Paul Gluckman

Contrary to XM claims that no regulation bars its $13 billion “merger of equals” with Sirius (CD Feb 22 p2), the FCC “explicitly prohibited any such merger” in a 1997 order establishing the 2 satellite digital audio radio services (DARS), said a memo readied Fri. for NAB, a foe of the deal. NAB sent copies of the document to the media.

CableLabs has refused to approve DTCP-IP as a digital output protection technology for one-way plug & play cable devices and DTLA members plan to appeal that refusal to the FCC, they told the Commission in an ex parte filing. DTCP and DTCP-IP have won “widespread adoption,” said the DTLA members -- Hitachi, Interl, Matsushita, Sony and Toshiba. License conditions CableLabs plans to impose on DTLA and its licensees “would effectively give cable operators rights to exercise control over multiple devices along the home network,” the DTLA firms said. They also would “inhibit home network interoperability and disenfranchise products currently on retail shelves and in consumer homes that provide effective and robust protection to content without risk of theft of cable service or harm to the cable network,” they said. A CableLabs spokesman said his organization “continues to engage with DTLA and its member companies to resolve outstanding business and licensing issues in an attempt to come to a marketplace solution similar to those CableLabs has reached with Microsoft, Real and Motorola for IP-based outputs.”

The House Judiciary Committee said Wed. it will hold a Feb. 28 hearing on the proposed XM-Sirius merger, with Sirius CEO Mel Karmazin testifying and other witnesses to be announced. Members need to examine whether the merger would improve choice and lower prices for consumers, said Judiciary Committee Chmn. Conyers (D-Mich.). Conyers is chairing a new bipartisan antitrust task force that will stay in session until Aug. -- its first order of business will be the proposed satellite merger.

Sirius and XM think chances are better than 50-50 they'll win regulatory approval of their all-stock $13- billion “merger of equals,” Sirius CEO Mel Karmazin told analysts Tues. in a joint conference call with XM Chmn. Gary Parsons. Karmazin wouldn’t have taken the merger proposal to the Sirius board if he weren’t so confident of regulatory approval (see separate story), he said. XM and Sirius wouldn’t have paid hundreds of thousands of dollars to antitrust attorneys if they weren’t sure they're on “solid” regulatory ground, Parsons said. However, Parsons, said he wasn’t willing to specify odds on merger approval.

Charter can ill afford the $100 million cost 2007-2009 of complying with the FCC CableCARD rule if the company is denied a waiver, it told the Commission. If Charter gets a waiver, it will deploy 240,000-280,000 new low-end set-tops and 300,000-350,000 new high-end boxes a year, it said. Low- end boxes the waiver would cover are 40-45% of the total but would run up most of the CableCARD compliance costs, Charter said. A waiver “would save it, and its customers, more than $50 million,” the company declared, citing “actual price information” from box suppliers Motorola, Scientific-Atlanta and Pace Micro. Those savings are “essential” for the company in the DTV transition, since it has “far fewer financial resources” than other big cable providers, it said. Charter has $20 billion debt, much from upgrades of old cable systems acquired in the 1990s, it said. The debt, 11 times yearly EBITDA, is more than triple Comcast’s and Time Warner’s, and 50% above the average of most large public MSOs, Charter said. The company said it has had negative cash flow each of the past 5 years. Charter runs many small, “widely dispersed” cable systems, so the digital transition will cost it far more than “more consolidated MSOs” per subscriber, it said. Charter called itself a “decentralized, highly scattered collection of local systems” in 31 states, with 3,379 franchises -- 4-1/2 times as many as Cox, which has a comparable number of subscribers. Unlike other large operators, Charter has no “national backbone” connecting its local systems, it said: “Charter must therefore spend significantly more per subscriber to launch digital simulcast in many of its markets because of higher distribution costs and because the fixed per-headend costs must be recouped from smaller, more localized bases of customers.” If Charter hadn’t spent so much money appealing the Commission’s rules for the CableCARD technology that “the cable industry came up with in the first place,” it might have the financial resources it now says it lacks, said Julie Kearney, CEA senior dir.-regulatory counsel.

If any American “loses the ability” to view over-the-air TV after the Feb. 2009 analog cutoff, it won’t be for lack of “accurate information about the transition,” the heads of CEA, NAB and NCTA told House and Senate leaders in joint letters Wed. Broadcasters, CE and cable will use their “collective resources to develop and implement an extensive consumer education campaign in advance of the transition,” the letter said. As expected, it didn’t have many specifics (CD Feb 14 p11), including on financing their program. The letter was signed by CEA’s Gary Shapiro, NAB’s David Rehr and NCTA’s Kyle McSlarrow. Copies of the House letter were sent to Commerce Chmn. Dingell (D-Mich.) and ranking member Barton (R-Tex.) and to Telecom Subcommittee Chmn. Markey (D-Mass.) and ranking member Upton (R-Mich.). The Senate letter went to Commerce Chmn. Inouye (D-Hawaii) and ranking member Stevens (R-Alaska). The “inter-industry DTV campaign” won’t wait until the cutoff date “to educate consumers about the transition and provide information about actions they may need to take to ensure they do not lose television reception,” the letter said. “These efforts will focus on developing simple, powerful messages about the consumer benefits of digital technology and actions that consumers should take to maintain their access to over-the-air television.” The campaign will be waged by “a broad coalition” that will include the entertainment and communications industries and consumer organizations, the letter said. “Educational tools” they said they will develop: (1) A “robust” website giving “simple, useful information about consumer options” during the transition, with links to a “wide variety of industry resources.” (2) Printed materials to be distributed to consumers at points of sale. (3) Public service ads on broadcast, cable and print media. (4) Information about NTIA’s DTV coupon and converter box program. “In short, we will help lead consumers to information about equipment, devices and hardware currently in development to expedite the transition, as well as provide answers to their questions about the television equipment in their homes and its viability in a digital world,” the letter said. Dingell hailed the CEA/NAB/NCTA effort, vowing he'll “closely monitor” public- and private-sector outreach “to ensure that no American household loses its television signal.” The transition “will considerably disrupt nearly 21 million American households dependent on over-the-air television, and millions of other Americans who subscribe to pay services but also use over-the-air sets,” Dingell said in a statement late Wed. Last year’s hard-date legislation from the Republican-controlled Congress “failed to ensure adequate consumer education,” he said.

Mobile phones are the next great “growth platform that’s coming” because all mobile service providers are “looking for content to sell” as a hedge against price declines in voice- only services, News Corp. CEO Rupert Murdoch told the Media Summit N.Y. conference in a Thurs. keynote. “We think there’s a huge opportunity there,” because there are at least 2-3 times as many mobile phones as computers, Murdoch said.

Viacom was “smart” to order YouTube to remove over 100,000 video clips from its site (CD Feb 5 p3), and there probably will be a “domino effect” of other media companies stepping forward demanding the same, IAC/InterActive Corp. CEO Barry Diller told the Media Summit in N.Y. in a keynote Wed.

NTIA “certainly” expects enough DTV converter boxes to go around when coupon distribution begins next year, NTIA Dir. John Kneuer said in a C-SPAN interview televised Sat. “One of the powerful incentives of the program -- it creates a billion-dollar marketplace for manufacturers to address,” he said: “That’s a very attractive marketplace for them to serve.” Kneuer wouldn’t say where NTIA will stands on means- testing for coupon eligibility. The agency’s proceeding reveals a consensus that there’s “a very broad cross-section of Americans who are going to be impacted by this and that to the extent possible, they should be eligible,” he said. NTIA will put “systems in place” to fight waste, fraud and abuse in the program, including thwarting resale of coupons, Kneuer said: “I'm not sure what the marketplace for a coupon would be. If there’s broad eligibility for the coupon, why would one go and buy it on eBay when you can request it from the government in the first instance?” Asked whether he had called the $5 million set by law for consumer outreach “a drop in the bucket,” Kneuer didn’t acknowledge using those words. But if he did, he said, it was probably in the “context” that $5 million pales in comparison with what the CE and broadcast industries and others will spend to educate the public on the analog cutoff. He wouldn’t have used “drop in the bucket” to say the consumer outreach element isn’t well enough financed, he said. “I'm focusing that money on making people aware of the program itself, and we're working closely with the broadcasters and the consumer electronics industry and others, so as they're doing their broader public education campaigns, that they are reflecting and referencing our program,” Kneuer said. “I intend to use those broader, bigger efforts to really leverage our $5 million resource.”

With final rules for NTIA’s DTV coupon program imminent, a key deadline in getting DTV converter boxes to market on time may have been missed. That’s what NTIA says in a summary of the program posted on the website of Office of Management & Budget, which is reviewing the rules.