion Research found that 36 percent were aware that cable operators want to offer phone service. Fifty-one percent of older consumers (55 years or older) were aware of that desire. In addition, 31 percent of consumers said they would be willing to test phone service by cable operators if costs were comparable. Of that group, younger consumers -- about 44 percent of those aged 18 to 34 -- were willing to switch. Finally, about 34 percent of current cable subscribers said they would try cable operators' phone service. And 25 percent of consumers who do not currently get cable would try cable operators' phone offerings -- a figure that Heisler said suggested cable operators might have success in tapping unpenetrated markets by adding phone service. "Knowing what we know about public sentiment toward cable, these numbers seem fairly significant to us," said Opinion Research spokeswoman Beth Helms. The bottom line: Consumers show a surprisingly high awareness of cable operators' desire to compete for local phone customers and "at least a willingness to consider" switching, Heisler said. "Price is going to be a strong selling point." The upcoming surveys will present consumers with a variety of different scenarios: for example, cable TV and local and long-distance phone service bundled together and offered by each of those industries at different price points. Heisler said cable companies lag behind phone companies in doing that kind of research. Cable operators tend to limit their research to customer satisfaction surveys, he said. NEW WIRELESS TECHNOLOGY READY TO ROLL? New York -- Wireless broadband technology moved back toward the fast track to national rollout last week, thanks to progress in spectrum sharing negotiations at the Federal Communications Commission and a variety of developments elsewhere. In Washington, Suite 12 Group and Motorola Satellite Communications broke a deadlock over competing claims on spectrum between terrestrial local multipoint distribution service (LMDS) and low earth orbit satellites. They agreed to share spectrum based on a set of procedures that are meant to avoid interference between the disparate systems. Meanwhile, Western International Communications Ltd. of Canada demonstrated successful operation of the Suite 12 28 GHz wireless technology over two adjacent cell sights, and the first fully commercial operation of 28 GHz technology launched in Caracas, Venezuela. Adding to the momentum behind preparations for use of the new technology in all areas of telecommunications, sources also reported that at least three telephone companies are now experimenting with broadband wireless in their networks. Brooklyn, N.Y.-based Suite 12, the original proponent of LMDS technology, developed the means for exploiting extremely high microwave frequencies. Current generation systems permit delivery of 49 FM TV channels to very small, window-sill mounted antennas. Suite 12's technology arm, Motorola's terrestrial wireless equipment developers and other entities are working on more advanced systems that support all types of broadband communications. The Suite 12-Motorola agreement came with three weeks left in the timetable the FCC set for industry agreement on the contentious spectrum sharing issue. One way or the other, the commission will bring LMDS to fruition, if for no other reason than the technology promises to generate huge spectrum revenues for the government, Suite 12 partner Shant Hovnanian said. He added that CellularVision, the operating arm of Suite 12 that is partnered with Bell Atlantic Corp. in the New York City area, is adding new transmitters to its 49-channel video service this fall under the special license originally granted by the commission for testing of the system. MICH.-SPAN VICTIM OF POLITICS Lansing, Mich. - A cable channel devoted to covering Michigan legislative activities fell victim last week to political in-fighting between a Republican governor and Democrats in the House of Representatives. The Sept. 26 launch of the Michigan Government Television Network, which would carry executive, legislative and judicial proceedings, was put on hold after Democratic state Attorney General Frank Kelly said funding for the project would have to be appropriated by the legislature. Kelly was responding to questions raised by Democrats, who feared that Gov. John Englar, a Republican, planned to use the network to campaign for re-election. The Michigan Cable Television Association's membership had agreed to donate channel space on their systems for MGTV, as well as satellite dishes, where necessary. "It's an election year," said MCTA spokesman Chris Horak. "Since the governor initiated the channel, there was some fear that it would be used for partisan purposes." Englar had sought to create the network through an executive order issued in late 1993. Funding of $2 million for the first year would come from the proceeds of a $12 million settlement in an overcharge case between the state and Michigan Bell Telephone Co. "The concern in the House was that there was this pool of $12 million, and no legislative oversight," said Rep. Alma Stallworth, a Democrat from Detroit. "We thought 1995 would be a more reasonable [launch] date. Then we would have true basis for negotiation, and this wouldn't be utilized for the governor's re-election." "We're probably looking at the first of the year," Horak said. "But trying to predict a schedule for a legislature is like trying to pick straws out of the air. GI PURSUING PIRATES USING PORTABLE TECHNOLOGY New York -- General Instruments Corp. is actively pursuing legal and technical measures to attack a device that pirates cable signals without having to stay attached long-term to the set-top. The device, which has reportedly been trafficked for about a year by third party set-top manufacturers, is especially worrisome to cable operators because of its portability. Placed between the cable and the set- top, the so-called "cube," which only works with GI set-top products, allows unauthorized viewing of all premium and pay-per-view products. Theoretically, a single cube could be passed around a neighborhood, spreading the impact of the piracy device. GI engineers are testing countermeasures in an undisclosed cable system, the company said. The device has been advertised nationally as a "Cube box," "Jerrold RF" and "Jerrold Cube," among other names. It is used to alter Jerrold DPV-5, DPV-7 and DPBB-7 converter descrambler units, according to court documents. The device is similar in concept to a device that was used to modify Pioneer Communications of America Inc. technologies in the 1980s, said Stan Durey, director of security programs for GI." Security experts believe a former cable employee may be responsible for figuring out the Jerrold program. Cubes have been located nationwide. For instance, in a raid conducted earlier this year in Burbank, Calif., authorities seized cube technology along with a variety of manufacturers' set-tops, said Mike Bates, Southern California regional director of security for Continental Cablevision, which doesn't use the Jerrold set-tops the cube targets. But paperwork seized with the hardware indicated the suspected pirate/distributor was trying to duplicate the technology. Pirates pirate from one another, trying to figure out a cheaper way to make technology so they can sell their own cubes rather than just distribute them. Some pirates also retain ownership of the cubes and only sell de- authorization services. That way, if an operator detects and defeats a cube, the subscriber can get the pirates to deprogram the box for a small fee, Bates said. FCC MAY SLASH LEASED ACCESS RATES Washington -- The Federal Communications Commission is expected to adopt new leased access rules on Sept. 19, according to sources familiar with its upcoming agenda. The agenda is to be released today. According to sources, the FCC is going to slash leased access rates in response to complaints that rates have been raised to unreasonably high levels. Sources said the FCC will order cable operators to charge the average implicit rate instead of the highest implicit rate. Dan Brenner, National Cable Television Association vice president for law and regulatory policy, said he heard that leased access was on the next agenda but had no details. "We would be disappointed if the current rules, which are working, were changed," Brenner said, adding that leased access channels have been popular outlets for religion-based and home shopping programming. Maria Silveria, general manager of TeleMiami, Spanish-language leased access programming in south Florida, said she met last Wednesday with FCC Chairman Reed Hundt to discuss rates. Silveria said a Tele-Communications Inc. system raised rates from $3,500 a month to $26,000 a month after new FCC leased access rules took effect last September. TeleMiami has not had to pay the new rates because the FCC intervened, Silveria said. TIME WARNER WILL PAY $1.23M IN SAN DIEGO San Diego -- Following the example of Cox Cable San Diego, Time Warner Cable's Southwestern Cable system in San Diego has agreed to a $1.23 million settlement to end a suit by the county district attorney's office challenging the system's late fees. Talks still continue with two other cable companies which operate in and around San Diego: Times Mirror Cable Television's Dimension Cable system and Daniels Cablevision in Carlsbad. Southwestern Cable, the community's second largest operator, will credit customers on upcoming bills in the amount of $2.50 per late fee. A penalty of $230,000 will go to the county to pay for legal fees and investigations costs. Any funds left over after the appropriate customers have been credited will go into a newly-formed county education fund and will be used to buy TV and other audio-visual equipment for San Diego elementary and secondary classrooms. Cox Cable agreed in August to a settlement of about $7 million to end the challenge of its late fees. It too is offering rebates and contributions to the educational fund. FCC CONTINUES WORK ON GOING-FORWARD RULES Washington -- Cable industry leaders and Federal Communications Commission Chairman Reed Hundt last week continued talks on new going- forward rules but failed to fashion a compromise, sources said. "It's still a work in progress," said Torie Clarke, National Cable Television Association vice president and strategic counsel. Clarke confirmed that NCTA president Decker Anstrom met personally with Hundt last week for a bargaining session. Cable Telecommunications Association president Stephen Effros said he had been in contact with both Hundt and his chief of staff, Blair Levin. NCTA and the FCC are trying to agree on rules for adding new programming to regulated tiers and the contours of permissible a la carte offerings. Effros said the issues are complex. He said the FCC is having problems because it is micromanaging the industry. In trying to come up with new going-forward rules without disrupting other regulations, Effros said the FCC looked like a "spider caught in its own web." Some cable industry sources speculated that the issue might drag into November because the FCC might want to postpone any major decision until after the biennial congressional elections. KBLCOM OFFERS LOCAL PHONE SERVICE IN TEXAS KBLCOM Inc.'s Paragon Cable operation in San Antonio, Texas, has begun offering local telephone service to residents of an apartment complex in direct competition with Southwestern Bell Corp., a Paragon spokesman said last week. That's about all the company would say. Calls to local Paragon officials were referred to spokesman T.J. Connolly, who would only say that an Aug. 25 story in the San Antonio Express-News reporting the new service was accurate. Beyond that, Paragon will not comment on its plans to offer phone service, he said. In the newspaper article, Paragon officials talked about adding other apartment buildings beyond the first complex, which has 360 units. Paragon general manager Navarra Williams was quoted as predicting as many as 8,000 apartment-dwelling customers might get their phone service from Paragon. "We saw an opportunity to provide additional services to our customers," Williams said, as well as protecting the current customer base against future threats from phone companies or other competitors. The article was unclear about how and under what regulatory conditions Paragon was providing local phone service. A spokeswoman for the Texas Public Utility Commission said she was not familiar with the Paragon service and could not comment on it. -=-=-=-=-=-=-=-=-=-=-=-=-=-And Finally...-=-=-=-=-=-=-=-=-=-=-=-=-=-=- Baby, it's cold inside ... When La Cadena Deportiva, the regional Spanish-language sports service goes national in January, Hispanics in the rest of the country will be introduced to a sport L.A. area residents already view in their own language: ice hockey. The network has a small problem to solve, however, before it begins regular telecasts: coming up with Spanish words to explain hockey-exclusive terms. A partial glossary: disco is the designation for puck; hockey stick is baston (cane); offside, fuera de lugar (out of place); goalie, guardamena oportero (door guarder). The Wire's favorite? congeladora, (the freezer), otherwise known as the penalty box. ----------------------------------------------------------------------- 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 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--