Las Vegas— Jerry Kent said his recent decision to buy an optical-network company with a national footprint could help cable operators avoid federal program-access laws.
Last month, Kent's Cequel III agreed to purchase Broadwing Communications Services Inc. in a partnership with Corvis Corp. Broadwing can use its optical lines to distribute cable networks to 150 markets.
Federal law requires cable MSOs to sell their satellite-delivered networks to EchoStar Communications Corp. and DirecTV Inc. But since Broadwing is a terrestrial service, cable networks riding the platform would be exempt.
"The cable industry can develop its own programming and deliver it via our Broadwing network and take programming exclusivity," Kent said last week at an investors' conference held by A.G. Edwards.
Broadwing could trigger a fight in Washington, D.C., where consumer groups and the satellite industry always look for signs that cable might be trying to skirt federal program-access laws.
The $129 million investment in Broadwing would also help lower the cost of providing regional video-on-demand services and bypass access charges to the Baby Bells, Kent said.
Kent, the former CEO of Charter Communications Inc., used some of Cequel III's $1 billion kitty to plunge back into the industry through the purchase of 400,000 subscribers in rural markets, where cable-system prices are lower than in urban markets.
Nevertheless, Kent said rural cable companies face hardships and he plans to ask Congress to create a new universal-service program, requiring large cable companies and programmers to contribute a percentage of revenue to companies that want to deploy broadband in rural markets but face cost barriers.
Another issue Kent intends to pursue with Congress or the Federal Communications Commission is the cost of programming to small operators.
"Rural customers shouldn't be discriminated against. There is a price discrepancy, in some cases more than double," Kent said.
Cable-industry leaders, such as National Cable & Telecommunications Association chairman Michael Willner, have routinely cautioned that seeking help from the federal government often backfires.
"The reality is that there is going to be a difference between the largest operators and the smallest operators. What that difference is should be something that should be the result of negotiations," said Willner.