From: John Higgins <
[email protected]>
Subject: Cable Regulation Digest 6/27
Date: Sun, 26 Jun 1994 09:13:37 -0400 (edt)
CABLE REGULATION DIGEST
Summary of regulatory news from Multichannel News 6/27/1994. Vol.1,
No.26
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 (
[email protected] or
212-887-8390) For Multichannel News subscription information:
800-247-8080. A bargain at $65/year.
EDITOR'S NOTE: I'm finally coming up for air. Ever since the NCTA show
in New Orleans I've been working almost full time on a special cable-telco
financial report. But it finally publishes this week so those of you who
subscribe to Multichannel can check out, among other things, how
financially flexible the telcos REALLY are when it comes to going to war
with the cable operators. But it's not on line. (See what kind of stuff you
miss by not subscribing??? That's 1-800-247-8080..)
But getting the report into print means I finally had time to go...
CABLE REGULATION SOUNDTRACK: ...Record shopping!!! I did the tour of the
East Village used CD shops over the weekend. New York's interesting this
week because of the mix of very distinct groups of tourists walking
around. We locals get to play the game of guessing the origin of
particular pack of slow-walking tourists ("World Cup or Gay Games?")
Anyway, I went prowling for bands I had never actually heard before. One
tasty treat was Velocity Girl, a D.C.-area band that's been getting great
buzz. Much different than the harsh sound I expected. They're melodic,
almost pop-like, but with a very strong edge. Very recomended.
QUOTE OF THE WEEK
"For those who interpret the hot competition over McLean Hunter and
Times Mirror as a signal that the domestic cable industry is vibrant and
healthy, they totally miss the point...This isn't happening because of
some speculative excess. It has to happen . And failure to do that is
going to mean extinction. So I hope the trade press and public-policy
makers in Washington don't misunderstand what's happening, because there's
an element of fear in these transactions.
Continental Cablevision chairman Amos Hostetter
DEAL FRENZY PAINTS CONTRASTING VIEWS
New York -- Although a new wave of system sales has the cable deal
market sizzling, the latest transactions paint sharply contrasting
pictures of how healthy the business really is.
In Comcast's $1.3 billion agreement to acquire Maclean-Hunter Ltd.'s
U.S. cable systems, the Philadelphia-based MSO had to wrestle past four
other bidders in a spirited auction to bag the lucrative properties.
But Hallmark Cards Inc. has had a less-happy experience in its deal to
sell its Crown Media cable unit to two operators, Marcus Cable and Charter
Communications Inc., for $900 million, far lower than the $1.3 billion the
company had initially hoped for.
Sources said that Hallmark is barely escaping with a small profit on its
plunge into cable and that, in fact, it had to yield such generous terms
to Charter that any profit there won't be seen for years.
Further, Gaylord Entertainment Corp. is in the final stages of
negotiations with Century Communications Corp. and Marks Cable to sell its
systems, which serve 170,000 subscribers, but some anticipate the price to
be far lower than Gaylord had expected. One source familiar with the deal
estimates a valuation of less than 10.5 times cash flow.
Federal regulators are pointing to the huge deal activity as proof that
cable remains vibrant, despite industry executives' gloomy warnings about
being hammered by regulation.
Another CEO agreed. "There's a feeling of survival, that the world
belongs to the big," he said, adding that "the prices are reflective of
the new world order. These are prices based on next year's cash flow,
which is 15 percent lower."
Comcast president Brian Roberts had a more moderate view, expressing
faith in assurances by Federal Communications Chairman Reid Hundt that
coming rules will create financial incentives for operators. Still, he
cautioned, "I think there's definitely a d esire by operators to get
bigger, whether that's more critical mass, telephony, whether it's
survival instinct."
DOLAN VOWS TO OVERBUILD N.J. OPS
New York -- Cracks appeared in the solidarity of the cable fraternity
last week when Cablevision Systems Corp. chairman Charles Dolan declared
that he expects to invade the turf of other cable operators, by either
overbuilding or piggybacking on a telco 's video-dial-tone system.
Addressing a meeting of media executives at the Museum of Television &
Radio, Dolan declared that he is in the business of packaging and
retailing programming to TV viewers, not just wiring cable systems.
If cable operators are going to face competition in their local markets,
Dolan said, then there is no reason that Cablevision should not be one of
the contenders.
He said that he was specifically interested in overbuilding operators in
New Jersey, notably the Maclean-Hunter systems that were won in an auction
days earlier by Comcast Corp., which outbid both Dolan and Continental
Cablevision Inc. However, the comp any disclosed no specific plans.
Some of those who heard Dolan's speech reported that much of the crowd
was stunned by the forcefulness of his interest in overbuilding. The local
monopoly is perhaps the most treasured asset in the cable industry, and
hearing a major industry figure com e so close to declaring war on other
operators was baffling.
"It was wild," said one Wall Street executive who heard Dolan speak.
"Everybody was sitting there in a state of shock."
Cablevision spokesperson Norman Fein confirmed Dolan's remarks, which
were made in a private meeting that was closed to the press. Dolan was not
available to comment.
"What he is saying is that competition is coming, from telcos, from DBS,
from MMDS," Fein said. "Everybody has said that there are going to be two
wires into the home. Who's to decree that the other wire isn't a cable
company's?"
Overbuilding would be a "logical extension" of Cablevision's retailing
business, "taking that service into areas where we're not currently
providing service," he said.
MSO executives who heard about Dolan's remarks were equally surprised.
Many questioned how serious he was or whether he was primarily angry over
losing the Maclean-Hunter bidding contest. One Comcast executive said
Dolan's comments were made out of "frustration."
MSO executives also noted that Dolan remains financially constrained for
an ambitious overbuild program. However, they agreed that he has much of
the customer-service and programming infrastructure in place to reach
customers by riding a telco's video p lant.
If Dolan believes that overbuilding or riding a telco's plant would be
lucrative in the markets of other operators, asked industry executives,
what does that say about the value and vulnerability of his own lucrative
Long Island, N.Y., franchise.
HOUSE HEADS TOWARD TUES. TELCO VOTE
Washington -- After weeks of gridlock that some thought might prove
fatal, the House of Representatives is scheduled to vote Tuesday on
legislation that would drop competitive barriers between cable operators
and local telephone companies.
The House, acting three months after legislation passed two committees,
will consider two bills. One deals extensively with cable-telco
competition, and the second allows the seven Baby Bells to enter the $60
billion long-distance business, among other things.
The break came late last week when two powerful House committee chairmen
announced they had reached a compromise on their Baby Bell long-distance
legislation.
Consequently, House leaders are planning to take the bills to the floor
under an expedited procedure typically reserved for non-controversial
measures. Unless a House member raises an objection, the bills are slated
to pass by voice vote and unamended.
While the House is poised to act, the Senate's situation is far less
promising. The Baby Bells are adamantly opposed to the long-distance entry
test found in legislation sponsored by Sen. Ernest Hollings (D-S.C.),
chairman of the Commerce Committee. Sen . Daniel Inouye (D-Ha.), chairman
of the Communications Subcommittee, last week suggested that the effort
could be doomed for the year.
"I hope the Senate has a look at the speed and thrust of the House
action and follows suit," said Bill McCloskey, a spokesperson for
BellSouth Corp., a regional Bell company.
SCRIPPS HOWARD FINED ALMOST $1M
Sacramento Calif. -- Sacramento Cablevision, the Scripps Howard Cable TV
Services system, should pay almost $1 million to four consumers as
restitution for the operator's anti-competitive behavior against two
overbuilders, a state judge has ruled.
Attorneys familiar with the case said it is one of the few instances in
which competitive tactics by an operator against an overbuilder have been
successfully challenged. It is only precedent setting for California,
however.
In the past, overbuilders generally have lost federal anti-trust suits
because they had to prove predatory pricing -- that is, that the operator
charged a rate less than his variable costs. Legal experts said an
operator would have to charge $3 or $4 a month for basic cable, an amount
equivalent to programming costs, to be found guilty of such a practice.
Seven consumers (only four of whom are still plaintiffs in the action)
sued Sacramento Cablevision in 1991. The subscribers allege that
Sacramento overcharged customers in non-competitive areas -- $14.50 --
compared with charging rates as low as $5.75 in areas where it competed
with overbuilders Cable America Inc. and Pacific West Cable.
The judge ruled that the plaintiffs can receive only injunctive relief
and restitution. The plaintiffs sought $3.6 million. Attorneys for the
operator argued that any restitution should be limited to between $45,000
and $75,000. Judge Roger Warren ruled that Scripps Howard is liable for
$940,000 in restitution.
A Scripps Howard spokesperson said the company will decide whether to
appeal the judgment once the judge issues his written ruling, sometime
after July 9.
DBS COMPANIES REPORT STRONG SALES AT LAUNCH
Direct-broadcast satellite companies reported that business was off to a
flying start in their first two markets, with three more cities coming on
line this week and about seven more next month, DBS marketers say.
"We had a complete sell out in Jackson [Miss.] over the weekend, and
we're very pleased with the initial sales results," Joseph Clayton,
executive vice president of Thomson Consumer Electronics Inc., said Friday
from the Consumer Electronics Show in Chicago. Thomson started selling
its dishes in Jackson, its first market, on June 17. Sales in Shreveport,
La., began on June 21. Thirty-six stores sell the RCA-brand gear.
By the end of June the home-receiving sets will be selling in Little
Rock, Ark.; Tulsa, Okla., and Albuquerque, N.M.
Asked how many satellite-dish packages were sold, at retail costs of
either $700 or $900, Clayton said, "It's a substantial quantity. One [a
Sears Roebuck & Co. outlet] sold 36 of them." Different retailers are
offering different monthly financing options, he said.
About half of the DBS units sold were the $900 model, which can
accommodate a second television-set hookup, Clayton said. Also, more
Jackson buyers opted to pay $69 for an installation kit instead of paying
a dealer twice that much to install the 18-inch-diameter dish and related
gear. He said he wasn't sure if that was because Jackson consumers were
frugal or especially handy.
Clayton said he was not sure which programming providers the purchasers
were choosing. The two services using the same satellite and Thomson
receiving gear are Hughes Electronics Inc.'s DirecTv Inc. and United
States Satellite Broadcasting Inc., control led by Hubbard Broadcasting
Inc.
BIG DEAL INSPIRES OPS AT WIRELESS SHOW
Las Vegas -- Wireless cable operators fed their appetite for dealmaking
in the nation's gambling mecca last week, and Brian Gast apparently came
up with aces. Gast, CEO of acquisitive American Telecasting Inc. (Atel),
of Colorado Springs, Colo., and Ate l's underwriters closed a $100 million
high-yield debt offering that other operators said they'd try to
duplicate. Experts predicted at least one other publicly held wireless
firm would try to follow suit, possibly filing a registration this
week. Atel's deal -- which packs more than $50 million into Gast's war
chest with no interest payments for five years -- was the show-stopper at
a buoyant gathering put on by the Wireless Cable Association here. The
good mood even bubbled into Federal Communications Commission Chairman
Reed Hundt's lunchtime speech Wednesday, which began and ended with
standing ovations and during which Hundt giggled a few times. Hundt said
the wireless cable industry appears to be ending seven lean years and is
anxious to celebrate some fat times. "I think they're pumped," was how
Greg Bicket, COO of CAI Wireless Systems Inc., of Albany, N.Y., described
his colleagues' mood.
CABLEVISION FIRST MSO TO INSTALL OWN SWITCH
WOODBURY, N.Y. -- Cablevision Systems Corp. has installed its own
telephone switch as a means of accelerating its transition into the first
MSO to become a full-fledged telephone company.
In July, Cablevision's Lightpath subsidiary will begin providing
switched services to customers through a state-of-the-art 5 ESS central
office digital switch, newly installed at the MSO's Hicksville, N.Y.,
operations center.
Deployment of such a switch is still a rarity among competitive access
providers in general.
"We'll have two customers on-line with switched services in a couple of
weeks," said Joseph Cece, president of Lightpath, which is wholly owned by
the MSO. "We expect to sign several others fairly quickly."
The switch, supplied by AT&T Corp., is equipped to handle 10,000 lines
at the outset, with a capability of as many as 80,000 lines as needs
dictate, Cece said.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-AND FINALLY...-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
HASSELHOFF PPV EVENT BOMBS
Semaphore Entertainment Group's June 17 pay-per-view event featuring
Baywatch star David Hasselhoff sank as operators reported very poor
buy-rates for the event. The show, which featured Hasselhoff and several
members of the popular Baywatch series singing and performing comedy
skits, generated buy-rates around the 0.1 percent level although the
company declined to reveal the exact figure. Many operators reported
single digit buys for the event.
Baywatch buy-rates nonwithstanding, SEG said it will continue to
distribute PPV events despite the uncertainty over support from partner
Bertelsman Music Group, and also is planning to jump back into the PPV
music business.
Yet despite the low buy-rates for Baywatch, SEG will continue to
distribute PPV events. Bob Meyrowtiz, president of SEG, said the company
will also remain a player in the PPV business with the support of BMG,
which recently pulled out of a potential deal with Tele-Communications
Inc. to develop a basic music channel.
-----------------------------------------------------------------------
HOW TO GET IT: The best way to obtain CABLE REGULATION DIGEST each
week is subscribing to the TELECOMREG mailing list
(
[email protected], SUBSCRIBE TELECOMREG YOUR NAME). Available
by finger with the command: FINGER
[email protected].
Anonymous FTP and Gopher archives are now graciously made available at
Vortex Technology. To FTP, head for ftp.vortex.com, change directories to
"/tv-film-video/cable-reg". By Gopher, head for gopher.vortex.com and
select the "*** TV/Film/Video ***" menu item.
--30--
