Why Cable Gave Up Access Fight

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Washington -- It's not like the cable industry to back
down without a fight.

But that's exactly what happened in the past six
weeks, as three MSOs -- Comcast Corp., Time Warner Cable and MediaOne -- waved the white
flag one by one, rather than battling Ameritech New Media over access to ESPN Classic

It may have been a matter of luck, good timing, or a
combination of the two, but the chain of events proved at least one thing: In less than
two months, ANM achieved through a high-profile Federal Communications Commission
complaint what it has failed to achieve on Capitol Hill during the past two years --
namely, passage of new program-access legislation.

Under federal law, MSOs are entitled to ink exclusive deals
with programmers in which they do not have financial stakes. Classic Sports is owned by
The Walt Disney Co., which does not own cable systems.

ANM, the cable division of Chicago-based Baby Bell
Ameritech Corp., had filed a complaint at the FCC alleging that Time Warner and MediaOne
had illegal contracts to distribute Classic Sports exclusively starting Jan. 1, 1999, in
segments of Michigan and Illinois.

Comcast, which was already a defendant in two unrelated
program-access cases pending at the FCC, worked out an arrangement with ANM prior to July
1 -- the date of ANM's FCC filing -- so it was never named as a defendant.

A few hours after ANM president Deborah Lenart ended her
press conference here to unveil the FCC filing, Time Warner informed the media that it
would not enforce its exclusivity against ANM.

MediaOne, asserting that its contract with Classic Sports
was "legal and proper in every respect," said it planned to "maintain"
the exclusive deal. On July 31, MediaOne took the next step, telling the FCC that
ANM's complaint was "frivolous" and that it ought to be rejected.

But not long after FCC staff began to review the various
arguments on their merits, MediaOne's interest in protecting the Classic Sports deal
vanished. Two weeks ago, MediaOne agreed not to enforce its exclusivity in nine
Detroit-area communities where it vies for subscribers with ANM.

In an interview last week, Lenart said she expects Classic
Sports to renew its contract with ANM beyond the Dec. 31, 1998, expiration date.

Lenart said notwithstanding Classic's status as a
non-vertically integrated programmer, the contracts were illegal because the MSOs used
their clout to block ANM from further distributing Classic Sports, which ANM has been
carrying for the last three years.

"When an existing cable operator with monopoly power
in the marketplace exerts market power like that and forces a new competitor to not have
access to the programming that they are already carrying, and that they have invested in,
that's an unfair practice, in our determination," Lenart said.

In league with other competitors to incumbent cable
operators, Lenart has repeatedly called on Congress to abolish nearly all forms of
exclusivity. Two House bills have been introduced that are designed to do precisely that,
but their outlook for this year is shaky.

Lenart said it was false to assume that ANM was using the
complaint process to make de facto changes in program-access laws.

"If that were the case, we would be filing
program-access complaints for TV Land" and local sports network ChicagoLand TV
(CLTV), she said.

Lenart said she has not filed to obtain access to TV Land,
CLTV and MSNBC because these unaffiliated networks, unlike Classic Sports, have never been
included in an ANM programming package.

Between the time when ANM filed its complaint and when
MediaOne agreed to waive exclusivity, ANM caught a break: The FCC adopted new
program-access-enforcement rules in which the agency promised to impose fines and to award
damages if operators knowingly violate its rules.

Spokesmen for Time Warner and MediaOne said their actions
with regard to Classic Sports were unrelated to events in Washington, D.C., and they
scoffed at the idea that ANM had a winnable case at the FCC.

"We made it very clear when we initially declined to
exercise the exclusivity contract that we were doing it for our own reasons, and not
having anything to do with the validity of the contract, and that it in no way should this
be seen as diminishing that right in the future," said Michael Luftman, Time
Warner's vice president of corporate communications.

Time Warner's involvement in the case was narrower
than MediaOne's.

Steve Lang, MediaOne's executive director of financial
and corporate communications, said the MSO was confident that the FCC would have denied
ANM's complaint, just like the FCC dismissed ANM's bid to void MediaOne's
exclusive deal with Home Box Office under a contract that was grandfathered by the 1992
Cable Act.

"It's just not worth the time and energy,"
Lang said. "We are not interested in expending the energy and resources over this
particular network in that particular set of markets."

A Washington, D.C., cable lawyer, who asked not to be
identified, said that although ANM's case was porous, ANM's prospective loss of
Classic Sports was "not our best fact situation, from a public-relations" point
of view.

"I don't know that the cable industry was looking
to create another anecdotal thing that could be thrown up in their face about taking stuff
away from people," the lawyer added.