A Collective Fit of Good Spirit

BY K. C. NEEL The cable industry reveled in its successes last week as 16,700 executives converged in Chicago for the annual NCTA show. Checking pesky and potentially problematic issues at the door for the most part, cable executives spent most of their time basking in the glory of rising stock prices, growing cash flows and the introduction of services they said will lure new customers from the woodwork for years to come. Still, a few problems surfaced during the show. Despite a tacit understanding to put their grievances aside for a few days, operators publicly complained about rising programming fees. It was one crack in an otherwise overwhelmingly positive show of allegiance and optimism. “To say that the existing affiliate fee structure should continue doesn’t make sense,” said Comcast Cable president Steve Burke during the closing general panel session of the show on June 11. “We’re at the point in time when the current model is broken.” Other MSOs chimed in agreement. Cablevision Systems Corp.’s cable division president Tom Rutledge said if a network creates new value, raising the rate is fair. But “for the same product to go up at a compounded 10% a year every year isn’t appropriate.” Meanwhile, Massillon Cable president Bob Gessner and a group of other smaller operators distributed stickers attacking ESPN’s rising prices. As Gessner, whose privately held Massillon Cable counts 47,000 customers in Massillon, Ohio, was placing the stickers on chairs prior to the programming general session on June 10, an ESPN intern followed him picking up as many as he could before other attendees could get their hands on them. The crack in the détente disappointed ESPN executives, who cried foul after the operator general session on June 11 concluded. “We disagree with the way they characterize the way ESPN has contributed to their business,” an ESPN spokesman said. “They have a very healthy business, everyone acknowledged that, and we are part of the reason why. They have spent $75 billion on their plant in order to launch new products, and they are making a very healthy margin on those products. About the one thing we do agree on is that this should be solved in private negotiations.” Federal Communications Commission Chairman Michael Powell sent the same message when he addressed the industry on June 10. He strongly urged against going to regulators for help, saying the industry has a habit “of blowing it” and cautioning there is no longer such a thing as “surgical legislation.” He’s disappointed that broadcasters and cable operators aren’t further along in working out carriage deals for digital broadcast signals and warned that the commission is now aiming its sights on digital must-carry. “Some people will like the outcome; others won’t,” Powell said, noting it’s time for the commission to play “umpire” on the issue. Regardless, this year’s show was mostly a time to celebrate the fact that the industry is finally seeing real financial benefits from the slew of products and services they’ve launched over the past couple of years. Comcast president and CEO Brian Roberts may not like the “King Brian” moniker many industry players have bestowed on him, but he and his company were definitely leading the show this year. The show was held in Comcast territory, and the MSO took advantage of that by showcasing the system every chance it got. The company televised programs from the convention floor to local customers and employees and it announced it was launching HD in the area. Roberts, as well as Comcast chairman Ralph Roberts, were constantly mugged and glad-handed like benevolent rulers wandering their kingdom. High definition programming and technology clearly took center stage throughout the entire show. Operators vowed to launch HD in more markets in the coming months claiming customers are demanding the product and predicted sales will skyrocket as TV set prices come down later this year. But digital and broadband services certainly were not forgotten at the door. Indeed, several operators, none more so than those from Comcast, said they were excited about the notion of reclaiming analog bandwidth by going fully digital over the next few years. Most operators admitted there will come a time when a fully digital network is inevitable. However, the timetable for such a transition differed between companies. Comcast’s Roberts and Burke said they’d love to begin the transition to full digital within three years and were encouraged by a $70 tuner device developed by Pace that converts digital into analog for those customers that aren’t interested in having a high-tech digital box attached to every TV set in their home. Burke said the ability to stem piracy alone could pay for the whole transition. Moreover, the executives said, the additional bandwidth would make room for new services including more HD channels, new broadband data applications and Voice over Internet Protocol telephony offerings. Several questions remain on how to make the transition smooth for customers as well as programmers, but there was little time spent last week dwelling on that pesky issue. Despite the euphoria of the industry’s success today, operators had they eyes clearly peeled on the future. Just as he did when he spoke to the industry for the first time seven years ago, Microsoft chairman Bill Gates proclaimed cable as the technology that will land on top of the communications heap. The last time Gates came to an NCTA show he touted the benefits of high speed data, which didn’t even exist yet. The business has lived up to his expectations, growing at double-digit rates and producing double-digit cash flows for operators. Gates’ message this year was clear: Voice over Internet Protocol is the next big opportunity for cable. Glenn A. Britt, chairman and CEO of Time Warner Cable, was elected last week to a one-year term as chairman of the board of directors of the NCTA. Brian L. Roberts, CEO and presient of Comcast, was elected vice chairman. Elected as secretary and treasurer respectively were Tom Rutledge, president-cable and communications, Cablevision Systems Corp., and Nickolas Davatzes, president and CEO, A&E Television Networks. In addition to the officers, immediate past chairman Michael S. Willner, vice chairman and CEO, Insight Communications, and NCTA president and CEO Robert Sachs, the following were reappointed to the NCTA executive committee: Decker Anstrom, president and COO, Landmark Communications Inc.; Matthew C. Blank, chairman and CEO Showtime Networks; Robert Miron, chairman and CEO, Advance/Newhouse Communications; James O. Robbins, president and CEO, Cox Communications; William T. Schleyer, chairman and CEO, Adelphia Communications; and Carl Vogel, president and CEO, Charter Communications. Other board elections included: associate director: Robert Stanzione, president and CEO, Arris Inc., was elected to serve a two-year term; at-large programmer directors: Nickolas Davatzes, president and CEO, A&E Television Networks, John S. Hendricks, chairman and CEO, Discovery Communications Inc., and Carole Black, president and CEO, Lifetime Entertainment Services, were reelected to serve two-year terms; at-large system directors: Peter P. Brubaker, president and CEO, Susquehanna Media Company, was reelected to a three-year term, John D. Evans, chairman and CEO, Evans Telecommunications Company, was reelected to a two-year term and William J. Bresnan, president and CEO, Bresnan Communications, was elected to a three-year term; rural and small system director: Joseph S. Gans III, president and CEO, Gans Multimedia Partnership, was reelected to a two-year term.