News

Giveback Time, or What?

10/08/2000 8:00 PM Eastern

Adelphia Communications Corp. has a problem, and it's asking some 10 different cable networks to temporarily give it a hand by surrendering their coveted analog slots in exchange for digital berths-for a period of about one year, or until the MSO upgrades of about one-fifth of its subscriber base.

The operator has felt the pinch from subscriber loss in smaller systems which have not been rebuilt and, consequently, can offer only 30 basic channels, asMultichannel News'ace programming editor, Linda Moss, reported in a page-one story last week.

Depending on how you count them, those systems add up to a total of 800,000 to 1 million homes, or roughly a fifth of the MSO's entire 5-million-subscriber base.

In a nutshell, Adelphia wants to take back six to eight of its analog slots from programmers and convert them to digitally compressed channels, using a 12-1 compression ratio that would make room for many new digital services.

In the interim, Adelphia would provide digital boxes free to affected subscribers without charging them for a separate digital tier. The MSO would package the new digital outlets as an expanded-basic service for about as much as it charges in rebuilt systems.

At first blush, this has got to sound pretty alarming to programmers, who've found the climate for launching new networks as daunting as negotiating peace in the Middle East. Now, those networks with analog distribution are being asked to move over to digital for a bunch of Johnny-come-latelies.

Of course, none of this can happen without the networks' consent. Adelphia must procure a waiver from affected programmers. Some will probably say, "No thanks, pal," and walk away from the proposition.

But for other programmers whose contracts have lapsed, this is just another thorn in the flesh-yet another new hurdle they must jump over to remain on that precious analog band.

Programmers have beefed that their contracts with MSOs will soon be as big as the New York City phone book, with new clauses and demands added by the day on new negotiating points like streaming video.

And now, Adelphia has thrown another monkey wrench into the process-and some programmers worry that other MSOs will emulate the idea.

The level of concern varies by programmer. Some actually see it as an opportunity to gain more wiggle room with MSOs, especially those with multiple services. One programming chief said the network would consider the Adelphia proposal if the MSO, in turn, would carry some of his other networks in exchange for a helping hand during the rebuild period.

But some programmers simply have more leverage than others, and that's got to be a numbing prospect for a programmer with only one network and no aces up its sleeve, like retransmission consent.

Adelphia has painted this as a win-win situation. And it really could be, if Adelphia executes its plan properly, judging from how other MSOs have successfully staved off losses to DBS by adding digital services to their lineups.

But other MSOs didn't do it the way Adelphia is now attempting to do it. And that's what makes this so unusual.

Adelphia hopes when its systems are eventually rebuilt and can offer additional services-presumably high-speed Internet access, telephony, etc.-subscribers will start paying for their set-tops and revenues from the new services will fund the boxes its customers are getting for free.

The MSO expects the vast majority of subscribers in those systems that now offer only 30 channels to jump at the chance to get expanded basic for a modest cost increase. It sounds good on paper.

But with this plan, Adelphia is basically asking its subscribers to pay later for something that they will soon be getting for a mere pittance. The new services that the MSO will be offering down the road must be very compelling for the numbers to work.

And that's made some programmers are wary. They are not as optimistic as Adelphia, predicting that only 40 percent of subscribers will opt to take the new free box for the first wave of new digital channels.

That's why this is such an interesting story: because no one knows who's right in these uncharted seas. We'll keep you posted as events unfold.

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