News

SACHS: DONT DIS US

9/17/2000 8:00 PM Eastern

Los Angeles-As cable operators face overbuilds in most of the nation's top markets, cities must not place incumbents at a disadvantage when rushing to dole out new franchises.

That was the message National Cable Television Association president Robert Sachs delivered to local regulators last Thursday for at the National Association of Telecommunications Officers and Advisors' annual conference.

In the year since NATOA members last gathered in Atlanta to debate the open-access question, Sachs noted, the number of start-up broadband service providers eager to take on entrenched cable operators has exploded.

That development adds to the competitive pressure from direct-broadcast satellite operators, who in the last year have pushed their share of all multichannel subscribers to 15 percent as cable's piece has slipped below 80 percent, by the NCTA's count.

"Your constituents either have, or soon will have, a choice of multiple service providers for video, voice and high-speed Internet service," Sachs said. "When one out of five consumers buys multichannel video from someone other than their local cable operator, it's time to acknowledge the reality: that today, consumers across the nation enjoy the benefits of competition in the delivery of video programming."

But cities must ensure that franchises awarded to companies like RCN Corp., WideOpenWest LLC, Western Integrated Networks LLC and Seren Innovations Inc. are "comparable to those of the incumbent," he added.

In an interview, Sachs offered San Francisco as an example, noting that city recently granted RCN a franchise with a 15-year buildout provision-something not offered to the incumbent, AT & T Broadband.

"There shouldn't be government-sanctioned cream-skimming," he said.

Some local officials were not entirely persuaded by Sachs. Incoming NATOA president Ron Mallard said it was reasonable to offer a longer build-out schedule to a new entrant up against an entrenched incumbent that has been generating revenue-and hasn't had to share the market-for up to 15 years.

But it would be unfair to give newcomers "an unreasonably long time to build out the system," or let them serve the most lucrative parts of the community, then "make a business decision that they're going to dramatically slow their buildout," Mallard said. "The key to it is to have the right mechanisms in place to make sure the overbuilder builds the entire system in the prescribed time frame."

Compared to last year, when access dominated the NATOA gathering, this year's conference seemed lacking in excitement.

"This is a sleepwalker's convention," said one attendee.

But there were some access conversations, despite a 9th U.S. Circuit Court of Appeals decision which held that local franchising authorities can't force cable operators to allow independent Internet-service providers to use their networks.

One NATOA member, who asked for anonymity, said cities are waiting "for the other shoe to drop" in the form of a 4th Circuit Court decision on Henrico County, Va.'s appeal of a ruling that struck down its open-access ordinance.

"It's hurry up and wonder, as opposed to hurry up and wait," the observer said. "The only way it [open access] is going to the Supreme Court is if there is a split between the circuits. If the [4th Circuit] goes against the cities, the door stays closed."

An amicus brief filed by the Federal Communications Commission added an interesting new wrinkle to the Henrico County case, said attorney Wes Hepler of the Washington, D.C., law firm Cole, Raywid and Braverman.

The FCC filing said the 9th Circuit erred in declaring cable-modem service a telecommunications service, which, in theory, subjects it to the commission's common-carrier requirements. It could be a cable service, a telecom service, or even an information service, the FCC said, adding that the final decision should rest with it and not the courts.

"It's an interesting argument," Hepler said. "I think the commission is signaling what direction it's [taking]. If it's a cable service, that restricts what the commission can do. If it's a telecommunications service, that also significantly restricts what the commission can do."

Cox Communications Inc. CEO Jim Robbins put in a plea for abandoning efforts to obtain "government-mandated" access.

Cox is spending $36 billion to upgrade 900 franchises, he noted, and can only attract that kind of investment in a stable regulatory environment. The upgrades will allow cable to become the only "real viable competitor" to the telcos, but open access would be a disincentive to such projects, added Robbins.

Cox is willing to cooperate with Internet providers, but only after its exclusivity agreement with Excite@Home Corp. expires, Robbins said.

It was not lost on NATOA members that Robbins and Sachs referred to the issue as "government-mandated access," rather than "forced access," the catchphrase preferred by the cable industry over the past two years.

With AT & T, Cox, Comcast Corp. and Time Warner Cable readying trials that would allow them to offer multiple ISPs to their customers, "what's happening in the business environment has overtaken the regulatory issue," said Sachs.

"But there's a clear distinction," he said. "Our industry remains strongly opposed to 'government-mandated access,'" or "forced access," he said. "There's a difference between accommodating multiple ISPs and offering customers choice, and having government set the price, terms and conditions for how a competitive business operates."

Robbins also asked NATOA to support cable's efforts to revise must-carry and retransmission-consent rules.

Rules that allow local broadcasters to choose whether their signals have must-carry status or are subject to retransmission consent were "barely workable" during the last cycle in 1996. Now, said Robbins, mega-mergers have created broadcast powerhouses, resulting in "a game of blackmail" in which broadcasters can try to force carriage of affiliated digital networks on cable operators in return for the retransmission rights to highly viewed analog channels.

"You play an important role in changing consumer perceptions," said Robbins. "You can inform your communities that cable's bridging the digital divide."

According to attorneys who addressed the conference, about all city officials can do is talk when their constituents are faced with a potential retransmission-related channel blackout.

Few localities have active franchises that predate the 1984 Cable Act and include specific service requirements regarding which networks are to be carried, said Tim Lay of the Washington, D.C., law firm Miller and Van Eaton. For the rest of the cable universe, about the only provision addressing blackouts is the requirement of a 30-day notice of programming changes.

The best strategy for cities is as an informal, impartial mediator, Lay suggested. Cities should represent their constituents before the FCC and Congress, where typically the only testimony is from the corporate combatants, he said.

Want to read more stories like this?
Get our Free Newsletter Here!
September
October

VR 20/20

The Times Center, New York, NY