CABLE EXECUTIVES CONTINUE TO HIT 9TH CIRCUIT DECISION ON MODEMS

Cal. has been the site of several lawsuits between municipalities and MSOs, with the cable executives accusing the cities of being unreasonable in their expectations. Terry Bienstock, exec. vp-govt. affairs for Comcast, cited the cable company’s litigation with San Jose as a prime example: “The city wanted $40 million in improvements. We felt we had no recourse but to challenge their conditions. But in the end it helped frame the dialog, not just with San Jose but other markets as well.” Bienstock blamed some of the contentiousness on what he labeled “short-term players. I think the San Jose system had 5 or 6 owners in the last decade. And having short-term players set unrealistic expectations. When you're a long-term player it’s not un- American to want to make money.” Cox Legal & Regulatory Affairs Senior Vp James Hatcher agreed: “We had a case where Jefferson Parish in Louisiana objected because Cox wasn’t paying a franchise fee. They told us, ‘We don’t care what the federal government says -- this is Jefferson Parish.’ Fortunately, not all of our operations are in the 9th Circuit.” Although a judge affirmed that since the FCC had labeled cable modems an information service so a franchise fee wasn’t appropriate, Hatcher said the case reflected the tension between markets and MSOs.

Despite the litigation, Charter’s Shaw said he didn’t feel it had hindered overall business. “Although regulation uncertainty is a worry, I don’t think the rollout of cable modems has been affected. But I do think it’s important to step back and understand what is the basis of these issues… And when we do, I think we'll see it’s not a pure regulatory issue but simply a financial issue that should be dealt with through negotiations, not the courts.” Cox’s Hatcher added: “The high-speed business is doing well. I think its success comes from the FCC’s hands-off approach, so far, to innovation and I give them credit.”

While the panelists presented a united front on the 9th Circuit, they disagreed noticeably when the issue of complying with RIAA subpoenas was addressed. Shaw said Charter was aggressively fighting the requests for subscriber information: “While we absolutely do not condone copyright infringement, we have to respect the privacy of our customers. We have appeared before the 8th Circuit and we have responded under the Cable Act.” Beyond the privacy issue, Shaw admitted there was a public relations aspect to their stance: “We are in competition for customers with Verizon and other competitors who have already taken a very public stance against these subpoenas. We think it would send a bad message to the public if we weren’t equally as bullish on privacy issues.” Bienstock also supported subscriber privacy but was more vague as to exactly how Comcast was responding: “It’s in all our best interest to maintain copyrighted material and support the RIAA. But the process they adopted was a real problem. So we have tried some negotiations. But there are some real problems with the Copyright Act that need to be fixed.” Cox, on the other hand, has agreed to cooperate with requests. Said Hatcher: “We took a conciliatory approach and are working with the RIAA.”

One issue the 3 panelists could agree on was the need to use their allotted bandwidth wisely while pushing to evolve the business models. Shaw said: “We have all upgraded in the last few years but we have to be careful how we deploy our bandwidth to make sure we have enough for the new services we want to roll out.” Bienstock agreed: “We're not one industry anymore, we're multiple industries. We can’t keep living a model that is 30 years old and pretend nothing’s changed. We get too entwined in communication structures set up a long time ago. We have to look at things from a consumer’s point of view.” Bienstock used the example of municipalities’ wanting a public access channel to be used basically as a civic bulletin board. “We have to ask ourselves if that’s the best use of that bandwidth. I don’t think cable is the best place for that anymore. It is much more efficient to use the Internet for that.”

The speakers also called for quick resolutions on regulatory issues. “Investment follows regulatory certainty,” said Bienstock: “We need to know what kind of regulations there will be on VoIP [voice-over-IP], because traditional phone regulations make no sense. It should be ‘regulation-lite.’ VoIP is not one technology, it’s a service provided by many different companies. So how should we regulate that? Again, looking from the consumer’s perspective, you have to ask what they expect. Yes, there should be some regulation for public safety, such as 911, but we need to move in the direction of a national regulatory scheme, with just one set of rules. If we end up with a set of rules for each state or market, that will be very expensive and that cost will be passed to the consumer.” -- Valerie Milano

Western Show Notebook…

The FCC’s push for the transition to digital is tempered by the lack of a workable plan to prevent an estimated 15% of the public from being left without digital reception equipment, FCC advisers admitted on a policy panel at the Western show here. Although FCC Media Bureau Deputy Chief William Johnson said “I think the staff is on track to have a draft in front of them [the 5 commissioners] this year,” the unresolved issues of how broadcasters should be regulated “will drag this out some more.” The stakes are considerable, NCTA Senior Vp-Law & Regulation Daniel Brenner said: “The political ramifications of telling that many people there is no more free TV could be significant.” Part of the problem is that there’s no comparable situation to use as a guidepost, although close attention was paid to the recent transition in Berlin, the first market to pull the plug on analog. Brenner said: “They identified all the noncable, nonsatellite subscribers, and the German government paid for the equipment for those who couldn’t afford to upgrade. But in Germany they don’t have hi-def so the boxes were relatively inexpensive and it was a total of 5,000 households that got one box each. It is highly unlikely our government would be willing to follow a similar strategy because it would involve so many more people.” On the question of DBS carriage, Johnson said he believed satellite providers should have some obligation, “as is technically feasible, but what’s feasible is the questions. I suppose what we're doing is temporizing until the market changes.”