News

Venezuelan MSOs Unite to Promote Ad Rules

10/25/1998 7:00 PM Eastern

Caracas, Venezuela -- The Venezuelan cable industry is
pushing harder than ever for clear rules governing pay TV advertising, after authorities
closed down wireless cable operator Omnivisión for transmitting commercials.

The case brought to a head an industrywide issue that
Venezuela's Supreme Court is expected to rule on any day now.

Early this month, Omnivisión's systems -- eight
multichannel multipoint distribution service systems and one VHF signal -- were closed
down by Venezuela's Ministry of Internal Affairs on the grounds that pay TV licensees are
prohibited from selling advertising.

Omnivisión was transmitting commercials on its VHF
channel, which, in something of a unique arrangement, is covered only by a pay TV license.

Although Omnivisión has now reopened (minus its
advertising), Julio Martí, the Venezuelan minister of transport and communications,
explained the government's action: "[Omnivisión] began transmitting permanent
signals of noninformative programs that included advertising messages and commercials
promoting the sale of goods and services," which represented a "flagrant
violation" of the law.

Not everyone agreed that the law is so clear-cut:
Venezuela's pay TV advertising rules "are very much open to interpretation,"
according to Alberto Scharffenorth, general manager at Venezuelan MSO Cabletel. And the
Supreme Court's imminent decision on the status of pay TV advertising seemed to indicate
that there are some still gray areas.

Venezuelan MSOs had long been advertising freely until a
year ago, when Conatel, the government agency responsible for pay TV regulation, raised
the issue, Scharffenorth said. He added that the agency sent out letters to MSOs,
including Omnivisión, strictly forbidding them to advertise. "Conatel was telling
cable companies that they could not insert ads," he said. However, Omnivisión
thought that it was safe to advertise because it had a court order protecting it from any
government interference, pending an official judgement.

But the company miscalculated, and its closure raised many
hackles in the cable industry, including those of Evelyn González, general director of
the Venezuelan Chamber of Subscription TV (Cavetesu). "It's ridiculous when you think
of it ... [Venezuela] is the only country in the Western hemisphere outside of Cuba where
it is illegal for MSOs to sell advertising space," she said.

Although Cavetesu was already lobbying to have the rules on
pay TV advertising clarified, the Omnivisión situation came to symbolize what everyone
was fighting for, González said. "[Cavetesu] was working on seeking this permission
anyway, but Omnivisión provided a bandwagon for everybody to jump on."

She added that many Venezuelan MSOs have supported
Omnivisión's claim that it should be allowed to sell advertising space until the law is
changed.

There are also the issues of why Omnivisión was singled
out for closure and the significance of its timing. According to Omnivisión executives
Hernán Pérez Belisario and Eduardo Sapene, the closure happened because of
"pressure from national open-signal channels," or broadcasters.

They suggested that Venezuelan broadcasters wanted to make
an example out of Omnivisión because it aggressively began selling advertising at a time
when broadcasters were beginning their upfront advertising sales for the coming year.

Another competitive concern was Omnivisión's attempt to
have its VHF signal made into a broadcast-style service, but still under the terms of its
pay TV license.

Officials from the Ministry of Internal Affairs couldn't be
reached for comment regarding the remarks by Pérez Belisario and Sapene.

Jo Dallas contributed to this article.

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