Cable TV operator faces challenges

COMCAST: RIDING OUT THE STORM

December 14, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

The war rages all around him.

A bitter fight in Congress ends with a new law to regulate the cable industry. The Federal Communications Commission begins to draft new regulations, which could drastically change service, rates -- and company profits. And new technologies start to transform the entire industry.

In Timonium, Steve Burch is calm.

"This is a vulnerable time for us," says Mr. Burch, Comcast Cablevision Inc.'s vice president in charge of operations in Delaware and Maryland. But, he adds, nobody knows exactly what the new FCC rules will be. "We're trying to operate business as usual."

Comcast is laying low for the moment, waiting to see what happens in the next few months, with the cable law in court and the FCC still months away from publishing rules that will spell out how local officials can regulate cable rates.

But it is clearly a tumultuous time for Comcast and Mr. Burch:

* The cable law may have far-reaching effects, but exactly what is uncertain;

* Cable companies are fighting over whether they have to pay to carry local broadcast channels;

* Telephone companies are threatening to tread on cable's turf by transmitting video programs over phone lines;

* New technologies are expanding the services that cable may provide, from better pay-per-view to telephone services;

* And cable companies, including Comcast, are facing diminished growth, due to regulation and the coming saturation of cable in America's homes, leaving fewer and fewer potential new customers.

But not all is bleak.

"We believe the cable industry still has a bright future," Alex. Brown Inc. analysts Kenneth Berents and Karen Ficker wrote in a November report. "In the near term, projected growth . . . may slow due to re-regulation." But, they add, regulation may force cable companies to find new ways to make money, which would strengthen the industry.

How to handle the myriad changes and challenges facing cable is Mr. Burch's job. At 42, he's an industry veteran who started out selling cable TV service in Washington state in the late 1970s -- he used the money to pay his way through Gonzaga University's law school. He ran Comcast's Baltimore County system, then did a tour with another cable company in Phoenix before returning to Baltimore to take his current job.

Mr. Burch's strategy is fairly straightforward.

First, wait to see how much authority the FCC gives counties to regulate the price of basic cable service -- existing premium services like Home Box Office won't be regulated -- and then see what the county does.

Some county officials are espousing something less than a hard line.

"I'd be content to leave the money the way it is and to see it doesn't increase the way it has in the past," said William Gehring, a member of the Baltimore County Telecommunications Advisory Panel, which advises the county council on cable issues.

"I don't have any confidence in those [FCC] guidelines making any particular difference for consumers," said Anne Darlington Andrews, another TAP member. "I'm not convinced regulation will hold down costs. I think the best way to assure that costs are reasonable and good service continues is to assure meaningful competition."

Second, Mr. Burch plans to play hardball with broadcast TV stations. The stations have the right under the new law to choose either to be paid for their programming or to be guaranteed a specific spot on a cable system's dial. Comcast wants to give them their spots and keep the money, and won't rule out dropping the stations if they insist on being paid.

"We hope it doesn't come to that, but we don't want our subscribers to have to pay for broadcast TV," said Mr. Burch. "The burden is really on the broadcasters to decide whether they want to take the chance. We think we're as important to them as they are to us."

Marcellus Alexander, Arnold Kleiner and Philip Stolz -- the heads of WJZ, WMAR and WBAL, the three network-affiliated stations in Baltimore -- all said they can't comment on whether their stations will ask for the guaranteed place on the dial or for the money.

Only Mr. Alexander of WJZ said his station has made a tentative decision, which he won't discuss before talks with Comcast and other local cable operators. "We want to have those discussions directly with Steve," he said.

Lastly, Comcast wants to look beyond the law to the technology. Because with market saturation approaching -- more than 60 percent of Baltimore County households and 70 to 80 percent of Harford and Howard is wired -- growth is a little trickier to come by.

"That's going to be the chief challenge of the next 10 years," Mr. Burch said.

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