From: [email protected]
Date: Sat, 17 Dec 1994 21:35:35 -0800
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 CABLE REGULATION DIGEST
 Summary of regulatory news from Multichannel News 12/19/1994. Vol.1, No.51
 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 $78/year.

 Multichannel e-mail contacts:
Marianne Paskowski, 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: As I write this, I'm sitting on a plane to Florida (where
I grew up) to take some Christmas vacation. I don't want to think about
cable for a while Y'all have a great holiday and we'll resume publication
Jan. 2nd.  Haven't done music reviews for a while, but can't resist some
last minute shopping tips for music fans in your life. The best album I
bought this year is Hole's "Live Through This", awesome, powerful rock
from Courtney Love. A very close second is Soul Co ughing's "Ruby Vroom",
an odd, haunting album from a New York quartet. Imagine the Talking Heads
led by a white rapper backed by awesome musicians. Also try Velocity Girl,
"Simpatico", Combustible Edison's "I, Swinger" for eclectic cocktail jazz.
I'll say hi to Mom for ya. Send any Christmas presents to
[email protected].

   CABLE'S HOLIDAY WISH LIST
 "In addition to world peace, an end to hunger and a cure for AIDS, I wish
for: Five fiber rings, four new revenue streams, three banker friends, two
more hours a day and a rational FCC."
     James O'Brien, President, Jones Intercable Inc.

 " ... Deregulation, first of all. That probably isn't a new one. If I can't
have that, FCC preemption of state and local [regulations]. Last, but not
least, a Republican president a couple of years early."
     Mike Gilliam, President, SBC Media Ventures Inc.

 " ... Simply, level off next year. Let the FCC do their thing, have all
the rule-making in place. Let them act on their cost-of-service complaints
as they must and get a telecommunications law in place that makes a level
playing field and lets in competition. If you really do believe all those
things can happen next year, then you do believe Santa Claus inhabits the
North Pole."
     Tom Waldrop, General Manager, Media General Fairfax Co. (Va.)

    "I wish for competition on all five lanes of the information
superhighway, good weather for rowing in early spring and a new commission
phone book."
     FCC Chairman Reed E. Hundt
  " ... Sweeping federal legislation in 1995 that would free up
competition in the local exchange."
     Jim Robbins, President, Cox Cable Communications Inc.

 " ... Peace and joy for our employees, regulator certainty and fairness and
please God, no more "telecollectivism."
 Leo Hindery, Chief Executive Officer, InterMedia Partners L.P.

 1. Our own cameras in Congress
 2. Reversal of Must Carry
 3. Another 40,000 miles in the C-SPAN School Bus
 4. To re-enact the entire Civil War battle by battle
 5. A game of chicken with the QVC Bus
 Brian Lamb, Chairman and CEO, C-SPAN

 PCS BIDS TOP $1 BILLION BUT FALL SHORT OF GOALS
 Washington - Bidding on 99 licenses for broadband wireless communications
air waves topped the $1 billion mark last week as the government took steps to
speed up the auction.
 Meanwhile, Cox Cable Communications Inc., which first won a "pioneer's
preference" designation in October 1992 for demonstrating how wireless calls
could interconnect with cable plant, was granted a 30-MHz license in the Los
Angeles and San Diego areas last Wednesday. Two other pioneers also were
granted licenses.
 Cox also is part of the WirelessCo L.P. consortium with Sprint Corp., Tele-
Communications Inc. and Comcast Corp. On Thursday, WirelessCo took the lead in
bidding for the biggest available license, for the New York metropolitan
trading area, with an offer of $187.5 million.
 A total of 38 new high bids were recorded in two rounds of bidding on
Thursday, compared with only five on Wednesday. On Thursday, companies were
required to place bids for licenses that would cover two-thirds of the
population area for which they want to remain eligible. Before then, bidders
only had to go after licenses covering one-third of the population.
 Even with the boost, analyst David Roddy, senior economist at Economics and
Technology Inc. in Boston, said bidding is "still very slow in terms of the
values we're looking at."
 Government estimates heading into the auction were that $10 billion would be
raised by selling 120 MHz of spectrum. This round of bidding will dole out two
30-MHz licenses, or a total of half the available spectrum. At this rate,
Roddy said, the 120 MHz would sell for only $2.2 billion.
 The low values so far reflect an awareness that "there's a lot of
competition, a lot of expense, and a lot of timing" involved, Roddy said.
 After Thursday, WirelessCo had the lead bids for 12 licenses, including ones
in the Boston-Providence, Miami-Fort Lauderdale and Denver metropolitan areas.
PhillieCo L.P., the Sprint team minus Comcast, led the bidding for a
Philadelphia metropolitan area license with a $20.7-million offer.
 Partnerships of Continental Cablevision Corp. and Cablevision Systems Corp.
led in the bidding for licenses in the Boston and Cleveland areas. Cox,
bidding separately, led in the race for a license in the Omaha, Neb., market.
 Cox and two other pioneers, Omnipoint Corp. (New York area) and American
Personal Communications (Washington-Baltimore area), will pay for the licenses
they received. But they get 15-percent discounts, under a formula that
calculates the average selling price of other licenses in Top 20 markets on a
per capita basis. The three companies must pay at least $400 million combined.

 SIGNAL PIRATE GETS THE SLAMMER
 Little Rock - Jan Gregory Manzer, the first person ever extradited from
a foreign country for theft of cable programming, was sentenced last week
to 46 months in jail and ordered to pay $2.7 million in restitution by a
U.S. District Court in Arkansas.
 A Hot Springs, Ark., jury took less than three hours to convict Manzer on
two counts of mail and wire fraud each, and one count of criminal copyright
violations.
 Known as "V.C. Hacker," Manzer ran an operation between August 1987 and May
1988 that modified satellite descramblers to illegally receive protected
electronic transmissions. He also provided satellite dealers with software to
modify descramblers.
 "This is the major victory for the [satellite] industry," said Dennis
Powers, chief of signal security for Home Box Office Inc., which estimates it
lost $6 million in revenues because of Manzer's operations. "This is the first
individual that I can think of that will be sent to jail, and will do the
time.
 "Anybody thinking about compromising this satellite technology, or any new
satellite technology, should take a second look at the consequences.
 Jim Allen, head of the National Cable Television Association's Office of
Cable Signal Theft, called Manzer a "key player" in the arena of satellite
signal theft.
 "He was one of the biggest -- if not the biggest," Allen said. "He had an
operation dealing in thousands of satellite decoders. This shows that the
government is serious about this type of economic criminal behavior."
 Manzer was one of the first satellite pirates to compromise the VideoCipher
technology following encryption of Home Box Offices's signal in 1986.
 The court ordered Manzer to make restitution to General Instrument Corp.,
HBO and other programming services listed as victims in the case.
 At his sentencing last week, representatives from HBO and Cable/Home
Communications Corp. said Manzer had cost the satellite industry millions in
lost revenues.
 It's estimated that Manzer worked through a nationwide network of 270
satellite dealers, who used his software to manufacture 75 to 100 bogus
descramblers apiece.
 Manzer fled the country after his arrest in a Federal Bureau of
Investigation sting led to his indictment in 1992 by a federal grand jury in
the western district of Arkansas. He was arrested in Amsterdam on Sept. 12,
1993, and returned to the United States in June of the following year.
 In addition to 46 months in jail, Manzer will spend another three years
under supervision after his release.

 FCC ACTION SIGNALS HOPE ON HORIZON
 Washington -- In a precedent-setting action, a small California cable
operator has won approval to raise basic rates by 31 percent next month to
avert bankruptcy.
 The Federal Communications Commission said last Tuesday that family-run
Horizon Cable TV in Marin County may raise monthly rates up to $6.50 after
determining that Horizon was unable to meet its financial obligations.
 Horizon, a basic-only system owned by the young husband-and-wife team, Kevin
and Susan Daniel, was the first such hardship case adjudicated by the FCC
under the 1992 Cable Act.
 The FCC decision had been pending since mid-October when Horizon first filed
for relief. It came just two days before Horizon had to repay a $1.3-million
bank loan.
 "We barely made it," Susan Daniel said. "We got lucky, I guess, because we
were the first case to step up to bat."
 The Daniels incurred the debt in 1991 to cover Horizon's purchase and
upgrades for two systems.
 But successive FCC rate freezes and Horizon's timid pricing strategy
combined to trap the Daniels' in a situation in which they were losing about
$8,000 per month after cutting costs to the bone, and caused them to default
on parts of their loan agreement with Silicon Valley Bank.
 "We are relieved that we can now move forward with our bank now," Susan
Daniel said. The FCC determined that the Daniels had not overpaid for the
system.
 Under the FCC's ruling, Horizon can add $6.50 in the towns of Stinson Beach
and Marin West from the current basic rate of $20.42 and $20.33, respectively.
About half of Horizon's 2,300 subscribers will be affected by the increase.

 FCC CLEARS 11 OPS FOR MIGRATION TO A LA CARTE
 Washington -- The Federal Communications Commission last week cleared a new
group of cable operators that had been investigated for possible violation of
rate regulation by migrating a few channels to a la carte packages just before
the onset of regulation in September 1993.
 The FCC decided 11 new cases and ruled that the offerings would not have to
be folded back into regulated tiers. The FCC said that the operators could
offer the a la carte package as non-price-regulated new product tiers created
under the agency's new going-forward rules.
 The FCC was not breaking new ground here because a precedent for this action
had been set with release of its first a la carte cases Nov. 18. The FCC has
adjudicated 30 out of 62 a la carte cases. It has ordered just one operator --
Adelphia Communications Corp.-- to return an entire tier of service from a la
carte to regulated status. FCC sources said it was likely that decisions
similar to Adelphia's would be announced shortly.
 Those cleared of any rate violation or refund liability in the Dec. 12
announcement were: Cablevision Industries, Smithfield, N.C.; Comcast
Cablevision, Howard County, Md.; Cablevision of Raleigh, Hillsborough, N.C.;
Cablevision Industries, Long Beach, Calif.; Cable TV of Greater San Juan,
Puerto Rico; Cablevision Industries, Morrisville and Hillsborough, N.C.; US
Cable, Lake Forest and Lake Bluff, Ill.; Comcast Cablevision, Sterling
Heights, Mich.; and Century Cable TV, Brunswick, Ga.

 FCC URGES REFUND SETTLEMENTS AS COST-SAVING STRATEGY
 Washington -- The cable industry could save millions of dollars in refunds
and legal costs by negotiating refund settlements with the Federal
Communications Commission, FCC sources said last week.
 FCC Cable Services Bureau chief Meredith Jones said the agency would be
willing to settle before issuing rate orders that could involve lengthy
appeals and postpone the day when subscribers actually see refunds or credits
on their monthly bills.
 "We would be willing to explore creative ways to expedite relief," Jones
said in an interview.
 National Cable Television Association spokesman Rich D'Amato said the
proposal was new, and consequently he had few details. "Most of what we know
about this is what we've seen in the media. It's an interesting proposal but
at this point we don't know much about it."
 Signs of flexibility at the FCC are beginning to emerge as the cable
industry heads to federal court Dec. 20 to appeal the agency's rate rules that
forced operators to slash their rates 17 percent.
 The FCC has adjudicated hundreds of complaints but has a backlog of some
6,000 cases -- many of them duplicative -- under the first round of
regulation, in addition to 500 new cases under the second round of rate cuts
ordered by the FCC in February.
 The FCC so far has issued refund orders totaling at least $2.6 million, with
Dimension Cable hit the hardest at $1.2 million. Jones said no operator has
agreed to the terms of the FCC's refund orders. By settling before refund
orders are issued, both cable operators and the FCC could bypass the appeals
round.
 "If people don't want to settle, we are perfectly willing to go forward,"
Jones said.

 ARIZONA COMMISSSION MAKES WAY FOR VDT
 Regulators in Arizona are debating whether the local telephone market should
be opened to competing providers.
 Staff members of the Arizona Corporations Commission, which provides
oversight to state utilities, recommend that elected board members approve
transition from regulated, monopoly telephone service (provided by U S West
Inc.) to managed competition for both local exchanges and in-state long
distance. Under the rules, cable companies, such as Times Mirror Cable TV in
Phoenix, which are building fiber optic networks, can get Commission authority
to provide business and residential dial tone. The state would require that
competitors participate in a "universal service fund" to assure that basic
telephone service remains available statewide at reasonable prices.
 If the state opens telco markets, the competitors would qualify for
streamlined regulation, allowing them to change their prices simply by
notifying customers and the Commission.
 The Commission's three-member board will discuss the recommendations this
week. If a competitive plan is approved, it will be effective July 1, 1995.

 OPS ADD ALREADY-LAUNCHED AND RETRANS NETS TO BASIC
 New York - Many cable operators with channel capacity will add channels to
their regulated expanded-basic lineups and think about launching new product
tiers after they've raised their basic rates, said operator and programmer
executives.
 The channels set to gain the most expanded-basic launches are the
retransmission consent networks and the not fully penetrated channels that
have built up some brand identity.
 With the exceptions of The History Channel and Home & Garden Television,
networks that haven't launched yet haven't been getting much consideration for
expanded basic distribution.
 "We're maximizing our opportunities under the going-forward rules; we want
to introduce products on expanded basic," said Jedd Palmer, senior vice
president of programming for Tele-Communications Inc. "We want to get the
$1.20."
 Palmer said he wasn't sure yet how many TCI systems had channel capacity to
add channels, but the ones that had space will add retransmission consent
channels and then channels that the MSO has contracts with but hasn't been
able to fully distribute.
 "We're adding channels where we have capacity on expanded basic," said
Harvey Boyd, vice president of operations, Southwestern region, for Post-
Newsweek Cable. "We're reserving the right to migrate them [to a new-product
tier] if need be.
 "We have tended to pick the strongest services the systems don't have rather
than load the systems with lower-quality services. License fee wasn't the
primary factor," said Boyd. "The primary factor was to enhance subscriber
satisfaction. I was convinced that if we added channels that were not in
demand, it would not be in our long-term best interests."
 "Services like E!, America's Talking, Court TV, Comedy Central, The Learning
Channel and ESPN2 are doing well," said David Zaslav, senior vice president of
affiliate marketing and sales for CNBC. "If you were in their affiliate sales
war rooms, you would find an immense amount of activity."
 Zaslav doubts many of the brand-new network startups will get much
distribution.
 "There's a general feeling out there that a number of these new start-up
services aren't going to make it," he said.
 While the programmers are reluctant to give hard launch numbers, networks
such as the Television Food Network and America's Talking, both retransmission
consent networks, said they will gain "millions" of subscribers on expanded
basic as a result of the going-forward rules.
 Several networks, such as Court TV, were said to be offering upfront
marketing money in the two dollars per-subscriber range.
 Betsy Dirnberger, senior vice president of affiliate sales for the TV Food
Network, said due to a jump in distribution from the going-forward rules, the
network has revised its forecast up to 15 million subscribers by the end of
1995. TVFN currently has 8.4 million subscribers.

 TCI CORPORATE ADDED TO EMPLOYEE LAWSUIT
 A Jan. 9 trial in a lawsuit brought by five employees of TCI Cablevision of
Tulsa will be delayed until next spring following a move to add TCI's
corporate office as a co-defendant, according to an attorney for the
plaintiffs.
 The five women are suing TCI Cablevision of Tulsa on the grounds that they
have suffered from post-traumatic stress disorder following a company-
sponsored security seminar that was set up to appear like a real armed
robbery.
 On March 23, 1993, several employees were instructed to stay late to take
part in a security seminar in which two fake armed bandits forced their way
into the building, brandishing real guns, using foul language and taking a
hostage.
 "At that moment, they were convinced they were going to be shot," said James
Garland III, an attorney with Frasier & Frasier, a Tulsa-based law firm that
represents four of the women in the case.
 In an inter-office memo circulated March 26, system officials said the
purpose was to "illustrate graphically what a robbery can be like." The memo
added that "none of the guns were loaded, and they all had the firing
mechanisms removed."

 HUNDT TO EXPLAIN RATE BREAKS
 Washington -- Federal Communications Commission chairman Reed Hundt in a
speech at the Washington Cable Club scheduled for this Tuesday will outline
how the Commission could ease regulation of cable systems as competition
begins to develop, according to an FCC source. Hundt will explain how the
Commission may offer operators greater pricing flexibility in areas where
strong competition from telcos or direct-broadcast satellite services is
beginning to develop, but has not yet penetrated local markets so heavily that
rate regulation would be automatically lifted under the 1992 Cable Act.
 National Cable Television Association president Decker Anstrom said
liberalizing the effective competition test in the 1992 Cable Act will be a
legislative goal next year. He said also that NCTA will push for extending
program access rules to telephone companies that own programming, citing the
Baby Bell agreement with Creative Artist Agency, as an example.

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

 Coverup at Fox ... Fox Network viewers will see less of Dream On star
Martin Tupper's butt than HBO subscribers. According to transcripts of a
recent press briefing, John Matoian, Fox's new entertainment group president,
said the network's new acquisition will not rival NYPD Blue in the broadcast
nudity department. Dream On's producers always planned for a syndicated life
for the saucy cable show so they shot coverage (literally) for the revealing
nude scenes. The news brought disparate responses from Fox affiliates. Half
were relieved while half said, "Oh darn, I like ... the way it's shot on HBO,"
Matoian reported.

 Online shopping ... We can't tell whether Home Shopping Network's
cyberspace foray is going to be a great business, but at least it's popular:
Online magazine The Web Word ranks HSN's recently acquired Internet Shopping
Network as the fifth most popular World Wide Web site on the net. The Top 4
are CommerceNet, a haven for other commercial net ventures; Canadian Airlines
International; cellular manufacturer Ericsson; and an archive of SEC
documents.


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