Tier Study Keeps Skinny Hopes Alive

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Washington -- When congressional advocates hit a brick wall
in their efforts to force cable operators to offer a bare-bones basic tier, they did the
next best thing: They commissioned a study.

For more than one year, House Telecommunications
Subcommittee chairman Rep. Billy Tauzin (R-La.), Rep. Edward Markey (D-Mass.) and Rep.
Rick Boucher (D-Va.) have argued that cable subscribers' access to a broadcast-only
basic tier would be good for cable subscribers and for direct-broadcast satellite users
who can't get local TV signals from DBS.

Under considerable pressure from the cable lobby, the
lawmakers backed down. Instead, they won bipartisan support for a study by a Commerce
Department bureau that would analyze "the technological capability, availability and
affordability of a broadcast-only tier of cable service."

The study was inserted into satellite legislation (H.R.
851) adopted by the House Commerce Committee two weeks ago. Before such a provision can
become law, the House, the Senate and the White House all have to accept it.

The House Commerce bill would give the National
Telecommunications and Information Administration 180 days to complete the study and to
report its findings to the House and Senate Commerce Committees.

Tauzin, in comments to reporters, suggested that the NTIA
was chosen because it would conduct a more balanced appraisal than the Federal
Communications Commission would.

"I think that there is confidence in this committee
with the NTIA that does not extend to the FCC," Tauzin said.

Although the word "study" has an innocent ring to
it, it could at some point snowball into legislation that some in the DBS industry --
DirecTV Inc., in particular -- have been urging Congress to consider.

Last year, Tauzin and Markey introduced a bill that would
have required cable operators to offer a basic tier that included only local TV signals
and PEG-access (public, educational and government) channels, at rates set by the FCC.

DirecTV hailed the creation of a mandated lifeline tier
mainly for two reasons. First, it would conserve DBS spectrum. Second, it would save DBS
subscribers from potentially paying twice for national cable networks.

Boucher -- a long-standing advocate of the DBS industry --
sponsored the study amendment, which the Commerce Committee adopted unanimously by voice
vote.

During debate on the amendment, Tauzin explained the allure
of a broadcast-only basic tier -- which he prefers to call a "skinny tier."

"The skinny tier is a way for the customer to take the
broadcast channels from cable and to then have the option of buying the rest of the
package from cable, satellite, or some other provider," Tauzin said.

After acknowledging that many cable operators do in fact
offer a skinny tier, Tauzin said the problem might be that cable subscribers were unaware
of its existence.

"This [NTIA] report hopefully will not only help us to
understand where it is available to consumers, but at some point, I would hope that either
in this legislation or in some fashion, we might encourage the cable companies to do more
about informing consumers of the availability of skinny tiers," Tauzin said.

Although he declined to oppose Boucher's amendment,
Rep. Mike Oxley (R-Ohio), a consistent supporter of cable deregulation, said he was
concerned that the study was a dress rehearsal for a law requiring "a
one-size-fits-all, price-regulated, broadcast-only tier."

Oxley said small operators that provide only one tier might
not be able to afford adding a second tier without increasing rates.

Steve Effros, president of the Cable Telecommunications
Association (CATA), elaborated on Oxley's point by saying that a broadcast-only basic
tier in rural markets would have the perverse effect of driving up basic rates.
That's because small operators that lost customers to DBS would have to recover the
lost revenue by raising the price of basic.

"The broadcast-only basic would have to pay for the
infrastructure, which would make [basic] unaffordable," he said. "It just
doesn't take a genius to figure this out."

However, Tauzin indicated that his broadcast-only
basic-tier approach might not be all bad for cable operators -- especially operators that
offer nonvideo services, such as Internet access.

The skinny tier, he said, would at least keep "the
customer connected to cable, even though the customer may buy other satellite programming
from an alternative provider."

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