From: owner-cablereg-l@netcom.com Date: Sat, 17 Dec 1994 21:35:35 -0800 Reply-To: higgins@netcom.com CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 12/19/1994. Vol.1, No.51 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 EDITOR'S NOTE: As I write this, I'm sitting on a plane to Florida (where I grew up) to take some Christmas vacation. I don't want to think about cable for a while Y'all have a great holiday and we'll resume publication Jan. 2nd. Haven't done music reviews for a while, but can't resist some last minute shopping tips for music fans in your life. The best album I bought this year is Hole's "Live Through This", awesome, powerful rock from Courtney Love. A very close second is Soul Co ughing's "Ruby Vroom", an odd, haunting album from a New York quartet. Imagine the Talking Heads led by a white rapper backed by awesome musicians. Also try Velocity Girl, "Simpatico", Combustible Edison's "I, Swinger" for eclectic cocktail jazz. I'll say hi to Mom for ya. Send any Christmas presents to higgins@dorsai.dorsai.org. CABLE'S HOLIDAY WISH LIST "In addition to world peace, an end to hunger and a cure for AIDS, I wish for: Five fiber rings, four new revenue streams, three banker friends, two more hours a day and a rational FCC." James O'Brien, President, Jones Intercable Inc. " ... Deregulation, first of all. That probably isn't a new one. If I can't have that, FCC preemption of state and local [regulations]. Last, but not least, a Republican president a couple of years early." Mike Gilliam, President, SBC Media Ventures Inc. " ... Simply, level off next year. Let the FCC do their thing, have all the rule-making in place. Let them act on their cost-of-service complaints as they must and get a telecommunications law in place that makes a level playing field and lets in competition. If you really do believe all those things can happen next year, then you do believe Santa Claus inhabits the North Pole." Tom Waldrop, General Manager, Media General Fairfax Co. (Va.) "I wish for competition on all five lanes of the information superhighway, good weather for rowing in early spring and a new commission phone book." FCC Chairman Reed E. Hundt " ... Sweeping federal legislation in 1995 that would free up competition in the local exchange." Jim Robbins, President, Cox Cable Communications Inc. " ... Peace and joy for our employees, regulator certainty and fairness and please God, no more "telecollectivism." Leo Hindery, Chief Executive Officer, InterMedia Partners L.P. 1. Our own cameras in Congress 2. Reversal of Must Carry 3. Another 40,000 miles in the C-SPAN School Bus 4. To re-enact the entire Civil War battle by battle 5. A game of chicken with the QVC Bus Brian Lamb, Chairman and CEO, C-SPAN PCS BIDS TOP $1 BILLION BUT FALL SHORT OF GOALS Washington - Bidding on 99 licenses for broadband wireless communications air waves topped the $1 billion mark last week as the government took steps to speed up the auction. Meanwhile, Cox Cable Communications Inc., which first won a "pioneer's preference" designation in October 1992 for demonstrating how wireless calls could interconnect with cable plant, was granted a 30-MHz license in the Los Angeles and San Diego areas last Wednesday. Two other pioneers also were granted licenses. Cox also is part of the WirelessCo L.P. consortium with Sprint Corp., Tele- Communications Inc. and Comcast Corp. On Thursday, WirelessCo took the lead in bidding for the biggest available license, for the New York metropolitan trading area, with an offer of $187.5 million. A total of 38 new high bids were recorded in two rounds of bidding on Thursday, compared with only five on Wednesday. On Thursday, companies were required to place bids for licenses that would cover two-thirds of the population area for which they want to remain eligible. Before then, bidders only had to go after licenses covering one-third of the population. Even with the boost, analyst David Roddy, senior economist at Economics and Technology Inc. in Boston, said bidding is "still very slow in terms of the values we're looking at." Government estimates heading into the auction were that $10 billion would be raised by selling 120 MHz of spectrum. This round of bidding will dole out two 30-MHz licenses, or a total of half the available spectrum. At this rate, Roddy said, the 120 MHz would sell for only $2.2 billion. The low values so far reflect an awareness that "there's a lot of competition, a lot of expense, and a lot of timing" involved, Roddy said. After Thursday, WirelessCo had the lead bids for 12 licenses, including ones in the Boston-Providence, Miami-Fort Lauderdale and Denver metropolitan areas. PhillieCo L.P., the Sprint team minus Comcast, led the bidding for a Philadelphia metropolitan area license with a $20.7-million offer. Partnerships of Continental Cablevision Corp. and Cablevision Systems Corp. led in the bidding for licenses in the Boston and Cleveland areas. Cox, bidding separately, led in the race for a license in the Omaha, Neb., market. Cox and two other pioneers, Omnipoint Corp. (New York area) and American Personal Communications (Washington-Baltimore area), will pay for the licenses they received. But they get 15-percent discounts, under a formula that calculates the average selling price of other licenses in Top 20 markets on a per capita basis. The three companies must pay at least $400 million combined. SIGNAL PIRATE GETS THE SLAMMER Little Rock - Jan Gregory Manzer, the first person ever extradited from a foreign country for theft of cable programming, was sentenced last week to 46 months in jail and ordered to pay $2.7 million in restitution by a U.S. District Court in Arkansas. A Hot Springs, Ark., jury took less than three hours to convict Manzer on two counts of mail and wire fraud each, and one count of criminal copyright violations. Known as "V.C. Hacker," Manzer ran an operation between August 1987 and May 1988 that modified satellite descramblers to illegally receive protected electronic transmissions. He also provided satellite dealers with software to modify descramblers. "This is the major victory for the [satellite] industry," said Dennis Powers, chief of signal security for Home Box Office Inc., which estimates it lost $6 million in revenues because of Manzer's operations. "This is the first individual that I can think of that will be sent to jail, and will do the time. "Anybody thinking about compromising this satellite technology, or any new satellite technology, should take a second look at the consequences. Jim Allen, head of the National Cable Television Association's Office of Cable Signal Theft, called Manzer a "key player" in the arena of satellite signal theft. "He was one of the biggest -- if not the biggest," Allen said. "He had an operation dealing in thousands of satellite decoders. This shows that the government is serious about this type of economic criminal behavior." Manzer was one of the first satellite pirates to compromise the VideoCipher technology following encryption of Home Box Offices's signal in 1986. The court ordered Manzer to make restitution to General Instrument Corp., HBO and other programming services listed as victims in the case. At his sentencing last week, representatives from HBO and Cable/Home Communications Corp. said Manzer had cost the satellite industry millions in lost revenues. It's estimated that Manzer worked through a nationwide network of 270 satellite dealers, who used his software to manufacture 75 to 100 bogus descramblers apiece. Manzer fled the country after his arrest in a Federal Bureau of Investigation sting led to his indictment in 1992 by a federal grand jury in the western district of Arkansas. He was arrested in Amsterdam on Sept. 12, 1993, and returned to the United States in June of the following year. In addition to 46 months in jail, Manzer will spend another three years under supervision after his release. FCC ACTION SIGNALS HOPE ON HORIZON Washington -- In a precedent-setting action, a small California cable operator has won approval to raise basic rates by 31 percent next month to avert bankruptcy. The Federal Communications Commission said last Tuesday that family-run Horizon Cable TV in Marin County may raise monthly rates up to $6.50 after determining that Horizon was unable to meet its financial obligations. Horizon, a basic-only system owned by the young husband-and-wife team, Kevin and Susan Daniel, was the first such hardship case adjudicated by the FCC under the 1992 Cable Act. The FCC decision had been pending since mid-October when Horizon first filed for relief. It came just two days before Horizon had to repay a $1.3-million bank loan. "We barely made it," Susan Daniel said. "We got lucky, I guess, because we were the first case to step up to bat." The Daniels incurred the debt in 1991 to cover Horizon's purchase and upgrades for two systems. But successive FCC rate freezes and Horizon's timid pricing strategy combined to trap the Daniels' in a situation in which they were losing about $8,000 per month after cutting costs to the bone, and caused them to default on parts of their loan agreement with Silicon Valley Bank. "We are relieved that we can now move forward with our bank now," Susan Daniel said. The FCC determined that the Daniels had not overpaid for the system. Under the FCC's ruling, Horizon can add $6.50 in the towns of Stinson Beach and Marin West from the current basic rate of $20.42 and $20.33, respectively. About half of Horizon's 2,300 subscribers will be affected by the increase. FCC CLEARS 11 OPS FOR MIGRATION TO A LA CARTE Washington -- The Federal Communications Commission last week cleared a new group of cable operators that had been investigated for possible violation of rate regulation by migrating a few channels to a la carte packages just before the onset of regulation in September 1993. The FCC decided 11 new cases and ruled that the offerings would not have to be folded back into regulated tiers. The FCC said that the operators could offer the a la carte package as non-price-regulated new product tiers created under the agency's new going-forward rules. The FCC was not breaking new ground here because a precedent for this action had been set with release of its first a la carte cases Nov. 18. The FCC has adjudicated 30 out of 62 a la carte cases. It has ordered just one operator -- Adelphia Communications Corp.-- to return an entire tier of service from a la carte to regulated status. FCC sources said it was likely that decisions similar to Adelphia's would be announced shortly. Those cleared of any rate violation or refund liability in the Dec. 12 announcement were: Cablevision Industries, Smithfield, N.C.; Comcast Cablevision, Howard County, Md.; Cablevision of Raleigh, Hillsborough, N.C.; Cablevision Industries, Long Beach, Calif.; Cable TV of Greater San Juan, Puerto Rico; Cablevision Industries, Morrisville and Hillsborough, N.C.; US Cable, Lake Forest and Lake Bluff, Ill.; Comcast Cablevision, Sterling Heights, Mich.; and Century Cable TV, Brunswick, Ga. FCC URGES REFUND SETTLEMENTS AS COST-SAVING STRATEGY Washington -- The cable industry could save millions of dollars in refunds and legal costs by negotiating refund settlements with the Federal Communications Commission, FCC sources said last week. FCC Cable Services Bureau chief Meredith Jones said the agency would be willing to settle before issuing rate orders that could involve lengthy appeals and postpone the day when subscribers actually see refunds or credits on their monthly bills. "We would be willing to explore creative ways to expedite relief," Jones said in an interview. National Cable Television Association spokesman Rich D'Amato said the proposal was new, and consequently he had few details. "Most of what we know about this is what we've seen in the media. It's an interesting proposal but at this point we don't know much about it." Signs of flexibility at the FCC are beginning to emerge as the cable industry heads to federal court Dec. 20 to appeal the agency's rate rules that forced operators to slash their rates 17 percent. The FCC has adjudicated hundreds of complaints but has a backlog of some 6,000 cases -- many of them duplicative -- under the first round of regulation, in addition to 500 new cases under the second round of rate cuts ordered by the FCC in February. The FCC so far has issued refund orders totaling at least $2.6 million, with Dimension Cable hit the hardest at $1.2 million. Jones said no operator has agreed to the terms of the FCC's refund orders. By settling before refund orders are issued, both cable operators and the FCC could bypass the appeals round. "If people don't want to settle, we are perfectly willing to go forward," Jones said. ARIZONA COMMISSSION MAKES WAY FOR VDT Regulators in Arizona are debating whether the local telephone market should be opened to competing providers. Staff members of the Arizona Corporations Commission, which provides oversight to state utilities, recommend that elected board members approve transition from regulated, monopoly telephone service (provided by U S West Inc.) to managed competition for both local exchanges and in-state long distance. Under the rules, cable companies, such as Times Mirror Cable TV in Phoenix, which are building fiber optic networks, can get Commission authority to provide business and residential dial tone. The state would require that competitors participate in a "universal service fund" to assure that basic telephone service remains available statewide at reasonable prices. If the state opens telco markets, the competitors would qualify for streamlined regulation, allowing them to change their prices simply by notifying customers and the Commission. The Commission's three-member board will discuss the recommendations this week. If a competitive plan is approved, it will be effective July 1, 1995. OPS ADD ALREADY-LAUNCHED AND RETRANS NETS TO BASIC New York - Many cable operators with channel capacity will add channels to their regulated expanded-basic lineups and think about launching new product tiers after they've raised their basic rates, said operator and programmer executives. The channels set to gain the most expanded-basic launches are the retransmission consent networks and the not fully penetrated channels that have built up some brand identity. With the exceptions of The History Channel and Home & Garden Television, networks that haven't launched yet haven't been getting much consideration for expanded basic distribution. "We're maximizing our opportunities under the going-forward rules; we want to introduce products on expanded basic," said Jedd Palmer, senior vice president of programming for Tele-Communications Inc. "We want to get the $1.20." Palmer said he wasn't sure yet how many TCI systems had channel capacity to add channels, but the ones that had space will add retransmission consent channels and then channels that the MSO has contracts with but hasn't been able to fully distribute. "We're adding channels where we have capacity on expanded basic," said Harvey Boyd, vice president of operations, Southwestern region, for Post- Newsweek Cable. "We're reserving the right to migrate them [to a new-product tier] if need be. "We have tended to pick the strongest services the systems don't have rather than load the systems with lower-quality services. License fee wasn't the primary factor," said Boyd. "The primary factor was to enhance subscriber satisfaction. I was convinced that if we added channels that were not in demand, it would not be in our long-term best interests." "Services like E!, America's Talking, Court TV, Comedy Central, The Learning Channel and ESPN2 are doing well," said David Zaslav, senior vice president of affiliate marketing and sales for CNBC. "If you were in their affiliate sales war rooms, you would find an immense amount of activity." Zaslav doubts many of the brand-new network startups will get much distribution. "There's a general feeling out there that a number of these new start-up services aren't going to make it," he said. While the programmers are reluctant to give hard launch numbers, networks such as the Television Food Network and America's Talking, both retransmission consent networks, said they will gain "millions" of subscribers on expanded basic as a result of the going-forward rules. Several networks, such as Court TV, were said to be offering upfront marketing money in the two dollars per-subscriber range. Betsy Dirnberger, senior vice president of affiliate sales for the TV Food Network, said due to a jump in distribution from the going-forward rules, the network has revised its forecast up to 15 million subscribers by the end of 1995. TVFN currently has 8.4 million subscribers. TCI CORPORATE ADDED TO EMPLOYEE LAWSUIT A Jan. 9 trial in a lawsuit brought by five employees of TCI Cablevision of Tulsa will be delayed until next spring following a move to add TCI's corporate office as a co-defendant, according to an attorney for the plaintiffs. The five women are suing TCI Cablevision of Tulsa on the grounds that they have suffered from post-traumatic stress disorder following a company- sponsored security seminar that was set up to appear like a real armed robbery. On March 23, 1993, several employees were instructed to stay late to take part in a security seminar in which two fake armed bandits forced their way into the building, brandishing real guns, using foul language and taking a hostage. "At that moment, they were convinced they were going to be shot," said James Garland III, an attorney with Frasier & Frasier, a Tulsa-based law firm that represents four of the women in the case. In an inter-office memo circulated March 26, system officials said the purpose was to "illustrate graphically what a robbery can be like." The memo added that "none of the guns were loaded, and they all had the firing mechanisms removed." HUNDT TO EXPLAIN RATE BREAKS Washington -- Federal Communications Commission chairman Reed Hundt in a speech at the Washington Cable Club scheduled for this Tuesday will outline how the Commission could ease regulation of cable systems as competition begins to develop, according to an FCC source. Hundt will explain how the Commission may offer operators greater pricing flexibility in areas where strong competition from telcos or direct-broadcast satellite services is beginning to develop, but has not yet penetrated local markets so heavily that rate regulation would be automatically lifted under the 1992 Cable Act. National Cable Television Association president Decker Anstrom said liberalizing the effective competition test in the 1992 Cable Act will be a legislative goal next year. He said also that NCTA will push for extending program access rules to telephone companies that own programming, citing the Baby Bell agreement with Creative Artist Agency, as an example. -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=- Coverup at Fox ... Fox Network viewers will see less of Dream On star Martin Tupper's butt than HBO subscribers. According to transcripts of a recent press briefing, John Matoian, Fox's new entertainment group president, said the network's new acquisition will not rival NYPD Blue in the broadcast nudity department. Dream On's producers always planned for a syndicated life for the saucy cable show so they shot coverage (literally) for the revealing nude scenes. The news brought disparate responses from Fox affiliates. Half were relieved while half said, "Oh darn, I like ... the way it's shot on HBO," Matoian reported. Online shopping ... We can't tell whether Home Shopping Network's cyberspace foray is going to be a great business, but at least it's popular: Online magazine The Web Word ranks HSN's recently acquired Internet Shopping Network as the fifth most popular World Wide Web site on the net. The Top 4 are CommerceNet, a haven for other commercial net ventures; Canadian Airlines International; cellular manufacturer Ericsson; and an archive of SEC documents. ------------------------------------------------------------------------- HOW TO GET THE CABLE REGULATION DIGEST: E-MAIL - To: listserv@netcom.com Subject: Ignored Body: subscribe cablereg-l FINGER - higgins@dorsai.dorsai.org FTP - ftp.vortex.com/tv-film-video/cable-reg GOPHER - gopher.vortex.com/*** TV/Film/Video*** WWW - www.vortex.com *--30--*