• Details: Comments: FCC Proposed Cable Franchise & FCC Chairman Martin's Speech.
• http://www.teletruth.org/docs/fccfranchise.doc

STORY: Starting in 1992, every Bell company filed to offer cable services over their phone lines, known as “Video Dialtone”. This document directly quotes just some of the commitments made. However, the FCC has never acknowledged these deployments or the billions of dollars collected,state-by-state. Some states, like New Jersey, have commitments till 2010. The FCC needs to redo the Advanced Network reports and investigate the monies collected from customers that were directly related to these failed deployments.

Released: December 11, 1995, CS Docket No. 95-61 This excerpt is from “Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming”, SECOND ANNUAL REPORT, (*NOTE: Footnotes converted to endnotes.)

Chart of Video Dialtone applications from First Report: http://www.newnetworks.com/videodialtonedeployment.htm

Consequently, a total of sixteen applications for commercial Video Dialtone (VDT) service have been approved, and two applications for commercial VDT service remain pending before the Commission. The status of the approved applications for permanent commercial VDT authorization is as follows:i

•Bell Atlantic's July 1994 authorization for a VDT system in Dover Township, New Jersey, that will pass 38,000 homes.ii The tariff for this system was permitted to become effective following a one-day suspension, subject to investigation.iii This VDT system is scheduled to begin service in 1995, and is expected to become the first permanent commercial VDT system in operation.iv

•NYNEX's March 1995 authorization for two VDT systems, one in Rhode Island that will pass 63,000 homes and one in eastern Massachusetts that will pass 334,000 homes. NYNEX's applications, filed in July of 1994, proposed completion of construction in 2010.v According to some trade press accounts, NYNEX is proceeding on target with a "cautiously aggressive" strategy with its VDT systems in eastern Massachusetts and Rhode Island.vi Earlier reports suggested, however, that while still pursuing VDT entry, NYNEX had scaled back its deployment plans and may utilize wireless cable in the near term to reach subscribers while constructing its VDT systems.vii

•PacBell's August 1995 authorization for four VDT systems in California, which will pass 490,000 homes in San Francisco; 360,000 homes in Los Angeles; 259,000 homes in San Diego; and 210,000 homes in Orange County, California. PacBell's applications, originally filed in December 1993, proposed an advanced, wire based video and telephone network that would be constructed sometime in 1996 at an expense of approximately $16 billion.viii It appears that PacBell currently plans to pass only 500,000 homes with this advanced network in 1996, increasing to one million homes in 1997.ix These reports suggest, however, that PacBell is accelerating construction of the VDT network in the San Francisco Bay Area, scaling back its VDT deployment plans in its other authorized areas, and deploying wireless facilities in those areas in the near term while building out the VDT systems.x

•GTE's May 1995 authorization for four VDT systems that will pass 476,000 homes in Pinellas and Pasco, Florida; 334,000 in Honolulu, Hawaii; 122,000 in Ventura, California; and 109,000 in Manassas, Virginia.xi Reportedly, GTE is aggressively moving ahead with its VDT plans. By the end of 1996, GTE reportedly plans to pass a total of 500,000 homes in three markets: Ventura, California; Pasco and Pinellas counties, Florida; and Honolulu, Hawaii. By 1997, GTE reportedly plans to enter the Manassas, Virginia market, increasing its total homes passed to 900,000 homes in all four markets.xii GTE states that its goal is to pass seven million homes with VDT in 66 top markets within the next ten years.xiii

•The remaining five applications for permanent commercial VDT authority were granted to Ameritech in January 1995 for five systems that proposed to pass 232,000 homes in Detroit, Michigan; 501,000 homes in Chicago, Illinois; 115,000 homes in Indianapolis, Indiana; 262,000 in homes in Cleveland and Columbus, Ohio; and 146,000 homes in Milwaukee, Wisconsin.xiv After obtaining these authorizations, Ameritech decided to pursue entry into the MVPD marketplace through stand alone cable systems, rather than VDT systems.xv

As noted above, seven of the Section 214 applications for permanent commercial VDT authority that were pending at the time of the 1994 Report have been withdrawn or suspended by the applicant. These seven applications represented a potential market of over 4.3 million homes passed by VDT. The disposition of these applications includes the following:

•On May 24, 1995, Bell Atlantic withdrew two applications for permanent commercial VDT systems that proposed to pass 1.2 million homes in the D.C. LATA and 2 million homes in the mid-Atlantic area.xvi Bell Atlantic announced that it was considering new technologies and would submit amended applications at a later date, after further evaluating the technologies.xvii Press reports suggest that in the D.C. and mid-Atlantic regions, Bell Atlantic plans to use wireless technology pending further development of switched digital video ("SDV") architecture.xviii Notwithstanding its withdrawal of two significant VDT proposals, Bell Atlantic is going forward with VDT in other areas, including the construction of a permanent commercial VDT operation in Dover.

•On May 31, 1995, U S West requested suspension of further Commission consideration of the five applications it filed in January and March 1994, which proposed permanent commercial VDT service to 1.1 million homes, including 90,000 homes in Boise, Idaho; 357,000 homes in Denver, Colorado; 357,000 homes in Minneapolis, Minnesota; 162,000 homes in Portland, Oregon; and 160,000 homes in Salt Lake City, Utah.xix U S West stated that it wanted time to review results of its Omaha, Nebraska market trial and to study new technologies.xx

Thus, in addition to Bell Atlantic's Dover VDT system, the available data indicates that four LECs, Bell Atlantic, PacBell, GTE, and NYNEX, are entering or planning to enter the MVPD marketplace as VDT operators in a total of eleven markets that range in size from 63,000 to 490,000 homes passed. These eleven permanent VDT systems represent potential VDT service to approximately 2.5 million homes passed.

LEC Entry Into the MVPD Marketplace Through Cable and Wireless Facilities. Several LECs have indicated an interest in providing cable service in their telephone service areas. For example, as noted above, Ameritech is pursuing entry through construction of cable systems, and has sought and obtained from local cable franchising authorities and the Commission authority to construct cable systems in Plymouth, Canton and Northville Townships in Michigan (near Detroit);xxi in Columbus, Ohio; and in Glendale Heights, Illinois (near Chicago).xxii Ameritech plans to begin offering stand alone cable services in 1996 and to complete its cable systems by early 1997.xxiii SBC has received Commission approval for a temporary market trial of cable service in Richardson, Texas.xxiv BellSouth has applied to provide cable service in Daniel Island, South Carolina.xxv In addition, four smaller LECs  MebCom Telephone Company, Hargray Telephone Company, Inc., Bluffton Telephone Company, and Kingsgate Telephone, Inc.  have obtained authority to provide stand alone cable service, pursuant to the Commission's streamlined Section 214 review.xxvi

Other LECs are pursuing entry into markets for the delivery of video programming through investments in, and acquisitions of, wireless providers. CAI, in which, as noted above, Bell Atlantic and NYNEX have invested, has wireless systems located in both Bell Atlantic's and NYNEX's local telephone service areas.xxvii Cross Country, which, as noted above, was recently acquired by PacBell, has wireless systems in PacBell's local telephone service area.xxviii The extent to which these LEC's plans are intended to be a transitional means of entering the MVPD market pending development of a wireline distribution system, or are intended to be complementary to or a substitute for such entry, remains unclear.

LEC Entry into Video Programming. In addition to offering video transport services, LECs have also entered into a number of joint ventures to produce and package video programming. As noted in the 1994 Report, several LECs had already entered into ventures with programmers.xxix

In October 1994, Bell Atlantic, NYNEX, and PacTel announced the formation of a joint venture, since named Tele-TV, to provide interactive video networks. One part of the venture will produce content for the LEC's distribution facilities and the other will develop technical systems.xxx In April 1995, Ameritech, BellSouth, and SBC announced an alliance with Disney Corporation to develop and package video programming and interactive services.xxxi On August 10, 1995, GTE joined this group.xxxii

3. Conclusions

When the 1994 Report was released, there had been no actual entry by LECs, beyond VDT trials, into multichannel video programming distribution markets in their local telephone service areas. However, large scale wire-based entry by LECs in the near term, primarily through the construction of VDT systems, was widely anticipated. As noted in the 1994 Report, if granted and constructed, the VDT applications pending at that time would have allowed service to approximately 8.5 million houses, which is nearly ten percent of the nation's television households.xxxiii

Since the 1994 Report, some LECs appear to be reassessing their options for entry into the MVPD marketplace within their local telephone service areas. While some LECs intend to pursue construction and operation of permanent VDT systems, other LECs are also considering wireless technology and stand alone cable systems. It appears that, in the aggregate, currently authorized VDT facilities of four LECs (Bell Atlantic, NYNEX, GTE, and PacBell) would allow service to approximately 2.5 million homes in eleven markets. However, considering all modes of entry into MVPD markets, LEC plans may have not declined in terms of markets entered and the number of homes passed. At least three LECs (PacBell, NYNEX and Bell Atlantic) appear to have increased their respective overall number of homes passed by adding wireless technologies to their entry plans. Other LECs (including U S West, SBC, Bell South, Ameritech and several smaller LECs) have entered, or are entering, MVPD markets as cable operators.

Thus, an examination of LEC activity since the 1994 Report makes it clear that the state of LEC entry into the MVPD marketplace is continuing to evolve, both in terms of the mode and timing of entry. The pace of technological change may affect the speed of LEC entry into the MVPD marketplace, irrespective of which mode of entry the LEC chooses. Both U S West and Bell Atlantic cited the need to further evaluate new technologies as a reason for asking the Commission to suspend review of certain Section 214 applications.xxxiv GTE and Bell Atlantic acknowledge in their comments a reluctance to commit to a technology that may become obsolete in the near future.xxxv Moreover, as was the case in 1994, unresolved issues remain that affect the ability of LECs to offer delivered video programming:xxxvi (1) the Commission's regulatory framework for VDT is still developing; telecommunications reform legislation is still pending before Congress;xxxvii and (2) the Supreme Court is expected to decide the constitutionality of the statutory cable-telco cross-ownership ban sometime next year.xxxviii

E. Satellite Master Antenna Television Systems

SMATV systems are MVPDs that serve residential, multiple dwelling units ("MDUs"), and various other buildings and complexes. A SMATV system generally offers the same type of programming as a cable system, and the operation of a SMATV system largely resembles that of a cable system -- one or more satellite dishes and antennas receive the programming signals; equipment combines, amplifies and processes the signals; and wires distribute the programming to individual dwelling units. By statute, however, a SMATV system is defined by way of an exception to the definition of a cable system.xxxix A system is a cable system if "closed transmission paths" (i.e., wires) are used: (1) to serve buildings that are not commonly owned, controlled, or managed, or (2) to cross a public right-of-way. To qualify as a SMATV system, and not be subject to cable system regulation, neither of the two statutorily defined operational elements for a cable system may exist within the system.xl

A typical SMATV system is an unfranchised, stand alone system that serves a single building or complex, or a small number of buildings or complexes in relatively close proximity to each other. For this reason, SMATV systems are sometimes referred to as "private cable systems." Recently, SMATV operators have begun using 18 GHz microwave facilities to link MDUs that are separately owned or separated by public rights-of-way.xli By using microwave equipment instead of coaxial cable to link their facilities, SMATV operators avoid being regulated as cable operators. This permits them to realize efficiencies associated with using some of the same headend equipment to serve more subscribers.

i A chart is provided in the appendices summarizing the current status of all of the VDT applications for commercial service that have been filed with the Commission (omitting the four U S West applications that were filed and dismissed since the 1994 Report). Infra Appendix C-1.

ii New Jersey Bell Tel. Co., 9 FCC Rcd 3677. See also infra Appendix E.

iii The Bell Atl. Tel. Cos. (Waiver of Part 69 to Offer VDT service in Dover Township, N.J.), Order, DA 95-1282 (June 9, 1995). See also Bell Atlantic Tel. Cos., Tariff F.C.C. No. 10, Transmittal Nos. 741, 786, Order Designating Issues for Investigation, CC Docket No. 95-145, __ FCC Rcd ___ , DA 95-1928 (Sept. 8, 1995) (rates, terms and requirements for VDT service in Dover Township).

iv See Launch Delayed, Comm. Daily, Aug. 16, 1995, at 5.

v New Eng. Tel. & Tel. Co. (VDT Serv. Auth. to Communities in R.I. & Mass.), Order & Authorization, File No. WPC 6982, 10 FCC Rcd 5346, 5349 ¶ 5 (1995).

vi NYNEX Intrigued, but Wary, of VDT Opportunity, Washington Telecom News, Sept. 25, 1995, at 5; NYNEX Plans a Common Carriage Model for VDT, Washington Telecom News, June 19, 1995, at 14.

vii 1995 GKM Databook, supra, at 33-34.

viii Pacific Bell Co. (VDT Serv. Auth. for Communities in Orange Co., S.F. Bay Area, L.A. Area & S.D. Area in Cal.), Order & Authorization, File Nos. WPC 6913 et al., __ FCC Rcd ___ , FCC 95 302 (Aug. 15, 1995).

ix See Pacific Telesis, Pacific Telesis Refines Network & Video Strategy (News Release), Sept. 27, 1995; Leslie Cauley, PacTel Puts Off Interactive-Video Plans, Concentrating Instead on Wireless Cable, Wall St. J., Sept. 28, 1995, at A3; John M. Higgins, PacTel Finds Video Plans Too Ambitious, Multichannel News, Oct. 2, 1995, at 1, 52.

x 1995 GKM Databook, supra, at 33-34.

xi Contel of Va., Inc. (VDT Serv. Auth. for Communities in Va., Fla., Ca. & Haw.), Order & Authorization, File Nos. WPC 6955 et al., __ FCC Rcd ___ , DA 95-1012 (May 5, 1995, CCB).

xii GTE to Have Video Dialtone Nets in 3 Markets by Year End, Computergram Int'l, May 10, 1995; Mark Berniker, GTE's Video Dialtone Gets FCC Green Light, Telemedia Week, May 8, 1995, at 76.

xiii Berniker, supra, at 76.

xiv Ameritech Operating Cos. (VDT Serv. Auth. for Communities in Ill., Ind., Mich., Ohio & Wis.), Order & Authorization, File No. WPC 6926, 10 FCC Rcd 4104 (1995).

xv See infra Appendix C-2.

xvi E.g., Bell Atlantic Co., Bell Atlantic Moves to Deploy Full Service Network with Latest Digital Technology (News Release), May 24, 1995; Bell Atlantic Asks FCC to Suspend 2 VDT Reviews, Comm. Daily, Apr. 26, 1995, at 1; Bell Atlantic Drops VDT Applications, Comm. Daily, May 25, 1995, at 2.

xvii Bell Atlantic Moves to Deploy Full Service Network, supra.

xviii Id.; Bell Atlantic Picks Wireless Cable Video Solution, Comm. Daily, May 18, 1995, at 4. See the discussion below for more information on SDV. Infra sec. III.C.

xix See Application of U S West Communications, Inc. (Application for Permanent Commercial VDT Serv. in Denver, Colo.), File No. WPC 6919 (filed Jan. 10, 1994); Applications of U S West Communications, Inc. (Application for Permanent Commercial VDT Serv. in Portland, Or. & Minneapolis, Minn.),File Nos. WPC 6921, WPC 6922 (filed Jan. 19, 1994); Applications of U S West Communications, Inc. (Application for Permanent Commercial VDT Serv. in Boise, Idaho & Salt Lake City, Utah), File Nos. WPC 6944, WPC 6945 (filed Mar. 16, 1994).

xx See U S West Asks FCC to Suspend Action on VDT Applications Pending Test Results, Comm. Daily, June 1, 1995, at 1.

xxi On August 14, 1995, the FCC proposed fining Ameritech $200,000 for beginning construction of the Plymouth Township system without prior Section 214 authority. Ameritech Corp., Notice of Apparent Liability for Forfeiture and Order to Show Cause, File No. ENF 95-13, __ FCC Rcd ___ , FCC 95-356 (Aug. 14, 1995). On August 16, 1995, in compliance with the Notice of Apparent Liability for Forfeiture and Order to Show Cause, Ameritech sought temporary and permanent Section 214 authorizations to construct, operate, own and maintain cable facilities within Plymouth Township, Michigan. The Common Carrier Bureau granted Ameritech's request for Section 214 temporary authority that same day. Ameritech New Media Enters. (STA to Operate Cable Facilities in Plymouth Twshp., Mich.), Order & Authorization, File No. WPC 7099, __ FCC Rcd ___ , DA 95 1819 (Aug. 16, 1995, CCB). Shortly thereafter, Ameritech appealed, on First Amendment grounds, the Commission's Fourth Report and Order in CC Docket No. 87 266 streamlining the Section 214 procedural requirements for a telephone company seeking authority to construct a cable television system within its service area. See Ameritech Corp. v. FCC, No. 95-1423 (D.C. Cir. filed Aug. 18, 1995); Ameritech Corp. v. FCC, No. 95-1441 (D.C. Cir. filed Aug. 25, 1995). See also United States Tel. Ass'n v. FCC, No. 95-533-A (E.D. Va. filed July 31, 1995) (also challenging the Section 214 requirement on First Amendment grounds).

xxii Ameritech has received Commission approval of streamlined Section 214 applications to provide stand alone cable service in each of these five areas. See Ameritech New Media Enterps., Order & Authorization, File No. WPC 7099, __ FCC Rcd ___ , DA 95-1819 (Aug. 16, 1995, CCB); Ameritech New Media Enters. (Columbus, Ohio), Order, File No. WPC 7106, __ FCC Rcd ___ , DA 95-2067, 1995 WL 574393 (Sept. 28, 1995, CCB); Ameritech New Media Enters. (Plymouth Twshp, Canton, Plymouth & Northville, Mich., and Glendale Heights, Ill.), File Nos. WPC 7099, WPC 7103, WPC 7104, WPC 7105 & WPC 7107, deemed approved, in Federal Communications Commission, Commission Action on Common Carrier Bureau Domestic Facilities Applications, Report No. D 819 A, Public Notice No. 55978 (Sept. 27, 1995).

xxiii See Plymouth Twp., Mich., Becomes First to Grant Cable Franchise to Ameritech, Comm. Daily, June 29, 1995 at 2; Ameritech's Cable Plans Hit a Snag in Illinois, Cable World, Sept. 30, 1995, at 1, 76; Ted Hearn, Ameritech Takes Cable Plunge, Multichannel News, Nov. 6, 1995, at 3.

xxiv Southwestern Bell Video Servs. (Application to Temporarily Provide Cable Service to Richardson, Tex.), File No. WPC 7088, deemed approved, Federal Communications Commission, Commission Action on Common Carrier Bureau Domestic Facilities Applications, Report No. D-812-A, Public Notice No. 55205 (Aug. 9, 1995).

xxv BellSouth Co. (Application for Authority Pursuant to 47 C.F.R. § 63.01 to Offer Cable Service in Daniel Island, S.C.), File No. WPC 7093 (filed July 19, 1995).

xxvi See MebCom, Inc. (Application for § 63.16 Approval for Cable Facilities to Serve Mebane, Alamance and Orange Co., NC), File No. WPC 7068, deemed approved, Federal Communicaions Commision, Commission Action on Common Carrier Bureau Domestic Facilities Applications, Report No. D 819 A, Public Notice No. 55978 (Sep. 27, 1995); Hargray Tel. Co. (Application for § 63.16 Approval for Cable Facilities to Serve Portions of Beaufort Co. & Jasper Co., S.C.), File No. WPC 7059, deemed approved, Federal Communications Commission, Common Carrier Network Services Division, Public Notice No. 60214 (Oct. 16, 1995); Bluffton Tel. Co. (Application for § 63.16 Approval for Cable Facilities to Serve Portions of Beaufort Co., S.C.), File No. WPC 7058, deemed approved Federal Communications Commission, Common Carrier Bureau Network Services Division, Public Notice No. 60214 (Oct. 16, 1995); Kingsgate Tel. Co. (Application for § 63.16 Approval for Cable Facilities to Serve Harris Co., Tex.), File No. WPC 7118, deemed approved, Federal Communications Commission, Common Carrier Bureau Network Services Division, Public Notice No. 60287 (Oct. 20, 1995).

xxvii CAI's wireless systems located in Bell Atlantic's local telephone service area include Philadelphia, Washington, D.C., Pittsburgh, Baltimore and Norfolk/Virginia Beach. Bell Atlantic would be able to pass four million households in those markets through CAI's wireless systems. CAI's wireless systems located in NYNEX's local telephone service area include New York, Boston, Long Island, Buffalo, Providence, Albany and Syracuse. In addition, CAI has wireless systems in Cleveland, Hartford, Rochester, Stockton/Modesto and Bakersfield. See CAI Wireless Systems, Inc., Prospectus 5 (Sept. 21, 1995). For more detail on the CAI-NYNEX/Bell Atlantic transaction, see the discussion above. Supra sec. II.C.1.

xxviii See Pacific Telesis Group, Pacific Telesis Becomes Nation's First Telco to Offer Wireless Cable Television (News Release), July 25, 1995. See also supra sec. II.C.1; John M. Higgins, PacTel Finds Video Plans Too Ambitious, Multichannel News, Oct. 2, 1995, at 1, 52. PacBell reportedly expects to reach five million homes with wireless cable by 1997. Leslie Cauley, PacTel Puts Off Interactive-Video Plans, Concentrating Instead on Wireless Cable, Wall St. J., Sept. 28, 1995, at A3.

xxix 1994 Report, 9 FCC Rcd at 7498 ¶ 107 n.305. In September 1993, U S West invested $2.5 billion in Time Warner Entertainment Company L.P. According to U S West, the alliance is to provide information services, telephone, and entertainment over Time Warner's cable systems in 29 markets outside of U S West's telephone service area. U S West 1994 Annual Report, 10 (1994). In late 1993, NYNEX invested $1.2 billion in Viacom with the aim of jointly developing video on demand and interactive services. Jennifer L. Schenker, NYNEX Raised Profile, CMP, Mar. 20, 1995, at 26-28.

xxx Bell Atlantic, Bell Atlantic, NYNEX, and Pacific Telesis Partner to Create Next Generation of Home Entertainment and Information Services; Creative Artists Agency Allied with Telephone Companies (News Release) Oct. 31, 1994.

xxxi SBC Communications Inc., Disney, Ameritech, BellSouth and SBC Launch Home Entertainment Partnership (News Release) April 18, 1995.

xxxii Ameritech Corp., GTE To Join Disney, Ameritech, BellSouth and SBC in Home Entertainment Partnership (News Release) Aug. 10, 1995.

xxxiii 1994 Report, 9 FCC Rcd at 7496 ¶ 104.

xxxiv See supra notes 240, 249.

xxxv GTE Comments at 9-10; Bell Atlantic Comments at 13-14.

xxxvi 1994 Report, 9 FCC Rcd at 7504-05 ¶ 120.

xxxvii See H.R. 1555, 104th Cong., 1st Sess. § 201 (1995); S. 652, 104th Cong., 1st Sess. § 202 (1995).

xxxviii United States v. Chesapeake & Potomac Tel. Co., No. 94-1893 (filed Jun. 26, 1995).

xxxix Communications Act § 602(7), 47 U.S.C. § 522(7).

xl See Implementation of Sections 11 & 13 of the 1992 Cable Act (Horizontal & Vertical Ownership Limits, Cross-Ownership Limitations and Anti-Trafficking Provisions), Memorandum Opinion & Order on Reconsideration of the First Report & Order, MM Docket No. 92-264, 10 FCC Rcd 4654, 4659 ¶ 12 (1995) ("SMATV-Cable Cross-Ownership Recon.").

xli See Amendment of Part 94 of the Commission's Rules to Permit Private Video Distribution Systems of Video Entertainment Access to the 18 GHz Band, Report & Order, PR Docket No. 90-5, 6 FCC Rcd 1270 (1991).