From: [email protected]
Date: Mon, 15 May 1995 10:16:55 -0700
Subject: Cable Regulation Digest 5/15
Reply-To: [email protected]
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CABLE REGULATION DIGEST
 Summary of regulatory news from Multichannel News 5/15/1995. Vol.2, No.20
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]

*  Cable Datacom Emerges As Next Wave
*  Optimism Pervades Stormy National Cable Show
*  Bell Atlantic Promises New VDT Plan
*  Benefits Hazy For MCI'S Murdoch Deal
*  Anti-Truster Bingaman Makes Telco Monopoly Plea

 Editor's Note: Back from the National Show and still exhausted. Can't
believe I didn't know Suddenly, Tammy at some tiny club. And to think I
just bought their new album at a used CD store down there (called Pagan
Rhythms -- yes!). But it was gratifying to discover that Dallas has punks!
Couldn't believe the number of women in the Deep Ellum district dressed all
in black, with dark, dark lipstick, any number of pierced body parts and
white face powder. It was as if I had never left the East Village. Hey,
Texas ain't all pickup trucks. As a treat for y'all who have expressed
particular interest, I'm running our show coverage full-text, rather than
editing it down, including our cable modem report. Enjoy

 "I don't want to talk to you, I'm here to have fun."
          Time Warner chairman Gerry Levin to a trade reporter asking
          questions following his appearance at the National Cable Show.

 "There's no question that the telcos in their public statements are
trying to bury the cable industry in the equity markets, in the capital
markets."
          A much more cordial TCI president John Malone, accusing the Baby
          Bells of trying to scare cable investors and lenders.


 CABLE DATACOM EMERGES AS NEXT WAVE
 Dallas - "The future is cable," the theme line going into last week's
National Cable Show, became "The future is cable modems" by the time the
convention was over.
 While several companies had announced plans to start trials on broadband
connectivity to personal computers, executives with many top MSOs last week
said they now see data communications as an important revenue generator
that could quickly lead the way to cable's later expansion into telephony
and interactive TV.
 "We see data services as a separate business from what we're doing in
Orlando," said James Chiddix, senior vice president for engineering and
technology at Time Warner Cable.
 While rollout of interactive television beyond Time Warner's Orlando,
Fla., Full Service Network is a year to two years away, Time Warner is
making plans to launch PC services on a wide scale by early next year,
Chiddix said. "There's a lot of internal activity going on in this area,"
he added.
 Tele-Communications Inc., which two weeks ago announced plans for an
"@Home" Internet access service in a partnership with venture capital firm
Kleimer Perkins Caufield & Byers, is targeting Sunnyvale, Calif., and
Boulder, Colo., as the starting points in early 1996. Rollouts will follow
in Hartford, Conn., Chicago and possibly other areas, said a senior
executive, speaking on background.
 TCI's business plan calls for rapid movement to nationwide operations,
including an offering of the service to other MSOs on a turnkey basis
through TCI Technology Ventures, which also is marketing the headend-in-
the-sky (HITS) service.
 The surge in enthusiasm for entry into residential and small business
datacom rests in part on the growing popularity of the Internet and
worldwide preparations to exploit its commercial potential. Executives
believe a high-speed data port into the PC would give cable the opportunity
to offer service providers the graphics and access rate capabilities they
need to win broad consumer support.
 "The Internet growth is there, and cable is well-positioned to take
advantage of it," said Jim Ginsburg, senior information officer for Jones
Interactive.
 `HIGH-SPEED DATA WORKS'
 But, as Ginsburg and others made clear, there is much more to the
opportunity than Internet and commercial online services. For example, he
said, "Education is a $400 billion business that is not easily accessed by
the average person. Interactivity is critical to extending access, and we
have the opportunity to do that."
 One of the most ambitious early forays into datacom by cable companies
involves neither the Internet nor education, but focuses instead on use of
Cox Communications Inc. cable links in Phoenix to connect manufacturing
concerns with high-speed transfer of designs and other material crucial to
remote collaboration in commercial projects.
 "We've been offering a 10-megabit-per-second Ethernet connection from the
headend to each customer, and our experience shows high-speed data on cable
works," said Marty Weiss, multimedia networks director for Cox.
 Now Cox, which launched the Phoenix project in cooperation with Arizona
State University two years ago, is expanding the data operation to include
telecommuting, which it intends to introduce systemwide by sometime next
year, assuming it can clear some unusual regulatory barriers.
 Chiddix and other operators are confident the vendors now lined up to
produce the gear will come through in time for commercial launches in 1996.
 "We think the hardware will be available from a variety of vendors,"
Chiddix said.
 LOTS OF HARDWARE
 The prevalence of hardware offerings for cable datacom at the National
Show attested to industry enthusiasm for the service potential. Companies
showing product included DEC, General Instrument Corp., Intel Corp., Zenith
Electronics Corp., Hybrid Networks, LANCity Corp., Motorola Inc., Northern
Telecom and Philips Broadband Networks.
 "When you walk the floor, it seems like everybody except Playboy has
announced a modem," joked Steve Craddock, vice president of new media
development for Comcast Corp., which is in the midst of multiphase tests of
Intel's modems in Lower Merion, Pa.
 Comcast won't take delivery on second-generation modems until later this
year, Craddock said, adding that the new Intel units will deliver data at
speeds of 30-megabits-per-second downstream and at 128-kilobits-per-second
upstream. Comcast plans to widen the trial to
 350 Philadelphia-area homes by the fourth quarter and is holding fast to
a national rollout in 1996.
 TOO PRICEY
 But if performance is becoming less of an issue, price isn't. MSOs want
prices to be down in the $300 range, as opposed to the $400 to $1,000 tags
attached to units that were on display at the show.
 Intel, which declined comment on Craddock's description of its next-
generation product, said it could hit the target price point by building a
circuit card for insertion inside the PC. But operators are balking because
they want to retain control over the modem as part of the service package.
 Packaging and pricing of data services soon will be addressed in Viacom's
Castro Valley, Calif., system, where 20 schools and libraries and 130
households are connected to data service using Intel modems. "We'll do a
pricing trial in October to try to convert the trial subs into paying
customers," said Bruce Kaplan, general manager of the Castro Valley system.
"While we have some intuitive ideas, we'd rather let the marketplace create
some ideas, then marry the two together."
 From a technical standpoint, there is much more to sorting out the
datacom issues than the modem and its price. For one thing, Craddock noted, overall system integration is vital to success.
 "The magic isn't the modem," he said. "The magic is making all the pieces
talk together. The modem and the server have to match."
 LANSING SUCCESS
 At TCI, integration has been a big part of the early success of one of
the MSO's first forays into datacom, where the East Lansing, Mich., cable
system is providing a high-speed connection to support medical imaging
projects at Michigan State University.
 Jim Clark, a director of new business development at TCI, said the
success of the 10-month project has prompted the company to expand its data
service beyond the campus into a test with elementary schools and a
telecommuting trial, beginning with a single link to the home of Ron
Choura, a commissioner with the state Public Service Commission.
 Other projects under development include use of TCI's World Wide Web site
in East Lansing to spawn local commercial ventures, starting with a real
estate posting service that might be tied in with the system's classified
ad channel, and use of the system server's hard disk as a storage space for
backing up data transfers by large companies.
 "Disaster recovery is an important revenue opportunity," Clark said.

 OPTIMISM PERVADES STORMY DALLAS SHOW
 Dallas -- Just as the Texas-sized hailstorms gave way to a brilliant
southwestern sun, cable operators perceived the regulatory, technological
and competitive squalls engulfing the industry subsiding a bit during last
week's National Cable Show.
 Of course, good weather never lasts. But industry executives were buoyed
by a favorable outlook on telecom legislation from key Washington players
and practically gloated over sudden confusion being projected by telcos in
their push into video.
 National Cable Television Association president Decker Anstrom declared
that the industry is "earning the benefits of cable's political recovery,"
citing momentum for bills moving through Congress that would substantially
scale back harsh rate regulation that has gripped the industry for the past
two years.
 The convention looked pretty rocky starting out. Tremendous hail storms
swept Dallas just before the show, diverting many incoming flights to
Memphis, Tenn., Birmingham, Ala., and Atlanta. Some exhibitors were forced
to scramble when the basement of the Dallas Convention Center flooded,
threatening their show booths.
 But by Monday, the sunglasses came out and attendance climbed past
25,000, a new record and up more than 6 percent from last year. "This is
the most upbeat show I've seen in a long time," said Fred Nichols,
president of TCA Cable TV.
 Comcast Corp. president Brian Roberts, who assumed the National Cable
Television Association's chairman post last week, expressed optimism that
technology and legislation would quickly fuse to allow cable systems to
drain telephone revenues away from the Baby Bells. Roberts contended that
even the threat of competition shouldn't dampen industry officials'
enthusiasm.
 "If we bring it all together, I think we can stand up to anyone," Roberts
said during the opening general session.
 The recovery that Anstrom referred to is far from 100 percent, however.
The Clinton administration and key Democrats harshly oppose provisions in
telecom legislation lifting many current restrictions on enhanced basic
rates. Cable unsuccessfully pushed for even broader deregulation.
 So Anstrom tempered his optimism with a reality check, cautioning MSOs to
curb themselves if the rate regulation fight is won.
 Even though operators have suffered significant losses from price caps,
Anstrom called rate discipline "the most critical test," warning that
"leadership requires that we put our long-term objective over short-term
needs."
 Continental Cablevision Inc. chairman Amos Hostetter and Time Warner Inc.
chairman Gerald Levin also were anxious that the industry is projecting the
wrong image in its push for price deregulation.
 Hostetter contended the operators' push was not intended to return to
rapid price increases.
 "I think there's a misunderstanding," he said. "It's not that people
think they are going to be able aggressively to raise prices, but to be
able to package and price services according to the market," he said. Right
now, MSOs face substantial regulatory gymnastics when seeking to repackage
channels into new deals for subscribers, he contended.
 TELCO MISSTEPS
 Operators rallied around the telcos recent video moves. Many cited Bell
Atlantic Corp.'s withdrawal of its video dialtone application as proof that
the RBOCs are tangled up in making their technology economically feasible.
(See story page 2).
 And while Wall Street sees Bell Atlantic, Nynex Corp. and Pacific Telesis
Group's sudden in
 vestments in wireless cable operators as competitive threats, MSO
executives dismissed them as more evidence of disarray.
 "It really makes you wonder which shell is the pea under now," said Bill
Bresnan, chairman of Bresnan Communications Corp., during a financial
panel. "There's confusion about whether they have a strategy at all,
whether they have a technology strategy or whether they have a marketing
strategy."
 Tele-Communications Inc. president and CEO John Malone was equally
gratified. "There's no consistent behavior over there, it's all over the
map," he said.
 But other operators cautioned that even if the RBOCs are misstepping
they're still dangerous.
 "If they're in disarray today, they'll regroup," said Prime Cable COO
Jerry Lindauer.
 CASH CRUNCH?
 Indeed, the competition from telcos continues to threaten operators'
access to capital from lenders and investors, cash critical to cable's push
to both defend itself and attack RBOCs by launching telephone services.
 Operators assert they can recover most of the money currently committed
to plant upgrades through existing, known services like more premium and
pay-per-view channels plus advertising.
 "The dominant capital going into cable today is to build capacity into
our systems for a business we know is there today," Hostetter said. Money
for expensive items like digital compression converters and video-on-demand
file servers won't be spent until it's clear that businesses exist, he
added.
 Levin said he found Wall Street's skepticism "astonishing."
 "The demand factor for telephony is self-evident" from the amount being
spent with the Baby Bells, Levin said. "The question is what is the extent
of that investment." At the same time he acknowledged that no one can
determine the size of the demand for many of the other services cable is
planning, or the ultimate cost of equipment operators need to buy.
 But the costs are coming down, Levin said. The initial cost of Time
Warner's first sophisticated ATM switch in its Orlando, Fla., Full Service
Network trial totaled $3 million. "We can now buy that switch for
$100,000," he boasted.
 THE $300 BOX
 At the same time, expensive chips produced by Silicon Graphics Inc. for
the Orlando set-top units now are being included in a new Nintendo game
unit. The mass production of those chip sets should push down the cost of
the box from a prohibitive several hundred dollars each.
 "I believe that we will have the $300 box at the appropriate moment, and
that's when we understand what the consumer wants," Levin said.

 HUNDT THROWS WRENCH INTO DIGITAL TV FUTURE
 Dallas -- Federal Communications Commission chairman Reed Hundt threw
cable's digital future into uncertainty last week by telling National Show
attendees here that the agency would authorize its own standards for
digital broadcast.
 Hundt's speech came two days after an international standards group --
known as DAVIC (Digital Audio Visual Council) -- achieved a major
breakthrough on digital compatability.
 Industry leaders at the show saw Hundt's position as a double-barrel
threat: to cable industry efforts to meet the challenge of digital direct-
broadcast satellite services; and to the ability of U.S. manufacturers to
capitalize on the momentum they've achieved through world agreement on
contentious standards issues.
 "By the time I come to this convention breakfast next year," Hundt said,
"I predict the FCC will have authorized a new standard for sending digital
broadcast signals over the air."
 The standards are necessary, Hundt said, because Congress is likely to
mandate giving broadcasters the option to use second channels for delivery
of multiple digital channels rather than high-definition TV. So, he said,
it falls to the FCC to "make sure that consumers don't have to pay hundreds
of extra dollars for a digital receiver, and hundreds more redundant
dollars to make the cable connection compatible."
 "We're terribly concerned that the Commission's intervention could
confuse and slow down implementation of digital services in the cable
industry," said Richard Green, president of Cable Television Laboratories
Inc.
 "We have an RFP out right now in anticipation that the industry will soon
launch HITS [headend-in-the-sky]. It makes it hard to proceed knowing the
government could come in and say the private sector's approach may not be
the one government will follow," Green added.
 "There's nothing more certain to chill innovation in digital
communications than the fear that the government is going to dictate
standards," said James Chiddix, senior vice president for engineering and
technology at Time Warner Cable.
 Privately, industry reaction was even more intense.
 "You're going to see a massive showdown with U.S. industry and the rest
of the world on one side and the U.S. government on the other if the
Commission doesn't let the private sector take the lead on this," said
another senior industry executive, speaking on background.
 The most fundamental point of concern has to do with the technique used
in modulation of digital signals, which was the issue resolved in a
unanimous vote at the meeting of DAVIC in Sardinia, Italy, the week before
the convention started.
 There, General Instrument Corp. and Scientific-Atlanta Inc. along with
other leading manufacturing interests overcame long-standing disagreements
to endorse a single approach to the modulation technique known as QAM
(quadrature amplitude modulation).
 "This was an incredible development, truly a historic one," said Robert
Luff, chief technical officer of S-A's Broadband Communications division
and a member of DAVIC's management committee. "All of us have an equal
amount of flesh on the floor, but we're all willing to make the
adjustments in what we've been doing in the interest of lowering costs and
speeding the introduction of digital technology."
 Where European groups under the government-led standardization process
known as DVB (digital video broadcast) had taken one approach to QAM and GI
and SA had taken different ones, now all will have to "respend silicon," in
Luff's phrase, in order to achieve uniformity. Modulation is a vital part
of the digital transmission process because it determines how many bits per
hertz (wave cycle) are carried in a radio frequency channel.
 Under the high-definition TV standards-setting process at the FCC,
members of the Grand Alliance have chosen Zenith Electronic Corp.'s
proprietary VSB (vestigial sideband) modulation technique over QAM. Many
participants attributed that decision to a government desire to bolster a
U.S. manufacturing concern rather than to any fundamental performance
distinctions between VSB and QAM.
 "The politics behind the HDTV decision are likely to carry over to SDTV,"
or standard definition TV, warned one participant in the process.
 "The world is choosing QAM because it's equal in performance and has long
been implemented on silicon, which means it will be available faster and at
lower cost. There is no such thing as a VSB chip."
 Even at this early stage of digital implementation, the changes required
to conform everyone's approach to QAM will set back delivery of hardware by
a few months, Luff noted. FCC intervention, he added, could add a much
longer term to the delays.
 "The FCC doesn't regulate the speed of microprocessors, the design of
joysticks and air mouses, the nature of content, yet all of these things
and more have enormous co-dependence on transmission standards," Luff said.
 While FCC officials have made clear that their standards setting for what
is becoming known as SDTV will encompass conditional access, compression
and other aspects of the digital issues addressed by DAVIC, it's the
modulation issue that poses the greatest threat to progress, Luff noted.
 Industry sources reported that cable CEOs were taken aback at a dinner
with Hundt the night before his speech, when he told them that House and
Senate telecom reform bills made provision for broadcasters to make use of
the UHF channels set aside for HDTV as conduits for SDTV, where a TV
station could broadcast as many as six digitized NTSC programs as well as
data services in a single 6-MHz channel.
 "We've dropped the ball here," fumed one cable executive who attended the
dinner. "We've done nothing to raise this issue with legislators."
 Said another attendee, who also asked not to be named, "The cable
industry poured considerable time and money into a good faith effort to
support development of HDTV standards and now we're being betrayed at the
11th hour with a decision to abandon HDTV in favor of multiple channel
digital broadcasting."

 TEXAS STORMS SNARL CABLE CONVENTION
 Dallas -Flooded exhibit space. Dented or unavailable rental cars. Hour
after unplanned hour in the nowunfriendly skies. That's what many people
will remember about Cable '95.
 With two episodes of "tornadic activity" in three days, the storms in
Dallas caused more thrills for operators attending the convention than
a visit to Six Flags Over Texas. Perhaps Comcast Corp. president Brian
Roberts summed it up best when he asked incredulously, "Can you believe
some people move here for the weather?"
 Cable events are getting a reputation for act of God-type disasters -- a
severe earthquake rattled Los Angeles hours after the 1994 CableAce Awards.
 The water rides began on Friday, when a storm that eventually claimed
the lives of 16 people in the region dumped up to five inches of rain,
plus hail the size of golf balls, in an hour.
 Noreen O'Loughlin, senior vice president of marketing for American Movie
Classics, was trapped at a downtown restaurant on Friday when the first
storm whipped up whitecaps in the parking lot. Well, trapped may be a
harsh word: At least they had food, and drinks were on the house.
 She was better off than colleague Susan Muller, an event planner for
AMC.  Muller and two vendors were trying to drive to the Loews Anatole
when flooded roads forced them to abandon a Lincoln Continental and wade
hand-in-hand, so no one would slip under the flowing waist-deep water,
across the highway back to the hotel.
 The AMC executives had come to town early to set up a party tent for a
convention function -- a feat O'Loughlin vowed never to repeat in Dallas in
May.
 Peter Boylon, chief financial officer for United Video Satellite Group,
also had to pull an "abandon ship" with his rental. While returning to his
hotel from a visit to a friend in the Highland Park neighborhood, his car
was swamped when a passing bus created a wake that flooded out his engine.
When the water continued to rise, he left the car to hotfoot it back to
his friend's house.
 At least they got rentals. Some executives arriving on Saturday
and Monday, after each of the storms, found that their reserved cars were
unavailable due to hail damage and because local residents had rented all
of the stock when their personal vehicles were destroyed by flooding.
 The sun came out briefly on Saturday, allowing vendors that were assigned
space on Level 2 of the convention center time to break down booths that
they'd just set up so that the water could be removed from the hall.
 After a storm drain above the
 Level 2 floor burst, several inches of water stood on most of the Level 2
exhibit space, convention officials said.
 Bob Bergman, strategic marketing manager for the cable products division
of Intel Corp., estimated that his team vacuumed 150 gallons out of their
booth space. Vendors cooperated by sharing drying fans and mops to
eliminate the inch of standing water in the hall. Sandbags were
strategically placed to prevent further flooding, which turned out to be a
good preventative measure when a second drenching storm hit on Sunday
night.
 This storm produced the most adventures in the skies for attendees trying
to arrive for the Monday sessions. When DallasFort Worth Airport was
closed, delegates found themselves rerouted elsewhere. Seth Abraham,
president of TVKO Sports, cooled his heels watching basketball playoffs in
an airport bar in Las Vegas when his flight was canceled.
 One executive who should get some free frequent-flier trips for his
circuitous route to Dallas is Lou Pugliese, vice president,
special programs, Turner Educational Services. He left Atlanta at 9 p.m.
on Sunday for Dallas, only to be turned away. The flight was rerouted to
Shreveport, La., but because the field there did not
have a large enough gate to accommodate the L-1011 that he was riding, the
plane sat on the runway for three-and-a-half hours.
 "Babies were crying, they ran out of drinks ... I was frustrated,"
he said. Finally, the flight took off again, to Atlanta, where 257 people
had to find new flights. He managed to get on another flight to Pensacola,
Fla., then finally to Dallas by noon on Monday. Displaying his dedication,
he went straight to a meeting in the rumpled clothes that he'd been wearing
for two days.
 "It was a great icebreaker," he said.
 Those who got in just before the storm questioned whether they were
lucky or not. Flights that landed just before the Dallas airport closed,
such as Delta Flight 333 out of La Guardia ("It should have been 666,
the devil's flight," quipped one passenger) were real white-knucklers,
canting and bouncing like marbles in a jar.
 Weather-related travel delays put a real dent in exhibit floor traffic on
Monday, but Tuesday's crowds almost made up for it, vendors said.
 "There are even crowds in the booths that aren't serving drinks or
featuring live girls," joked one exhibitor.

 BELL ATLANTIC PROMISES NEW VDT PLAN
 Dallas -- Bell Atlantic Corp. officials last week made it semiofficial
that they will re-file their video dialtone applications, proposing a lot
more fiber and a lot less coaxial cable.
 The comments came as Bell Atlantic executives went out of their way to
stress their commitment to the video business in general and to the common-
carrier, VDT business model in particular.
 In an interview at the National Cable Show here, Mark Wegleitner, vice
president of broadband multimedia network implementation, was emphatic
about the Philadelphia-based regional Bell's stance. "We're still firmly in
the video dialtone camp," he said.
 Bell Atlantic likes the idea of earning revenue from a multitude of
programming providers in addition to providing its own video fare through
Bell Atlantic Video Services, Wegleitner said. That model is preferable to
acting as a proprietary, closed-network cable operator, he said.
 The telco executives' flak jackets were severely dented a few weeks ago
when the company asked the Federal Communications Commission to put most of
its pending VDT requests on hold while it rethinks its planned video
architecture.
 Now, company officials say that later this month they will formally tell
the FCC they will re-file their Section 214 applications for northern New
Jersey and six Mid-Atlantic markets. The new architecture will replace a
hybrid fiber/coaxial delivery system with switched-digital video (SDV)
systems. Bell Atlantic will still seek to wire 3 million homes over three
years.
 According to spokeswoman Shannon Fioravanti, the SDV approach will be "a
more advanced form of fiber-to-the-curb."
 She said Bell Atlantic officials have said all along they would prefer to
use SDV when it became affordable. HFC was seen as an interim technology.
In recent months, the cost gap between the two approaches has narrowed
significantly, according to officials. Running fiber closer to the home
also simplifies the challenges surrounding dual use of networks for video
and telephony, they added.
 "Now we have skipped that [HFC] step and are deploying a more robust
architecture, and that is good for consumers," Fioravanti said. She went on
to add some "pockets" may still see HFC if there is little market demand
for the advanced services that can only be delivered by SDV.

 BENEFITS HAZY FOR MCI'S MURDOCH DEAL
 New York -- MCI Communications Inc.'s surprise deal to invest up to $2
billion in News Corp. was lauded as a sweet one for Rupert Murdoch, but
the benefits to MCI were far from clear.
 While the two companies touted the deal as a grand strategic alliance of
content and distribution, News Corp. chairman Rupert Murdoch and MCI
chairman Bert Roberts Jr. couldn't cite much in the way of tangible
ventures or products they might create.
 Unlike other deals between telephone and media companies, the strengths
of MCI and News Corp. don't mesh snugly. News Corp.'s holdings are in
entertainment: studio 20th Century Fox, U.S. TV network Fox Broadcasting,
British satellite programmer British Sky Broadcasting and Asian direct-to-
home service Star TV.
 MCI has a formidable telecom network, but few direct links to consumers.
The long-distance carrier's drive into the local loop business, Metro
 MCI, is aimed squarely at driving high-capacity fiber into businesses,
whose "content" needs do not include Melrose Place.
 By contrast, the Sprint-Cable partnership links long-distance carrier
Sprint Corp.'s brand name and central switching capacity with three MSOs'
residential fiber networks. U S West Inc.'s investment with Time Warner
Inc. pushes the MSO's cable systems into the residential telephony
business.
 Murdoch gets lots of cash to spend, but other than a joint venture to
develop media products (calling for an additional $200 million), analysts
said it's not clear   what MCI gets in the deal.
 "I think that remains to be seen," said Salomon Bros. telecom analyst
Jack Grubman, who favored the deal because of the financial structure
rather than the strategic fit.
 A media analyst was more blunt: "Rupert found somebody with $2 billion
burning a hole in his pocket."
 "From MCI's perspective, we could not have hoped for a more comprehensive
content provider," Roberts said. "This gives us a tremendous number of
options and packages to offer our subscribers."
 "We treat this as a strategic move, and I think it is for MCI," Murdoch
said. "We want to use this money that's coming to us to accelerate our
growth as one of the leading software providers in the world."
 But Roberts and Murdoch last week said the new products will come,
speaking of business information services tied to News Corp.'s vast
newspaper empire plus linking their Internet operations. Further, the two
companies will explore investments in new companies and could launch a
Latin American direct broadcast satellite venture.
 For all the hype about the Internet the two companies have little to put
together, particularly when sums like $2 billion are concerned. News
Corp.'s Delphi Internet online service is stalled out at around 100,000
subscribers, while rivals have been surging. MCI's InternetMCI is a startup
that has little penetration among individual users, although the company is
an important "wholesale" distributor of Internet traffic from one retailer,
like America Online, to another.
 Other than that, Murdoch was reduced to proposals like tapping into MCI's
database. "We may develop things that are purely for Friends & Family
customers," he suggested.

 ANTI-TRUSTER BINGAMAN MAKES TELCO MONOPOLY PLEA
 Washington -- Shoved aside by pending telecommunications legislation, the
Department of Justice's chief antitrust official is sounding the alarm.
 Without a strong gatekeeper, Baby Bell monopoly power will likely be
prematurely unleashed on long-distance carriers and telecom equipment
manufacturers, Assistant Attorney General Anne Bingaman said on separate
appearances in recent weeks.
 In two Capitol Hill appearances in less than a week, Bingaman pressed the
case for giving DOJ authority over Bell entry into those markets.
 "Customers simply have no choice for local service," she testified to the
House Judiciary Committee May 9. Because of this "bottleneck," she said,
DOJ should review proposed Bell entry "based on market facts."
 However, the department has been cut out of the loop, in favor of the
Federal Communications Commission, under the main House and Senate telecom
bills (S. 652 and H.R. 1555). The Bells would be required to satisfy a
checklist of conditions, such as unbundling their networks and allowing
interconnection, before getting into long distance and manufacturing.
 Bingaman said the FCC test "does not obviate the need for a market-based
analysis" by DOJ.
 "The two agencies complement each other; they are not substitutes," she
added. "DOJ is the agency with competition expertise."
 But House Republican backers of the FCC role argued against creating
redundant regulatory "hoops" and criticized DOJ for de
 lays in the waiver process governing Bell entry into other fields since
the 1984 AT&T Corp. breakup.
 Citing formidable telecom rivals, Rep.Carlos Moorhead (R-Calif.) doubted
new Bell super-monopolies would emerge, and said the DOJ retained general
antitrust authority to act if such fears were realized.
 "That's unscrambling eggs," Bingaman replied. "We don't want to
unscramble eggs."
 Bingaman welcomed the bill (H.R. 1528) introduced recently by Judiciary
chairman Henry Hyde (R-Ill.) to give the department a piece of the action.
Under the bill, the department would have 180 days to review Bell entry
applications.
 Bingaman nevertheless expressed deep concern that the DOJ would be
handcuffed under Hyde's measure. Not only would the department have the
burden of proof, but it would be required to approve applications unless it
"finds by clear and convincing evidence that there is a dangerous
probability" a Bell company would use its market power to achieve a new
monopoly, she said.
 Bingaman called the new standard virtually impossible to meet. In the
waiver process, the Bells carry the burden of proof and must show there
isn't a "substantial possibility" competition will be impeded.
 Hyde's bill still conflicts with the Commerce Committee's H.R. 1555,
which has no DOJ review.
 Speaking to reporters at the National Show in Dallas last week, Hyde
expressed confidence the committees would "work it out," but Commerce
telecommunications panel chairman Jack Fields (R-Texas) said: "Henry Hyde
is always welcome at any table for discussion. The Justice Department is
not welcome. We do not want them involved."
 The week before, Bingaman and telco and long-distance officials also
discussed DOJ's telecom role before a Senate Judiciary antitrust panel. At
the same hearing, National Cable Television Association president Decker
Anstrom lobbied against a bill (S. 664) to allow the retail sale of cable
set-tops.

 -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=...And Finally=-=-=-=-=-=-=-=-=-=-=-=-=-=-

 One crew constructing booths for the National Show put in a little extra
heavy lifting. When the big floods hit Dallas two days before the show,
four big boys from Lincoln Exhibits knocked off for dinner after
assembling NewsTalk and Blonder-Tounge's booths. On the way to eat, they
spotted an Audi stuck on the edge of a ditch, close to sliding down into a
few feet of water. So they hopped from their van, jumped into the
chest-deep water and lifted the car back onto the road. "He looked like he
was in trouble," said Lincoln president Gary Cioffu. No, his workers
didn't get overtime.

 Add Jeff Marcus to the list of cable CEOs checking out the competition
by getting a DirecTv dish. But when installers came out to the Marcus Cable
chairman's house, they encountered a special problem: a delicate roof made
partly out of copper. A series of snags meant that installers had to keep
coming back over three days. The final tab for the dish, receiver and labor
to hook up one TV set: $1,600.

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