From: [email protected]
Date: Sun, 7 May 1995 22:15:48 -0700
Subject: Cable Regulation Digest 5/8
Reply-To: [email protected]

-

CABLE REGULATION DIGEST
 Summary of regulatory news from Multichannel News 5/8/1995. Vol.2, No.19
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 ([email protected] or
212-887-8390)
 For Multichannel News subscription information: 800-247-8080. A bargain
at $78/year.

 Multichannel e-mail contacts:
Marianne Paskowski, editor: [email protected]
Andy Grossman, news editor [email protected]
John M. Higgins, finance editor: [email protected]
Kent Gibbons, new media editor: [email protected]
Leslie Ellis, technology editor: [email protected]

 EDITOR'S NOTE: Well, it took at trip to Dallas to find something falling
harder and faster than cable stocks these days. It's raining like hell right
now, though I missed the softball-sized hailstones from two days ago. Guess
Mother Nature has lousy cable service or something. Got a product line or
cable network you want checked out at the National Show this week? E-mail me
and I'll try and snoop it out.

 QUOTE OF THE WEEK
 "What you are seeing here is the rethinking of business strategies. John
Malone and others in the cable industry predicted for a long time that the
telcos would have a hard time justifying the massive buildout of big pipes to
every home in their areas, and I think that the telcos at some level are
trying to figure out whether he might have been right."
   FCC Chairman Reid Hundt on Bell Atlantic's withdrawal of its video
   dialtone application.

 FCC BLOCKING PRIMESTAR EXPANSION
 Washington - In an action that could remake the direct-broadcast satellite
landscape, officials at the Federal Communications Commission have blocked a
key element of PrimeStar Partners' $1 billion plan to expand its DBS service.
 The FCC's International Bureau refused to give Advanced Communications Corp.
an extension of its DBS operating license, a move that could deny PrimeStar
critical orbital slots it needs to become a high-powered service.
 The order, released April 27, requires Advanced to give the government back
27 orbital slots at 110 degrees -- a desirable location providing nationwide
coverage -- and another 24 slots at 148 degrees west longitude.
 The Bureau determined that Advanced had made too little progress in the more
than 10 years it has had permission to build and launch a DBS service. For
that reason, Advanced was denied a second four-year permit extension and was
denied permission to transfer the permit to a Tele-Communications Inc.
subsidiary called Tempo DBS Inc.
 Through a series of deals involving PrimeStar partner TCI, Advanced's 27
slots at 110 degrees were earmarked for PrimeStar's planned jump from a
medium-powered to a high-powered DBS service.
 PrimeStar needs the extra satellite capacity to compete against the likes of
DirecTv, United States Satellite Broadcasting and the future EchoStar and
AlphaStar services.
 Analysts said the potential blow to PrimeStar could be a big boost to
EchoStar Communications Corp., which plans to launch a high-powered DBS
service this fall. EchoStar had tried to cut a deal with Advanced to get its
orbital slots and sued Advanced after Garner made the
 deal with Tempo instead.
 Analyst Michael Alpert, a veteran DBS consultant in Washington, D.C., said
if the decision holds up, "it could change the balance of power in the DBS
business."
 "That is a major blow for PrimeStar and a major victory for EchoStar,"
Alpert said, adding he was surprised by the Bureau's apparent get-tough
stance.
 Advanced plans to ask the five FCC commissioners to overrule the Bureau
order. In the past, the FCC has given DBS permit holders considerable leeway
with construction deadlines because it wanted to encourage competitors to
cable television. But, the order states, the FCC has made clear "such latitude
is not appropriate in an era in which DBS licensees are successfully operating
and are competing for subscribers."

 HOUSE GOP ON FAST TRACK WITH TELECOM BILL
 Washington -- House Republicans plan to ram a cable deregulation bill
through committee in May, putting the measure on a fast track, and perhaps a
collision course, with the White House.
 The House GOP last week unveiled a telecommunications reform bill that would
deregulate upper-tier service within 15 months, provide instant relief for
many but not all small operators and ease many regulatory burdens imposed by
the Federal Communications Commission.
 Basic-tier service provided by all operators would continue to be regulated
until a competitor reaches 15 percent penetration. The bill also would prevent
cable operators from increasing basic prices more than once every six months.
 National Cable Television Association president Decker Anstrom released a
statement calling the 134-page bill "a good blueprint."
 But the Clinton administration viewed the GOP bill, which also allows the
Baby Bells into cable, long-distance phone service and telephone equipment
manufacturing, as too lenient. "
 The bill deregulates cable operators prematurely and will result in cable
rate increases for millions of Americans," said Commerce Secretary Ronald
Brown in a statement.
 Rep. Jack Fields (R-Texas), who helped craft the bill, dismissed White House
concerns about cable relief, saying competition would restrain cable pricing.
 "If we were to deregulate basic and upper tiers on all companies on the date
of enactment, we could understand the Vice President or anyone else being
concerned. But we think we have put this in that competitive deregulatory
model we are trying to create," Fields said.
 The House bill -- HR 1555 -- was introduced May 3 by Commerce chairman Rep.
Thomas Bliley (R-Va.). It has the sup
 port of seven committee Democrats including ranking member Rep. John Dingell
(DMich.).
 However, Dingell told reporters he had problems with cable deregulation. "I
hope that this can be corrected as we go forward," he said.
 Rep. Edward Markey (D-Mass.), chief sponsor of the 1992 Cable Act, declined
to support the bill. "The cable language that was added in the last two weeks
was not the product of a negotiation, and [it] protects monopolies in
situations where there is no competition to check prices," said David Moulton,
Markey's chief of staff.
 Republicans themselves are not united. Judiciary Committee chairman Henry
Hyde (R-Ill.) introduced a bill - HR 1528 -- that would allow the Justice
Department to review Bell company applications to offer long-distance service.
Fields said Justice should not have a role.
 The Bliley-Dingell bill is far broader than the Senate bill that passed the
Republican-controlled Commerce Committee in March by a 17-2 vote.
 The Senate bill would deregulate the upper tier upon enactment, but empower
the FCC to punish "bad actors" whose rates substantially exceed the national
average.
 If the Bliley-Dingell bill be
 came law, the upper tier would be deregulated upon enactment only in markets
where phone companies have video dialtone or cable service authorization. But
across-the-board deregulation would occur after 15 months and the FCC would
have no authority to police bad actors.
 The upper tier of small operators would be deregulated upon enactment. The
bill defines a small operator as an entity with less than 1 percent of cable
subscribers -- approximately 600,000 subs -- that is unaffiliated with a
company with more than $250 million in gross revenue.

 CABLE MODEMS AT THE TOP OF CABLE CONVENTION HIGHLIGHTS
 New York - Data communications and distance-learning applications should
have a high profile this year at the National Cable Television Association's
annual convention in Dallas.
 Engineers headed for Cable '95 said cable modems and cable phone gear were
among their top priorities.
 "[Cable modems] are at the top of my project list," said Joe Van Loan,
senior vice president of engineering at Cablevision Industries. He added that
"the thing to look at during this National Show is what isn't," because
several major technologies like digital video compression have suffered
repeated delays.
 "It'll be interesting to see how much has moved forward in the last 12
months, after the reality sunk in," Van Loan said.
 "It's a matter of going through those tire-kicking motions that [we
engineers] find interesting -- I need to know what's real and what's an empty
box," said Tom Staniec, director of engineering for NewChannels Corp., now a
division of Time Warner Cable.
 Ted Hartson, vice president and chief engineer for Post-Newsweek Cable,
quipped that
 he's in search of a "telephone with an F-connector input," as well as an
"advanced addressable set-top that truly is advanced and not just `virtually'
advanced."
 On the speedy computing side, watch for a blitz of offerings from cable
modem vendors like Com21, Digital Equipment Corp., Hewlett-Packard Co., Hybrid
Networks Inc., Intel Corp., LanCity Corp., Motorola Inc., Northern Telecom,
Philips Broadband Networks and Zenith Electronics Corp.
 Most are working on external models that link to personal computers through
an internal Ethernet card installed within the PC.
 Intel Corp. will show off an asymmetrical model that spews data at rates of
10 Mbps toward the home PC, with either a telco or coaxial upstream ride. It
also is working on a 27-Mbps downstream/96-kbps upstream unit, said Matt
Diethelm, general manager of Intel's cable products division.
 Hewlett-Packard will show off its "under $400" external modem, which sends
data at speeds of 30 Mbps downstream with an aggregate rate of 15 Mbps up,
said
 Lorraine Bartlett, product manager for Hewlett-Packard's cable modem line.
 Zenith Electronics is touting what it calls a "third-generation" cable
modem, which sends data at symmetrical speeds of 4 Mbps, said Bill Luehrs,
vice president of network systems operations.
 And, a technical session titled "Managing Multimedia Traffic in the Cable
Network," scheduled for 2 p.m. on Tuesday, promises MSO input on data
communications issues and strategies. Moderated by Nick Hamilton-Piercy, vice
president of engineering for Rogers Cablesystems, the session includes three
presentations from engineers with Time Warner Cable.
 The education market also will be well represented, in a display
 called "Show & Tell: Cable's Commitment to Education." Examples include Cox
Communications Inc. showing off its "Model Technology School" near San Diego;
Ingenius, the venture between Tele-Communications Inc. and Reuters NewMedia,
showing its "Xchange" and "What on Earth" data services; Prodigy Services Co.
displaying its "Homework Helper" database search service; and the J.C.
Sparkman Center for Educational Technology focusing on preparing teachers to
integrate technology into their lessons.
 "There must be 100 businesses that are going to be online, and education is
one of the largest," said Bernard Luskin, CEO at Jones Interactive Services
Inc. Jones' ME/U: The Education Network will demonstrate a graphic user
interface for learning-on-demand applications. "[Education] is a sleeping
giant," Luskin said.
 Ingenius will announce "What on Earth," the multimedia package of six daily
news stories, now available to cable subscribers around the country. The
venture has carriage agreements with systems covering about 90 per
 cent of the nation's cable subscribers.

 SMALL OPS GETTING BIG BOOST UNDER FCC PLAN
 Washington -- The Federal Communications Commission is about to unveil a
plan granting wider regulatory relief to small systems and small MSOs, agency
sources said late last week.
 According to the plan, which is apparently close to adoption, the FCC would
rewrite its rules to define a small system as one with 15,000 subscribers as
long as the company has a total of no more than 400,000 subscribers.
 FCC sources said the agency has crafted a formula that would allow qualified
small systems to charge on average between $1.20 and $1.24 per regulated
channel. All regulated channels would be included in the formula."
 For this group [of cable systems], there would be a new threshold with
regard to what a reasonable rate would be," said Cable and Telecommunications
Association president Stephen Effros. "The numbers are still shifting, but
you've got basically the right number."
 Rates at or below the adopted dollar amount would be deemed reasonable, and
the burden to prove otherwise would fall on regulators. Rates above the
permitted level would have to be justified by the operator.
 CATA, the National Cable Television Association and the Small Cable Business
Association have been working with FCC officials for more than a year on the
guidelines.
 "The Commission has been very cooperative," Effros said.

 GTE TAKING LEAD IN VIDEO DIALTONE
 GTE Corp., the biggest phone company without a name-brand programming
adviser, now has the right to build some of the nation's biggest video
dialtone networks.
 In the start of an expected stream of VDT approvals this month, GTE won
Federal Communications Commission consent to build VDT systems in Ventura
County, Calif.; Pasco and Pinellas Counties, Fla.; Honolulu; and Manassas, Va.
 The Stamford, Conn.-based phone giant expects to sign up its first
subscribers sometime this year. Its video networks will pass 500,000 homes by
the end of next year (construction cost: $200 million) and pass 900,000 homes
by the end of 1997. The total network would reach 1.4 million homes. Manassas
won't be in the initial rollout, GTE said.
 William Wilson, GTE Telephone Operations' vice president of video services,
said GTE has no current plans to provide programming directly on its networks.
That could change, though. GTE is one of the many telcos with a federal court
order declaring the cross-ownership ban unconstitutional, and Wilson said GTE
reserves the right to provide programming later.
 GTE plans a mix of 80 analog channels and 168 compressed digital channels.
It was close to naming a lead programming packager that would select what
would appear on about half of the analog channels. But the FCC rejected GTE's
proposal for sharing popular programs on the analog channels, and that has set
back the process, Wilson said.
 The telco will deploy a hybrid fiber optic/coaxial cable architecture, with
fiber running to nodes of 500 homes each. GTE plans only to offer video services over that plant, not telephony.
 The FCC order stipulates that GTE offer subscribers digital settop decoders
from the start of service. Digital terminals are still in testing phases and
are not expected to be available in quantity until next year. But Wilson said
General Instrument Corp., GTE's set-top supplier, has promised to deliver at
least some digital boxes by the end of the year.
 GTE's victory at the FCC could add momentum to talks with the venture formed
by Ameritech Corp., BellSouth Corp., SBC Communications Inc. and Walt Disney
Co. Wilson and executives at those companies have not publicly acknowledged
the talks, but GTE wants to make alliances and the Disney group wants other
partners.
 FCC officials say they expect to act on all pending VDT applications by the
end of May. Pending applications include ones by Pacific Telesis Group in
California; U S West Inc. in Colorado, Idaho, Minnesota, Oregon and Utah; Bell
Atlantic Corp. in New Jersey (although Bell Atlantic withdrew several other
applications); and Southern New England Telecommunications Corp. in
Connecticut.

 GI BACKING AWAY FROM MICROSOFT TV SYSTEM
 General Instrument Corp. is putting on the back burner a plan to use
Microsoft Corp.'s operating system within GI's digital set-tops, leaving
little chance of the alliance bearing fruit in the near term.
 Instead, GI will tap Microware Corp. and its "DAVID" operating system for
the advanced digital settops it is showing off at this week's National Show in
Dallas.
 GI executives last week noted that the Microsoft agreement was not
exclusive, and that they will pursue similar software alliances with Apple
Computer Inc. and others.
 GI similarly disbanded with Intel Corp. -- which is closely tied with
Microsoft Corp. as the software maker's primary chip platform -- last year. GI
had planned to use Intel chips as the core microprocessing engine in its
TVLinX product, which added multimedia features to its CFT-2200 addressable
analog set-top.
 But the TVLinX line is also going through a metamorphosis, said Dan Moloney,
vice president of addressable technologies for GI, who explained that GI will
likely leverage portions of the TVLinX line into other GI products instead of
building a stand-alone feature box.
 Intel's 486 chips may still figure into GI's development plans, Moloney
added.
 Executives with GI said the decision to halt work with Microsoft stems from
differing views of strategic direction; GI plans to use the
 IBM/Motorola "PowerPC" chip as its processing engine and needs an operating
system designed to work with that chip before Microsoft plans to deliver it.
 "We're all learning what makes sense and what doesn't make sense," said
Moloney, who added that "as it turns out, some pairings make more sense than
others."
 GI still plans to use Microsoft's operating system as the basis of a
futuristic flavor of its "Digital Entertainment Terminal," an upgraded version
of the DigiCable set-top it announced in 1992.
 Microsoft's set-top operating system will initially run on Intel's x-86-
based microprocessor, with plans to adapt other microprocessors late this
year, said Alan Young, set-top box product manager at Microsoft.
 "From an implementation standpoint, we elected to implement a product we
thought had the most nearterm applicability," which is the PowerPC/Microware
combination, Moloney said.
 GI favors the PowerPC chip over Intel's Pentium line because "you simply get
more bang for your buck," said Moloney, who explained that "as we spent more
time in this advanced digital environment, we decided that the architecture of
the PowerPC is better suited for the manipulations performed in a set-top box
than Intel's platform."
 The chip decision, while somewhat arcane, figures heavily into what kinds of
digital applications can be delivered by network operators to customers. GI
believes the approaches under way by Apple, with its QuickTime and QuickDraw
tools, and Macromedia with its Director tool, are poised to snare more
attention -- and content -- from developers.
 For its analog set-tops, GI plans to bundle in a basic applications tool
made by Wink Inc. and will announce the details of the alliance at this week's
National Show.
 Moloney said GI is currently focusing on four core set-top variations: the
analog CFT-2200, DigiCable, the new Digital Entertainment Terminal and a
"high-end" adjunct to the DET, which will support Microsoft's operating
system.
 The CFT-2200 uses a Motorola 68x-based processor and an operating system
called "Vrtx," made by Microtech Inc., with variable RAM amounts from 500
kilobytes to 1 Mbyte, said Moloney.

 -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=...And Finally=-=-=-=-=-=-=-=-=-=-=-=-=-=-
 Wireless in Washington ... One of the best cable resources on the Internet
is an electronic archive of FCC documents that includes the agency's Daily
Digest of actions, orders, etc. Most net-heads can use basic tools like the
World Wide Web or Gopher to surf over to the archive. But not FCC-ers; the
folks regulating the infohighway have limited access to the net and generally
are only able to squeeze e-mail out of their computers. So to get the online
FCC stuff, about 20 staffers subscribe to a mailing list called Telecomdocs.
Washington telecom lawyer Robert Keller each day fishes stuff off the FCC
server (fcc.gov) and zips it off to the University of Wisconsin, where a
computer mass mails it back to the FCC (and other subscribers). "Silly, isn't
it?" asked list-meister and telecom consultant Barry Orton. Anyone can
subscribe by e-mailing [email protected] with the message
"subscribe telecomdocs Your Name."

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