FCC Acts on New Calif. Dereg Requests

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Washington -- Time Warner Cable became the second cable
operator to fail to win deregulation from the Federal Communications Commission based on
wireless cable competition from Pacific Bell Video Services in Southern California.

Time Warner urged the FCC to price-liberate cable systems
serving 19 communities in Los Angeles and Orange counties, but the FCC refused in a May 1
decision issued by the Cable Services Bureau.

The FCC said the denial was based on its finding that Time
Warner had failed to demonstrate that the 375,000 households potentially affected by the
decision were "reasonably aware" of PBVS' digital-multichannel service.

PBVS has been offering digital wireless cable service for
nearly one year, including 49 basic channels and 40 channels of pay-per-view.

The FCC said it wants cable operators to show that
competitors are using the mass media, direct-mail, or both to alert consumers that they
have a choice in providers. PBVS has opted to take a low-key marketing approach in lieu of
the mass media.

Cable-industry lawyers said the FCC's holding that
competitors have to be engaged in major marketing efforts in order for cable operators to
win deregulation was not contemplated by Congress in the Telecommunications Act of 1996.

One cable lawyer quipped that a cable operator, hoping to
change some minds at the FCC, was contemplating taking out a full-page ad in the Los
Angeles Times
to tell readers about PBVS' competitive offering.

Last month, the FCC rejected a similar petition filed by
Charter Communications Inc. for systems serving about 200,000 subscribers in Los Angeles
and Orange counties.

Following the Time Warner order, the FCC refused to
deregulate Marcus Cable Co. L.P. in Whittier, Calif., and Comcast Corp. in various Orange
County communities. Both Marcus and Comcast said they faced competition from PBVS.

However, Marcus got some good news when the FCC deregulated
a Marcus system in Barron, Wis., where Marcus is facing overbuild competition from
Chibardun Telephone Cooperative.

In 1996, Congress added a provision to cable law dealing
with the deregulation of a cable system that faces video competition from a phone company
or from a video company using a phone company's facilities.

The new provision said a phone company that offered
comparable video programming, except for direct-broadcast satellite service, in
competition with a cable system meant that the cable system was totally deregulated.

The FCC found that PBVS' service was comparable to
Time Warner's, but that the service did not meet the "offering" standard in
FCC rules.

"Consumer awareness of a competing service is an
essential element of the offer requirement of the [local-exchange carrier]
effective-competition test," the Cable Bureau said. "Time Warner did not present
evidence that PBVS has engaged in any type of mass-media marketing."

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