Dressler: Time Warner's Gatekeeper

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In the arena of MSOs versus programmers, Time Warner Cable, currently the largest MSO, has been engaged in a nasty public skirmish with The Walt Disney Co. over retransmission consent. In March, Disney came within minutes of pulling its ABC TV station off Time Warner's system in Houston. Negotiations between both media giants are continuing, with senior vice president of programming Fred Dressler at the bargaining table for Time Warner Cable. Dressler of late has taken an especially hard line with programmers over license-fee increases. As the gatekeeper for access to 12.7 million subscribers, he has not only banged heads with Disney but so far has opted not to carry NBC's cable Olympics package; passed on Geraldine Laybourne's Oxygen; and hasn't even done a carriage deal with Turner South, which is owned by his sister company, Turner Broadcasting System Inc. Multichannel News editor in chief Marianne Paskowski and programming editor Linda Moss recently interviewed Dressler in his Stamford, Conn., headquarters to hear his side of the Disney dispute. Dressler also talks about why Time Warner is so adamant about holding down program costs-particularly following last year's sunset of rate regulation-in this new era when operators can no longer pass through certain program-cost increases to subscribers and then justify those rate hikes by saying they were just conforming to a government-mandated formula. An edited transcript follows:

MCN: You're a veteran in this business, and you have lived through massive consolidation on the part of other MSOs, your

own company and programmers. How has that affected your job and decision-making?

FD: I haven't seen a significant difference. We've always been one of the largest cable operating companies, so as a percentage of the cable households available for programmers, we've commanded a large position in the marketplace. It's really the relative size that matters, as opposed to the absolute size.

MCN: Well, since you've always been big, maybe it's a little bit of a different situation. But I hear from both programmers and MSOs that it has become a leverage game now because you've got these huge companies that all have a lot of leverage negotiating with each other.

FD: Making deals is usually about leverage. And this has always been a leverage game for as long as I've been in it. I've had a philosophy, however, in doing deals over the years, which says that in this business, the first deal you do with a programmer is usually the best deal you'll ever do as a cable operator.

From then on, it's really up to the programmer to create leverage in the marketplace by establishing loyalty among the viewers, improving the programming and getting advertisers that are interested in having access to those subscribers.

MCN: You're known as a very tough negotiator. I guess that's part of the job description?

FD: I would hope that people think I'm tough but I'm fair and I'm a pretty good person to do business with. I don't think we have any record of abusing people, and I don't think we've demonstrated that we can't get deals done. We probably say the same about a lot of the people we negotiate against, which is that they are pretty tough. That's the nature of the business.

MCN: And part of the formula, of course, are the bargaining chips that go along with it-be it getting a discount on somebody's other services for launching one of their new ones, or retransmission consent, whatever it may be. So that's all part of that financial price?

FD: Sure, there are all kinds of considerations.

MCN: It's not just whether it's a monthly license fee of 19 cents per subscriber, or 50 cents, or whatever?

FD: No, not at all. There are a lot of elements that go into a deal and, frankly, it's somewhat of a disservice when anybody reports on an upfront payment or a license fee.

These contracts are an inch thick when you are done, which demonstrates that there are a lot of other considerations involved, including what tier people are going to be on or what channel they're going to be on; how much marketing they are going to get; what package they're in; how much they're going to be promoted; how much we're going to promote them; how much contribution toward promotion they're going to provide.

MCN: At a recent conference, Comcast Corp. president Brian Roberts was discussing retransmission consent. He called it a lose/lose-more' situation for MSOs in that operators risk upsetting the public or subscribers if they take a broadcast station off. But then, you can't afford to jack up rates to pay for some of these new services that have been associated with retrans.

FD: Well, of course, retransmission consent is another one of those great giveaways that the broadcasters got out of Congress. It has taken the cable industry-I say that broadly, and perhaps some cable operators more than others-a little while to figure out, again, going back to where this conversation began, where the leverage points are in this negotiation.

We as a company were looking to have peace in the valley a few years ago, and we agreed to launch some new services rather than having a fight with the broadcasters.

And we tried to figure out what was going on. We had been negotiating with all of the broadcasters at the same time that first time around, and we had a deadline to have deals done with every broadcaster in the market.

And what we have learned in the past six or seven years is that there's probably not much leverage either way in a negotiation with a broadcaster-that despite the fact that people pound their chest on both sides of the table, the broadcasters need the cable operators at least as much as the cable operators need the broadcasters.

And if you take a look at the various examples of where the people have gone right up against the deadlines, at the end of the day, it really hasn't been a lot of pained experience on either side because people back away and say, Wait a minute, if you're going to go to war, people on all sides of the war get hurt.'

MCN: Why do you think the past retransmission go-arounds were not as bumpy as this round had been? Why has it been so bumpy, with the situation at Fox Broadcasting Co. and Cox Communications Inc., and with Disney, in particular?

FD: Cable operators gave away too much the first time. We didn't really know what the values were.

MCN: Broadcasters wanted money originally?

FD: Well, yeah, it started with CBS [Corp.] saying they wanted cash, and that's what it was all about.

MCN: They backed down and never got anywhere.

FD: And then the first deal that happened was the TCI-Fox [Tele-Communications Inc.] deal, for FX.

MCN: Right.

FD: And if you recall, we didn't do that deal right off. We hung out. We were the last ones to do a deal, and six or nine months after the deadline passed, we finally reached an agreement with them. We didn't give away very much at that point because by then, we had done deals with most of the other networks, and it turned out that Fox was the last one to come to the table.

By then, we'd already begun to learn our lesson, which was that carrying the broadcaster is important to the broadcaster, and being carried on the channels that they're used to being on is important, and I think as cable operators, we forget.

MCN: You could have whipsawed them around.

FD: Once they choose retransmission consent, No. 1, they are not entitled any longer to be on the cable system, and they're not entitled to be on the channel they want. And all of a sudden, it goes into play and it becomes a part of negotiation.

And what happened is that as an industry-and certainly, as our company-we gave away too much, which emboldened the broadcasters this time around to say, Well, if that's what we got last time, guess what we can get this time.'

And they overreached and made it impossible for us to accept any kind of terms that they laid out. And so push comes to shove.

MCN: You guys did a retrans deal late last year with Fox. It was not problematic, no dispute. As part of it, you are going to roll out Fox Sports World and Fox Movie Channel on digital. No problem, no acrimony: Why was that situation so easy to resolve?

FD: Fox learned their lesson six years ago.

MCN: But yet with Cox, they had the huge dispute. Different operator?

FD: I don't know what the terms of the Cox-Fox settlement were.

MCN: That was a very messy situation.

FD: Well, Fox went off the air for a week or so. Cooler heads prevailed, and they reached a settlement.

MCN: Cox CEO James Robbins was livid over this.

FD: We went pretty far down the line with Fox six years ago. They saw that we weren't going to do something outrageous, so, like you said, we sat down and we said, The chips are equally stacked. Let's work out a deal that makes sense for both of us. 'And we did it. We're happy with it, they're happy with it, and we moved forward.

The problem that you see that we face at the moment with others is that they are the people that got the most the last time, and therefore, they think they're entitled to even more this time. So it has become more problematic.

MCN: To go back to the Fox thing for a second, you are going to be giving some digital distribution to Fox Sports World and Fox Movie Channel. So why not do it for Disney? Why not do it for Lifetime Movie Network? What's the difference, in simplest terms?

FD: Well, in simplest terms, as I've said to you, what else is in that inch-fat document? Not the least of which is what is the cost.

If people are realistic, we're prepared to make realistic deals. Despite everything that has been written about our dispute with ABC Inc. and Disney, it's all been made pretty clear that we had agreed to give them what they wanted, which is to put Disney [Channel] down on basic and to launch their soap network [SoapNet].

MCN: So it came down to price?

FD: Well, we had even agreed to the price, and then Mr. [Disney chairman and CEO Michael] Eisner decided that the deal was unacceptable. He hadn't gotten enough. He ripped it up and started over again. And that's where we are.

MCN: Your position is that you had a deal, and the hang-up wasn't an issue of the networks, the start-up networks, or even putting Disney on basic. And they agreed to it.

FD: We ended up announcing the AOL [America Online Inc.] deal, and Disney said, Aha, they don't want to pick a fight with us while they are trying to get that merger done in Washington. Thank you. So that's additional leverage we didn't have last week. Let's see if we can get more. 'And that's where we are.

MCN: What's your hope to resolve that?

FD: Our position is that we're prepared to do the deal we had agreed to, and we'll wait and see what they want to do.

MCN: The ball is in their court?

FD: Absolutely.

MCN: Talk to us about your division's relationship with the networks that are owned by Time Warner Inc. The issue is, 'Well, they are all in the same corporate family. The networks-be it CNNfn or CNN/SI-are going to get a break or are going to have an edge with Time Warner Cable.' True? Not true?

FD: The best assurance that all of the networks are going to be treated fairly is the fact that we are partly owned by MediaOne [Group Inc.] and partly owned by [Advance/Newhouse]. And neither of those companies is going to benefit from our launching other Time Warner products that they don't own an interest in. So we have a fiduciary responsibility to the cable company to do the best job for the cable company, and that's really how we make our decision.

MCN: It sounds like you've answered that question often.

FD: To my partners.

MCN: What about autonomy? Time Warner Cable corporate versus your systems? My understanding is that it's very decentralized. Once you have signed a corporate deal with a programmer, what happens with your systems? Are they free to do what they want, or to what extent are they free?

FD: Well, historically, Time Warner has been one of the more decentralized companies. And for a long time, we even allowed the programming decisions to be made locally after assigning what are known commonly in the industry as hunting licenses.'

We rarely do those kinds of deals any longer, and we have become much more centralized in our programming decisions.

MCN: But why? Media-One started everything, going in this direction, wouldn't you say?

FD: I don't know who started it. But it certainly became evident that when you're in a position to actually promise to a programmer how much distribution you can actually deliver or what tier they will actually be on, what channels they will actually be on, then you can negotiate a much more favorable economic deal.

So recognizing that the bigger we got, the amount of money involved became so significant that it just made more common sense for us to make those decisions.

MCN: How far back did the change from decentralization to centralization occur? Three or four years ago?

FD: Approximately. I would say it was kind of half-and-half for a while, where we would step in and make centralized decisions once in a while if we saw that it really made sense to do that. But in the past two to three years, it's been almost universal where the decisions are made in the Stamford office.

MCN: What latitude do they have? How much?

FD: I don't think it's a question of latitude. It's still a collaborative effort. When programmers come in to see me, for instance, I will suggest that they go out and visit the systems first. If there isn't any demand for the product on the systems, then it's not good use of my time to spend time negotiating a deal with a programmer that nobody wants.

So it begins with the man in the field. They don't necessarily get to say, I'm going to launch it if nobody else is going to launch it, I don't care. 'But they do get to vote and say, This is a service I want.' If there is sufficient amount of distribution, then we try to leverage that distribution.

I'm then in a position to say, Gee, there's 6 million of our subscribers that actually want it. 'With those divisions that want it, I can sit down at the table and say, I know I can deliver 6 million,' or I can then go talk to other divisions and say, Can we make that 8 [million] or 9 [million] so we can get an even better deal?'

So we begin to work very, very closely together. We meet regularly with the people in the field. But when the contract is signed, we are now much more willing than ever in the past to actually commit to the delivery of subscribers.

MCN: Let's get back to Time Warner networks and getting on your system. For example, Turner South, part of Time Warner's TBS Inc., is looking for distribution in the South, where you have major clusters of subscribers. It still doesn't have carriage down there. Now in that case.

FD: You answered your own question, didn't you?

MCN: I was going to say in that case, the decentralized mode is still in place. Can you explain that? You don't have a corporate deal with Turner South. Maybe you never will. Is it up to those Southern systems to make the decision in that particular case?

FD: No. The systems in the Southeast are not at liberty to launch Turner South until we have a corporate deal, and we've been unable to come to terms yet.

MCN: People get very skeptical-perhaps myself included at times-and say that common-sense-wise, Time Warner Cable has to give its own networks a break. Those networks have to have leverage with them.

FD: I really don't know how to answer that other than to say that they have to fit into the mix and they have got to come to terms. If the people at Turner think they don't need to make a competitive offer, then the facts speak for themselves at the moment-that they need to be competitive.

As I've suggested, we have partners who say, 'You can't just do something with Turner that you wouldn't do in the marketplace.' The product has got to be good. And the deal needs to be competitive.

MCN: Is it difficult, though, with a new network? I'm thinking of something like Oxygen, which I think is a very urban kind of network. I understand the beauty of concentration and that where corporate is calling the shots, you're getting your discounts. But you are also suggesting that one size fits all, that what's good for New York might be good for Selma, Ala.? Is that in part why a network like Oxygen is having I wouldn't say an inordinate difficulty launching, but some?

FD: I'm not suggesting that it's one size fits all. The example I cited is that if there was one system that desperately wanted a particular service, and they feel they need it, they can state their case, and we do. We have one-off deals all over the place, or regional deals all over the place that aren't national.

But all I'm saying is that they need to tell us what their needs are, and then we're still in a much better position to know what the comparative pricing ought to be, what the comparative terms ought to be.

Because they all come through here. Someone in

San Antonio or Raleigh [N.C.] doesn't necessarily know whether or not they are getting a good deal in the marketplace. I at least have a top-down view of everything and have a comparative reference to know what's going on. When a new network comes in, they state their case and they state what their price is.

We can agree and disagree and have honest differences of opinion on that. But frankly, I look at it as no different than you or I going to the marketplace to buy a particular product.

I state as an example all of the time that I'd like to have a Ferrari, but I can't afford it. I'm not saying it's not worth it, and it is worth it to some people, but that doesn't mean you have everything you set your heart on. And the other guy gets to set the price, and you get to decide whether or not you want to pay it. And that's all that's going on here.

MCN: It sounds simple.

FD: But it is. Unfortunately, the example that you cite, people come in and they say, 'So-and-so did a deal at this price. Therefore, the market's been set.' I don't think that's true. Unfortunately, one of the biggest problems the industry faces now is that on the tail end of rate regulation, a large number of deals were done by one particular operator, at very high prices.

MCN: Care to name who that was?

FD: I think it's evident. The current AT & T [Broadband] entered into lots of new agreements, and it was all before the rate regulation ended.

And there was a different dynamic that existed at that time. The rules said that you paid a programmer and regardless of what you paid that programmer, you could pass it through on your rates. On April 1, 1999, that changed.

It now changed. Whatever we pay, you can't automatically pass through. And it came at a time when in fact what the government had hoped came about, and that was that there was sufficient competition in the marketplace so that you can't willy-nilly raise your rates.

So just signing contracts at exorbitant prices and attempting to pass those through to the consumer doesn't work anymore. It either cuts to your margin as a cable operator or raises your price to the point where it's not competitive any longer. OK?

And what's happened in the past 12 months-you're talking to me, it's 12 months since the sunset of that-is that we at Time Warner Cable have been trying to explain to the various programming services that we're in negotiations with that the world has changed and that just raising your prices because you've got a model that has worked for the previous five years isn't going to work any longer.

MCN: It's a new day.

FD: It's a new day. You were there when I made these comments a year ago at the CTAM [Cable & Telecommunications Association for Marketing] conference, when I said at that time that just because a programmer comes in and says, 'Here's my business plan, and my business plan has my rates going up by 5 percent or 10 percent per year.' The cable operator has a business plan, too, and I can't absorb those kind of rate increases.

If you saw today's paper, there is a story on AT & T raising their rates, in some places as much as 21 percent. And what do they cite as the reason? Programming costs.

MCN: Right.

FD: They have to now make up for those deals they signed. It's a big increase. But they signed contracts that have huge increases, OK? The reason why I don't have contracts with a lot of these programming services now is because we're trying like heck to get them to understand that the world has changed, and that just because AT & T signed those deals [before] the expiration of the rate regulation, that doesn't mean we're going to do that now.

MCN: You are out of contract with a number of programmers now, right? Is that exactly the reason?

FD: That's exactly the reason. We said no. We've said the world has changed. We can't go on business as usual as if the rate regulations were in place. Competition is real, and we have to compete on price. We can't just absorb exorbitant rate increases, and we're not going to.

MCN: Does sports fall under that category? I don't have to tell you that has been the wildest of the programming world's rising costs.

FD: Sports has been one of the biggest problems we face. Whether it's ESPN or whether it's the regional sports networks, the price increases are absolutely exorbitant.

MCN: And that's the conundrum everyone talks about.

FD: I've been telling the programmers exactly what I'm saying to you right now.

MCN: And they come back and argue?

FD: But here's the interesting thing. So you want to talk about the way negotiations work? None of these regional sports networks function in a vacuum, OK? They are all related and associated with other programming services.

So it seems to me that if sports, by the nature of the business, requires larger increases because of sports-rights fees and what they pay the players, then they as a company and we as a company have to figure out other ways to save.

And I don't think paying more for off-network programming or series that have flopped elsewhere or second- or third-rate movies requires those kinds of rate increases. So you balance.

MCN: And in this case, in part because of consolidation and growth, they can balance because they have other networks, so they can say, We'll give you a break on X, then you, Time Warner, pay a bigger increase on our regional sports channel?'

FD: Precisely. Want to help me negotiate these deals?

MCN: In talking about the regionals, I understand what you are saying, and that's a solution or way to get to work with them. Have you ever given serious thought to the tiering of those regional sports services, just take them out of the basic mix?

FD: I would love to be able to do that. The regional sports networks, if you recall, started out as stand-alone pay services.

MCN: That's right.

FD: And in some places within the Time Warner universe, they still are. It is something we would like to do, but again, going back to your first question, which is leverage, a regional sports network, an ESPN, the nature of sports, the nature of the customers we have who are- 'fan' is short for fanatic.

These present unique sets of problems, and you have to deal with it. We all make judgments along the way. And as I suggest, it's a balancing act. And we're not interested in losing any of the services we have. We are not interested in threatening to take anybody off.

We are simply saying that there needs to be an economic balance achieved, and the programmers have to recognize that the operators have five-year plans, as well as they do.

MCN: To harken back to Oxygen, is that an area where an audience is being underserved? Women?

FD: I'm not a good judge as to whether women are being underserved. I certainly have an interest in negotiating a fair deal with Oxygen. I am not dismissing the possibility that we could reach an agreement with them.

On the other hand, I would say that from my perspective, women are not unreasonably served by cable. Women like news, and they like Food [Network], and they like Home & Garden [Television], and they like AMC [American Movie Classics]. You can name a whole bunch of channels.

MCN: And what is women's programming?

FD: What is women's programming? You tell me. Are women underserved? Could they be better served? Absolutely. I would not suggest that they couldn't be better served, but I'm also not suggesting that they are necessarily underserved.

MCN: So doing a deal with Oxygen is not out of the realm of reality?

FD: Absolutely not. No.

MCN: But really, they stand in line with everyone else, even though Oxygen Media CEO Gerry Laybourne is AOL chairman Bob Pittman's friend? Which leads to another question: What is life like after the AOL deal?

FD: There is no way of knowing.

MCN: It's certainly going to be different.

FD. But I don't know how it will be different, and I think that at the end of the day, from what I understand of the AOL people, they are smart. They are interested in making money. They are interested in providing lots of choices. Not that their philosophy, as I read about it, isn't greatly different than what I've already espoused in this interview: offer the most amount of choices at a price people can afford.

So I don't think that what we're doing, what our philosophy is in doing these deals, is going to run afoul with what AOL's objectives are. Will life be different? Sure. I've been through lots of mergers. Things always change-some for the better, some for the worse. But I just don't see that what we're trying to do is in any way at odds with AOL's philosophy.

MCN: To the issue of media consolidation-CBS and Viacom Inc. One of the fruits of that merger is going to be that in the fall, Nick programming will air on CBS in the morning. As an operator, you pay for that Nick programming. How do you feel about seeing it on broadcast come September?

FD: I, of course, am one of those people who has also been troubled by the amount of programming, which operators have paid for the development of over the years, that's found its way onto satellite, as well.

MCN: And the overbuilders.

FD: Yes. So I think that the future is that you will see more exclusivity among the various forms.

MCN: You will?

FD: Among the various platforms. I believe that Congress and the FCC [Federal Communications Commission] will come to understand that just as it is in every other form of information and entertainment medium, exclusivity is in essence: How do you differentiate yourself in the marketplace?

And when Congress and the FCC feel that there is sufficient amount of competition in the marketplace, you will see more exclusivity developed.

MCN: In the interim, what do you think about those Nick shows being on CBS? What can you do as an operator?

FD: There's nothing I can do. I guess I don't have a right to speak much at the moment because we're out of contract with them.

MCN: Oh, OK [laughter]. They'll get a chuckle out of that. Are you adding onto your networks on digital now, or is anything being added on analog?

FD: Yes, we are adding analog, and we would expect to add onto analog for years to come.

MCN: Is there less of a crush than there has been in other years? Or was that all a myth that there was no analog space there?

FD: Well, we have continued to increase the channel capacity on analog, and we are planning to continue to do so in the years to come. We also would expect to be able to move some things off analog onto digital, creating more opportunities on the analog lineup.

MCN: Have you ever moved anything off analog to digital? I know people threatened to do so, but do contracts and other issues get into the way? Cox was supposedly evaluating all of its analog-digital placement.

FD: We haven't done anything wholesale. It's not our style to want to do that. But there are some systems-I'm trying to think where we actually have moved things off analog, either to an analog tier, or to an additional tier, or off an analog tier to a digital tier. There's been some moving around, but not a wholesale moving around. While we haven't done a lot of that in the past, you're going to see more of it in the future.

MCN: How far are you rolled out with digital, AthenaTV?

FD: We expect to be fully built out with the capability by the end of this year. The problem at that point is getting enough boxes from the manufacturers to get them distributed.

We've got several different suppliers. Our primary supplier is Scientific-Atlanta [Inc.]. But we buy boxes from Pioneer [New Media Technologies Inc.] and Pace [Micro Technology plc]. I don't know who else we are negotiating with these days. But we are trying to get as many boxes distributed as we can.

Our expectations are that we will, in a fairly short period of time-meaning a matter of a few years-exceed 50 percent of basic homes with digital.

MCN: Where are you now?

FD: Well, we should have 2 million digital homes by the end of this year.

MCN: And what are you finding? That multiplex pays are very popular, or pay-per-view?

FD: It's all popular. It is flying out the door. We can't keep the boxes, and we can't hook up people fast enough. The product is appealing. It always has been. It always has been appealing, and what people want is more. They want more choice.

MCN: I wanted to bring up overbuilding. You have some competitive situations. What are the programming guys sitting here in Stamford doing to make yourselves more attractive to subscribers in these markets where overbuilders are coming in?

FD: My goal is to give the people in the divisions as much ammunition as possible, and that comes in two forms out of this office.

One is the maximum amount of product to offer, so that we are offering more choice and, hopefully, at a lower price than our competitors can offer.

The rest of it is up to them locally to figure out what kind of better service they can provide and what kind of better packaging of offerings, what other things they can offer up against the competition to be successful.

Most of our people are successful. The farsightedness of this company in building out to 750 megahertz in advance of almost anybody else proved to be a very smart thing. So we're there. We are not wondering whether or not we've got the capacity to take all of this programming. The answer is, if I can do a deal for programming, then those systems have room for it.

MCN: When we started talking, you said your world hadn't really changed all that much with this industry consolidation. But subsequently, you mentioned things like AT & T Broadband taking in these huge programming costs, and I would have to wonder about Vulcan Ventures Inc. One-half of this industry is owned by outsiders who don't know what you know historically. It kind of messes things up for you.

FD: Well, it is certainly making the negotiations that we're in now more difficult. And that's why I think that you, in doing your job, go around and talk to programmers and find out that Time Warner is being difficult-more difficult than most-these days.

MCN: They've mentioned it.

FD: And that's the reason, and I think if I was them, I would be upset, as well, because things were going along just fine.

MCN: Then they came to Stamford. So it has changed.

FD: Well, I think the points of negotiation have changed. The question that was raised earlier was whether or not leverage has changed, whether the fact that we're large or small has made a difference, and I said no, that didn't make a difference.

The points that you are negotiating, of course, they're different. They were different before we were regulated. The entire negotiations changed once we went into rate regulation. And all I'm saying is that now they've changed again, or they need to change again, now that we have come out of rate regulation.

And sometimes people are a little slow to recognize that the world has changed around them, and that's what they're facing right now.

MCN: That certainly seems true, especially with consolidation.

FD: Look, I would have to admit that when rate regulation went into effect, we were a little slow in changing the deals we did. We didn't know what kind of deals to do right away because we didn't know how to deal with the regulation. Once we figured it out, we began to enter into some new deals.

And some of the deals are just expiring now, now that the regulations are over, OK? And it's not surprising to me that the programmers would say, Hey, I kind of liked the way those deals were. I want to continue them the way things were going for the past five years. And we are simply saying, Time out. Stop a second. Step back. We know you'd like that. It's not so.'

The government didn't want it that way. The consumers don't want it that way. We don't think it can work that way in the marketplace any longer.

MCN: Surely you're not the only one, though, who recognizes that?

FD: I don't get to share my philosophies with my colleagues on a direct basis. That wouldn't be appropriate. So I only know about what's going on when the programmers come in and say to me, 'Well, why are you being difficult? This company has agreed and that company has agreed.' And I say, I can't be held accountable for how they negotiate or what they think is a good deal.'

But I think that, like I say, these cable companies have to take a look and say, Wow, what happened to my margins?'

MCN: That reminds me of something I haven't asked you about, the Olympics. You haven't done an Olympics deal with NBC, right?

FD: No, we haven't.

MCN: AT & T Broadband has done a deal, and some other operators have done deals with them. Why haven't you done a deal?

FD: My position is the same on the Olympics as it is on everything else we've discussed today. Would we like to offer the Olympics? Sure. Would we like to offer them at a reasonable cost? Sure. We don't think the current proposals are reasonable.

MCN: Are you close to settling with NBC?

FD: I don't think we are any closer than we've been for the past year. Things could change on a dime. But as we sit here today, no.

We've been meeting regularly with Disney/ABC. We've been meeting regularly, and I can't say we're any closer than we were on the day they pulled the deal off the table. We thought we had a deal. They we were ready to sign. And they changed.

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