Covert cable TV? CATV consortium complains about BellSouth's buildouts

Eliciting an image of BellSouth technicians sneaking around in the dead of night to lay cable, a consortium of cable TV operators in Tennessee last week accused the telco of secretly and unlawfully building cable TV networks, among other things.

But BellSouth said what it's doing is no secret. The telco is simply laying coaxial cable in regions where it is also laying telephone lines, namely newly built residential areas, a company spokesman said.

"This is not against any laws whatsoever," he said. "The local jurisdiction knows what we're doing and why, but even without those conversations there's nothing to prevent us from doing that.

The Tennessee Cable Telecommunications Association disagrees. BellSouth should not be laying cable without a cable TV franchise, said Chuck Welch, a partner at McNeely Pigott & Fox in Nashville and special counsel to the TCTA.

Laying cable as it lays twisted pair raises speculation that BellSouth will cross-subsidize its cable network with telephony revenues-a concern that the TCTA presented to the Federal Communications Commission earlier this year in a petition filed in conjunction with the Cable TV Association of Georgia.

"If they don't have a [cable] franchise where they're putting in these facilities, then who's paying for the cable system?" asked John Seiver, partner at Cole Raywid & Braverman, Washington. "They're putting the buildout of the cable facilities on the account balance sheet for their regulated business, which is an unfair cross-subsidy.

Welch alleged that BellSouth has a history of illegal cross-subsidization, citing a 1993 Florida Public Service Commission audit that found that the telco had factored part of its cable TV construction into its regulated balance sheets. However, the commission did not take action because the amount of money involved was minute, Welch said.

BellSouth officials maintain that the company is following strict guidelines to keep costs separate between its video and telephony facilities, and they call the complaints ridiculous.

"They're dragging out the old cross-subsidization thing, but they have no evidence to support that in either filing," the spokesman said. "They have not produced any document or evidence beyond saying, 'They must be doing this, and therefore we protest.' Desperate times call for desperate measures, and that is where the cable industry seems to be.

But Welch believes that BellSouth's actions will give the telco an unfair advantage over incumbent cable operators that have gone through traditional channels to build out their video networks.

"It's easier to ask for forgiveness later than permission first," he said. "I don't know that they would actually turn on service without getting the proper authority, but they're constructing and getting ready and building a presence in these areas without any prior approvals from any agency, either local or state. At this point, they're posturing themselves to be in the business without any sort of approval.

Despite protests from the cable TV industry, the Federal Communications Commission granted MCI the right to begin offering its AskyB direct broadcast satellite service. Time Warner, the National Cable Television Association, Cox Enterprises and Primestar Partners had asked the FCC to delay approving MCI's DBS license, citing the pending MCI/BT merger. A non-U.S. company cannot own more than a 25% stake in a U.S. broadcasting company, according to federal law. If the merger goes through, AskyB will be wholly owned by BT and News Corp., an Australian company. The FCC ruling did not address whether MCI can transfer the DBS license to BT. Time Warner will challenge the FCC ruling when the issue of transferring the licenses comes up, a spokesman said.

SSC KICKS OFF CONSULTING UNIT Siemens Stromberg-Carlson has launched its Consulting & Integration Services business, a division intended to help customers with network design for services such as videoconferencing, telemedicine and video-on-demand. Televideo Inc., which is deploying an advertiser-supported VOD service in New York, is one customer of the SSC service. CABLE VENDORS INK deal Northern Telecom, Arris Interactive and Com21 have signed a global co-marketing agreement. The three companies will co-market Com21's ComUNITY Access cable modem system with Arris Interactive's Cornerstone telephony-over-cable system, for which Nortel is a distributor.