CABLE FACES UNPRECEDENTED ONLINE LEGAL ISSUES, SPEAKERS SAY
ANAHEIM -- Proliferation of online services offered by cable companies has resulted in MSOs’ grappling with unprecedented, and unforeseen, privacy and legal issues. At law and policy roundtable Thurs. at Western Show here, Charter Vp Linda Reisner cited unexpected consequences of being Internet broadband supplier and having ISP customers: “We have school districts calling us up telling us a student had just posted a message on a Web site that they were coming to school to shoot someone. Then we have to call the police immediately to provide that information, but that creates privacy issues.”
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Such incidents put strain on MSO Web security personnel and legal staffs, Reisner said: “If I get a phone call like that, that is the number one priority. I've got a very limited legal staff and limited security staff, but I've got to have somebody stop everything they are doing and make sure to take care of it right away… It puts us in the position of having to assist the police, which we have always had to do through subpoena powers and things like that. But it raises the level of involvement with our customers in a way we never had when they were just watching our television service.”
In past, privacy issues could complicate such situation, but Reisner said new laws had made dealing with such crises easier: “The new antiterrorism bill says if you have reasonable belief that there is a threat of ‘imminent harm,’ you can release personal information you normally could not release. And in those cases, I think we are well within our legal rights. When it comes to child pornography, there are federal statutes which require us to report it if we get a call from a customer saying they came across a site that offends them. But before we do, someone at Charter has to look at it and decide, is it or isn’t it? These are the issues that 2 years ago didn’t exist for MSOs.”
Speakers expressed concern over costs and revenues related to online, including concern over issue of what money was being left on table when there was no comparable parity in franchise fees and costs for DBS vs. cable. Reisner said: “We pay our programmers a significant amount of money and we spend a lot of money trying to figure out how to deal with programming costs. The last issue on the table is almost always streaming video, and that is very difficult. At the same time, programmers are asking more money from us, raising rates as much as 13%, they are going after markets that will cannibalize our audience, such as streaming video. Their attitude is: ‘Well, you get cable modem money. We should be able to see our programming on our Website.'”
However, attorney James Casserly said: “Revenues are not really declining. Consumers are buying more cable services than they were before. Just look at cable service revenues alone, not counting Internet, and you will see they've had a significant upward slope over the past period of years as people have gone from being basic only to premium services to digital.”
Meanwhile, question of whether to regulate seemed to be telecom’s burning question at show. Attorney Lee Burdick observed: “California seems to be going backward. The courts here are having a difficult time dealing with the competitive issues. The PUC is spinning on a paternalistic political philosophy for the consumer” that focuses on pricing and failure of cable MSOs to reduce costs as they had promised.
Burdick said Cal. PUC was wrestling with question of state vs. local regulation: “The Commission feels that municipalities are incompetent and has flat out stated it. They point as evidence of this failure [to] the fact that 95% of the marketplace is controlled by the same few companies established 5 to 7 years ago. With the state receiving so many complaints about cable service, the PUC is considering a move to make cable service a utility and thereby bring it under its control.”
Not everyone agreed consumer cost should be focal point of any regulatory discussion. Attorney John Seiver said: “Just because prices haven’t dropped, they make the mistaken assumption there is no competition. But that would be like saying that because the price of a Mercedes has gone up, instead of down, that it doesn’t face competition” from other manufacturers such as BMW or Lexus. Attorney Gardner Gillespie said: “Consumers can always go to Radio Shack and get a dish. Satellite is the great equalizer.”
Although much of cable’s regulatory focus has been with eye toward fending off threat posed by satellite, panelists agreed powerline communications provided by utility companies posed potentially far greater threat because of existing access and because, as Gillespie said, “the power companies have no competition. We now know that.”