The Tex. cable industry’s lawsuit against a video franchise law raises legitimate issues, especially in allegations of preemption of federal authority, said lawyers who had studied it. The Tex. Cable & Telecom Assn. (TCTA) sued Thurs. to halt implementation of a bill signed the previous day by Gov. Rick Perry (R) (CD Sept 8 p10, July 18 Special Report).
Multicast must-carry legislation backed by broadcasters would cost cable $116 billion or more in lost revenue and other expenses, NCTA said, citing a study it commissioned. Congressional passage of such legislation, while far from certain, would mark an unjust taking of property violating the 5th Amendment, NCTA Pres. Kyle McSlarrow said. NAB disagreed, and several law professors said NCTA wouldn’t have much of a chance in court. McSlarrow said he hopes NCTA won’t have to weigh a lawsuit.
Scientific-Atlanta will benefit from growing competition among video providers, plus strong consumer demand and international growth, said Vp-Corporate Development John Buckett. Customer demand for HDTV, VoIP and PVR products will boost earnings, he said, echoing earlier comments by the set-top box maker. For instance, he said, Time Warner Cable is performing 20,000 VoIP installations per week. “This war is being fought on many fronts for the broadband home,” Buckett said at the Kaufman Bros. investor conference in N.Y.C.: “More competition, more capital, that is based on obtaining the subscriber, is going to be spent.”
Cable operators -- which stopped billing some subscribers affected by Hurricane Katrina -- likely will lose tens or hundreds of millions of dollars in revenue, plus the cost of restoring operations, analysts said. Cable One and Cox are among Gulf Coast cable operators that suspended billing in disaster areas, firm officials said Tues. Comcast is issuing credits “case by case” and area by area, a spokesman said. Mediacom, which some analysts said may be the region’s worst-hit cable operator, didn’t comment.
The America Channel (TAC), which failed for 2 years to get cable carriage, signed a deal with Verizon to be part of its FiOS fiber pay-TV service. Some media activists said the deal raises competitive issues. The upstart network, 1 of 5 that Verizon said Mon. it will air, has fought against Adelphia’s takeover on grounds that it will further stifle programming competition (CD Aug 5 p9). The success of Verizon’s deal with the fledgling network will indicate whether programmers can succeed without help from major cable operators, said Media Access Project Senior Vp Harold Feld.
Scientific-Atlanta (S-A) will use Microsoft IPTV software in its set-top boxes, including those used in the upcoming launch of SBC’s pay TV service. The latest deal expands a previous relationship between Microsoft and Scientific-Atlanta, which had been working on encoders, S- A IPTV Product Dir. David Alsobrook told us. The firm is “targeting a worldwide market” for IPTV set-top boxes, he said. It will roll out separate models for the U.S. and international markets. The model for SBC -- which plans to sell a pay-TV service of its own to compete with cable operators -- will be ready by mid-2006, Alsobrook said. “We haven’t actually announced any other customer commitments at this time,” he noted. The S-A integration is “going well,” said Ed Graczyk, Microsoft TV mktg. dir., who called the accord announced Mon. “an extension of that longstanding history” between the firms. He said Microsoft is conducting trials of its set-top box software for Verizon’s FiOS project, which also will compete with cable operators in selling faster Web service and pay TV. “We're on target with them” for a FiOS launch this year with a Motorola set-top box, Graczyk said. SBC this month picked Motorola and S-A to provide set-top boxes for its introduction of IPTV set for late this year or early next (CD Aug 19 p5).
Emmis, which is selling some TV stations, didn’t follow equal employment rules at 2 properties in Honolulu, the FCC said, fining the firm $18,000. KGMB (Ch. 9, WB) and KHON-TV (Ch. 2, Fox) failed to recruit properly for 11 job openings, the Commission said. Emmis didn’t keep proper records for Equal Employment Opportunity (EEO) public files, Media Bureau Acting Chief Donna Gregg said in a notice of apparent liability for forfeiture, issued Fri. Emmis learned of the poor recordkeeping in an internal audit, a spokeswoman noted, saying Emmis takes “all of our FCC obligations seriously.” Once Emmis saw the problem, she said, the broadcaster “took immediate steps to correct the situation, including better training of our hiring managers.” Emmis has 30 days to try to get the fine reduced or rescinded. The Hawaii stations are not among 9 Emmis is selling for $681 million (CD Aug 23 p4). The EEO violation isn’t likely to come up in the deal’s license transfer proceedings because the FCC never has said unintended bias affects the character necessary to hold a license, an industry source said. Gregg wrote that the stations, which “willfully and repeatedly” violated some EEO rules, now must submit recruitment and hiring data to the FCC for 3 years.
The cable industry, pushing for royalty fee changes, is losing money because of outdated rules that favor some TV stations over cable systems, lawyers say. As a result of changes in the broadcast and cable industries since 1976, cable operators may be losing millions of dollars annually, they said. Cable attorneys said the problem needs fixing immediately.
Crown Media Holdings, which said last week it may sell itself, could fetch more than $1 billion. The owner of the Hallmark Channel said last week it’s considering strategic alternatives including a sale to a 3rd-party (CD Aug 22 p8). Hallmark Cards owns a majority. The entire company, including its domestic library, could bring roughly $1.3 billion, estimated Jefferies & Co. cable analyst Robert Routh. Natexis Bleichroeder analyst Alan Gould predicted a price of about $1.1 billion. Both named Comcast, Disney and Liberty Media as possible buyers. Officials at Crown Media and Hallmark didn’t comment. “There are clearly synergies if a company with multiple cable networks were to absorb Crown Media,” Gould told us, saying the company has about $450 million in net debt. “It’s very difficult in today’s environment to have the economics work as a single [channel] programmer.”
SBC picked Motorola and Scientific-Atlanta to provide set-top boxes for its Internet Protocol TV (IPTV) launch, set for later this year or early next. That “controlled market entry” will precede a wider launch mid-2006, SBC said. It said the contracts, lasting through 2008, will provide “equal opportunity to both vendors.” The set- tops, which will use Microsoft IPTV Edition software, will give customers access to features that include VoD as part of SBC’s Project Lightspeed. Financial terms weren’t disclosed. Motorola, which has sold wireless handsets and telecom infrastructure gear to SBC, views the order as “an expansion of a relationship that has been going on for a number of years,” Dan Moloney, pres. of its Connected Home Solutions unit, told us. Verizon’s pay-TV launch, which Motorola also is working on, is on schedule for a Sept. or Oct. introduction, he said: “Things are progressing very well.” The deal may boost demand for Scientific-Atlanta products, because “this really creates a new market,” CTO Bob McIntyre told us in a separate interview. But the company is unlikely to have order “visibility” until the 2nd or 3rd quarter of the year. He said SBC is “going to go at a measured pace, and they know it’s going to be hard with the system integration.”