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ZeCG Times3|Xew Roman#Xj\  P6G;9XP#phoenix#C\  P6QP#"i~'^?JWllJJJly8J8=llllllllll==yyy_ǜyJRyy̜J=JdlJ_l_l_Jll==l=llllJR=llll_h+huJ8udJJJ8JJJJJJJJl=__________J=J=J=J=llllllllll_ljlllyl_____u_____lllululJ=JlJJJlyuul=WJJ=lllllJJJyRyRyRyu[=dllllll̜u___lJlyRJl8llH'HWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNNNdlJ_lllll=ElAElAJJ__lJJllԄNقNyyJ_lA"lق~ulyԂlxxofxGcxxxxxxxSxxxxxxxJxxxxJxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxxxfi]f]oJiAlJ{SxJ8.uJo]]{JoSxJxf`SfSSiJxJofx]fffxi{8SxxxfJffffz88SSSSx{SSSxxxf8`SJ8Muu]daqqZZnn{{xu{{M{aZZ5M5M҅P?kHP LaserJet 4M Rm 846 L1tional)HL4MPCAD.PRSc PE37\ SUP2 .6KO CG TimesTimes New RomanTimes New Roman Bold P6G;9XP#CG TimesTimes New Roman"i~'^09CSS999S]+9+/SSSSSSSSSS//]]]Ixnnxg]xx9?xgxx]xn]gxxxxg9/9MS9ISISI9SS//S/SSSS9?/SSxSSIP!PZ9+ZM999+99999999S/xIxIxIxIxIlnIgIgIgIgI9/9/9/9/xSxSxSxSxSxSxSxSxSxSxIxSxRxSxSxS]SxIxIxInInInZnIxigIgIgIgIxSxSxSxZxSxZxS9/9S999Su]ZZxSg/gCg9g9g/xSbxSxSxSxSxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS88WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN 0F  !"#$%&'()*+,-./G23456789:;<=>?@ABCDERoot EntryF@u2 Ole PIC LBook NV ࡱ> LZE2YQ'2ࡱ>  FMicrosoft Excel ChartBiff5Excel.Chart.59qࡱ>ࡱ> Oh+'08@h Valued G 3B$=$x8X1Arial1Arial1Arial1Arial1Arial1#hBaskerville Old Face1Arial1#hBaskerville Old Face1#Baskerville Old Face1Arial"$"#,##0_);\("$"#,##0\)"$"#,##0_);[Red]\("$"#,##0\) "$"#,##0.00_);\("$"#,##0.00\)%""$"#,##0.00_);[Red]\("$"#,##0.00\)5*2_("$"* #,##0_);_("$"* \(#,##0\);_("$"* "-"_);_(@_),))_(* #,##0_);_(* \(#,##0\);_(* "-"_);_(@_)=,:_("$"* #,##0.00_);_("$"* \(#,##0.00\);_("$"* "-"??_);_(@_)4+1_(* #,##0.00_);_(* \(#,##0.00\);_(* "-"??_);_(@_)                + ) , *    #  #  Chart2 i)CU1  3HG&L&"Baskerville Old Face,Regular"&12Source: Bureau of Labor StatisticsMHP LaserJet IIISi@w ,,@MSUDOHP LaserJet IIISid "d,,??3CU1]`f-*A@@ 1983 = 100] ]x  A@@"(JAN. 1986: CABLE RATE DEREGULATION "]nKB A@@TAPRIL 1993: REREGULATION ]t  A@@OCT. 1994: RELAXED REGULATIONS ]l u vD8A@@FEB. 1996: TELECOM ACTs ]*  }@]*h c @]*F 8 >@]j pR A@@"CONSUMER PRICE INDEX0 0 323   43Q;/ &#113.3 114.8 115.3 115.2 115.2 115.5Q;KQi;g3      4E43Q;  JAN 1986:Q;Qi;E4DFAX 3OPQf 3 ! 43*Y@>@$@#4523  43" $% 3O&Q444%fj= 3O9& Q .+CABLE RATES SINCE DEREGULATION IN THE 1980s'44  1986 1986       1987 1987   1988 1988  !!""## $1989 $1989%%&&''(())**++,,--..// 01990 01990112233445566778899::;; <1991 <1991==>>??@@AABBCCDDEEFFGG H1992 H1992IIJJKKLLMMNNOOPPQQRRSS T1993 T1993UUVVWJun-05WJun-05XXYYZZ[[\\]]^^__ `1994 `1994aabbccddeeffgghhiijjkk l1995 l1995mmnnooppqqrrssttuuvvww x1996 x1996yyzz{{||}}~~JUL-97JUL-97fffff\@\@]@fffff&]@,]@333333]@fffff]@,^@fffff^@l^@^@^@^@33333_@ _@9_@,_@_@fffff_@_@_@fffff6`@fffffF`@9`@0`@33333`@`@̼a@a@̬a@ b@ b@33333#b@̜a@̼a@fffffa@fffffb@a@33333b@ b@ b@Yb@b@fffffb@33333#c@c@33333sc@33333c@9d@pd@Pd@fffff6d@|d@33333d@d@ 3333 3  dMbP?_*+%.-&CCABLE RATES SINCE DEREGULATION IN THE 1980sMHP LaserJet IIISi@w ,,@MSUDOHP LaserJet IIISid "dXX??U  n' W  b   EP EP @              EPb         ~ !@ JAN 1986:~ l@~ @~ @~ @~ \@@{@~ \@~ ]@ ~ @  ~ @  ~ @  ~ @  ~ @ ~ @~ @~ ^@~ ^@ @^@~ G@~ B@~ e@~ [@~ @~ @~ @~ @~ U@~ n@~ Z@@0`@~ @Dl-""""" """"""""""" """""""""""  n'! 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Camille KnoxMicrosoft Excel@%żࡱ> ՜.+,08@ LT \ w CU1Chart2  WorksheetsChartsࡱ>DocumentSummaryInformation8  METAFILEPICTZEΦd)ZE2Y    _ """)))UUUMMMBBB999|PP3f333f3333f3ffffff3f̙3ff333f333333333f33333333f33f3ff3f3f3f3333f33̙33333f333333f3333f3ffffff3f33ff3f3f3f3fff3ffffffffff3ffff̙fff3fffff3fff333f3f3ff3ff33f̙̙3̙ff̙̙̙3f̙3f333f3333f3ffffff3f̙3f3f3f333f3333f3ffffff3f̙3f3ffffffffff!___www45'  ' _- "-  ] "--'-- _-  $^XhXh^^X "-X^Xhh^X^--'-- Z--'-- iX^--'--  iW^ "--  $ ^bfjnrvz~}plHKJ==9LH@;A;==1*   $(,048;?CGKOSW[_cgko{s{wu{mo{xqysW:66G=<898:==;:=ALRZ\XUOGA<88 8 56310!+%)-15 9=@DHLPTX\`dhhd`\XTPLHD@=951-)%!  {wsokgc_[WSOKGC?;840,($  ~zvrnjfb^^ `-  `$ ^bfjnrvz~}plHKJ==9LH@;A;==1*   $(,048;?CGKOSW[_cgko{s{wu{mo{xqysW:66G=<898:==;:=ALRZ\XUOGA<88 8 56310!+%)-15 9=@DHLPTX\`dhhd`\XTPLHD@=95 1-)%!+0136 5 888<AGOUX\ZRLA=:;==:898<=G66:Wsyqx{o{mwus{o{kgc_[WSOKGC?;840,($   *1==;A;@HL9==JKHlp}~zvrnjfb^^ "-%^^% ^bfjnrvz~}plHKJ==9LH@;A;==1*   $(,048;?CGKOSW[_cgko{s{wu{mo{xqysW:66G=<898:==;:=ALRZ\XUOGA<88 8 56310!+%)-15 9=@DHLPTX\`dhhd`\XTPLHD@=951-)%!  {wsokgc_[WSOKGC?;840,($  ~zvrnjfb^%^^%^bfjnrvz~}plHKJ==9LH@;A;==1*   $(,048;?CGKOSW[_cgko{s{wu{mo{xqysW:66G=<898:==;:=ALRZ\XUOGA<88 8 56310!+%)-15 9=@DHLPTX\`dhh--'--  `iX^--'--  `_ "-X^ ^Arial-Z^~Z~^Z^kZk^Z^XZX^ "-^hBaskerville Old Face---"Systemn-'---  `>ZV  H2 "Y+CABLE RATES SINCE DEREGULATION IN THE 1980s         ---'--- _---'--- _----'--- _  2 ?100 2 v?130 2 ?160 2 c?190 2 ?220 2 P?250---'--- _---'--- _ Arial- 2 .V1986-Arial- 2 .1987-Arial- 2 .1988-Arial- 2 .1989-Arial- 2 .1990-Arial- 2 .C1991-Arial- 2 .s1992-Arial- 2 .1993-Arial- 2 .1994-Arial- 2 .1995-Arial- 2 .11996-Arial- 2 ,WJUL--Arial-2 &h97----'--- _-_ZBBaskerville Old Face- 2 E 1983 = 100   ----'--- _` Arialce-  2 } JAN. 1986: 2 u CABLE RATE  2 k DEREGULATION     ----'--- _t 2  APRIL 1993: 2 x REREGULATION   ---'--- _GArial-  2  OCT. 1994: 2 RELAXED   2  REGULATIONS    ----'--- _^ 2  FEB. 1996: 2  TELECOM ACT   ---'--- _ "- - ) $1%%1h $bohb7> $@D8@-V<Baskerville Old Face- Baskerville Old Face- 2 CONSUMER PRICE INDEX-  ----'---  _-- -'- _-'- _--' _ '  -4' Object #0001߽Excel.Sheet.5ࡱ> G F !"#$%&'()*+,-./023456789:;<=>?@ABCDEHRoot EntryF`:2 @Ole PIC LBook - ࡱ> LZEB^Q'p5ࡱ>  FMicrosoft Excel WorksheetBiff5Excel.Sheet.59qࡱ>ࡱ> Oh+'0@Hp  3B=" =x$Y9X@"1rArial1rArial1rArial1rArial1rArial1rArial1rArial1@rArial1hrArrus BT"$"#,##0_);\("$"#,##0\)"$"#,##0_);[Red]\("$"#,##0\) "$"#,##0.00_);\("$"#,##0.00\)%""$"#,##0.00_);[Red]\("$"#,##0.00\)5*2_("$"* #,##0_);_("$"* \(#,##0\);_("$"* "-"_);_(@_),))_(* #,##0_);_(* \(#,##0\);_(* "-"_);_(@_)=,:_("$"* #,##0.00_);_("$"* \(#,##0.00\);_("$"* "-"??_);_(@_)4+1_(* #,##0.00_);_(* \(#,##0.00\);_(* "-"??_);_(@_)m/d                + ) , *    FIGURE 2 Sheet1  Sheet2 Sheet3 !Sheet4 "Sheet5 #Sheet6 $Sheet7 %Sheet8 k&Sheet9S'Sheet10;(Sheet11#)Sheet12 *Sheet13*Sheet14+Sheet15,Sheet16  3%$&C&"Times New Roman,Bold"&12FIGURE 2@?&L&"Times New Roman,Regular"Source: Bureau Of Labor Statistics({Gz?)333333?MHP LaserJet 4V@g XX@MSUDOHP LaserJet 4V<d "dXX? ףp= ?3Sheet1]\`E { A@@p@10/94C(R]ZN W A@@@2/96C0 h«3""3Q:+ CPI (Cable Rates)Q;G"Qi;c"3     4E4""3Q:{ PPI PROGRAMMING (Costs)Q;"Qi;"3     4E4DFAp 3OSL 3 +! 43*??! 4% 3O&Q MONTH AND YEAR'4%%3O&Q INDEX (10/94 = 1)'4523  43"  3Ou%3O&Q423   4444%2 W3O9F;& Q .+CABLE RATES COMPARED WITH PROGRAMMING COSTS'44 D@@            !!"?"?#5Z?#@?$D!?$@?%`x%s=?%vևF?&xa?&vևF?'#?'vևF?(y 5?(vևF?)F@#H?)vևF?*=@f?*vևF?+F@#H?+vևF?,N?,vևF?-"߯?-vևF?.C?.vևF?/?/vևF?0ުPM?0vևF?11 ?1X+?2U]o?2X+?3)/?3X+?4iW!'U?4X+?5?{f?5nr?6쟧?6nr?7-(?7nr?82?8nr?9@?9ou?:,?:ou?;k+?;ou?<c?<ou?= P8L?>fCC??Ď??fCC?@ѮBO?@fCC?Ap Cgd 3  dMbP?_*+%&APage &P"D6??U} I  #s'WbEPEP@     EPbbCPI (Cable Rates)PPI PROGRAMMING (Costs)@??5Z?@?D!?@?`x%s=?vևF?xa?vևF?#?vևF?y 5?vևF?F@#H?vևF?  =@f? vևF?  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xw-E~Y'@W%x]+c1-i7e|J 9RP3V$E \*Xwb< > tBDv  z H  +   N * * C CT " o \ *g *5  { m ;   s Ah 6   y G   a H Y# '/ N_-  A* -_N'/ Y# H a   G y   6 Ah s   ; m  { 5 g * * \ o " T  C C *N *    +H z   vBDt  ><bwX*\ $EV3PR9J |e7i-1c+]x%W@'Y~Ew-x ?q'9@kM.`3e4. `R5L ~H  !!AAA~ALAAAAARA AAAAeA3AAAAkA9AAAAqA?A AAAwAEAAAAAWA%AAAA]A+AAAAcA1AAAAiA7AAAA|AJAAAAAPAAAAAVA$AAAA\A*AAAAbA<A AAAtABAA A Az AH A A A A AN A A A A AT A" A A A Ag A5 A A A Am A; A AAAsAAAAAAyAGAAAAAYA'AAAA_A-AAAA -_N'/ Y# H a   G y   6 Ah s   ; m  { 5 g * * \ o " T  C C *N *    +H z   vBDt  ><bwX*\ $EV3PR9J |e7i-1c+]x%W@'Y~Ew-x ?q'9@kM.`3e4. `R5L ~H  !!!  %QeAAe  eekkee%%KFn&/61#%k2PP# CABLE RATES SINCE DEREGULATION IN THE 1980s PF 1+SINCCABLE RATES SINCE DEREGULATION IN THE 1980s[#(F9#%k2PP# 100 qP( 100[ (F  #%k2PP# 130  130[ (Fd#%k2PP# 160 d160[ (F!c#%k2PP# 190 !190[ (F #%k2PP# 220 220[ (F%&#%k2PP# 250 %250\$(G#%k2PP# 1986 qP( 1986\$(G#%k2PP# 1987 qP( 1987\$(Gf$ #%k2PP# 1988 qP( f1988\$(G p #%k2PP# 1989 qP(  1989\$(G #%k2PP# 1990 qP(  1990\$(GU#%k2PP# 1991 qP( U1991\$(Gk#%k2PP# 1992 qP( 1992\$(G#%k2PP# 1993 qP( 1993\$(GO#%k2PP# 1994 qP( O1994\$(GZ#%k2PP# 1995 qP( 1995\$(G#%k2PP# 1996 qP( 1996\$(G+#%k2PP# JUL- qP( JUL-Z"(EF#%k2PP# 97 qP( 97b*FMyD_ ,,#%k2PP# 1983 = 100 ,PF  yD1983 = 100b*FMQ #%k2PP# JAN. 1986: qPF  JAN. 1986:bFMy #%k2PP# CABLE RATE  yCABLE RATEdFOA#%k2PP# DEREGULATION  ADEREGULATIONc+(NR{#%k2PP# APRIL 1993: qP(  R{APRIL 1993:d(O#%k2PP# REREGULATION  REREGULATIONb*FMq#%k2PP# OCT. 1994: qPF  qOCT. 1994:_FJ#%k2PP# RELAXED RELAXEDcFNNu#%k2PP# REGULATIONS  NREGULATIONSb*(ME#$#%k2PP# FEB. 1996: qP(  E#FEB. 1996:c(N"##%k2PP# TELECOM ACT  "TELECOM ACTiii@i@X9jN! R5 l4FW~X$,,#%k2PP# CONSUMER PRICE INDEX ,PF CE ICONSUMER PRICE INDEX ,^"^"GG^"www^"w^"^"Wk^"kW3^"3W^"W^"W^"WS ^"S W ^" W ^" W ^" Wf ^"f W. ^". W ^" W^"W^"WM^"MW^"W^"W^"Wm^"mW5^"5W^"W^"W^"WH^"HW^"W^"W^"Wh^"hW0^"0W^"W^"W^"W ^"w^"w^"GGGG^" ^"WGG^"^"GwG77kk7337777S S 7  7  7  7f f 7. . 7  777MM7777mm7557777HH7777hh7007777 Gkfkf3T 3T   y y   S S    ;  ; f  f  . .    MnMnHH##mm5h5h  \\HH77hh00  ! G[[3 3     { { C C    V V        = =       ] ] % %   }}88XX  VV (l!!l~kAEAk3y X. . 3y  Z Z   T T  A  e A S x - S  @    a  x  a f ; @ f ; . S a  a .     `MsI(IMn;##nhhIIm*Gm*5ZCC50"0oo7g7Hm#H$5$]]zhBh0U 0vv8 8 !!b!!  F%%h %%h j%%h 2 %%h  %%h  %%h  %%h R %%h  %%h  %%h  %%h e %%h - %%h  %%h  %%h  %%h M %%h  %%h  %%h  %%h l %%h 4 %%h  %%h %%h %%h H%%h %%h %%h %%h g%%h /%%h U%%h %%h %%h   r:F]-/,,#%k2PP# CABLE RATES COMPARED WITH  ,PF COMPCABLE RATES COMPARED WITH iFT)+,,#%k2PP# PROGRAMMING COSTS COSTPROGRAMMING COSTS   Y!(D#%k2PP# 1 pP( 1\ (G s #%k2PP# 1.05  1.05[ (F#%k2PP# 1.1 1.1\ (Gcs#%k2PP# 1.15 c1.15[ (F"V##%k2PP# 1.2 "1.2  f.FQ #%k2PP# MONTH AND YEAR PF ARMONTH AND YEAR  i1FT #%k2PP# INDEX (10/94 = 1) PF  = 1INDEX (10/94 = 1) :%RNSB ~YY( ~F33 ~i1FT ^#%k2PP# CPI (Cable Rates) pPF atesCPI (Cable Rates)   "YcY X%%ho7FZ#M+#%k2PP# PPI PROGRAMMING (Costs) pPF ING PPI PROGRAMMING (Costs)  ]%(H]#%k2PP# 10/94 WP( ]10/94 \$(G}0 Y#%k2PP# 2/96 WP( }02/96  X-   X Fۚ yO- U 1 1S!1m"ddZ  yO-footerX` hp x (#%'0*,.8135@8:Consumers saved $35 billion on their cable bills)&footnote reference)#footnote reference##XP\  P6Q9XP#+"x {O-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# David Lieberman, "Industry argues for deregulation," USA Today, May 31, 1995; Statement of Reed Hundt, Chairman, FCC before the House Judiciary Committee, on the State of Competition in the Cable Television Industry, Sept. 24, 1997. x+ and the market began to open itself up to competition. x   xUnfortunately, after those initial successes, the FCC has virtually abandoned all efforts to  x<police market abuses or challenge inflated cable TV rates. What happened to the goals set for the  xagency by Congress to reduce cable rates to a reasonable level and promote broadbased, head xtohead competition? Relaxed regulation has resulted in substantially higher rates and increased concentration of ownership.  X7-  X -II.xINCREASED CONCENTRATION AND RATE HIKES   xSo what went wrong? The culprits here are plentiful. Cable, telephone and satellite  xcompanies exaggerated their desire and willingness to compete against each other. The FCC had  x.to adjust to an expanded mission with numerous responsibilities foisted on it by the 1996 Act,"!-\+\+ "  xand the deregulatory pressure from many in Congress contributed significantly to the agencys  X-relaxation of cable regulations.)+footnote reference)#footnote reference##XP\  P6Q9XP#o ~J-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) The FCC also appears to have perceived the Act's deregulatory thrust to mean that, as the original versions of S. 652 and H.R. 1555 indicated, Congress intended for the Commission to relax  ~O-cable rate regulation as soon as possible. However in the Act# d6X@DQ|@#=#C\  P6QP#s final version, Congress reinstated full Commission authority to regulate all cable programming services of the largest cable companies for three years. See Pub. L. 104104, 110 Stat. 56 (1996) at Sec. 301(b)(4). xo   "xThe time has come to do an inventory of the promises made by the cable industry in  xexchange for a deregulated environment. From the consumers point of view, those promises  xhave been broken and the FCC has done virtually nothing to hold the industry accountable. It  xLis time for the Commission to address legitimate concerns about excessive cable rate increases  x[and massive concentration of ownership by the largest cable companies. It is time for the FCC  xto take action, for the sake of the consumer, to set a new course for the marketplace. We believe the first step should be with a cable rate freeze.   xWhy a freeze? First look at the lack of competition. The numbers tell a sad story. The  X < xFCC#Xx6X@DQ iX@#=# XP\  P6Q9XP#s own market analyses show a few large cable companies dominate the ownership and distribution of cable programming:  XxBetween 1995 and 1996, concentration of cable systems at the national level  increased,. . . In the 1995 Report, we found that the four largest cable MSOs  Aserved 55% of all cable subscribers nationwide, with TCI (with a subscriber share  of 26%), Time Warner (16%), Continental (7%), and Comcast (6%) being the four  largest. In the past year, the percentage of cable subscribers served by the four  largest MSOs has risen to 61.40%, with TCI (27.94%), Time Warner (18.94%),  V-#?M\  P6Q e?P#Continental/U S West (7.69%), and Comcast (6.83%) remaining the four largest. . .# XP\  P6Q9XP#   XxOverall, the size of verticallyintegrated ownership interests has remained nearly  Qthe same. Cable MSOs, either individually or collectively, own 50% or more of 47 national cable programming networks, compared with 45 networks last year 8  Xx   XxVertical integration continues to involve principally the largest cable system  operators. The eight largest cable MSOs have a stake in 63 of the 64 vertically X]-integrated services, or in 98% of all such services.)J3footnote reference)#footnote reference##XP\  P6Q9XP#" ]E yO;!-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, THIRD ANNUAL REPORT, CS Dkt. No. 96133, adopted by the FCC Dec. 26, 1996, at para. 130145 (footnotes omitted). x"  x   xCompetition is unlikely to develop in the current environment of consolidated ownership  xin the cable industry. To make matters worse, now there is a dangerous link between the largest  x.entrepreneurs in the cable industry through the Time Warner/Turner Broadcasting merger !  xwhich threatens efforts to increase competition on the information superhighway. Although the  xFederal Trade Commission (FTC) attempted to limit the involvement of TeleCommunications  xInc.'s (TCI) John Malone ( more than 9% owner of Time Warner) in the control of Time Warner," e -\+\+"  xthis merger unites the owners of cable systems serving approximately onehalf of all subscribers  x=and owning many of the most popular cable programming networks. The FTC agrees with our  x[assessment that there are grave dangers associated with this type of merger because the cable market is already so concentrated.  XxThe sale of Cable Television Programming Services to MVPDs (Multichannel  Video Programming Distributors) in the United States is highly concentrated, . . .  Xx  XxEntry into the relevant markets is difficult, . . .   ~XxEntry into the production of Cable Television Programming Services for sale to  6MVPDs that would have a significant market impact and prevent the  anticompetitive effects is difficult. It generally takes more than two years to  develop a Cable Television Programming Service to a point where it has a  substantial subscriber base and competes directly with the Time Warner and  Turner "marquee" or "crown jewel" services throughout the United States. Timely  entry is made even more difficult and time consuming due to a shortage of available channel capacity . . .  Xx   oXxEntry into the sale of Cable Television Programming Services to households in  each of the local areas in which Respondent Time Warner and Respondent TCI  noperate as MVPDs is dependent upon access to a substantial majority of the high  quality, "marquee" or "crown jewel" programming that MVPD subscribers deem  `important to their decision to subscribe, and that such access is threatened by  increasing concentration at the programming level, combined with vertical  X-integration of such programming into the MVPD level.)Afootnote reference)#footnote reference##XP\  P6Q9XP# X yO-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# In the Matter of Time Warner Inc., Turner Broadcasting System, Inc., TeleCommunications, Inc., and Liberty Media Corp., FTC File No. 9610004, Complaint, Sept. 12, 1996 at 68 x  x   xUnless TCIs additional market consolidating transactions since this merger are not  xblocked by antitrust and regulatory authorities, the TCI/Time Warner stranglehold on the market  x-will only tighten. TCI announced plans to purchase one third of Cablevision Systems Corp., four  xmonths ago, an acquisition which would promise this conglomerate onethird of all cable  X < xsubscribers (not including TCI#Xx6X@DQ iX@#=# XP\  P6Q9XP#s 9% interest in Time Warner, which serves about 19% of cable  xZsubscribers). The effect such a transaction would have on the world of sports enterprises should  X< x-cause supporters of competition pause. This transaction would expand TCI#Xx6X@DQ iX@#=# XP\  P6Q9XP#s partial ownership  X< xof regional sports channels considerably, by adding Cablevision#Xx6X@DQ iX@#=# XP\  P6Q9XP#s Rainbow Media Holdings. The  xacquisition, which consists of Madison Square Gardens, the New York Knicks, the New York  xRangers, and 8 additional regional sports channels would make TCI sports programming empire  X"- x! now strong with 14 partial ownerships even more formidable.)Nfootnote reference)#footnote reference##XP\  P6Q9XP#* " {O'-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Paul Farhi, #d6X@DQ|@#A#C\  P6QP#A Sporting Chance to Be No. 1,#d6X@DQ|@#@#C\  P6QP# Washington Post, June 24, 1997 x* TCI also is attempting to  X#< x\expand its stake in Rainbow by joining with Rupert Murdoch#Xx6X@DQ iX@#=# XP\  P6Q9XP#s News Corp. to purchase an"#z -\+\+""  X<additional 40% stake in Rainbow#Xx6X@DQ iX@#=# XP\  P6Q9XP#s sports assets.)aWfootnote reference)#footnote reference##XP\  P6Q9XP#u Z yO)-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Mark Robichaux, #d6X@DQ|@#A#C\  P6QP#FoxTCI Venture Nears Pact to Buy 40% Of Cablevision Sports for $850  {O-Million,#d6X@DQ|@#@#C\  P6QP# Wall Street Journal, June 20, 1997 xu   1xWorking with TCI, Murdoch appears to be following the lead of Cablevision System  xCorp.s Chairman Charles Dolan in combining sports team ownership and control of regional  x<sports channels with a distribution system, to control the price and distribution of popular sports programming:   XxIn the early nineties, John Malone, the president and C.E.O. of TeleCommunications, Inc.   (TCI), had begun to follow Dolans lead, creating a regional network of sports cable   channels through a subsidiary called Liberty Media Corporation. It was this readymade   network that Murdoch tapped into when he and Malone, in late 1995, created a joint   1venture, called Fox/Liberty Sports. . . In fortifying their net of regional channels that   ^feature local games, Murdoch and Malone were betting that viewers care more about   seeing their home teams play than watching whatever games are on a national channel. . .(#  yO -Xx#C\  P6QP#(#  Xo-  ?Xx#XP\  P6Q9XP#For Murdoch, buying the Dodgers is a vital step in building his two regional Fox Sports   West networks in Southern California, and it is also a way to checkmate the now Disney  |owned ESPN. Currently, Fox/Liberty Sports has locked up the local cable rights to all   lsix of the professional sports teams in Los Angeles the Lakers, the Kings, the Clippers,   the Dodgers, and the Disneyowned Angels and Mighty Ducks. But in a couple of years,   when Foxs rights to those teams expire, ESPN having missed the opportunity to expand   from a nationalto a regionalchannel business will almost surely try to start a local cable   |sports channel, going head on against the local Fox cable channels. The value of the  X-  Dodgers to Fox when that moment comes cannot be overestimated. Owning the team  X-  [is a way of making sure you dont lose the rights , Peter Barton, the former C.E.O. of Liberty, points out.(# Xx(#  X[-  Xx The thinking here, of course, is that once you have the rights secured, and you own   hthe channels, you can adopt a more profitable business plan one that, if unchecked,   would mean fewer and fewer games on free TV. . . Taking control of sports in a   market gives them the ability to charge rabid fans to watch games that you and I  X-grew up watching for free. [quote from an unnamed source].(# IV***  X-T     1TPXxWithin the last two years, Fox Sports has become a coholder of baseballs national  ]broadcast television rights and mainly through Fox/Liberty Sports deals the holder of   localcable rights of a majority of the teams. Many teams depend heavily on those   Nrevenues, and if Fox owned the Dodgers it would be in a position to affect a rival teams   competitiveness. Drayton McLane, the owner of the Astros whose localcable rights are   owned by Fox Sports Southwest said, It is absolutely of concern, because it is your business partner who is paying you and also owns the Dodgers.(#  X&-IV***  "& -\+\+%"Ԍ  lTԙPXxWhen I asked about the possibility of McLanes voting against the deal, for example, he   alluded to the Astros deal with Fox. I dont think they have an alternative, he said.  X-  > Were the only regional sports network in town. Indeed, Fox is already ubiquitous   in baseball with its ownership of the national rights and its dominance of local   rights so the idea of taking a stand to block this deal may, in the end, seem just too  X-  !quixotic. And there is also, of course, the factor of the owners financial selfinterest;   a price as high as $311 million for the team and its realestate holdings obviously raises  X_-the value of the other franchises as well.)[footnote reference)#footnote reference##XP\  P6Q9XP# X_ ~J-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) Connie Bruck, The Big Hitter, The New Yorker, December 8, 1997 at 8893 (emphasis added) x  (# Xx(#  X1- xWhile The New Yorker focuses on Murdochs strategy, this business plan clearly adds dramatic market power to John Malones existing cable empire.   xThese transactions coincide with a number of other deals between Rupert Murdoch, TCI  xand Time Warner that illustrate how bumpy the road to competition is getting on the information  xsuperhighway. After threatening to launch a competitive challenge to the cable industry by  X < xjoining forces with EchoStar#Xx6X@DQ iX@#=# XP\  P6Q9XP#s satellite television business, Murdoch abandoned EchoStar in  x>return for a share of the cablecontrolled satellite system (Primestar) and carriage of his Fox  Xy- xZNews Channel on Time Warner systems.)qfootnote reference)#footnote reference##XP\  P6Q9XP#= Zy yO-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# John Lippman and Mark Robichaux, #d6X@DQ|@#A#C\  P6QP#News Corp. Wins Tentative Pact to Join Cable Firms in  {O-SatelliteDish TV Service, Wall Street Journal, May 27, 1997 x= If this transaction is approved by the Commission and  x[antitrust authorities, the cable industries Primestar partners TCI, Time Warner, Comcast, US  xWest (formerly Continental Cablevision) and Cox will control massive satellite capacity. This  xcapacity could have been used to offer competition to the cable industry, but instead the cartel  x]of cable heavyweights will be in a position to use this satellite capacity to preserve their monopoly.   NxThis cable cartel has transformed onetime renegade Rupert Murdoch into a full partner,  Y- xthanks to the overwhelming market power of the nations largest cable companies. T#X P7XP#his spring,  Y< xJRupert Murdoch#Xx6X@DQ iX@#=# X P7XP#s News Corp. proposed a major competitive assault on the cable industry. As  xMr. Murdoch described the venture to the Senate Commerce Committee on April 10 of this year:  "Xx. . .DBS still has not made major inroads against cable. Why? For three major  Oreasons: the minimum $700 upfront outlay required for current DBS services is  too expensive; current DBS services do not easily or economically serve multiple  oTV sets in the home; and the DBS program package does not include local broadcast stations. . .  Xx   Y - XxSubject to merger approval, SKY plans to come to market this Fall with a  X!-service that does overcome these limitations. . .  Xx   OXxThe upfront costs for SKY subscribers will include only around fifty dollars to"#B -\+\+s#"  @purchase the dish itself, plus a fifty dollar refundable deposit per converter box  and a reasonable installation charge. With that, consumers can receive hundreds of channels of digital pictures with CD quality sound.  Xx   XxFinally, SKY will overcome the most difficult hurdle. We will bring viewers their local broadcast stations as a part of the basic package. . .  Xx   ^XxCharlie Ergen and I are truly excited about the procompetitive service we want  YH- to bring to market in a few short months. For the first time, when consumers   choose between cable and DBS offerings, the choice before them will be  between two equivalent service to multiple sets in the home and equivalent signupcosts. . .   Y -Xx   Xx. . . SKY is willing to risk a three billion dollar capital investment to bring  Y -consumers a better choice now. . .  Xx   Y-XxIf you give the legal authority to compete, the rest is up to us.)wfootnote reference)#footnote reference##XP\  P6Q9XP#X yO-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Statement of Rupert Murdoch before the Senate Commerce Committee on Multichannel Video Competition, April 10, 1997 (emphasis added) x    xInstead of SKY, consumers are left with another broken promise from the industry giants.  YL< x The cable industry did not take kindly to Murdoch#Xx6X@DQ iX@#=# X P7XP#s competitive efforts and launched a counterattack, that transformed and coopted the threat:  |XxAs the cable industry descends on New Orleans today for its annual trade show,  it is launching a legal, political and advertising assault aimed at blocking or at  Y< least slowing down the new service, reviled in cable circles as #Xx6X@DQ iX@#A# X P7XP#the Death Star.#Xx6X@DQ iX@#@# X P7XP#  |Although Sky is scheduled to begin operating next year, it must clear regulatory  Qhurdles involving market concentration, foreign ownership and copyright violations. The cable industry plans to exploit all these in a bid to topple Sky.   Y~< XxThe cable industry will marshal its forces against rival Rupert Murdoch#Xx6X@DQ iX@#=# X P7XP#s plan  Yg< Oto beam hundreds of TV channels including local TV stations into peoples#Xx6X@DQ iX@#=# X P7XP# homes via satellite, cable giant Ted Turner declared yesterday.   ?9<Xx#Xx6X@DQ iX@#   Y< ^XxA# X P7XP#We#Xx6X@DQ iX@#=# X P7XP#re going to make it as tough for him as we possibly can. Kind of like the  Y< Russian army did with the German army,#Xx6X@DQ iX@#@# X P7XP# said Mr. Turner, Time Warner Inc.  Y-vice chairman. . .)0footnote reference)#footnote reference##XP\  P6Q9XP#\ {OT#-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Jeannine Aversa, Associated Press, #d6X@DQ|@#A#C\  P6QP#Cable Industry Takes Aim at Murdoch#d6X@DQ|@#=#C\  P6QP#s Satellite,#d6X@DQ|@#@#C\  P6QP# Washington  {O$-Times, March 20, 1997 x  x   >xThe Bureau of Labor Statistics reports that since passage of the 1996 Act, cable rates shot  X!- xup about 14% (compared to an inflation rate of 3.8%).)footnote reference)#footnote reference##XP\  P6Q9XP#X!D yOk(-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Bureau of Labor Statistics, Consumer Price Index, urban areas, cable services and all goods, February 1996 through August 1997 x This is more than three times the rate"!-\+\+""  xzof inflation, and 50 percent higher than where the FCC itself projected rates would be at this  X- xxtime.)-footnote reference)#footnote reference##XP\  P6Q9XP#b ~J-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) Petition of Consumers Union, op. cit., xb The FCC has also found that cable subscribership has expanded as consumers cannot find a lower priced alternative:  XxIn all but a few local markets for the delivery of video programming, the vast  ~majority of consumers still subscribe to the service of a single incumbent cable  operator. The resulting high levels of concentration, together with impediments  to entry and product differentiation, mean that the structural conditions of markets  for the delivery of video programming are conducive to the exercise of market power by cable operators. . .  Xx   XxDuring 1996, the cable industry's total basic subscribership, total homes passed,  V - #?M\  P6Q e?P#basic penetration, and premium channel subscriptions have reached alltime highs. .  X - .# XP\  P6Q9XP# Subscribership grew from a total of 59.7 million at the end of 1994 to 62.1  million at the end of 1995, a 4.0% increase. . . This increase in penetration is the  ~second largest annual increase since 1977. According too at least one analyst,  Pindustry subscribership appears to be growing at approximately a 3% growth rate  Xq-during 1996.)pfootnote reference)#footnote reference##XP\  P6Q9XP#q  yO*-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# THIRD ANNUAL REPORT, op. cit., at para. 1214 and para. 128 (footnotes omitted) x    /xWhen seeking reduced regulation during Congressional consideration of the 1996 Act, the  xMcable industry claimed that potential competition would prevent the excessive rate increase consumers have been experiencing:  XxBut he [Mr. Anstrom] says that the looming threats of imminent competition will keep cable operations honest.   ?<Xx#Xx6X@DQ iX@#   X< $XxA# XP\  P6Q9XP#If I#Xx6X@DQ iX@#=# XP\  P6Q9XP#m running a variety store, and I learn that WalMart is buying a parcel of  Xj< `land and they#Xx6X@DQ iX@#=# XP\  P6Q9XP#ll open in 18 months, what am I going to do jack up my prices  XS<and alienate my customers? No Way,#Xx6X@DQ iX@#@# XP\  P6Q9XP# Mr. Anstrom says.)footnote reference)#footnote reference##XP\  P6Q9XP#BZS {O-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Mark Robichaux, #d6X@DQ|@#A#C\  P6QP#Cable Industry Says New Rivals Obviate Rules,#d6X@DQ|@#@#C\  P6QP# Wall Street Journal, April 3, 1995. xB   X%< xApparently, no #Xx6X@DQ iX@#A# XP\  P6Q9XP#WalMarts#Xx6X@DQ iX@#@# XP\  P6Q9XP# are anywhere in sight to challenge the cable #Xx6X@DQ iX@#A# XP\  P6Q9XP#variety store#Xx6X@DQ iX@#@# XP\  P6Q9XP# monopoly.   xThe cable industry and the Commissions former chairman blame rate increases on the  X- xrising cost of programming.){footnote reference)#footnote reference##XP\  P6Q9XP#Z$  {Ol&-footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Rebecca Cantrell, #d6X@DQ|@#A#C\  P6QP#TCI Reports Rise In Cash Flow,#d6X@DQ|@#@#C\  P6QP# Rocky Mountain News, March 4, 1997; and  {O6'-David Lieberman, #d6X@DQ|@#A#C\  P6QP#TCI to Boast Cable TV Rate,#d6X@DQ|@#@#C\  P6QP# USA Today, March 13, 1997; statement of Reed Hundt, op.cit. xZ What the cable industry and former Chairman Hundt fail to  xmention, however, is the fact that eight of the thirteen most popular cable networks are" . -\+\+"  xsubstantially owned by cable operators see Table 1, and a substantial portion of overall cable  xprogramming is owned by the largest cable companies see Table 2. It appears that the largest  xcable companies, knowing that programming costs can be passed through to consumers and  X< xcompetitors with the FCC#Xx6X@DQ iX@#=# XP\  P6Q9XP#s relaxed regulations, have made programming their profit center. The  xFCC points out that, while the price of regulated cable programming shot up 19% in 1995, the  xLprice of premium channels (including the most expensive movies) and broadcast channels (the  Xv- xymost expensive, popular network programming) rose only 2%.)Ϭfootnote reference)#footnote reference##XP\  P6Q9XP#)v X-#footnote reference##XP\  P6Q9XP#x)footnote reference) THIRD ANNUAL REPORT, op. cit., at para. 19.#C\  P6QP#) However, the Commission has  X_- xdone nothing to investigate this programming sleight of hand.)footnote reference)#footnote reference##XP\  P6Q9XP#_y ~Jq -footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) In echoing cable industry claims about programming prices, former FCC Chairman Hundt presented charts to the House Judiciary Committee that are inconsistent with the Commissions own analysis of cable industry pricing and misleading to the public. These charts appear to show that cable rates are higher in markets that are competitive than in monopoly markets, even though more detailed FCC analyses show just the opposite. Rates tend to be 1220 percent lower where competition exists. These charts also appear to disregard programming discounts from the rate card in evaluating trends in programming prices, only evaluate costs for a small group of program networks, and fail to consider any qualitative differentials among cable channels. Contrary to the FCCs charts, Figure 2 shows that after passage of the 1996 Act, cable rates shot up much faster than input costs ! like programming ! that cable operators incur. See also statement of Reed Hundt, op. cit. x In addition, BLS data show that  xjcable rates are rising much faster than the cost of programming (see Figure 2). And neither the  xjcable industry nor the FCC note that cable has a new lucrative source of revenue ! advertising  X -brings about $1 billion more each year, more than $7 billion in total, to cable operators.)=footnote reference)#footnote reference##XP\  P6Q9XP#{   ~J-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) Paul Kagan Associates, Inc., Cable TV Financial Databook, 1997. x{   {xWhat is most troubling is the Commissions apparent change of heart in measuring what  x competitive market factors determine reasonable rates. While the FCCs earlier rate regulation  xKdecisions state that systems in the overbuild [i.e., headtohead competition] sample provide the  X - xmost informative data with regard to estimating reasonable rates,)tfootnote reference)#footnote reference##XP\  P6Q9XP#X  ~J-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) In the Matter of Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Second Order on Reconsideratiion FCC Dkt. No. 92266 at para. 29. x this weeks FCC Report on  X- xCable Industry Prices provides NO information on headtohead competition in either the press  Xy- x[release or body of the Report!)ffootnote reference)#footnote reference##XP\  P6Q9XP#y ~J -footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) FCC Report on Cable Industry Prices, MM Dkt. No. 92266, Dec. 15, 1997. x After digging through a confusing and potentially misleading  xmaze of information, anyone who stumbles upon Attachment D5 will find the most important  xinformation that led the Commission to reduce cable rates in 199394. Attachment D5 shows  xthat where cable faces headtohead competition (from another cable company, telephone  X- xLcompany or municipal system), rates are still about $3/month lower than everywhere else.)footnote reference)#footnote reference##XP\  P6Q9XP#Q ~J?$-footnote text#footnote reference##XP\  P6Q9XP#x#oDD0DXDhD |t#э)Sfootnote reference) Id. At Attachment D5 xQ In  xpercentage terms, rates are 1520% lower where headtohead competition exists. Originally, this  x[was the basis for the Commissions benchmark regulations that reduced cable rates. Now, it is hidden in an attachment and given no recognition in the Reports conclusion.   xPreoccupied with numerous, time constrained proceedings designed to open the local and" -\+\+"  xKlong distance telephone markets to more competition, the FCC has failed to address the excessive  X- xKvideo concentration and monopolistic pricing its own analyses identify. Since passage of the  X- xY1996 Act, cable rates are rising at a faster rate than ever before (see Figure 1). It is  x<therefore time for the Commission to take action to ensure reasonable rates, prevent monopolistic  X-practices and promote vigorous competition for cable services.  X_-III.xSLOW GROWTH OF COMPETITION   xOne of the biggest disappointments so far, under the 1996 Act, has been the retreat of the  xxlocal telephone companies from their previous desire to compete against the cable industry. After  xyears of clamoring to offer competition to the cable industry, the local telephone companies  xfully unshackled by the 1996 Act to enter the video market through four different streamlined  X - xjapproaches)footnote reference)#footnote reference##XP\  P6Q9XP#  yO -footnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# Pub. L. 104104, 110 Stat. 56 (1996); see also ANNUAL REPORT, op. cit., at para. 6769. x have done more backtracking than competing against cable. While Ameritech  xand BellSouth have made modest efforts to provide video services, the much ballyhooed Bell company TeleTV initiative went from a major potential competitor to the dustheap last year:  BXxSixteen months ago, Mr. Grushow agreed to take over the programming arm of  TeleTV, a television joint venture owned by Bell Atlantic, Nynex and Pacific  Telesis. The three companies had set a lofty goal: to develop an interactive alternative to cable television . . .  Xx   oXxThe Baby Bells originally planned to rollout TeleTV to 30 million homes in six of the nation's seven largest markets by the end of the century . . .  Xx   BXxBut after repeated delays in technology and a tectonic shift in regulations, the  #Baby Bells now admit that getting into television is only one of several priorities.  Having completed his design for TeleTV, Mr. Grushow wonders how many  X|-people will ever see it.)Pfootnote reference)#footnote reference##XP\  P6Q9XP#Z|  {O5-footnote text# footnote reference##XP\  P6Q9XP#x)S  footnote reference)#C\  P6QP# Mark Landler, "Baby Bells' TV Developers Are on Hold and Frustrated," New York Times, August 5, 1996 x   ~XxTeleTV, the highprofile programming alliance owned by three Baby Bells, has  been ordered to slash its budget, slow down hiring and delay development of  2interactive fare ostensibly the reason the unit was formed for at least another  X -year.)Afootnote reference)#footnote reference##XP\  P6Q9XP#\ z {O$-footnote text# footnote reference##XP\  P6Q9XP#x)S  footnote reference)#C\  P6QP# Leslie Cauley, "Baby Bells Push the Pause Button Again on TeleTV Interactive Unit," Wall Street  {O$-Journal, June 7, 1996 x  Xx   XxBell Atlantic Corp., Nynex Corp. and Pacific Telesis Group are taking steps to  }shut down TeleTV, . . . they have basically abandoned their hopes of leading the  way on development of the next generation of interactive fare amid technical"! -\+\+ "  X-difficulties, rising costs and vast changes in the market.)footnote reference)#footnote reference##XP\  P6Q9XP#Z {O)-footnote text#(footnote reference##XP\  P6Q9XP#x)S((footnote reference)#C\  P6QP# Leslie Cauley, "Bell Atlantic, Nynex, PacTel to Close TeleTV," Wall Street Journal, December 6, 1996 x  x   ?xThe Bell company pullback from aggressive video competition has also occurred in the  xMwireless market. The FCC found that the only operational wireless system owned by a local  X- xphone company is a 42,000 subscriber system in California.)footnote reference)#footnote reference##XP\  P6Q9XP#g yO'-footnote text#(footnote reference##XP\  P6Q9XP#x)S((footnote reference)#C\  P6QP# THIRD ANNUAL REPORT, op. cit., at para. 72 xg Recently Bell Atlantic abandoned  X- xa digital trial in Fairfax, Va.,)footnote reference)#footnote reference##XP\  P6Q9XP#L z yO -footnote text#0footnote reference##XP\  P6Q9XP#x)S00footnote reference)#C\  P6QP# Id., at fn. 224 xL and in conjunction with Nynex, appears to have bailed out of wireless altogether:  XxBell Atlantic Corp. and Nynex Corp. said they plan to "suspend" their agreement  3with a small wireless cable operator, CAI Wireless Systems Inc., . . . The move  sets the stage for the two Bells to bail out of that business altogether as they pursue other opportunities.  Xx   XxThe Friday announcement amounted to an aboutface for Bell Atlantic and Nynex,  which last year had hailed their pact with CAI as instrumental to speeding delivery  of video entertainment and information service to millions of customers in the  X-Northeast.)footnote reference)#footnote reference##XP\  P6Q9XP#!\  {O3-footnote text#0footnote reference##XP\  P6Q9XP#x)S00footnote reference)#C\  P6QP# Leslie Cauley, "Bell Atlantic, Nynex Plan to Suspend Agreement With CAI Wireless Systems," Wall  {O-Street Journal, December 16, 1996 x  x   lxIt is interesting that most of the Bell companies now believe they are better off investing  x-their money in the longterm opportunity to move into the long distance business even though  xnot a reality until statutory guidelines are met instead of the immediate chance to compete with  xcable. For example, at the time they announced their proposed merger with Nynex, Bell Atlantic  xjofficials expressed relief that their previous "pact" with cable giant TCI "foundered," as market  xanalysts described the logic for the Bell companies to pull back from a video competition strategy:  X< Xx#Xx6X@DQ iX@#A# XP\  P6Q9XP#The reason that longdistance carries the day over television is that it is just so  X< easy,#Xx6X@DQ iX@#@# XP\  P6Q9XP# said William C. Bane, a telecommunications consultant at Merger  oManagement Consulting in Washington. "The problem with them getting into  cable TV is that they don't have the plant," he added, referring to the miles of  XN-highcapacity cable typically required for video networks.)footnote reference)#footnote reference##XP\  P6Q9XP#"Nf  {OM%-footnote text#8footnote reference##XP\  P6Q9XP#x)S88footnote reference)#C\  P6QP# Mark Landler, #d6X@DQ|@#A#C\  P6QP#A StickingtoTheirKnitting Deal," New York Times, April 23, 1996 x  x   xDespite aggressive past talk about competing in the telephone business, the cable industry  x=has retreated to its cushy video monopoly. Almost exactly two years ago, as Congress began  x{deliberations on the Telecommunications Act, the Senate Commerce Committee received" "-\+\+"  X< xtestimony from the cable industry stating unequivocally that #Xx6X@DQ iX@#A# XP\  P6Q9XP#. . . cable television companies are  X< xthe most likely competitors to local phone monopolies . . .#Xx6X@DQ iX@#@)footnote reference)#footnote reference## XP\  P6Q9XP##X yO-footnote text#@footnote reference##XP\  P6Q9XP#x)S@@footnote reference)#C\  P6QP# Statement of Decker Anstrom, National Cable Television Association Before the Committee on Commerce, Science, and Transportation U.S. Senate, March 21, 1995, S. Hrg. 104216 at 5,8, and 25 x The cable industry crowned itself  x King of the Competition Sweepstakes in telecommunications, and lobbied Congress to dump  xor relax cable rate regulation to increase cash flow and trigger competition. However, it appears Congress was sold a bill of goods.  XxIf you look at the entire structure, the competitive theory of the broad legislation  in front of this committee, the theory is that you are going to allow the Regional  Bell companies to move into manufacturing, information services, burglar alarm  services, cable, other areas, and that their potential for anticompetitive behavior  is going to be checked because they are going to have competition. And then you look around, and who is going to provide that competition?   X -Xx   NXxAnd I would submit to this committee it is us. We are the other wire, and  !if we do not have the financial and investment environment to make those  zinvestments, those tens of billions of dollars, then the end result is that this  committee and this Congress will have opened up a Pandora's box in terms  of extending the regional phone companies' monopolies, and you will never  Xb-close it again .)]footnote reference)#footnote reference##XP\  P6Q9XP#z$b yO-footnote text#Hfootnote reference##XP\  P6Q9XP#x)SHHfootnote reference)#C\  P6QP# Statement of Decker Anstrom, op.cit., at 115 (emphasis added) xz  x  X4-  xThe relaxed regulation of cable rates)footnote reference)#footnote reference##XP\  P6Q9XP#e%4x yOE-footnote text#Hfootnote reference##XP\  P6Q9XP#x)SHHfootnote reference)#C\  P6QP# THIRD ANNUAL REPORT, op. cit., at 1116 xe brought the cable industry into a strong cashflow  xposition, but the competition consumers were promised was not unleashed. Instead, the largest  xcable companies have virtually abandoned immediate efforts to compete with local telephone companies. For example,  aXxTime Warner has already indicated it plans to substantially scale back both  }Orlando (futuristic Full Service Network) and its ambitious plans for the telephone  `business, a move that is expected to save the company about $100 million next  _year in capital expenditures. "Our strategy to approach the telephone business is  Xe-something we are reassessing," a Time Warner spokesman confirmed.),footnote reference)#footnote reference##XP\  P6Q9XP#&e {O"-footnote text#Pfootnote reference##XP\  P6Q9XP#x)SPPfootnote reference)#C\  P6QP# Eben Shapiro, #d6X@DQ|@#A#C\  P6QP#Time Warner Expands Plans For Cost Cuts, Wall Street Journal, October 10, 1996 x   xShockingly, the most aggressive cable CEO, John Malone, has announced a full retreat from telephone competition:  #XxJohn Malone, chief of the nation's biggest cable company, TeleCommunications  Inc., has a stunning admission to make. His widely hailed vision for TCI's future  as a multimedia powerhouse straddling television, telephones and the Internet, isn't working. "! &-\+\+!"ԌXx   XxIt was too ambitious, over hyped, and impossible to carry out on schedule, he says . . ."The company got overly ambitious about the things it could do . . ."  Xx   XxHe is abruptly revising his longstanding promise that TCI was set to become the  2powerful lord of the new information superhighway, using cable to deliver phone service, the Internet, and other futuristic interactive goodies.   XH- Xx "If you read our annual report last year, you'd think we're onethird data,  onethird telephone and onethird video entertainment, instead of 100% video entertainment and two experiments," he says . . .  Xx   XxWith the zeal of a convert, he has a new sermon. The old cable industry is  a perfectly good business to be in, and shouldn't be penalized for failing to  ?deliver on all its promises, he says. Moreover, telephone companies have  X -retreated as video competitors to focus on longdistance business.  Xx   Xx"Right now, we've got zero revenue from residential telephone service,  diminishing revenue from highspeed Internet, and $6 billion in revenue from  XK-video entertainment," he says.)S footnote reference)#footnote reference##XP\  P6Q9XP#'\K {Ot-footnote text#Xfootnote reference##XP\  P6Q9XP#x)SXXfootnote reference)#C\  P6QP# Mark Robichaux, "Malone Says TCI Push Into Phones, Internet Isn't Working for Now," Wall Street  {O>-Journal, January 2, 1997 (emphasis added) x     xIt is no wonder that the telephone companies have lost their zeal to attack the cable market  xand compete aggressively for that business. Cable companies show no sign of taking away a  X<significant portion of the local telephone companies#Xx6X@DQ iX@#=# XP\  P6Q9XP# core business.   xBecause the telephone industry has been retreat, the biggest source of potential  x=competition to cable could come from the growing satellite industry. But, prices for necessary  xequipment to put satellite TV in to the home are substantially above cable rates, and the satellite  xsystems still cannot offer local broadcast stations. As a result, satellite remains only a limited  Xe< xy#Xx6X@DQ iX@#A# XP\  P6Q9XP#high end alternative to cable. The FCCs competition report suggests the view that satellite  XN- xTV provides a poor counterweight to constrain cable pricing.)footnote reference)#footnote reference##XP\  P6Q9XP#z(N yO-footnote text#`footnote reference##XP\  P6Q9XP#x)S``footnote reference)#C\  P6QP# THIRD ANNUAL REPORT, op. cit., at para. 38 and para. 125128. xz Even key players from the cable industry admit that Direct Broadcast Satellite is not cost competitive with cable:  }XxTCI spokesman Bob Thomson asserted yesterday that even with the increase, the  X<company#Xx6X@DQ iX@#=# XP\  P6Q9XP#s prices are still a bargain compared with DBS.   QXxAt a news conference, the company displayed charts showing that the cost of  service provided by one of its typical systems is about half that of the three leading DBS services, based on roughly equivalent program packages.   Xh$< XxThe widest disparity was between TCI#Xx6X@DQ iX@#=# XP\  P6Q9XP#s price and that of DirecTv/USSB, which"h$|(-\+\+#" is the leading DBS provider with more than 2 million customers . . .   ~XxDespite its growth, DBS services remain a higherpriced option for many, if not  X< `most, of cable#Xx6X@DQ iX@#=# XP\  P6Q9XP#s 65 million customers, particularly after factoring in the cost of  X< equipment and installation. What#Xx6X@DQ iX@#=# XP\  P6Q9XP#s more, DBS hasn#Xx6X@DQ iX@#=# XP\  P6Q9XP#t completely displaced cable  for avid viewers, since many DBS subscribers maintain basic cable service to  Xv<receive local stations, which DBS services don#Xx6X@DQ iX@#=# XP\  P6Q9XP#t offer yet.)footnote reference)#footnote reference##XP\  P6Q9XP#)v {O-footnote text#hfootnote reference##XP\  P6Q9XP#x)Shhfootnote reference)#C\  P6QP# Paul Farhi, #d6X@DQ|@#A#C\  P6QP#Biggest Cable Operation To Raise Rates 7% in #d6X@DQ|@#>#C\  P6QP#97,#d6X@DQ|@#@#C\  P6QP# Washington Post, March 14, 1997.   X1- CONCLUSION   xConsumers Union believes that the only immediate way to protect consumers from  xexcessive cable rate increases is for the FCC put a lid on prices and block monopolistic practices  xuntil effective competition develops in the video market. Without aggressive intervention in the  xLincreasingly monopolistic cable market, the competitive goals of the 1996 Telecommunications  xAct will never be achieved, and consumers will face spiraling cable rates without a reasonable choice of alternative service providers.   ]xThe Consumers Union petition to the Commission for an immediate freeze on cable rates  xzis a necessary response to an industry which is out of control. We hope the FCC will act to  xmake sure that consumers are not gouged by the cable cartel. A simple freeze on spiraling cable  x[TV rates will save consumers more than one billion dollars over the next year. And aggressive  x]FCC action to prevent anticompetitive cable industry practices will begin to promote the competition that Congress and consumers have been seeking for many years."")-\+\+"  X-7I TABLE 1 {bVertical Integration: Top Fifteen Programming Services by Ratings  X- By Prime Time Rating T T T ddx!HH @@@T         yO-#C\  P6QP#  X|-X(#XP\  P6Q9XP#Rank - u   -    Programming Service -  X-  -   X-;MSO with Ownership Interest)#footnote reference)#footnote reference##XP\  P6Q9XP#)X01ÍÍ X11 Í  Í  c1 yOfootnote text#xfootnote reference##XP\  P6Q9XP#x)Sxxfootnote reference)#C\  P6QP# See Table 5 for ownership percentages xc)X11 Í  Í  X01ÍÍ   -         -    c1 - h   -    TNT - h X-  -  TCI, Time Warner (Others have 5% or  Xh-less)  -       -    c2 - 3    -    TBS - 3  Xa-  -  TCI, Time Warner (Others have 5% or  X3 -less)  -   Q     -    c3 -     -    ESPN -   X, -  -   X -None  -         -    c4 -    -    USA Network -  X -  -   X -;None)D/footnote reference)#footnote reference##XP\  P6Q9XP#)X01ÍÍ X12 Í  Í  2 q yOfootnote text#footnote reference##XP\  P6Q9XP#x)Sfootnote reference)#C\  P6QP# USA Network and SciFi Channel are owned by Viacom which sold its cable systems to TCI in 1996.)X12 Í  Í  X01ÍÍ   -         -    c5 -    -    Lifetime -  X-  -   X-None  -        -    c6 -    -    Cartoon Network -  X-  -  TCI, Time Warner (Others have 5% or  X-less)  -        -    c7 - o   -    Arts & Entertainment - o X-  -   X-None  -        -    c8 - Q   -    The Family Channel - Q X-  -   Xh-TCI  -   o     -    c9 - 3   -    Discovery - 3 Xa-  -   XJ-TCI, Cox  -   Q     -    `10 -    -    TNN (The Nashville Network) -  XC-  -   X,-None  -   3     -    `11 -    -    CNN -  X%-  -  TCI, Time Warner (Others have 5% or  X-less)  -        -    `12 -    -    The Learning Channel -  X-  -   X-TCI, Cox  -        -    `13 - !   -    BET - ! X-  -   X -TCI, Time Warner  -        -    `14 - #   -    SciFi Channel - # X!-  -   X"-None  -  N   ! :  ; f -\   ; `15%: ;   ; The Weather Channel%: X#-;  X$-;None "$)-\+\+;"N  #: yO-TP \ ٙ#C\  P6QP#Sources: Paul Kagan Associates, Cable TV Programming, PrimeTime Ratings, July 1996, at 10.  X-k#XP\  P6Q9XP#(Reprinted from ANNUAL REPORT, op. cit., at Appendix G, Table 1)")-\+\+"  X-7I TABLE 2 T  X- MSO Ownership in National Programming Services T T T!HH @@@AHH @@@T N   #   X-   s)Programming Service .    .  BLaunch   KDate . o   .   X-AOwnership Percentage  .        .    Action PayPerView . Q   .    FSept90 . Q   .    TCI (22) Time Warner (15) .   o     .    AMC . 3    .    H7Oct84 . 3    .    Cablevision Systems (75) .   Q     .    Animal Planet .     .    H=Jun96 .     .    TCI (49), Cox (24.7) .   3      .    BET .     .    ICJan80 .     .    TCI (22) Time Warner (15) .         .    BET on Jazz .    .    ICJan96 .    .    TCI (22) Time Warner (15) .         .    The Box .    .    G'Dec85 .    .    TCI (5) .        .    Bravo .    .    H1Feb80 .    .    Cablevision Systems (50) .        .    Cartoon Network .    .    H7Oct92 .    .    Time Warner (100) .        .    Catalog 1 . a   .    G+Apr94 . a   .    Time Warner (50) .        .    Cinemax . C   .    FAug80 . C   .    Time Warner (100) .   a     .    CNN . %   .    H=Jun80 . %   .    Time Warner (100) .   C     .    CNN International .    .    ICJan95 .    .    Time Warner (100) .   %     .    CNNfn (The Financial Net.) .    .    G'Dec95 .    .    Time Warner (100) .        .    Comedy Central .     .    ZM .     .    Time Warner (50) .        .    Court TV . "   .    JSJul91 . "TCI (33.3) Time Warner (33.3)   Continental (33.3)        .    The Discovery Channel . $   .    H=Jun85 . $   .    TCI (49) Cox (24.6) .   "     .    Encore . q&   .    G+Apr91 . q&   .    TCI (90) .   $       Encore Love Stories(  ZM   JSJul94(     TCI (90)  q&       Encore Westerns*  ZM   JSJul94*     TCI (90)"))-\+\+2('"  (     .    Encore Mysteries .    .    JSJul94 .    .    TCI (90) .        .    Encore Action .    .    FSept94 .    .    TCI (90) .        .    Encore True Stories and Drama .    .    FSept94 .    .    TCI (90) .        .   X<Encore WAM! America#Xx6X@DQ iX@#=# XP\  P6Q9XP#s Youth   Network . q   .    FSept94 . q   .    TCI (90) .        .    The Family Channel . S    .    G+Apr77 . S    .    TCI (20) .   q     .    Faith & Values . 5    .    H=Jun84 . 5    .    TCI (49) .   S      .    FIT TV .    .    H7Oct93 .    .    TCI (20) .   5      .    fX .    .    H7Oct94 .    .    TCI (50) .        .    FXM .    .    H7Oct94 .    .    TCI (50) .        .    Germs International Television .    .    G+Apr93 .    .    Cox (50) .        .    The Golf Channel .    .    ICJan95 .    .  Continental (20.2), Comcast,   Cablevision Systems, Adelphia .        .    Great American Country . j   .    G'Dec95 . j   .    Jones (**) .        .    HBO . L   .    FNov72 . L   .    Time Warner (100) .   j     .    HBO 2 . .   .    G'Dec75 . .   .    Time Warner (100) .   L     .    HBO 3 .    .    H7Oct93 .    .    Time Warner (100) .   .     .    Headline News .    .    ICJan82 .    .    Time Warner (100) .        .    Home Shopping Network . !   .    JSJul85 . !   .    TCI (80) .        .    Home Shopping Network II . #   .    FSept86 . #   .    TCI (80) .   !     .    Independent Film Channel . %   .    FSept94 . %   .    Cablevision Systems (50) .   #    The International Channel&  JSJul90&  TCI (45)"%)-(({{c$T$"  %     .   X-,Into Television)8footnote reference)#footnote reference##XP\  P6Q9XP#)X01ÍÍ X11ÍÍ ,1 X"-#footnote reference##XP\  P6Q9XP#x)footnote reference) On December 1, 1995, tv! Network became Into Television.#C\  P6QP#,)X11ÍÍ X01ÍÍ  .    .    FSept94 .    .    TCI (100) .        .    Jones Computer Network .    .    FSept94 .    .    Jones (81) .        .    The Learning Channel .    .    FNov80 .    .    TCI (49) Cox (24.7) .        .    Mind Extension University .    .    FNov87 .    .    Jones (66) .        .    Much Music USA . j    .    JSJul94 . j    .    Cablevision Systems (50) .        .    Newsport . L    .    H1Feb94 . L    .    Cablevision Systems (25) .   j      .    Outdoor Life Channel . .    .    JSJul95 . .    .  Cox (41), Continental (23), Comcast   (22.5) .   L      .    Ovation: The Fine Arts Network .    .    G+Apr96 .    .    Time Warner (**) .        .    Prime Deportiva .    .    G!Mar95 .    .    TCI (100) .        .    Prime Network .    .    H=Jun93 .    .    X` hp x (#%'0*,.8135@8: