Sachs Speaks About NCTAs Objectives

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On the job for just two days, Robert J. Sachs was
understandably cautious about outlining a policy vision in one of his first interviews as
president of the National Cable Television Association. But he made it clear that the
focus of his lobbying effort, until further notice, is to defeat any attempt by government
to interfere with cable's Internet strategy of bundling access and content on a
proprietary basis. Following is an edited transcript of the interview, conducted Sept. 8
and 9 with
Multichannel News Washington bureau chief Ted Hearn.

MCN: So how does it feel to be working in the entertainment
capital of America?

Sachs: Terrific.

MCN: You've made the transition?

Sachs: I have.

MCN: And hit the ground running?

Sachs: I have. In truth, Labor Day came in mid-July this
year, in that since the announcement July 12, I've spent a fair amount of time at the
NCTA, meeting with department heads and employees and getting a good sense of the
organization.

MCN: Let's go big-picture first. Do you have an
agenda, and if you do, what is it?

Sachs: I have a policy agenda, and it's consistent
with the policy agenda that the NCTA has had, and that [former NCTA president] Decker
[Anstrom] ably put forth.

The most important issue our industry faces involves the
forced-access question. The NCTA will be using all of its various resources to make the
case that government regulation of the Internet is both unnecessary and inappropriate.

MCN: Are there particular people or groups you've
reached out to since your arrival in Washington?

Sachs: Since yesterday? I have had a chance over the summer
to make some courtesy calls on congressional committee staff. I've had the
opportunity to meet with several FCC [Federal Communications Commission] commissioners.
I've met with the heads of the Washington offices of MSOs and programming networks.

I've had a chance over the past six weeks to get out
to the field a little. I've visited with several MSOs and had a chance to spend time
with their senior management, and I am planning over the weeks ahead to make courtesy
calls on Capitol Hill, meeting with the other FCC commissioners.

I also had conversations with [National Association of
Broadcasters president] Eddie Fritts and [Motion Picture Association of America president]
Jack Valenti, both of whom were very gracious and welcoming. I'm looking forward to
sitting down with both of them, as well as with other heads of trade associations.

MCN: What's it going to take to ensure that the FCC
does not impose digital must-carry on cable operators?

Sachs: It's going to take a concerted effort by the
cable industry to demonstrate to the [FCC] that the marketplace is working, and I think
we're off to a very good start.

This week's announcement by AT&T [Corp.] of its
10-year must-carry agreement with Fox is just another indication of the fact that the
market's working. And that follows, of course, the announcements of Time Warner
[Cable's] arrangement with CBS [Corp.], and of AT&T's arrangement with NBC.

If, given some time, we see business arrangements
negotiated, the rationale for the [FCC] to take action anytime soon in this area will
dissipate.

MCN: But the broadcasters say they need must-carry because
it's the only way they can justify the investment in digital equipment, and they need
to know that they're going to get carriage on cable systems well ahead of their start
date.

Sachs: I don't think there's any question about
what would happen ultimately. The real question right now is whether any case can be made
for redundant must-carry requirements, where cable operators would be required both to
carry analog and digital signals with the same program. The law does not create that
right, and the NCTA has made that clear in our filings with the [FCC].

MCN: AT&T promised carriage on systems upgraded to 750
megahertz. Hasn't the MSO in effect forced broadcasters to accept the fact that their
transition to digital, for two-thirds of TV viewers, is going to occur on cable's
terms, and not on theirs or the FCC's?

Sachs: I have not [in] my one day here this week had a
chance to review the terms of the AT&T deal with Fox. I'd just as soon pass on
that question.

MCN: Where do you see the open-access -- or, as you say,
forced-access -- debate heading? Can cable withstand the assault? Do you have a strategy
in mind?

Sachs: I think some resolution of this issue is going to
come with the Ninth Circuit's decision in reviewing the Portland [Ore.] case. I would
expect that it will be several months after that case is argued before a decision is
issued.

And as you know, the court has put off the Oct. 6 argument
for reasons that have not been stated, but people who follow that court more closely
simply suggest that they have a crowded calendar. That decision was wrong on many bases,
and I would expect to see the court reverse it.

As to where we are in Washington, the FCC has been
steadfast in its view that this is a developing marketplace, and that with each day, there
are new broadband competitors that are announcing their service offerings.

It is very premature, to say the least, for there to be
government regulation of the Internet. Cable-modem service represents about a 2 percent
share of the Internet-access market. AOL [America Online Inc.] serves something north of
19 million customers today, [and it] has about a 40 percent Internet market share. By
their own predictions, the Bell companies and GTE [Corp.] anticipate having DSL [digital
subscriber line] in front of 38 million households by the end of this year.

AOL has invested $1.5 billion in Hughes [Electronics
Corp.'s] DirecTV [Inc.]. MCI WorldCom [Inc.] and Sprint [Communications Co.] have
invested about the same amount of money in buying wireless. It's a robust
marketplace.

So I think that when people look at the facts, they're
inclined to reach the inescapable conclusion that this is not a market that is crying out
for government regulation.

There does not seem to be much traction on [Capitol] Hill
for any legislation in this area. The [FCC] is going to be doing another report at the end
of this year on the status of broadband deployment. I would expect that this report, like
the previous report, is going to indicate that this is a dynamically developing
marketplace.

MCN: Wasn't the FCC's brief in the Portland case
disappointing? After all, nowhere did the agency agree with AT&T that Portland
violated the law and the Constitution, and nowhere did it agree with the cable industry
that cable provision of Internet access is a cable service.

Sachs: I think just the mere fact that the FCC filed an
amicus [curiae] brief and said to the Ninth Circuit that this is an issue that has
national implications -- this is an issue about which the [FCC] itself has yet to make
certain judgments -- is very helpful to AT&T.

MCN: But are we not looking at years and years of
litigation? The FCC said that even if the Supreme Court held in favor of Portland, it
could step in and pre-empt the city's action, and then that would get appealed. And
an FCC decision on leased access, which is pending, could spawn even more litigation. The
uncertainty can't be positive.

Sachs: There is certainly a prospect of more litigation in
this area, and that's a direct result of cities adopting ordinances or imposing
conditions on franchise transfers for renewals that they do not have legal authority to
impose. It's unfortunate that a lot of resources will be expended by all sides on
litigation.

MCN: Do you see the cable industry going to the FCC and
saying, 'Step in here, clean it up and establish the ground rules so that there is a
national policy?'

Sachs: The [FCC] has spoken on this issue. They have made a
conscious choice here that regulatory action on their part is inappropriate, given the
fact that cable is merely one of a number of broadband choices that is emerging. And that
there is no case to be made for government regulation of the Internet.

MCN: The point being, then, that the cable industry is
counting on the courts to restrain cities?

Sachs: I don't think we should generalize about
cities. When you think about it, there are 30,000 municipalities in this country where
there are cable franchises. The focus in the media has been on a handful, or less than a
handful, that have adopted ordinances or attempted to condition cable-franchise transfers
on common-carrier-like requirements.

San Francisco recently, I believe, voted 9-to-2 on this
issue. In Los Angeles, the city had a committee that did a report on this issue, which was
a very thoughtful and thorough study. If we're talking about Portland and Broward
County [Fla.], I wouldn't describe that as a flood of municipalities.

MCN: Apparently, Congress is going to pass a satellite law
that will allow direct-broadcast satellite carriers to offer local TV signals. Are you
re-evaluating the NCTA's support for the legislation?

Sachs: No.

MCN: The NCTA is backing it as long as must-carry holds?

Sachs: That's right, as long as the must-carry
provision with the date certain of Jan. 1, 2002, stands.

MCN: Before you know it, the debate on the extension of the
cable program-access rules will begin. Is it too early to start thinking about whether the
NCTA will oppose FCC renewal after 2002?

Sachs: We haven't had any board discussions on that

MCN: So it's a little too early?

Sachs: Yes.

MCN: Are you proposing to expand the cable industry's
minority-recruitment efforts, and if so, could you explain what's in the works?

Sachs: The cable industry will be making some announcements
in this regard during Diversity Week in New York, and we will be happy to discuss those
plans with you and your colleagues in the press at that time.

MCN: What about the internal dynamics at the NCTA and
AT&T's coming into the cable industry. AT&T has so many noncable interests
that it could be disruptive to the NCTA. For example, when Reps. Billy Tauzin (R-La.) and
John Dingell (D-Mich.) introduced the bill allowing the Bells to carry data over
long-distance lines without complying with the entry checklist …

Sachs: No, your premise is incorrect. The NCTA has
supported the principle of deregulation. The NCTA has not endorsed any legislation that
would reopen the 1996 Cable Act. That's an important distinction.

MCN: AT&T put out a statement, as part of its
coalition, opposing the bill. Obviously, you don't think that's a good example.

Sachs: I'm saying this based on being in this job for
a very short period of time, but every indication to date -- and I've had numerous
conversations with [AT&T general counsel] Jim Cicconi and with others on his team at
AT&T, and with [AT&T Broadband & Internet Services CEO] Leo Hindery --
AT&T has been extremely supportive of the NCTA.

Communications between the NCTA and AT&T are as open
and regular as they are between the NCTA and Time Warner, Comcast [Corp.], Cox
[Communications Inc.] and other members. I think the concerns that have been expressed by
some who would like to find controversy where there is none tend to be overstated.
I'm pleased with the working relationship, and I look forward to working closely with
AT&T.

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