Uncertainty Surrounds Cable in States

Author:
Publish date:

State cable associations nationwide are facing uncertain
futures in the wake of both a shift in power in some midterm elections and the dramatic
cable-industry consolidation that has brought marked changes in system ownership.

Many lobbying groups said they knew of no legislation
targeted toward them for 1999, and that they probably wouldn't know until new governors or
state houses make their priorities known.

One thing is pretty uniform: State associations think that
AT&T Corp. is a welcome sight on their radar. The long-distance carrier, which hopes
to close its merger with Tele-Communications Inc. early next year, has worked with many
telecommunications coalitions to promulgate local pro-competitive telecommunications
policy, and lobbyists welcome its muscle.

Already, in New Mexico, AT&T is solidifying its
relations with its adopted industry. It will become the state's second-largest operator
with its acquisition of 100,000 TCI homes. AT&T has asked the New Mexico Cable
Association to support a "cramming and slamming" bill that it will introduce
Jan. 19.

"They've always been supportive of cable, because
we've found that the enemy is U S West," association director Ray Davenport said.

The regulatory circuit that will be buzzing is the state
utility boards. Arizona, New York, Pennsylvania, Oregon, Michigan and Florida are among
the states where policy will certainly be under negotiation, whether cable-specific or
tangential to overall telecommunications policy:

• Oregon cable operators need their utility commission
to revise its definition of "power-clearance space" on utility poles, bringing
it into line with the definition used by the Federal Communications Commission.

The federal government has ruled that there are 40 inches
of usable space on a pole. Potential competitors appear to be locked out in Oregon because
that state holds that the usable space is for deployment only by the owner of the pole.

• In Arizona, U S West has asked the state to approve
a rate formula that will allow the telco to accelerate its return on investments in plant
to deliver such high-speed-data services as ISDN (integrated services digital network) and
DSL (digital subscriber line) and to improve basic telephone service.

The plan would collect an extra $126 million from consumers
over the next three years. The telco said it needs the "rebate" in order to
recover its investment in the face of competition.

The plan will surely be opposed by Cox Communications Inc.,
which has already invested more than $500 million in infrastructure improvements to
deliver telephony. Executives said shareholders, and not ratepayers, funded those
investments.

The Arizona Cable Telecommunications Association will also
monitor the proceedings before the state's Corporation Commission to assure that U S West
is barred from using ratepayer money to launch planned video services in the Phoenix area.

• New York operators work under a 25-year-old blanket
of state regulation that may unravel this year. Legislation will challenge the need for a
separate state cable-regulatory department with more employees than the FCC in an era of
convergence.

Four years ago, Gov. George Pataki proposed merging the
cable department into the Public Service Commission, but the effort was delayed due to the
number of pending sales and transfers in both the telephony and cable realms, said Richard
Alteri, president of the Cable Television & Telecommunications Association of New
York.

The PSC is also under mandate to report on the status of
telecommunications rules, many of which were enacted before the advent of direct-broadcast
satellite or open-video-system proposals.

• In Florida, abolishing the price cap and universal
service will be topics for the Public Service Commission.

The local-exchange carriers are already lobbying for a
large universal-service fund using a model that cable operators believe will be
anti-competitive, said Steve Wilkerson, president of the Florida Cable Telecommunications
Association. Wilkerson doubted that a proposal to do away with price caps would succeed.

• The Michigan Cable Telecommunications Association
has canvassed its membership as it prepares to draft a rewrite of the Michigan
Telecommunications Act, which sunsets next year.

Expected to be included in the industry's new five-year
version of the law are a provision allowing cable to enter into exclusive contracts with
multiple-dwelling units and a clause addressing municipal overbuilds.

"There are 35 communities with municipal electrical
utilities. And they're the one's that are likely to be of the mind frame that 'We do
electrical, why not cable?'" MCTA director Coleen McNamara said.

The industry will also want to strengthen the role of the
Michigan Public Service Commission, which cable feels is often slow to respond to its
complaints. For instance, it took the PSC nine months to act on a protest against
Ameritech Corp.'s controversial "AmeriChecks" program -- a marketing plan under
which the Baby Bell enticed consumers to subscribe to its Ameritech New Media cable
service by offering discounted local-exchange service.

"In the meantime, they're out stealing our customers.
We'd like the PSC to be able to issue restraining orders or cease-and-desist orders in
situations like that," McNamara said.

ATTACKING PIRACY

A handful of states are still at the grindstone honing
strategy on two chronic issues: theft of service and late fees.

In the "Lone Star State," operators will try to
"tweak" an existing theft-of-service statute in hopes of coaxing law-enforcement
agencies "to be a little more interested in our requests," said Bill Arnold,
president of the Texas Cable Telecommunications Association.

The plan is to target cable pirates who advertise illegal
set-top converters by having the crime categorized as a Class C misdemeanor, rather than
as a Class B offense.

"In Texas, it depends on the degree of the offense.
And it's tough to find a prosecutor who will make a case for a Class B misdemeanor,"
Arnold said.

Amending an anemic theft-of-service law is similarly on the
agenda in Nevada, where as much as 15 percent of the industry's gross revenues are lost to
cable pirates, according to the Nevada Cable Telecommunications Association. The industry
is drafting language that would boost the monetary penalty for theft of service from
$5,000 to $10,000, with a possible one-year jail term.

"The idea is to give the law more clout," said
Bob Gastonguay, executive director of the Nevada cable group. "The problem for us is
that just like in other jurisdictions, we have a hard time getting the locals to
prosecute."

Oregon operators will push to see the theory of
"rebuttable presumption" in their theft regulation. That is, law-enforcement
officers who seize boxes that were doctored or opened may assume that it was done for the
purpose of stealing service.

LEERY ON LATE FEES

On the late-fee front, strategies are varied. Some groups,
while acknowledging that their states need some clarifying language to break the wave of
operator lawsuits, nonetheless didn't want to talk about the issue for fear of raising
their profiles with potential litigators.

"Don't even mention us, please!" one legislative
adviser said.

But in Kansas, cable operators are planning a pre-emptive
strike against any local litigation.

The industry will seek an "enabling statute" that
will allow operators to recover the costs associated with collecting monthly bills that
are not paid on time.

"I don't think that anybody is doing anything
untoward," said Rob Marshall, executive director of the Mid-America Cable
Association. "But we're not happy with the way that some of these suits are turning
out. We don't want one filed here simply because we don't have a statute."

During this year's session, a bill surfaced in Indiana that
would have set the industry's late fees at the same levels as those of state utilities.
That bill, which would have allowed operators to collect about $1.26 on a $35 monthly
cable bill, died in committee. Operators there will be on guard against a resurrection.

Wisconsin also expects a failed bill, which would have
capped late fees at 6 percent of the total service, to resurface. Operators will fight it
with their same argument: If fees are capped, then on-time payers subsidize the tardy.

One state that was burned in its attempts to legalize
late-fee amounts last year, Illinois, will stay away from the issue for now. Cable
succeeded in passing a high late-fee limit in one state house where it was buried in a
bill on another topic. When critics screamed about subterfuge, embarrassed legislators had
to admit that they hadn't read the bill that they voted on.

Gary Maher, president of the Cable & Telecommunications
Association of Illinois, said the group will see how two major late-fee lawsuits conclude
before readdressing the issue.

An issue that allies New York cable operators and newspaper
publishers is winning permanent statutory authority for placing cameras in the courtroom.

For 12 years, news operations have held
"experimental" authority" to film trials. Several committees have studied
the activity and approved long-term acceptance of cameras. The sunset on the last
experimental period has expired and, because of the explosion in New York news operations
-- including many local cable-news channels and Courtroom Television Network -- Time
Warner Cable will be leading an effort to make video coverage permanent.

MUNICIPAL OVERBUILDS

The issue of municipal overbuilds is a new one that is
likely to become chronic.

In Ohio, operators plan to throw their support behind a new
bill aimed at creating a "level playing field" by requiring local governments to
adhere to the same rules as incumbent operators. This would include paying the same taxes,
which the municipalities are currently exempt from.

"It's a parity bill," Ohio Cable
Telecommunications Association executive vice president Ed Kozelek said. "It sets the
ground rules if they're going to get into the business of providing nonessential services.
Right now, they're electrical utilities. They own the poles. We pay them, plus they
regulate us."

Similar legislation is expected to be introduced in
Georgia, where cities could not undercut operators.

"It would also prevent them from using public revenues
on the project, and from regulating an entity that they compete against," said Nancy
Horn, president of the Georgia Cable Television Association.

Meanwhile, in Iowa, cable operators are prepared for a
battle against local governments, which plan to ask the legislature to amend a state law
precluding cities from operating municipal telephone utilities.

A recent ruling by the state Supreme Court upheld the law,
which theoretically rendered a host of municipal cable overbuilds uneconomical since they
won't be able to use telephone service to generate the extra cash needed to pay off their
systems.

"They have to go after it," predicted Iowa Cable
Telecommunications Association director Tom Graves. "You've got a lot of people out
there who have spent a lot of money on these things."

Graves conceded, however, that operators face an uphill
fight on two fronts. First, all that it takes is a simple rewrite of the existing law to
grant cities the permission to offer telephone service. They can already provide cable.

Second, the bid to change the law may gather support from
Gov.-elect Tom Vilsack, Iowa's first Democratic leader in more than three decades and the
former mayor of Mt. Pleasant, a community that had been studying an overbuild of TCI.

UNUSUAL CHALLENGES

A few state associations will have to delve into totally
new territory to handle legislation aimed at them. In Pennsylvania, a state legislator
named John Lawless has made it his public crusade to make sure that prison inmates pay at
least as much for cable as their law-abiding, suburban neighbors.

William Cologie, president of the Pennsylvania Cable and
Telecommunications Association, noted the prisoners benefit from a low bulk rate because
"basically, you're talking about two customers every eight feet." Still, from a
public-relations point of view, it's not an issue that the operators can oppose.

Oregon's union members are providing cable systems with a
new challenge. Last year, the state's electrical unions sought exclusive control of all
installations of fiber optic cable. Operators argued that coaxial and copper are not
subject to electrical inspection, and that this should be extended to fiber optic.

Cable interests were saved when the then-governor vetoed
the bill. But a task force on the issue has been formed, said Mike Dewey, executive
director of the Oregon Cable Telecommunications Association. The bill may be revitalized
now that there is a Democratic-controlled, presumably pro-organized-labor legislature at
work.

West Virginia operators, after the state Cable Advisory
Board asked to be decertified this year, anticipate that municipal forces will lobby for a
new regulatory scheme. They'll argue that even with some rate-regulatory authority
disappearing this year, oversight of other issues -- such as customer service and
equipment charges -- is still necessary, possibly in the form of a regional regulatory
body, sources in the state said.

But talk about a new situation: Minnesota cable interests
expect an "unsettled business climate" next year in the wake of the surprise
ascension of former professional wrestler Jesse "The Body" Ventura to the
governorship.

"A lot of people are interested in what he has
planned," said Mike Martin, director of the Minnesota Cable Telecommunications
Association.

Even if the Reform party governor takes time to get his
administration together, operators still expect a move by LECs to have their
capital-equipment costs exempted from the state's 6.5 percent sales tax. The tax produces
between $15 million and $20 million per year for the state's coffers.

"We believe that if they change it for them, they
should change it for us, because we are both building up-to-date networks," Martin
said.

Related