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Date: Mon, 20 Feb 1995 21:58:36 -0800
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CABLE REGULATION DIGEST
Summary of regulatory news from Multichannel News 2/20/1995. Vol.2, No.8
Copyright 1995 Multichannel News. Reproduction/distribution is permitted
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 QUOTE OF THE WEEK
 "You can't sell me a dozen eggs one day, then the next day give me 11 eggs
and a piece of coal and tell me you reserve the right to call [the coal] an
egg,"
          Ron Lerigo, Chambers Communications subscriber who sued after his
          cable system temporarily dropped local ABC and NBC affiliates. To
          cover expenses Lerigo incurred through his efforts to watch Monday
          night football, a judge order the cable operator to pay Lerigo's
          $95 bar tab.

 SUBS SUE CHAMBERS OVER DROPPED NETS
 When Greg Lerigo couldn't watch ABC or NBC on his cable system for a few
weeks in 1993, he figured his operator owed subscribers $1.5 million; Phil
Schlenker's goal was a bit more modest -- he wanted $95 to pay his bar tab.
 More than a year after retransmission consent and must-carry rules went into
effect, two California subscribers want compensation from Novato operators
Chambers Communications Corp. for dropping the local NBC and ABC affiliates.
 Schlenker actually won a small claims court order against Novato, Calif.-
based Chambers Communications Corp., while Lerigo has filed a  class action
suit on behalf of Chambers' 14,700 subscribers.
 The legal actions center on Chambers' failure to reach deals with NBC
affiliate KRON and ABC owned-and-operated station KGO.
 Chambers' subscribers had no NBC programming between Oct. 6 to Oct. 29; the
ABC station was off for seven months. As a result, the suit alleges the
operator owes each of the subscribers about $105, plus interest.
 Lerigo subscriber said he understands the blackout was attributable to some
hard-ball negotiations over must-carry, but adds consumers should be
compensated for their loss. He added that the operator should have offered
subscribers basic cable discounts or comparable programming inserted in the
lineup.
 "You can't sell me a dozen eggs one day, then the next day give me 11 eggs
and a piece of coal and tell me you reserve the right to call [the coal] an
egg," Lerigo said.
 Schlenker shaved $15 off his monthly cable payments as a protest after the
broadcasters were dropped. The cable company cut off his service after three
months of self-discounting, said his attorney, Max Hopkins. As a result, he
had to drive to a nearby town to watch Monday Night Football at a bar.
 Schlenker sued Chambers in small claims court and convinced the commissioner
to order the cable company to pay Schlenker's $95 bar tab.
 Though small claims actions are not technically appealable, Chambers'
attorney won a hearing on the case in state court where a judge upheld the
award but reduced the amount to $65, Hopkins said.
 Now Chambers' lawyer has combined the two cases and the whole matter has
been moved to federal court.
 Media lawyers said the class action suit has little or no chance of
progressing. They noted the courts have steadfastly refused involvement in
programming issues. Even if the allegations have merit, class actions are hard
to certify, attorneys say.
 But the lawyers noted, the case is an interesting example of an operator
being penalized for what one called "a bad bedside manner."
 Indeed, other communities had broadcast blackouts with no obvious residual
fallout.
 TCI Cablevision of Texas Inc., in Corpus Christi, bounced three network
affiliates for six weeks beginning Oct. 6, 1993. Angry consumers canceled
their subscriptions and signed on with a wireless operator in town, said TCI
general manager Dennis Moore. Three months after the broadcasters were
reinstated, those subscribers, and more, were back with TCI, he asserted.
 But people in Novato say consumers came away from the must-carry wars with
the feeling that the broadcasters care about them, and Chambers doesn't.
 Both sides communicated their side of the negotiations battle: Chambers sent
out notices of impending blackouts and explained the reasons, executives said.
KGO was demanding payment of 15 cents per subscriber or the addition of ESPN2
to the programming lineup. Chambers said it had no room for the service.
 But the broadcasters, especially KGO, made the bigger community bang. Twice,
the broadcaster brought a downlink truck to the local high school so sports
fans could watch Monday Night Football. The station sold pizza and drinks at
the events and donated the profits to local charities. KGO general manager Jim
Topping came to several city council meetings, bemoaning the blackout. In
contrast, Chambers' notifications went virtually unnoticed, city sources said.
 Hopkins, who also represents Lerigo, said the class action was filed in
January because he was waiting for the outcome of the recent Supreme Court
ruling against American Airlines. The court affirmed the rights of aggrieved
frequent fliers to sue for alleged breech of contract claims in state court.
He believes that ruling strengthens his case.
 Regardless of the timing, Chambers representatives say the suit is utterly
without merit. Further, said senior vice president Sylvia Sycamore, the
company flatly refuses to pay the $65 judgment to Schlenker since "he's not
right."
 The must-carry blackouts remain a burning issue to only a small group of
people in Novato, she said. "Most have gone about with their lives ... but
some claim there was a breech of contract, that there's some unspoken, yet
generally believed agreement, that we'd always carry ABC," Sycamore added.
 Sycamore and Chambers' attorney Richard Harmon argued that each bill
received by consumers warns that the cable company reserves the right to
change programming at any time. The litigation was removed to the U.S.
District Court for the Northern District in San Francisco because the suit
alleges Chambers violated the Cable Act provision mandating 30-day notice for
making changes in programming. Harmon said he expects the judge to throw out
the case when the issue has an initial hearing in early April.
 Ironically, as Lerigo awaits the decision of the court, he remains a paying
customer of Chambers Communications.
 "I looked into getting an antenna, but an engineer told me it would have to
be 300 to 400 feet in height, topped with a red light to warn aircraft and
costing about $250,000," he said.

 CABLEVISION, NYNEX SIGN PIONEERING PACT
 New York - Cablevision Systems Corp. stepped up preparations for residential
telephony last week with the signing of a ground-breaking interconnection
agreement with Nynex Corp. and selection of Northern Telecom Ltd. as vendor
for its first technical trial.
 The interim interconnection agreement with Nynex is the first such pact
between a cable company and a regional Bell operating company anywhere in the
country. It sets a tentative framework for head-to-head competition, including
provisions for customer retention of phone numbers when choosing a new carrier
and for the carriers' compensating each other for terminating calls
originating from the other carrier's customer base.
 "We look on this interim agreement as an encouraging sign that we'll be able
to move forward with residential service under final terms that allow
competition to work," said Joseph Cece, president of Cablevision's Lightpath
subsidiary, which presently provides switched services to business customers.
"The important thing here is that Nynex has embraced the concepts of
reciprocal compensation and number portability."
 Cece said technical trials of residential service will begin in the second
quarter of this year, with a market trial slated for the second half of the
year and commercial launch following in 1996. He said Northern Telecom,
because it was able to meet Cablevision's ambitious schedule, would be the
initial test supplier, but the MSO would probably test other firms' gear as
well.
 The deal with Nynex comes as the state Public Service Commission is
completing its Competition II Proceeding. Cable interests hope that action
will set the stage for more favorable terms than Nynex has so far been willing
to grant in its interim interconnection agreements with Cablevision and with
two competitive access providers, Teleport Communications Group and MFS
Communications.
 For example, where Nynex is willing to pay and charge a flat rate for call
completions, cable interests want "reciprocal incremental cost-based
interconnection rates," Cece noted. Under such terms the amount of the payment
would reflect the share of total distance a local inter-carrier call travels
over the call-completing carrier's lines.
 Because newcomers such as Cablevision will have fewer switches and therefore
longer line distances for the typical call, this formula would lower its
compensation costs to Nynex, making it easier for startups with their intense
capital costs to compete, Cece said.
 "If we're going to have an opportunity to offer a choice of alternative
phone service to small businesses and consumers, the rate has to be based on
the true incremental cost of the dominant LEC [local exchange carrier]," he
said.
 Cece said number portability arrangements were also a stopgap, insofar as
Nynex will use its call-forwarding capabilities to ensure calls get to a
customer who has switched carriers but who has retained their original phone
number. A permanent solution must involve installation of the technical means
to support transfer of numbers among carriers without relying on call-
forwarding, he said.
 The PSC staff working on the competition issue has already recommended a
reciprocal payment and number portability framework along lines suggested by
Cece, but Nynex is lobbying against going beyond the terms of the interim
agreement where reciprocal payment is concerned.
 "We believe this agreement benefits both Cablevision and ourselves and could
serve as a model for the terms to be worked out by the [Public Service]
Commission," said David Frail, a spokesman for Nynex. "It is possible, of
course, that the proceedings could result in rules that supersede the terms of
this agreement."
 Time Warner Cable's Communication division is aggressively pursuing
negotiations with Nynex, but, so far, has not found the terms to be adequate
to its needs, said Michael Luftman, vice president of public affairs at the
MSO.
 TCG, which was the first competitor to sign an interconnection agreement
with Nynex, has a different perspective on cost considerations, given its role
as a provider of business rather than residential phone services. But the
company, which is owned by Tele-Communications, Inc., Comcast Corp.,
Continental Cablevision and Cox Cable Communications, believes there must be
better terms before true competition is feasible, said Robert Atkinson, senior
vice president of regulatory and external affairs at TCG.
 Atkinson said he was concerned that "an inaccurate perception that effective
local exchange competition is here may develop" as a result of interim
agreements. "The reality is that while the interim inter-carrier compensation
deals in place with Nynex are a positive step, their interconnection pricing
levels still need to be adjusted," he added.

 HOLLINGS BILL GETS CABLE THUMBS DOWN
 Washington -- Key Senate Democrats have deliberated on cable rate
deregulation and the verdict is: No dice.
 Sen. Ernest Hollings (D-S.C.), with the apparent support of all Commerce
Committee Democrats, said last week he was unwilling to gamble by lifting
government price controls on cable before the industry faces effective
competition.
 "We want to promote competition but competition must be the prerequisite to
deregulation," Hollings said at a Capitol Hill press conference on Wednesday.
 Hollings voiced his hard line on cable rates at the same time he unveiled
telecommunications reform legislation to counter sweeping deregulatory
proposals advanced three weeks ago by Senate Republicans led by Commerce
Chairman Larry Pressler (R-S.D.).
 Pressler has called for cable's total liberation from price controls after
one year. But Hollings, who helped pass the 1992 Cable Act, signaled that the
GOP's plan was too drastic.
 Instead, Hollings wants to continue regulating cable until a competitor has
gobbled up 15 percent of the operator's subscriber base as current law
requires.
 "This Pressler bill says, `lets totally deregulate it and let the rates, the
games ensue.' And under the present conditions, we don't think that should be
permitted," Hollings said. "We certainly don't just want to bam-bam
deregulate."
 Hollings and Pressler sat down late last week to negotiate a compromise.
Cable sources were hopeful those talks might yield rate relief of some kind.
 "We are not happy [with Hollings' proposal], but I am not going to slit my
throat at this time," said Stephen Effros, president of the Cable
Telecommunications Association.
 Some in the cable industry were not surprised Hollings refused to give an
inch on rates.
 "The big thing would have been if the Democrats came back and said, `yeah,
we're for cable deregulation,'" a cable industry source said.
 The cable industry was dismayed with the Hollings plan not only because of
its stance on rate regulation but also because of its lopsided ground rules
for establishing competition between cable and local phone monopolies.
 "While it's still very early in the process, it's clear this bill wouldn't
yield a competitive telecommunications environment," National Cable Television
Association spokesman Rich D'Amato said in a statement. "Cable television
companies are the most likely competitors to the local phone monopolies, and
this bill clearly disadvantages cable."
 Hollings said he would let the telcos offer either cable service or video
dialtone on the day the bill became law, but would keep cable out of the local
phone business for a year -- until after the new law preempted state barriers
protecting local phone monopolies.
 Pressler, on the other hand, would impose a one-year moratorium on video
dialtone to promote the simultaneous opening of cable and local phone markets.
 Asked to explain the apparent imbalance in his bill, Hollings said the
telcos could not be held back a year because the courts were overturning the
1984 Cable Act's provision that prevents telcos from providing video
programming directly to their customers.
 "That's the court finding. They're allowing them in there right now. We're
being realistic," he said.
 The cable industry, which hopes to take the cross-ownership case to the
Supreme Court, was not persuaded.
 "Their position is just absurd," a cable industry source said, adding that
"all the cases were on appeal."
 Cable sources pointed to numerous difficulties the industry had with the
Hollings approach. Small cable operators, for example, could have trouble
competing in the phone industry because Hollings would permit states to waive
interconnection requirements for rural telcos.
 Hollings would also allow phone companies to have pricing flexibility if
either the Federal Communications Commission or state authorities determine
that the local phone market is competitive. Cable sources, fearful that telcos
could reap deregulatory rewards prematurely, noted that the Hollings plan
failed to spell out a definition of "competitive."

 AT&T WON'T ASSEMBLE BELL ATLANTIC NETWORK
 Bell Atlantic Corp. has scrapped plans for AT&T Corp. to assemble much of
the telco's planned video networks, saying it will act as its own systems
integrator.
 The decision last week, after months of contentious negotiation, means AT&T
is likely to remain a key equipment supplier but it won't oversee the purchase
of network gear.
 Stuart Johnson, CEO of Bell Atlantic Video Services, confirmed that AT&T
would still be a major vendor, along with General Instrument Corp. and
Broadband Technologies Inc.
 "The overall integration role is a competency we have," Johnson added.
Johnson's comments were made after a keynote speech here at Convergence
'95:  Interactive Television (which is co-sponsored by Multichannel News).
 The major sticking points: overall contract negotiations, project control
and disagreements over the role of subcontractors. As a result, Johnson said,
Bell Atlantic will use its own resources to marry the many components in its
planned switched-digital video networks.
 Most of the load will likely fall on the software side, as Bell Atlantic
manages the vast flow of digits from digital media servers, through switches
and out to consumer homes -- while still staying within the lines of the
Federal Communications Commission rules, which separate telco video from
outside plant.
 Other telecommunications vendors said privately they hoped the Bell Atlantic
decision would open the door for other suppliers to provide some equipment,
such as video transmission gear, which AT&T might have earmarked for itself.
 AT&T Network Systems was unable to complete a deal that was similar to ones
it has closed with Pacific Telesis Group and Southern New England
Telecommunications Corp. Bell Atlantic and AT&T signed a letter of intent last
May.
 Bell Atlantic wants to build video systems in its telephone territories in
northern New Jersey, Philadelphia, Pittsburgh, Baltimore, the Washington,
D.C., area and Hampton Roads, Va., and will spend upward of $5 billion over
the next four years to do so.
 The telco has asked the FCC to approve construction plans.
 Lawrence Babbio, Bell Atlantic's vice chairman, had complained publicly
about aspects of the AT&T negotiations, particularly price. Bell Atlantic
officials said the company did not achieve the savings they expected by giving
AT&T a broad integration role.

 PCS AUCTION GETS SPIRITED
 Washington, D.C. -- Deep-pocketed companies picked up the pace on bidding
for wireless licenses in the nation's biggest markets last week, with total
high bids topping $5.7 billion.
 WirelessCo L.P., the group of Sprint Corp. and three cable MSOs, ended
Thursday with the high bid for the New York market at $442 million. WirelessCo
has been alternating with Alaacr Communications Inc., the firm backed by Craig
McCaw, for the license in the biggest market.
 Each of the top four licenses -- one each in New York and Los Angeles-San
Diego and two in Chicago -- had high bids of more than $350 million as the
final stage of license bidding has been focused on the biggest markets.
 Pacific Telesis Group had the high bid on the Los Angeles license at $405
million; AT&T Corp.'s wireless unit led bidding for one Chicago license at
$372 million; and PCS Primeco L.P. (the group of three regional Bell companies
and AirTouch Communications Inc.) had the other high bid in Chicago at $385
million.
 Overall, WirelessCo led in 27 markets after Thursday, with high bids
totaling about $1.4 billion.

  -=-=-=-=-=-=-=-=-=-=-=-=-=-=And Finally...-=-=-=-=-=-=-=-=-=-=-=-=-
 Frustrated with the logo-mania permeating the O.J. courtroom, the folks
running the TV pool are clamping down on corporate trademarks. For a while it
was a Diet Coke can here, an IBM logo there, and Court TV's been loaded with
viewer e-mail complaining about "product placement. The biggest problem was a
computer monitor with a black "Sony" logo behind witnesses' heads. Engineering
consultant Scott Shulman demanded that the firm handling the computer setup
remove the logo, contending it had been painted black so it would show up
better on TV. The firm, Trial Presentation Technologies, acknowledged the logo
was painted on by Sony, which donated the equipment, but countered that Sony,
not the TV pool, switched the monitors. But Court TV folks have noticed that
the Canon logos on the defense team's computers, long upside down on camera,
suddenly are right side up.

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