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1990-10-14
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The following article appeared on page 1 in the July 25 1988 edition of
Multichannel News. Posted here with permission.
FCC May Propose Allowing Telcos to Own Cable Ops
by Jeannine Aversa
Washington - The Federal Communications Commission last week tentatively
proposed repealing all or part of its telephone-cable cross ownership
rules, but will solicit public comments on whether the agency should make
this recommendation to Congress.
For about one year, the agency has been considering either modifying or
eliminating the rules, which were adopted in 1970. Codified in the 1984
Cable Communications Policy Act, the rules generally prohibit companies
from owning cable systems in their service areas. Any FCC move to lift the
restrictions would have to be approved by Congress.
Since the FCC's cross-ownership rules were adopted, the cable
marketplace has grown - 50 percent of the country's homes are cable
subscribers - and the industry has become financially successful.
The fules are no longer needed to prevent anti-competitive abuses by
the phone companies, the FCC said. "Telephone companies are no longer in
the position that they can enjoy the advantage of being the first provider
of cable television service or preemptively eliminate competition from
independent cable operators," the commission said.
The proposal was criticized by the National Cable Television
Association and applauded by telephone companies, which would like to
become players in the video marketplace, as well as by the United States
Telephone Association, a Washington, DC based trade organization.
Cable groups contend that the phone companies still possess enough
econimic clout to bully competitors.
"For the telcos to keep their telephone monopolies, but at the same
time be freed to enter the cable business within their telephone service
areas, would be an invitation to predatory behavior not seen in this
country since the days of the robber barons," said NCTA president James
Mooney.
Not so, said USTA president John Sodolski: "The telephone induatry today
is a much different industry from when the cable prohibitions were originally
adopted. There has been a good deal of change."
The FCC said the benefits of allowing telcos to offer cable "are an
increase in the provision of new broadband services, such as HDTV,
videotex, home shopping and video phones, and extension of cable service to
areas where it is economically infeasible for a separate company to offer
service."
FCC chairman Dennis Patrick said he envisions a television marketplace
with "two pipelines into the home competing for video-services
programming."
If a telco were allowed to provide programming into the home it would
have to make its cable or fiber facility available to other programmers,
said Mr. Brock.
Phone companies can get a waiver of the rules under certain
circumstances, such as demonstrating "good cause" that it should
participate in the cable business, or by providing cable service to rural
areas that would otherwise be without it.
Also, FCC Common Carrier Bureau Chief Gerald Brock said the agency has
proposed further defining "good cause" waiver conditions and loosening
financial standards for affiliations between telephone and cable companies.
The FCC proposed that construction and operation of "technologically
advanced, integrated broadband networks" by a phone company would
constitute good cause for a waiver.
The agency is also calling for retaining existing regulatory safeguards
that forbid phone companies from having an unfair competitive advantage
over independent cable operators.
Those safeguards apply to access to utility poles and conduits, and
cross-subsidizations. FCC accounting policies require telephone companies
to separate regulated revenues from non-regulated revenues.
The FCC has not set a deadline for public comments on its proposals,
but Mr. Brock anticipated it will make a recommendation before the next
Congress convenes in January.
The issue has heating up on Capitol Hiss this year, although Congress
has taken no action.
Congressional amendments to the Cable Act would not change the 1984
U.S. District Court's Modified Final Judgement, which broke up American
Telephone & Telegraph Co. and restricts the seven regional Bell holding
companies from offering cable television and other so-called information
services.
Tele-Communications Inc., the nation's largest cable operator, was
skeptical that lifting the telco restrictions would work.
Bob Thomson, TCI's vice president of government affairs, said the
agency's action appears to "sweep off the table" concerns that cable
companies are too large. Telcos are "eight times the size" of cable
companies, he said.
He also said TCI has "serious doubts" as to how the FCC can adequately
guard against cross-subsidization and enforce its policies.
See related story in file TELCO2.CBL here in Lib 3