DIRECTV DEAL WOULD RAISE COMPETITIVE CONCERNS, NCTA IS TOLD

Bassetti said EchoStar buyout of DirecTV would raise antitrust concerns in DBS market, particularly in rural areas with limited access to cable. With up to 30 million homes in satellite TV’s core rural market, she said, govt. officials couldn’t ignore that impact. “There would be 30 million people who'd see 2 competitors go into one,” she said. “It’s procompetitive in some respects and anticompetitive in others.”

If Rupert Murdoch’s News Corp. succeeded in winning DirecTV, Bassetti said, combination would stir concerns of vertical integration. She said lawmakers would worry about possibility of DirecTV’s signing exclusive programming deals with its new parent company, shutting off Fox broadcast and cable channels from EchoStar and cable operators. Vertical integration issue is “less of a concern on the Hill but it’s still a concern,” she said. Noting cable industry’s firm opposition to extension or expansion of program access rules set to expire late next year, she said “it would be interesting to see cable’s reaction” to program access issue if shoe were “suddenly on different foot.”

Congressional aides also debated fate of Tauzin-Dingell bill, which would deregulate Bell provision of data across in-region, interLATA boundaries. While none would predict how bill would survive today’s (Wed.) scheduled markup by House Judiciary Committee, some warned that its failure probably would prompt more calls for regulating cable modem service. “There is a perception that perhaps we do need to change the regulatory structure” for DSL, said Will Nordwind, counsel to House Telecom Subcommittee. “There are clearly supporters of open access in the House.”

But others contended that while idea of regulatory parity for cable and phone industries had appeal, Congress ought to think twice before imposing similar regulatory regime on MSOs. “I think that changing the regulatory burdens on an industry while they're in the midst of innovating is a dangerous game,” Bassetti said. “We need to tread very, very cautiously.” Tim Kurth, policy assistant to House Speaker Hastert (R-Ill.), agreed. “I don’t believe we're at the point where we even want to get into this [open access],” he said, noting that many MSOs were starting to sign access deals with independent ISPs.

Hill staffers said Congress also was reluctant to intervene in market by setting dual carriage rules for cable operators during nation’s current DTV transition. While lawmakers want to speed pace of transition, aides said, they don’t want to accomplish that by imposing new burdens on another industry. “My boss is still grappling with the issue,” said Courtney Anderson, legislative assistant to Rep. Shimkus (R-Ill.): “It is a difficult issue.” Kurth expressed hope that broadcast and cable industries could yet find compromise.

All 5 congressional aides agreed cable industry still generated huge numbers of complaints from their constituents whenever cable rates went up. They urged cable operators to continue upgrading their plant and service, to keep adding new programming and features and to avoid promising too much. But some warned that cable still could remain public’s whipping boy because consumers cared so much about their TV service and cable’s record simply couldn’t compare with that of other industries. “Everyone thinks consumer electronics [industry] is the model -- more quality at lower cost,” Bassetti said. “There’s no way the cable industry can turn itself into a model of the consumer electronics industry, but that’s what you're going up against.” -- Alan Breznick

NCTA Notebook…

AT&T Chmn. Michael Armstrong couldn’t resist taking potshots at Bell operating companies and Tauzin-Dingell data deregulation bill Mon. Speaking on opening panel at NCTA convention, Armstrong called it “myth” that “regional Bells ought to be deregulated.” He said Bells, unlike cable operators, had long received guaranteed rate of return on their investments. “It’s the only industry I know where you can redecorate your office and improve your profitability,” he quipped. As for Tauzin-Dingell measure, which would lift restrictions on Bells’ carrying data across in- region, interLATA boundaries and is fiercely opposed by AT&T, Armstrong argued that it would “re-monopolize the long distance market” by “deregulating monopolies in the telecommunications industry.” Although he doesn’t believe bill will become law, he said, threat that it could become law “is creating too much uncertainty” for telecom players.

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Despite general recession in media ad spending this year, Viacom Pres. Mel Karmazin said his company enjoyed best first quarter ad sales in its history and would finish June with its best-ever 2nd quarter, too. Fresh off $300 million cross-platform ad deal with Procter & Gamble, Karmazin said ad market looked bad this year only because last year’s growth was so great. “It’s not a terrible ad market,” he insisted in Mon. opening session at NCTA convention. While market looks “terrible compared to the aberration” of 2000, he said, it looks fine compared with 1999. Karmazin termed last year “equivalent of Super Bowl year” for ad spending because of so much “dot-com funny money” showered on broadcasters and others. “Our Internet strategy was brilliant,” he quipped. “It was take as much money from the dot-coms as possible.” Karmazin also joked that media companies such as his would be “fighting” to siphon $300 per person tax rebates from consumers this summer. “What’s a better way to stimulate the economy than to have the money come to Viacom?” he asked.

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Viacom Pres. Mel Karmazin took his crusade for elimination of broadcast network and radio station ownership limits on road to Chicago Mon. Speaking at NCTA convention, Karmazin said govt. should allow major network such as Viacom’s CBS to own one of other Big 4 networks because of growth of cable, satellite and Internet as competitors to broadcast TV: “I think that rule is past its life cycle.” Karmazin also called for govt. to scrap broadcast TV duopoly restrictions in local markets as well as limits on number of radio stations in each market that one company could own. “I think we need to do the 2002 Telecom Act,” he said. Karmazin reasserted his interest in buying NBC and CNN if either ever went up for sale, assuming in NBC’s case that regulators dropped dual network rules.

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Universal Music Group (UMG) and video-on-demand provider DIVA announced agreement to develop and deliver new category of music video programming for digital cable subscribers. UMG’s customizable music applications, The Viewing Lounge, will enable cable viewers to create and enjoy personalized blocks of music video programming, companies said.

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MetaTV, provider of software for interactive TV, announced agreements with Tribune Media Services (TMS) and Worldspan, e- commerce provider for travel industry, to provide ITV technology for 2 companies. MetaTV will enable ITV services for TMS’s Zap2it entertainment service. For Worldspan, MetaTV will create ITV travel applications. MetaTV also announced availability of its next-generation platform, MetaTV Universal Portal Platform.

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Comcast and Intel agreed to develop and test home networking products designed to enable cable customers to share single broadband Internet connection, printers and drivers among computers in their homes. Companies said they also agreed to pursue joint marketing and promotion for Comcast’s high-speed Internet service and Intel’s Internet connectivity and home networking products.

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Cable could score over DBS by making local origination and public access programming part of digital package, speakers told NCTA forum Tues. Stressing importance of including such programs, Greg Bicket, New England vp-gen. mgr., Cox Communications, said they would work out to advantage of cable companies because they wouldn’t find their way onto DBS. In marketplace with interest in local programming, such strategy could be very effective, he said. Panelists agreed that getting back DBS customers was “big” part of growing cable’s base. Dish buy-back programs are important part of strategy, they said. “We take a swat team approach to it,” said Dave McCall, Charter senior vp-operations, with offers including free installation and dish buyback. Cable executives said there was shift in concept of core business to digital from basic. Cox is making digital core product incorporating most, if not all, of video programming, Bicket said.