From: owner-cablereg-l@netcom.com Date: Sun, 11 Jun 1995 21:24:36 -0700 Subject: Cable Regulation Digest 6/12 Reply-To: higgins@netcom.com - CABLE REGULATION DIGEST Summary of regulatory news from Multichannel News 6/12/1995. Vol.2, No.24 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 QUOTE OF THE WEEK "Just having one other competitor, two other competitors, that's not a big deal. Car dealers do it, dry cleaners do it." Susan Yee, COO of Twin County cable serving Allentown, Penn., one of the few truly competitive cable markets in this country. Twin County is being acquired by C-TEC. COURT: OPS CAN BLOCK `INDECENT' SIGNALS Washington -- Cable operators have the right to block "indecent" programming on public and leased-access channels, a federal appeals court ruled last week. The U.S. Court of Appeals for the D.C. Circuit upheld Federal Communications Commission regulations implementing a section of the 1992 Cable Act. The 7-4 decision reversed an earlier ruling by a threejudge panel of the court. Before 1992, operators were powerless to act when subscribers complained about access programming -- often sexually explicit -- that they found to be offensive, according to the National Cable Television Association, which argued in defense of the regulations. "We [operators] are required by law to offer leased-access and PEG chan nels," NCTA spokesman Rich D'Amato said. "This gives them some˙20control." Representatives of community programmers challenging the provisions on First Amendment grounds said operators are biased against them and should not have such control. "This decision has a chilling effect on noncommercial speech," said Barry Forbes, executive director of the Alliance for Community Media, which said Friday it will request a Supreme Court review of the ruling along with two other groups. Under the regulations, cable operators are allowed to ban leasedaccess and PEG (public, educational and government) programming they consider "indecent." The FCC defined "indecent" as "programming that describes or depicts sexual or excretory activities or organs in a patently offensive manner as measured by contemporary community standards for a cable medium." In the case of leased-access shows, operators choosing to allow such pro gramming must segregate it on a scrambled channel. Subscribers wishing to see the shows must ask for it in writing. The court found that the provisions did not violate free-speech protections because government wasn't banning programming or forcing operators to ban pro gramming. SENATE TELECOMMUNICATION BILL MODIFIES RATE RULES Washington -- The Senate last week began to debate telecommunications legislation and overwhelmingly approved an amendment that modified rules determin ing rate deregulation of cable operators. The amendment, adopted by a 77-8 vote early Friday afternoon, would allow the Federal Communications Commission to regulate upper tier rates only if they significantly exceed the national average. Separately, the Senate defeated by 64-30 an amendment by Sen. William Cohen (R-Maine) that would have required the FCC to draft rules promoting the com mercial availability of cable converters and set-top boxes. The House bill contains such a provision. Under the Senate amendment, the national average would be determined by in cluding the upper tier rates of all cable systems on a per-channel basis as of June 1, 1995, excluding the rates of small operators. The average is to be adjusted every two years. Under the compromise, small operators' upper tiers would be deregulated upon enactment. But the amendment would keep their basic tier regulated unless that was the only tier offered as of Dec. 31, 1994. The amendment defined small operators as those having about 600,000 domestic subscribers and does not directly own or control a daily newspaper or a telephone company with more than $100 million in annual revenues. The amendment also changed the bill in terms of cable deregulation when an operator faces competition from a local telephone company. The bill reported by the Commerce Committee freed all cable rates when a telco "offers" video programming. The amendment tightened this language by requiring deregulation when a telco provides "comparable" video programming. This change was designed to prevent cable deregulation if a telco simply offers one or two channels of pay-per- view. The bill contained no limitation on cable-telco combinations other than existing antitrust law. But the amendment added a provision that would bar cable and phone company buyouts and joint ventures except in areas with fewer than 50,000 people or in non-urbanized areas. The FCC would have authority to waive the anti-merger prohibition. TELEWEST/SBC DEAL BOOSTS U.K. CABLE London If you use the metaphor "a rising tide lifts all boats," then the U.K. industry was hit by a tidal wave last Thursday, with the major merger announced between TeleWest Communications plc and SBC CableComms Ltd. SBC will contribute 1.3 million equity homes under franchise to TeleWest's 2.8 million homes in a stock deal valuing the combined entity at $3.7 billion. The merger values privately held SBC's U.K. assets at [$UK]679 million ($1.1 billion), or [$UK]313 ($500) for each SBC unbuilt home -- a dramatic increase from the earlier benchmark of [$UK]200 ($320) set by other transactions. "It's a deal that re-affirms our belief in the market," said Alan Michels, CEO of TeleWest. News of the merger spurred heavy trading in U.K. cable stocks, which rose 5 to 10 percent on the day of the announcement. TeleWest and SBC now face the challenge of getting regulatory approval, which could prove sticky. TeleWest plc, as the company will be called, will have 4.1 million homes under franchise, making it 50 percent larger than No. 2 MSO Nynex CableComms Group. TeleWest's share of the more than 15 million U.K. homes under franchise will be 25 to 27 percent, which could prompt close scrutiny by the Independent Television Commission and the Office of Telecommunications -- the two U.K. agencies that have to approve the deal. The most held by one MSO so far has been 17 percent. TeleWest and SBC are expected to stress to regulators that the dominance of terrestrial television and British Telecommunications should outweigh concerns over the combined cable group's share of equity homes. If approved, the deal will dramatically escalate the already quickening pace of consolidation in U.K. systems, one that mirrors the U.S. consolidation. Seven MSOs in Britain will control more than 90 percent of the homes under franchise. In total, there will be just 15 operators, down from 50 a few years ago. SONY WILL SHIP FIRST DSS UNITS New York -- Sony Electronics Corp. plans to start shipping the basic model of its Digital Satellite System receiver on Thursday, a Sony official said. Sony plans to offer the systems in retail outlets in Southern California first as part of a distribution test, national marketing manager Ed Villamano said. The company expects the product to be available nationwide by the end of July, when most advertising will begin. The basic Sony unit will carry a suggested retail price of $749, or $50 higher than Thomson Consumer Electronics Inc.'s basic DSS unit. Retailers have indicated that they may charge less than that, though. Villamano said Sony believes that DSS subscriptions picked up again after Memorial Day weekend, following a slowdown after the Christmas period. Sony is the second DSS equipment provider after Thomson. DirecTv Inc. and USSB Inc. provide programming for the system. CABLEVISION SEEKING CONN. PHONE SERVICE Cablevision Systems Corp. chairman Charles Dolan told Connecticut regulators last week he wants to offer local phone services to his cable subscribers in the Nutmeg State. Dolan's declaration came Thursday at a franchise-renewal hearing, where he urged the Department of Public Utility Control to "give us the power to compete in telephony." The DPUC is writing rules on such topics as "unbundling" network services and providing for universal phone coverage. Cablevision is waiting to see how the state resolves those issues before formally applying to provide phone service, Cablevision of Connecticut spokesman John Porio said. For example, the state is leaning toward requiring phone providers to reach both high-density and lowdensity areas, while the MSO's two franchises are mostly in high-density areas. Cablevision has about 190,000 subscribers in the state. It plans to upgrade its systems to handle telephony and other interactive services. Elsewhere, Cablevision has an interconnection agreement with Nynex Corp. and plans to test residential phone service in New York later this year. Cablevision al ready provides local calling services to businesses on Long Island, N.Y., through Cablevision Lightpath Inc. C-TEC BUYS COMPETITIVE CABLE SYSTEM Princeton, N.J. - Most cable operators are trying to avoid competition. But MSO C-TEC Corp. has gone out of its way to find it. The Princeton, N.J.-based cable and telephone company has taken control of one of the few truly competitive cable systems in the country, Twin County Cable Inc. The system serves 74,000 subscribers in Lehigh Valley, Pa., primarily in Allentown. The deal is not huge -- just over $100 million in cash and stock. But it's unusual because the system itself is an oddity, facing competition from one of two other cable systems for more than 25 years. More importantly, C-TEC was eager to buy into a competitive situation in order to learn more about how to manage in such a market. C-TEC chairman David McCourt said the company is more interested in expand ing competitive businesses, like its long-dis tance arm, than monopoly ones. "We think that monopoly telecommunications businesses are going to go the way of the dinosaur," McCourt said. "We'd rather get bigger in a competitive environment." Daniels & Associates broker Chip James, who represented Twin County in the sale, said the competitive situation wasn't a turnoff to other potential buyers he approached. "Four companies were interested and did a fairly significant examination of it," James said. "Only one company said, `An overbuild? Nah, we can't touch it.' Three put offers down." Since the Federal Trade Commission started blocking MSOs from buying out competing cable operators, very few competing systems have sold. The Twin County deal boosts C-TEC's cable operations to 347,000 subscribers in Pennsylvania, New Jersey, Delaware and Michigan. Further, the company has an independent telephone operation serving 171,000 residential customers and 48,000 businesses in Pennsylvania. GOING-FORWARD SUBSCRIBER GAINS BY MIDSIZED NETWORKS Startup networks got little benefit from the FCC's rules for rate hikes "going forward" encouraging ops to add channels. But existing nets did fine. Network Sub Gain Total Subs May 1994- June 1995 June 1995* ('000s) ('000s) ESPN2 9,695 22,485 TLC 8,639 38,814 Cartoon 7,999 18,543 Court 6,442 21,593 Sci-Fi 6,331 22,786 E! 5,331 32,201 Comedy 5,217 35,651 fX 4,933 21,862 CMT 4,201 28,738 Food 4,172 12,254 Prevue 3,990 37,181 FVC 3,536 22,985 BET 3,083 42,616 Travel 1,866 17,099 Nostalgia -1,430 7,919 *fX subscriber gains are for December 1994-June 1994; Travel Channel gains are for November 1994-June 1995; TV Food Network gains are for January 1994-June 1995. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=...And Finally=-=-=-=-=-=-=-=-=-=-=-=-=-=- Perhaps building toward the day when women lust over cable installers like they do over UPS delivery guys, Cablevision Systems' Cleveland operation is considering a dress code. System mangers are worried that a few employees look a bit "scraggly" at times. "We want to present a nice, clean image," said chief engineer Chuck Gentry, who said the proposed rules are aimed particularly at installers going into homes. Guidelines under discussion include collar- length hair for men, uniforms with black belts only; fingernails trimmed to 3/4-inch or shorter; no exotic hair colors; and limits on hoop earrings for male techs. "That's more of a safety issue," Gentry said, noting that hoops can get caught as techs are crawling around. No word on butt cracks. ------------------------------------------------------------------------- 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--*