Excite@Home, Cablevision Settle

Heading off nasty showdown in court next month, Excite@Home and its 3 main MSO owners -- AT&T, Comcast and Cox Communications -- and Cablevision Systems dropped their dueling lawsuits against each other Aug. 17. In so doing, parties cleared way for sweeping restructuring of Excite@Home that would give AT&T unchallenged voting control of cable industry's leading high-speed data venture. Settlement also cleared way for Excite@Home to extend its distribution deals with its 3 main partners for at least another 4 years while providing Comcast and Cox with option to end exclusive carriage of data service and terminate entire distribution deal by June 2001, one year early (TVD April 3 p8).

As part of resolution of legal case, Cablevision agreed to dismiss its claims against Excite@Home and its 3 main MSO backers and Excite@Home agreed to dismiss its counterclaims against Cablevision, all filed in Del. Chancery Court, Wilmington, in late June and early July. But they didn't settle all issues. Instead, they agreed to conduct private negotiations on Cablevision's bid to gain warrant options and buyout terms similar to lucrative ones that Comcast and Cox received from AT&T in return for ceding control of venture.

As smaller partner in Excite@Home, Cablevision had argued that it was entitled to treatment similar to that accorded Cox and Comcast. "Cablevision wants an exit strategy where it gets the same kind of benefits that Comcast and Cox got," said Broadband Intelligence Pres. Cynthia Brumfield. However, other 3 MSOs and Excite@Home had said no, arguing that Cablevision had breached its contract with venture partners by not offering data service exclusively in its cable systems (TVD July 10 p6).

Both sides declined comment on negotiations, which are believed to have started in earnest. In terse statements, they merely said they had taken issue out of court. "We're looking forward to reaching an amicable resolution of the matter," Cablevision spokeswoman said.

But industry observers suspected that Excite@Home and its 3 main partners already had assured Cablevision that they would sweeten pot for MSO. Venture partners clearly hoped to entice Cablevision, which has rolled out Excite@Home to only fraction of its 93,350 data subscribers in N.Y. metro area, to extend service to its entire broadband customer base. "They [Cablevision] obviously got some reassurances of something," Brumfield said. "What that something is, isn't clear."

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AT&T submitted plan to FCC for complying with agency's safeguards to keep MSO corporate executives away from its programming assets, such as Liberty Media and Rainbow Programming. Confidential filing, required by Commission as part of its approval of MediaOne merger 2 months ago, apparently spells out AT&T's efforts to maintain firewall between its corporate offices and programming units. AT&T picked Marilyn Wasser, vp-law and corporate secy., to be its corporate compliance officer.

Overbuilder WideOpenWest (WOW) won another cable franchise in Tex. as Ft. Worth authorized it to build fiber broadband network to provide competitive cable TV, high-speed Internet access and telephone services to city's 215,000 households. Company already has franchises in suburban Grand Prairie and Irving and is negotiating with 20 other communities in state, including Dallas. WOW said it now has franchise agreements in place to serve more than million potential homes in Ariz., Colo., Mo. and Tex. and expects to sign up first customers early next year.

In followup to earlier inquiries to AOL and Time Warner (TW) on their pending merger, FCC Cable Bureau is seeking more details about AOL-TW's plans to integrate cable and online services. Specifically, 7-page letter seeks more information on merged company's plans to offer interactive TV services, open TW's cable lines to rival ISPs, grant competitors access to AOL's popular instant messaging (IM) system, provide high-speed Internet access over DSL lines, sign telephone and online carriage deals with AT&T. Most notably, 3rd in series of Cable Bureau letters asked: (1) Whether AOL-TW would favor affiliated programming services on its AOL TV interactive service and electronic programming guide. (2) For details on AOL's deals with DSL providers to offer high- speed AOL Plus service over phone lines. (3) For companies to supply more information about their negotiations with AT&T to provide AOL's online service to AT&T Broadband cable subscribers and AT&T phone service to TW cable subscribers. Separately, in quarterly SEC filing, TW revealed that it could take one-time charge of $200-$300 million to cover costs of restructuring its Road Runner high-speed data venture with AT&T. Under consent order it signed with Dept. of Justice, AT&T must divest its stake in Road Runner as part of its recent takeover of MediaOne Group.

Having satisfied objections of Justice Dept. and FCC by agreeing to spin off 122 radio stations in 37 markets -- many of them to minority buyers - Clear Channel Communications (CCC) now is free to close on its $23.5 billion purchase of AMFM Inc. and its 400-plus radio stations. Final approval came from FCC Aug. 15, 3 weeks after CCC's signing of consent decree to gain approval of Justice Dept. (TVD July 24 p5). Deal involves "a very complex series of transactions, all interrelated," and date for closure hasn't been set, CCC spokesman said. Deal, announced 10 months ago (TVD Oct 11 p9), had been awaiting approval by 2 agencies. FCC final order won't be released for several days, Commission official said, and separate concurring statements from commissioners are expected.

CBS affiliate WTVR-TV Richmond, Va., is first to sign up for electronic meter service that Nielsen Media Research plans to begin there in Oct. 2001. Nation's 60th largest TV market with 474,610 TV homes, Richmond-Petersburg will become Nielsen's 53rd metered market and expand Nielsen's coverage to 67.7% of U.S. households.

WorldCom said last week it planned to file applications with FCC to provide 2-way MMDS in more than 60 markets, including Boston, Pittsburgh, San Antonio. Aug. 14 marked opening of Commission's first filing window for companies to submit applications to provide 2- way services. Among other cities in WorldCom's first filing round are Buffalo, Jackson, Miss., Memphis, Norfolk, Providence. "Our applications move us one step closer to market launch," said John Stupka, WorldCom pres.-wireless solutions. WorldCom CEO Bernard Ebbers had announced plan to apply for 2-way services authorization in speech last month to Wireless Communications Assn. Company is conducting MMDS trials in 5 cities and has set commercial debut for later this year. WorldCom plans eventually to seek licenses in all 160 markets where it holds MMDS licenses. Stupka said Memphis would serve as "model market" for its MMDS offering of broadband fixed wireless service.

Moody's lowered debt rating for Adelphia Communications, nation's 6th largest MSO, and various subsidiaries. It said it cut rating for debt issued by Adelphia because of "heightened credit risk for all classes of securities issued by the company." Moody's blamed higher credit risk on Adelphia's aggressive acquisition strategy and heavy reliance on debt financing, saying company "has placed notably greater financial strain on its balance sheet over the past year." But Moody's confirmed Adelphia's overall Ba3 senior implied rating, pointing to "the ongoing strength of the company's operating performance," improvements expected from technological upgrades and attractive markets with good demographics.

Hearst-Argyle TV announced "long-term" retransmission consent agreement with Time Warner Aug. 14 after more than 7 months of negotiations and several contract extensions. Agreement covers broadcaster's TV stations in dozen TW markets. Parties declined to disclose terms of agreement but issues such as cash compensation and carriage of Hearst-Argyle's cable channel Lifetime were known to be key negotiating points. Hearst-Argyle said of 17.5 million TV households reached by its stations, 3.4 million are served by TW cable systems. With agreement, Hearst- Argyle said it had concluded retransmission contracts with all major MSOs except Comcast.

Nielsen Media Research signed deal with TiVo to gauge use of latter's personal video recording (PVR) service. Nielsen will use its software metering technology to measure TiVo set- top boxes in former's meter samples of TV households. Deal seems designed to make TiVo service more attractive to advertising community, which is greatly concerned about impact of time- shifting devices on viewing of ad-supported TV programming. Separately, TiVo signed deal with BBC to promote latter's programming on TiVo's service when it starts in U.K. later this year.

Satellite technology is rapidly becoming choice of companies seeking to avoid Internet bottleneck for sending video and music to PC users. With Internet music stations gaining popularity with online users, delivery over clogged wireline system has frustrated listeners, whose signals often are interrupted by stuttering or stopping. Satellites are becoming increasingly popular solution because music signals can bypass busy ground systems by going directly to satellite and back down through network to listener. Viacom's MTV Networks and Penguin Radio are just 2 of several programmers using satellite service. For instance, MTV, which has 18 Web sites, beams music signals over Internet using satellites. Bear, Stearns analyst predicted $48 billion market for streaming media by 2010. He said market was just $1.3 billion today, with only 30% of Internet traffic being delivered by 3rd party service providers such as iBeam or Cidera. IBeam has signed up 250 content providers since it started offering service 9 months ago at average cost of $4,600 monthly. Company still is in red, reporting 2nd-quarter loss of $33.1 million on revenue of $3.4 million, but prospects are brighter because of new offering, iBeam CEO Peter Desnoes said. Intelsat and PanAmSat reportedly also are set to enter Web distribution market.

FCC Cable Bureau granted 10 MSOs more time to start offering point-of-deployment (POD) security modules for hybrid analog- digital cable set-top boxes in selected markets. But Commission didn't give cable operators as much time as they sought in all their systems, ordering several systems to provide PODs to subscribers this fall and many to do so by next spring. In 11- page order issued by Cable Bureau Deputy Chief William Johnson Aug. 15, Adelphia Communications, AT&T Broadband, Cable America, Cablevision Systems, Charter Communications, Cox Communications, GCI Cable, Insight Communications, Mediacom Communications and Time Warner Cable all received at least partial extensions of agency's July 1 deadline for supplying PODs to customers. However, order stipulated that most systems must comply in year or less to speed move of cable set-tops to retail stores. Action followed unusual scolding of MSOs by Cable Bureau Chief Deborah Lathen, who, in late June order granting temporary 6-week waivers to MSOs, expressed strong doubts about "good faith" and "commitment" of petitioners to meeting POD requirements. (TVD July 10 p6).

Viacom has offered to buy from public holders remaining shares of Infinity Bcstg. it doesn't own for $15.2 billion by swapping 0.564 shares of Viacom Class B common stock for each outstanding Infinity share. Viacom, which holds 100% of Infinity's Class B stock but none of radio broadcaster's Class A, said its offering price was 13.6% premium over Class A price of $35.25 per share at close Aug. 14. In response, Infinity said its board had formed special committee of independent directors to review proposal. Infinity said special committee, consisting of Bruce Gordon and Jeffrey Sherman, expected to hire independent legal counsel and financial advisers to aid in its review.

Media General announced last week it would create Interactive Media Div. to boost its prospects in interactive TV and Internet businesses. Company said new unit, scheduled to start in Jan., would focus on business strategy, product development, interactive media operations.

In 2 new friend-of-court briefs, Hands Off The Internet and OpenNet Coalition submitted dueling findings on open access question to 4th U.S. Appeals Court, Richmond, Va. Like NCTA and 5 state cable associations earlier (TVD Aug 14 p6), Hands Off The Internet argued that "forced access" mandate of Henrico County, Va., ran afoul of national policy of broadband "unregulation" that encouraged deployment, investment and competition in emerging high-speed data market. Filing also contended that "disparate local broadband regulation" would undercut national policy, hamper broadband market and impose high technical and operational costs on cable operators. In contrary filing, OpenNet Coalition brief called on 4th Circuit to follow example of 9th U.S. Appeals Court, San Francisco, in declaring cable-Internet to be telecom service. It urged appellate court to overrule lower court's finding that high-speed data was cable service and treat cable-modem service as identical to DSL service over phone lines. "The service provided by MediaOne/AT&T is, in fact, essentially the same as local telephone company-provided high-speed data transmission (DSL) service and therefore, under the Communications Act, they are both properly defined as telecommunications services subject to specified regulations," group argued. OpenNet contended that open access mandates would "permit independent or unaffiliated ISPs to compete on a level playing field with cable-affiliated ISPs, and prevent MediaOne/AT&T and other cable companies from leveraging their control over the wire into an unfair advantage in the ISP market." Verizon and Henrico County also plan to submit reply briefs in case, with oral argument set for Sept. 27.

Media have fared well in appeals of losing jury trials involving First Amendment issues before Supreme Court and appellate courts, according to 20-year study (through 1999) by Libel Defense Center. In contrast, verdicts in favor of media seldom are reversed, with media victories as defendants upheld in 89.7% of cases. Only 27.8% of time have plaintiffs' victories in lower courts been upheld on liability and damages when appealed by media, study reported. In last 20 years, plaintiffs who are public officials or public figures "face nearly insurmountable odds" on appeal from media victory, Center said, with verdicts for media affirmed 89.7% of time. Findings "are solid evidence that appellate courts are substantial guarantors of free speech and free press rights in media cases," Center Exec. Dir. Sandra Baron. Supreme Court has granted certiorari in only 15 of 327 libel and privacy cases during period studied, with 23 appeals denied in most recent term of court (which ended in June), only one accepted. That case, Bartnicki v. Vopper, involves broadcast of portion of recording of telephone conversation without permission. Court's decision, expected in fall, "will be of enormous interest and importance," Center said.

DirecTV said it signed revenue-sharing agreement with National Rural Telecom Coop (NRTC) that will allow company to market programming services to customers living in NRTC communities. Move is viewed as important step for DirecTV in its attempt to improve numbers in rural areas, industry source said. DirecTV signed similar agreement with reseller Pegasus (TVD Aug 14 p8).

Speculation continued to intensify last week on how AT&T would reverse its declining fortunes on Wall St. Latest possibility surfaced Aug. 18 with Wall St. Journal report that AT&T Chmn. Michael Armstrong and BT CEO Peter Bonfield had been informally discussing possible merger, prospect that both companies disavowed later that day. Companies already have international Concert joint venture. Another possibility mulled by industry observers in last several months was that AT&T might spin off its consumer long distance operations into separate vehicle such as tracking stock. N.Y. Times also reported last week that Liberty Media Chmn. John Malone might stage leveraged buyout of company's consumer long distance business, which has seen disappointing results in last year, reflecting fate of competitors such as WorldCom.

RCN Corp. said it received regulatory approval to build high- capacity broadband network in Burlingame, Cal., to provide bundled phone, cable and Internet services. Competitive cable franchise follows similar approvals by Beverly Hills and Gardenia 6 weeks ago. Targeting most densely populated residential markets, company is offering its bundled service to northern Cal. communities of Daly City, S. San Francisco and San Mateo and is building network in Redwood City. In L.A., RCN is constructing system in alliance with Southern Cal. Edison. So far, RCN has designed or built 4,300 fiber miles of its high-capacity network in Cal., company said.

European Hot Telecom unit of DirecPC and UnitedScreens will start point-of-purchase audiovisual communications and ad service at 800 gas and convenience stores in Germany. Drivers pumping gas will be entertained by TV screens advertising new products and providing news, weather and traffic information. New service will be available in 4th quarter.

"Women at the Top: A New Era" is theme of Aug. 26-29 convention of AWRT, Regal Biltmore Hotel, L.A. Speakers include FCC Comr. Ness, TvB's Ave Butensky, Early Show co- anchor Jane Clayson, Young Bcstg.'s Deborah McDermott, ATAS Chmn. Meryl Marshall, XM Satellite Radio's Lee Abrams, E! Networks' Mindy Herman, Cartoon Networks' Betty Cohen, iBlast's Ken Solomon, Disney/ABC's Anne Sweeney. Emmis Bcstg. CEO Jeff Smulyan and TV host Leeza Gibbons will receive AWRT's Silver Satellite Award at Aug. 26 dinner.

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