From: John Higgins Subject: Cable Regulation Digest 10/31 Date: Sun, 30 Oct 1994 16:33:21 -0500 (est) CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 10/31/1994. Vol.1, No.44 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 Kent Gibbons, new media editor: kentgibb@well.com Leslie Ellis, technology editor: Ellis299@aol.com HOT NEWS * Cable Finally Lands Long-Distance Partner * Republican Win Could Be Good News For Cable * Baby Bells Close To Hollywood Deal QUOTES OF THE WEEK "If you're going to start producing movies and things like that, the hole is very deep. They've got zero distribution. On day one they've got no customers and they're going to start producing movies? Even those guys don't have that much money." "It's like Ray Smith used to say, his only experience in making movies is safety films." TCI president John Malone on the three RBOCs proposed deal with uberagent Mike Ovitz to push into Hollywood. SPRINT BACKS MSO TRIO'S PUSH INTO PHONE SERVICE New York -- Major cable operators' two-year long courtship of long- distance phone companies yielded a catch, with Sprint Corp. allying with MSOs Tele-Communications Inc., Comcast Corp. and Cox Enterprises Inc. to push into the local telephone business. The group announced last Tuesday they will build a nationwide wired and wireless phone network to rival local telcos, both through new "personal communications services" and by routing telephone traffic to homes on wired cable systems. The consortium said it would bid hard in the December PCS auction for licenses in markets where the cable companies operate systems. The Sprint arrangement "is a done deal," Comcast president Brian Roberts said. Earlier attempts to land the top two long-distance firms foundered. TCI has talked periodically with AT&T Corp. for two years about a venture, and Comcast brokered a deal that would have had MCI Communications Corp.'s invest in wireless startup Nextel Corp. MCI later pulled out of that deal. The nameless venture -- dubbed "Sprint Cable" by one cable CEO -- plans to invite other operators to participate by tying their systems to the main partners' switches and hubs. The goal is to serve as much of a local market as possible so the venture, for example, could efficiently market telephony to both TCI's customers in the northern Chicago suburbs and independent operators' subscribers south of the city. The basic pitch is: Agree to help market Sprint-branded telephone services and the group will help pay to upgrade cable systems to handle telephony. The cable partners also expect to fold alternate access provider Teleport Communications Group into the Sprint venture -- though without TCG's fourth investor, Continental Cablevision Inc. Comcast's Roberts said the combination will offer consumers a comprehensive package of telecommunications services, not just wireless pocket phones. "It's a strong imperative if you're a cable operator to go into the telephone business." He predicted telephone services over cable would be widely available by late 1995 or early 1996. The group released very few details and would not say how the venture would be financed. Esrey said that Sprint will own 40 percent of the partnership, TCI will have 30 percent with Comcast and Cox each owning another 15 percent. Cable operators still face technical and regulatory hurdles before they can offer local phone services over their broadband networks. The four firms said they would renew the fight in Congress next year for nationwide regulations allowing local phone competition. CABLE HAS LARGE STAKE IN ELECTION Washington -- Cable could have an interesting time on Capitol Hill if the mid-term elections are as disasterous for the Democrats as some pundits and polls contend. The question is not so much whether key industry critics will lose their seats. But if the Republicans win control of the Senate, and perhaps even the House, those critics could be pushed out of leadership position on key committees. Industry executives are hedging their bets. Cable is shunning Repulican House candidate Brad Bailey, who has attacked his opponent for supporting the 1992 Cable Act, claiming the law raised rates in the district and padded the bureaucracy with 240 new hires at the Federal Communications Commission. Like the cable industry, he wants to junk the Cable Act in favor of a comprehensive telecom bill. His opponent helped write the Cable Act. Too bad. The Winchester, Mass., resident is running against Democrat Edward J. Markey, the powerful chairman of the Telecommunications and Finance Subcommittee. And cable is backing Markey. In a heavily Democratic district, Markey is expected to win an 11th term. Cable has probably invested wisely. It's hard to say how the cable industry would fare in a House under Republican control. Markey would be out as chairman of the subcommittee, replaced by the more conservative Rep. Jack Fields (R- Tex.) A Fields-Markey bill on cable-telco would look a lot different from the Markey-Fields bill that passed the House this summer. A Republican-written bill would probably include a hard timeframe for telco entry rather than a waiting period geared to the release of Federal Communications Commission rules and regulations. On the other hand, Fields might be more willing than Markey to revisit elements of the 1992 Cable Act, such as the effective competition test and the program access rules. Fields, who has an easy race this fall in the Houston area, could decline the telecommunications job, as he is first in line to become chairman of the Merchant Marine and Fisheries Committee. Republican control would also mean the replacement of Rep. John Dingell, (D-Mich.), as chairman of the Energy and Commerce Committee, a position he's held since 1981. On the other side of Capitol Hill, a Senate in Republican hands would put Sen. Robert Dole (R-Kan.) in as Majority Leader. Dole advocates sweeping telecommunications deregulation, including repeal of the 1984 and 1992 cable laws. Sen. Ernest Hollings (D-S.C.), chairman of the Commerce Committee, would be replaced by Sen. Larry Pressler, (R-S.D.), a vigorous defender of rural interests. BABY BELLS READY TO SEE STARS? Michael Ovitz, agent to Hollywood's high and mighty, was close to adding three Baby Bells to his client stable last week. In a long-rumored deal that is expected to be announced Monday, Ovitz' Creative Artists Agency would work with Bell Atlantic Corp., Nynex Corp. and Pacific Telesis Group on gathering programming for the telcos' planned broadband systems. In addition to possibly providing new programming to those cable competitors, the new venture might use CAA's influence to try to win early releases of studio movies for video-on-demand services. That won't be easy to do, studio executives said. None of the companies would comment on the talks. But a source familiar with the plans confirmed much of the widely reported details, which appeared in last Tuesday's Daily Variety and then in several newspapers. The venture would be owned by the three Bells, which would commit a total of about $500 million over three years, although that figure could go higher or lower, the source said. CAA would serve as a consultant. Ovitz "represents all the big guys, so he gives you the entree to the creative people," the source said. CAA's clients include Steven Spielberg, Tom Cruise and Michael Douglas. The urge to find "content" for new phone networks drove three other Bells -- Ameritech Corp., BellSouth Corp. and SBC Communications Inc. (formerly Southwestern Bell Corp.) -- into a venture with Walt Disney Co. announced in August. And Nynex invested $1.2 billion in Viacom Inc. during the Paramount takeover battle. There actually would be two new companies. One would be a media company, which would create new programming and acquire other programming and interactive services. The other would be a technical company, which would work on a "navigator" system and develop standards for interoperability, the source said. The production facilities would include ones owned by Bell Atlantic in Reston, Va., and by PacTel in California. The programming would be distributed on the three Bells' networks and other interactive systems. FCC COLLECTS $297M FROM NARROWBAND PCS The Federal Communication Commission's second round of narrowband bids elicited $297 million the first day. The agency didn't auction off any licenses at this simultaneous multiple round auction in which 28 qualified applicants competed for 30 regional narrowband personal communication service licenses. The FCC will plunge into its third auction Dec. 5th for A- and B- block broadband PCS licenses. Setting the stakes in the first round of bidding was PCS Development Corp., which bid $16 million and $4 million on each of four 50/50-kHz and five 50/12.5-channel licenses, respectively. Six licenses in each of five geographical regions were available for bidding. As stakes rose, PCS Corp. was the highest bidder in four regions with $20 million on one of its eight prospects. Insta-Check Systems Inc. walked away with the highest bid of $21 million for a 50/50-kHz channel license. Others among the high bidders were, Pagemart II Inc., Mobile Media PCS Inc., and Westlink Licensee Corp. The PCS narrowband licenses can potentially be used for advanced voice paging, two-way acknowledgment paging and data services. ANSTROM BLASTS FCC, OUTLINES NCTA AGENDA Washington -- Poaching a popular theme from the 1994 campaign trail, Decker Anstrom is running against Washington. In a speech last week that ranged from serious to sarcastic, the National Cable Television Association president accused federal regulators of being "disconnected from reality" and unaware of the new competitive pressures facing the industry. Anstrom compared federal regulation of cable to a Japanese soldier who remained in the jungle years after World War II had ended but never got word of Tokyo's surrender. Nor did the soldier learn that Japan's former enemies were now its friends. "I have to admit that in many ways, Washington is a lot like that jungle, and too many policymakers remain trapped inside it, disconnected from reality," he said. He suggested in comments aimed at Federal Communications Commission chairman Reed Hundt that regulators were so obsessed with micromanaging cable that they might threaten the industry's ability to compete with the local phone companies one day. "Regulators continue their preoccupation with cable television," he told the Federal Communications Bar Association. "In their narrow focus, they are missing the big picture. They are overlooking our changed environment. And they may ultimately threaten the advent of competition." Although Anstrom's primary target was Hundt, he politely omitted Hundt's name from his speech and from his comments to reporters later. In another swipe at regulators, Anstrom mocked the Federal Trade Commission's probe of Tele-Communications Inc.'s planned acquisition of TeleCable Corp. based on anti-competitive fears of the geographic clustering of cable systems. "An FTC official was recently quoted saying that cable companies 'may be clustering to threaten the phone companies.' God help us!" Anstrom exclaimed, after noting that at least one Baby Bell is clustered in a 14-state region. -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=- CCTA FROWNS ON COMEDY; PRANK BANNED IN ANAHEIM Comedy Central's practical joke plans for the Western Show went over like phony poop in the punch bowl and have been vetoed by the California Cable Television Association as too risque. Comedy knew it had a problem when some convention hotels insisted that the CCTA prevent a repeat of last year's gag: huge plastic sheets with outlines of dead bodies in attendees' hotel rooms. That panicked some Japanese tourists who found an inadvertently placed outline but couldn't understand the accompanying prank letter. The CCTA stood up for Comedy back then but nuked this year's followup. "We think it's inappropriate. It's not the message we want to send to the women in this industry," said association vice president C.J. Hirschfield. Women In Cable chairwoman Ann Carlsen also protested. So what's the joke? Well ... we promised not to spoil the fun because Comedy hopes to revive it at another show. We think Brian's kinda cute, too ... C-SPAN's Susan Swain, speaking at last week's Women In Cable dinner honoring the women of C-SPAN, noted that when she was on the air not all viewers had their minds on the legislative process. For example, one caller wanted the camera to pull back so he could get a better look at the blouse she was wearing; another sent sketches for possible outfits. A letter with the words "have gun, will travel" on the envelope caused concern but turned out to be from someone willing to travel to blow dry her hair. Swain's favorite? A male voice on a live call-in show who wanted to inform her that she was having "a really bad hair day." ---------------------------------------------------------------------- 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--