HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA

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House Resolution 64

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House Consumer Affairs Committee

Room 60, East Wing Main Capitol Building Harrisburg, Pennsylvania

Wednesday, December 15, 1999 - 10:35 a.m.

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SFORE: morable Chris Wogan, Majority Chairperson morable Stephen Barrar morable Gene DiGirolamo morable John Fichter morable John Lawless morable Ron Raymond morable Paul Semmel morable Samuel Smith morable Keith McCall, Minority Chairperson morable Ron Buxton morable Ted Harhai morable Edward Staback morable Edward Wojnaroski

TROUTMAN REPORTING SERVICE (570) 622-6850 .SO PRESENT:

>dy Stuck Majority Executive Director

.sa Nicholas Majority Research Analyst izanne Kopko Majority Administrative Assistant

)b Mustin Minority Executive Director

TROUTMAN REPORTING SERVICE (570) 622-6850 CONTENTS

:TNESSES PAGE

.lliam J. Cologie, President 6 PA Cable and Telecommunications Association Harrisburg, Pennsylvania

>m Carey, General Manager 46 Adelphia Communications Erie, Pennsylvania lie Albright, General Manager 58 Charter Communications Johnstown, Pennsylvania mis Scott, Education Consultant 69 Suburban Cable Oaks, Pennsylvania irol Rosebrough, General Manager 86 Susquehanna Communications Williamsport, Pennsylvania

:itten Testimony Submitted By; spresentative Robert W. Godshall 53rd District

:. Louis S. Meyer, President Pennsylvania Citizens Consumer Council

TROUTMAN REPORTING SERVICE (570) 622-6850 4 CHAIRPERSON WOGAN: Good morning everyone. id once again, welcome to this hearing being conducted by e House Consumer Affairs Committee. This hearing is dng conducted pursuant to House Resolution 64, which rports to be an investigation into certain aspects of the lerations of the cable industry in Pennsylvania. Those of you who have long memories will icall that this resolution did not have its origin in our immittee. It started out in another committee, Finance. id a majority of the members of the House of ipresentatives thought that any such look at the cable idustry, whether it's advised or ill-advised, should be •re properly within the jurisdiction of our committee.

So here it is. And we're fulfilling our institutional mandate today by holding this hearing. I'd .ke to start by having my member — my colleagues and ;affers introduce themselves starting on my far left with ipresentative St aback. REPRESENTATIVE STABACK: Ed Staback, LC kawanna, Wayne. REPRESENTATIVE RAYMOND: Ron Raymond, Delaware »unty.

REPRESENTATIVE FICHTER: John Fichter,

•ntgomery County.

MR. MUSTIN: Bob Mustin, Democratic Staff.

TROUTMAN REPORTING SERVICE (570) 622-6850 5 CHAIRPERSON WOGAN: Chris Wogan, Chairman. MS. NICHOLAS: Lisa Nicholas, Majority Staff. REPRESENTATIVE WOJNAROSKI: Ed Wojnaroski, mbria County. REPRESENTATIVE DIGIROLAMO: Gene DiGirolamo, cks County. REPRESENTATIVE LAWLESS: John Lawless, mtgomery County. CHAIRPERSON WOGAN: Thank you, ladies and mtlemen. And I should mention as well that my colleague id Chairman, Keith McCall, who just had to leave, very ily led the forefight to defend the integrity and irisdiction of the House Consumer Affairs Committee on ds issue. And we thank him for that. I'd also like to thank a longtime staffer for ie House Consumer Affairs Committee, most people whom I link are familiar with her. She's done an excellent job. s're very, very sorry that she's leaving. She's going er to the Evil Empire. No, I'm kidding. She was hired by the Public Utility ramission. June Perry, thank you very much. We wish you til. We know you'll do an excellent job for them. And tat is why yesterday in the middle of — not the .ddle — but during the end of the hearing, we lost June id someone else showed up sitting at my right.

TROUTMAN REPORTING SERVICE (570) 622-6850 6 And we welcome two — actually welcome two new affers in the last couple of weeks: Lisa Nicholas, who's tting to my right now, and Jody Stuck who is sitting next ' June Perry. So welcome aboard. And June, we wish you e very best. We know you'll do an excellent job over ere because you were trained well over here. Without further ado, our first witness today William Cologie, who was our first witness yesterday. lcome, once again, to the House Consumer Affairs nnm ttee • MR. COLOGIE: Thank you, Mr. Chairman. Before get started, I too would like to express my condolences

your loss of June Perry to the PUC and warn the incoming aff they have big shoes to fill. We've had the pleasure working with June for, I think, about eight or nine tars now she's been on the Committee staff. And she's ways been a consummate professional and a joy to work th, and we wish her well. I am Bill Cologie, and I'm privileged to serve President of the Pennsylvania Cable and lecommunications Association. It's a trade association at represents the cable TV industry in Pennsylvania. We ve 45 member companies operating cable systems in innsylvania and more than 200 associate members who are ppliers to the industry.

TROUTMAN REPORTING SERVICE (570) 622-6850 7 These include cable programming networks, rdware suppliers, and other companies that provide goods d services to our industry. I appear before you today to dress matters raised in a resolution introduced by presentative Karl Boyes of Erie and passed earlier this ar by the House of Representatives, as well as to give e Committee some insights and overview of the state of r industry. I'll be followed by witnesses who will give e Committee additional insight into cable operations and r contributions to the communities in which we operate d our special role in education in Pennsylvania. The ble industry in Pennsylvania provides service to 572,000 households and businesses with traditional cable levision services.

My association's members provide these rvices in every Pennsylvania county and in all but the st rural municipalities. Local municipalities, through e granting of franchises — those are permits to occupy e public rights of way — license which companies are thorized to operate in their jurisdictions. It is the occupation of public rights of way, ring across city streets or burying cable under city reets, that legally separates cable from other providers multichannel video service. As you probably know, there

TROUTMAN REPORTING SERVICE (570) 622-6850 8 e other providers of multichannel video service operating Pennsylvania today. We have, for example, Direct Broadcast tellite. They're the providers of things like DirecTV id Echostar that provide service directly to homeowners a small satellite dishes which you might see in someone's ont yard or attached to the side of their house.

Satellite Master Antenna Television, SMATV, is other provider. SMATV systems are essentially private ±>le systems. You'll find these minicable systems lerating on private property in apartment complexes, mdominiums, in gated communities, hotels, motels, spitals, universities, virtually anywhere where there are mcentrations of people.

Unlike cable systems, they do not occupy or oss public rights of way. We also have Multichannel ltipoint Distribution Systems, MMDS, so-called wireless ±»le. They use a wireless technology to transmit ogramming. For years, an operation in Popvision has lerated in Philadelphia, offering a wide range of sports id premium programming to their subscribers. The newest competitor on the scene for us are lied Open Video Systems or OVS. They are a new class of deo systems created with the passage of the ilecommunications Act of 1996 to facilitate the entry of

TROUTMAN REPORTING SERVICE (570) 622-6850 9 lephone companies into the cable business. RCN is an example of an OVS provider, and they ve franchises to provide this service in communities roughout Southeastern Pennsylvania. Essentially, OVS impanies build networks very much like cable networks but .th what the act calls, quote, reduced regulatory burdens, id quote.

By law, the OVS provider and its affiliates e only allowed to use one-third of the capacity of their stems with the other two-thirds available for competitors i offer video programming. Though franchises are not squired by federal law, municipalities are free to impose ich requirements. Cable companies have a long history of iteraction with local government. Since the 1950s, we ive been required to get permits to occupy city streets, a actice which later evolved into the granting of anchises. Some in this room — I think Representative Lymond made reference to it yesterday, the franchise wars : the '60s and '70s when municipal officials would itertain proposals from rival cable companies vying for ie right to wire a community.

It was through this competitive process that iny municipalities granted a single franchise to serve ieir communities, resulting in what for years was a de

TROUTMAN REPORTING SERVICE (570) 622-6850 10 cto monopoly for the cable operator selected in that ocess. Since Congress passed the 1984 Cable Act, elusive franchises have not been permitted. Representative Boyes' resolution specifically ises the matter of franchise fees the cable industry Hects and pays to Pennsylvania municipalities. As you y know, municipalities are authorized to require cable mpanies to collect and pay franchise fees of up to 5 rcent of their revenues. These vary from community to community. Some ve opted not to charge franchise fees. Some communities :vy the fee only on basic service only. And there are immunities that collect anywhere from 2 to 5 percent on a ble company's gross revenues. Unfortunately, for our purposes, nobody illects nor reports the exact amount of franchise fees in innsylvania. However, our national association, the tional Cable Television Association, reports that last tar cable companies collected and paid $1.8 billion in anchise fees. In Pennsylvania, where we have approximately 5 id a half percent of the nation's cable subscribers, we mservatively estimate that 5 percent of the 1.8 billion s collected here. That means roughly $90 million was illected for Pennsylvania local governments through this

TROUTMAN REPORTING SERVICE (570) 622-6850 11 actice. Members of my association would find me remiss I didn't point out that cable's biggest competitor day, the Direct Broadcast Satellite folks, are not bject to that government-mandated fee. And so in most calities, they have a built-in 5 percent price advantage the pricing of their service since cable customers can't ssibly get cable service without paying that mandated vernment surcharge. The Boyes resolution also seeks information on e taxes paid by cable companies. Again, no branch of vernment tracks this. We do, however, pay the same taxes her businesses pay. We pay real estate taxes on our ildings and property; we collect and pay sales taxes on gunmti cable services, including cable modem service; and i pay business privilege taxes, employment taxes, irporate and personal income taxes, capital stock and anchise taxes, and all the so-called nuisance taxes to ich any business is subject. Cable is subject to other government fees, ch as the aforementioned franchise fees and other license es imposed by the FCC. These include licenses to operate crowave facilities, licenses to operate earth stations, id copyright and licensing fees on the programming. And at brings us to cable rates.

TROUTMAN REPORTING SERVICE (570) 622-6850 12 The average price of cable television basic rvice in the United States today is $28.92. For years, TA conducted its own rate survey. And invariably, the erage price in Pennsylvania was a few dollars below the tional average. In part, Pennsylvanians enjoyed these lower tea because there were so many legacy cable systems in nnsylvania; that's to say, systems owned by mom and pops id operated by the founders of those companies. They dn't have the debt loads that companies found it later id as the continuing basis of their operations. That's cable companies that built their stems later and operated as so-called MSOs, Multiple stem Operators, rather than as the proprietors of just ngle stand-alone systems. They financed their expansion .th cash flow and borrowing. So naturally, there was more essure on them to have higher rates.

A geographically limited mom and pop teration, one that served a single defined community, was ider no pressure to expand so thereby avoided the debt tat put pressure on rates in so many areas. tterestingly, because cable was born right here in tnnsylvania and because many of the early companies were ie entrepreneurial efforts of family business, we have a .sproportionate share of such businesses here in

TROUTMAN REPORTING SERVICE (570) 622-6850 13 nnsylvania. The Boyes resolution reports that cable rates creased at the rate of 8.1 percent each year over the st 10 years. We won't dispute those rates. But we will y that in recent years, the increases have been more idest as cable companies have demonstrated an increased nsitivity to consumer concerns and as our industry faces creasing competition.

We'll also point out that those increases look ite reasonable when you compare them to the increases ble operators have been hit with in programming costs. om 1996 to 1997, programming costs increased 18.4 trcent. From '97 to '98, they increased 20 and a half xcent.

That programming is the largest single driver : cable rates should not be a surprise. When the nnesota Timberwolves signed an untested rookie like Kevin xnett to a $100 million contract or when a movie studio frees to pay Julia Roberts $12 million for a movie, guess io's paying? The auctions the major professional athletic agues hold for broadcast rights to their contests show st how expensive this business is getting. With each new mtract, old records fall and the pressure on rates grows. recent FCC report states, and I quote, some cable

TROUTMAN REPORTING SERVICE (570) 622-6850 14 erators note that distribution rights for NFL and NBA ents have increased by 100 percent to 150 percent, while e NHL has increased its distribution fees by 260 percent. Interestingly, for years, cable companies were iticized for their rates being too high; and any creases were seen as unwarranted. That criticism seems have diminished as demographics have changed. My neration, the Baby Boomers, grew up with free television. Pay-TV was anathema to many of us. We now ve a generation moving into apartments and buying homes at grew up in homes with cable television where you only t what you paid for. So some of the resistance to paying r television is disappearing.

Additionally, since we now operate in a mpetitive environment where there are other programming oices available, people who explore the alternatives ten conclude that cable is indeed a good value. We know at Pennsylvanians consider cable to be a good value cause we've commissioned Penn State to conduct surveys most every year since 1989. Each survey finds that by large majorities, nnsylvanians consider cable television a fair value. The st time we conducted the survey, 64 percent of the spondents said basic cable was the best value from a list at included movie theatres, video cassette rentals,

TROUTMAN REPORTING SERVICE (570) 622-6850 15 -emium cable and broadcast television which is, of course, ailable free. Now, despite the incredible efforts on the : irt of the cable industry to provide the best service >ssible, we still live with a reputation for bad service iat in some cases is rooted in practices long ago radicated. The historical roots of cable's poor sputation go back to before the 1984 Cable Act. Up until 1984, cable's rates were regulated by micipalities. We have documents in our files that show ie average request for a rate increase was pending for 17 mths. Imagine you're running a business. Even though iur marketplace conditions mandate you increase your rices, your hands are tied. You're not free to set your own prices. Lther than taking money from an ever-shrinking profit irgin and putting it into a new phone system or hiring Iditional customer service personnel, chances are you ght be looking for other ways to economize. Cable operators, particularly before 1984, sre able to get away with poor service. When I joined the ;aff of PCTA in 1983, the general manager of the Lrrisburg Cable System told me he had a three-week waiting .st for cable installations. The complaint we heard most frequently as we

TROUTMAN REPORTING SERVICE (570) 622-6850 16 aveled around the state was, "I can't get cable where I ,ve." And this, of course, was in an era when HBO, MTV, IN and ESPN were all brand new and pretty exciting to the msumers and they were clamoring for them. The '84 Cable Act freed cable operators from inicipal rate regulation. When I joined the industry, the lie of thumb for operators was to provide service only iere there were 45 homes per mile; otherwise, there would ! no return on the investment, particularly with rates ipt artificially low by municipal regulators. When cable operators were free to raise prices > reflect their costs to reflect marketplace realities, ley expanded their service areas. Available resources ire put into upgrading cable plant and extending that .ant to as many households as could be reached.

By 1992, we found we were serving two-thirds : Pennsylvania's rural households, about the same ircentage we served in the urban environment. It wasn't tusual to be building in neighborhoods with houses imbering in the teens per mile. And some operators built i areas and still build in areas with homes — in areas .th homes under 10 per mile.

While all the resources were put into

:panding the network to meet consumer demand, money was

>t going into hiring customer service professionals, phone

TROUTMAN REPORTING SERVICE (570) 622-6850 17 steins weren't being upgraded, the existing staff wasn't tting the professional training that's so important in e service industry. As an industry, we've suffered for that. I ow cable operators who have in hindsight admitted they issed up, that more resources should have been applied to stonier service — to the customer service side of the siness. And we've taken great strides to overcome the ortcomings of those times. But people still remember the bad experiences years ago, not the dozens of good experiences in the tervening years. One of the initiatives we point to with ide is the on-time guarantee program. The way it works that if a cable company installer fails to keep an pointment to install cable, installation is free. If a service tech fails to keep an appointment

* provide service, the customer will be given $20. In me markets, cable operators are giving pizzas or other emiums if appointments are missed. I know of no other dustry that does anything like this. Companies like Time Warner and AT&T regularly port system performance levels where appointments are pt more than 99.7 percent of the time, and the pressure on them to eliminate those few appointments that are ssed.

TROUTMAN REPORTING SERVICE (570) 622-6850 18 Since the 1984 Cable Act, cable has operated ider FCC regulations which require expanded office hours, iat phones be answered within 30 seconds, that timely itice be given of changes in rates or service. And the idustry has embraced these changes. And I know of no mnsylvania operator that's been cited for violating any : these FCC customer service rules. Cable is widely perceived to operate as a •nopoly since in most communities there is only one cable impany. If you want cable service, there's only one impany that provides cable service. The more narrowly you ifine the service we provide, the less competition we ive. The more widely you define our service, the more impetition we have.

If you can let loose the notion of us as cable roviders and consider our member companies, as the most scent Federal Telecommunications Act does, as providers of iltichannel video service instead of cable service, all of sudden we have competition from all the other providers : multichannel video service that I previously mentioned, le SMATV operators, the DBS providers, MMDS, Open Video -stem operators. And that's a list that's growing and impetition that's growing more fears.

We read in the trade press of new developments t wireless technology. The broadcasters are poised to use

TROUTMAN REPORTING SERVICE (570) 622-6850 19 e gift of spectrum given to them by Congress to deliver ltiple channels of video programming. The DBS folks are iw authorized to carry local programming, eliminating a .gnificant competitive edge that cable's enjoyed. And most significantly, with video streaming irvices now available over the Internet, we'll see more •mpetition going forward. If you forget about the ltichannel designation and just categorize cable as a ovider of video entertainment, then we're competing with ical broadcasters, videotape rental companies, mail order oviders of video discs and movie theatres.

If you look at cable as being in competition »r the entertainment dollars of consumers, then you're •oking at us competing against theatres, the Harrisburg tnators, books, records, magazines, virtually anything tat fits into the family's entertainment budget.

The marketing departments of our bigger impanies take a very broad approach and see cable tmpeting for the discretionary spending of consumers. Our srvice is not a necessity by any means. That means our •mpetition includes everything that can be construed as .scretionary spending: Cookies, fishing licenses, Beanie Lbies, you name it, that's the business, the discretionary tending, for which we compete.

Today, 14.6 million consumers obtain

TROUTMAN REPORTING SERVICE (570) 622-6850 20 .ltichannel video service from a provider other than the hie industry. Where we had 100 percent of this market st a few years ago, today we have declined from a virtual mopoly to 82 percent of the multichannel video audience. In Pennsylvania alone, 379,000 households ready have satellite dishes. While you may say cable ill has overwhelming control of the marketplace, the ivel of competition in the cable business, the ltichannel video business, stands in stark contrast to e local telephone marketplace where the incumbent local :change carriers still have more than 99 percent of the isidential phone business. We in the traditional cable business welcome lis competition. Providing multichannel video service is ir core business. We're good at it, and we welcome the tance to compete. We recognize that the number of impetitors we have is growing. In our neighboring state of Ohio, my lunterpart at the Ohio Cable and Telecommunications sociation spends much of his time monitoring the activity municipally owned electronic companies who, since they ready own bucket trucks and have relationships with msumers and the wherewithal to move into the ilecommunications business, are challenging cable •erators not only by moving into the video business but

TROUTMAN REPORTING SERVICE (570) 622-6850 21 ie data communications business as well. Given all this competition, we recognize that ir share of the market is shrinking. As business people, t ir member companies know about reading a profit and loss atement. And they recognize that there's only a certain trcentage of your customers you can lose before you're no >nger profitable. Let's face it, you need to sell a lot of cable r just to pay the programers, the banks, the electric impany, insurance, rent, pole attachment charges, taxes, ilaries, and all the other expenses that any business >uld have. Only a small percentage of revenues represent :ofits.

And when your share of the market declines, >u either have to find a way to get those customers back : find new revenue streams to make up what you're losing. tat's the driving force behind cable's move into the data isiness and phone business and other areas. In the last few years, I * ve seen cable unpanies move into the home security business. Others are >ing commercial video production. Others are transporting ita. Some are building private networks for schools and isinesses. And many, of course, are moving into the rovision of high-speed Internet service.

They all recognize that in the face of

TROUTMAN REPORTING SERVICE (570) 622-6850 22 creasing competition, they must diversify and find new venue streams if their businesses are going to continue prosper. Before I close, I just want to take a minute > talk about the role cable plays in Pennsylvania's immunities. Every month of the year, cable companies write ecks to C-SPAN and PCN to keep those networks operating. ten we do subscriber surveys, I assure you there are more ople calling for Comedy Central and the Sci-Fi Channel an for C-SPAN II or PCN. While C-SPAN and PCN might be rated high on .e list of channels watched by the people in this hearing iom, people with a strong and direct interest in •vernment, those networks don't sell cable. This is truly service of our industry to the American people and the :ople of Pennsylvania. The cable industry also makes a significant mtribution to education through a program we call Cable . the Classroom. In Pennsylvania, we have wired more than 200 schools at no charge. And the industry's mtribution of free service programming and instructional pport material is valued at more than $2 million per year L Pennsylvania alone. Again, I ask, what other industry contributes

• much to local education? We have a witness who will

TRODTMAN REPORTING SERVICE (570) 622-6850 23 ill you more about Cable in the Classroom; but I did want > mention a related service, Cable's High-Speed Education tnnection. In areas where cable modem service is railable, participating cable companies have agreed to rovide a cable modem and free service to schools and .braries in their service areas. Now, in addition to these industry-wide titiatives, cable operators do incredible amounts of iblic service work in their communities. They sponsor ttle League teams, run public service announcements for teal charities, run Toys for Tots campaigns, collect truck tads of food for local food banks, and use their bucket neks to put up holiday decorations for their communities, ley provide television coverage of local Halloween Lrades, provide news coverage and community programming, >ver local government meetings, cover high school sporting rents, support local charities with cash contributions, ixticipate in local chambers and other civic ganizations, and I could go on and on and on.

As a state association, we applaud and scognize the involvement of our members in community rents. Over the past three years alone, nearly 100 cable 'stems in the state have been honored for their exemplary immunity service efforts with a community service award we tsue.

TROUTMAN REPORTING SERVICE (570) 622-6850 24 Our association has also created an award med the Joseph P. Connolly Award for Excellence in mmunity Service. Joe Connolly ran the Eastern nnsylvania division of Time Warner and was vice-chairman our association when he lost his life in a car accident. I knew Joe and played a role in establishing is memorial to him. As his cable — at his cable system, ey would send out hundreds of thousands of dollars worth

bills for public service advertising every year to arities in the Reading area marked paid in full. His division's employees served on 85 local ards and committees. Joe Connolly set the standard. And ch year, we give out a half dozen awards, five for nners up and one for the company which best exemplifies ble's commitment to the community.

And I'm proud that this year's winning mpany, Charter Communications, will be represented at the arings today by Dale Albright who's filling in at the st minute for our friend Karen Broach. And I expect Dale 11 be talking about what he and his coworkers at Charter d to earn this recognition.

Let me close by stating that the cable levision industry has a rich heritage in Pennsylvania. e industry was born here. Many of the industry's lestones were achieved here. And we're still a hotbed of

TROUTMAN REPORTING SERVICE (570) 622-6850 25 inovation with companies extremely well-positioned for •morrow based right here in the Commonwealth. I speak of companies like QVC, the world's irgest electronic retailer; C-Cor Electronics in State •liege with their cutting edge cable technology; and •rldgate, a company that will provide consumers with ;cess to the Internet through their televisions; and there e others. We believe that cable has the infrastructure, ie ingenuity, and the commitment to help make Pennsylvania leader of all the states and a world leader in distance lucation, telemedicine, e-commerce, community networking, id in using the technology available to improve and enrich ie lives of all our citizens. Our achievements have far surpassed the titial visions of cable pioneers. Yet when I speak to tose pioneers, many of them still industry leaders, guys .ke Joe Gans, John Rigas, Ralph Roberts, Jim Duratz, tlanda Barco, each of them firmly believes our industry's ihievement is only surpassed by its potential. If the Committee will entertain, I have a :ief videotape that was used at our industry's 1998 itional convention at the beginning of the convention. Lst a couple of minutes. But there are some Pennsylvania .ghlights featured there.

TROUTMAN REPORTING SERVICE (570) 622-6850 26 And right after that, I'll be happy to tertain any questions you may have. (The Committee observed a brief video.) MR. COLOGIE: Thank you for your indulgence, . Chairman. CHAIRPERSON WOGAN: Leading off, I recognize presentative Raymond for questioning. I'd also like to ntion the presence of Representative Barrar. I think presentative Harhai is down at the end, and I think presentative Semmel is on my right. Representative ymond.

REPRESENTATIVE RAYMOND: Thank you, Mr. airman. Nice to see you again two days in a row. I just ve a few questions. What are the number of companies at service Pennsylvania today, do you have any idea? MR. COLOGIE: Forty-five. REPRESENTATIVE RAYMOND: Forty-five cable ~ MR. COLOGIE: Well, we have 45 member mpanies. There are a lot of small mom and pops that en't members. REPRESENTATIVE RAYMOND: A couple hundred if took in all the little ones? MR. COLOGIE: Probably 56, -7, 60, somewhere . there.

REPRESENTATIVE RAYMOND: And 10 companies

TRODTMAN REPORTING SERVICE (570) 622-6850 27 srvice 80 percent of the homes in Pennsylvania is the imber I've been told. MR. COLOGIE: Sure. REPRESENTATIVE RAYMOND: That's about right. tat do you see is the future of the smaller companies, the .ttle mom and pop companies down the road? Are they going > be forced out, absorbed? What's going to happen to tern? MR. COLOGIE: I think it depends on how dented they are, how visionary they are, whether they ike strategic alliances or not. We have some cable >erators who have already abandoned ship saying it's just >t fun anymore with all the regulatory red tape they have > deal with and everything. And we have others. I mentioned yesterday Shen-Heights Cable TV in le small town of Shenandoah, Pennsylvania that's already ifering cable modem service. We have some small companies tat, since they're free of a corporate structure they have > deal with, are able to do remarkable things. In St. Marys, Pennsylvania, St. Marys Cable id fiber optic — their whole system fibered like 15 years fo, and, you know, positioned themselves very well for the iture. They've since entered an alliance with Adelphia. think they're half owned by Adelphia now, but they're :ill community-based.

TROUTMAN REPORTING SERVICE (570) 622-6850 28 Each school in -their community has its own tannel. So they're very well-positioned. And I would link, you know, some of the smaller ones that have — are >re visionary will fair very well, again depending on leir ability to strike alliances with providers of srvices that are in a position to apply. You know, they just — these companies don't ive Internet experts sitting in the back room. So when tey enter an alliance with a company like High Speed ;cess, High Speed Access makes that investment in their rstem, comes in and puts the equipment in their head end id conditions their lines and allows them to get into that isiness. I would suspect down the road they'll make an .liance with a phone provider so they're able to move into le phone business as well.

REPRESENTATIVE RAYMOND: And part of your resentation dealt with the mention of the franchise fees tat are paid to local municipalities. And it sounded to i like you didn't really particularly care to be paying tose fees because it puts you at a business disadvantage .th regards to satellite and what have you.

And I suspect that the local municipalities at sast that I represent wouldn't really like to hear that scause the cable company we've had has changed names a

TROUTMAN REPORTING SERVICE (570) 622-6850 29 imber of times, but it's always been the same cable >mpany. And you take quite a bit of leeway, I think, in tying, Well, we're not a monopoly. And it was the federal !le — the Federal Cable Act back in '86, was it — MR. COLOGIE: Eighty-four. REPRESENTATIVE RAYMOND: — '84 that said you ist can't have exclusive franchises. Well, what do you ill what's out there now? They're all exclusive ranchises except for maybe one or two or three places in ie state. Just playing on words, my neighbors had one ible company to pick from. And they have a cable company to pick from tat since the 1996 Telecom Act has raised rates 23 srcent. Now, you used an example of why they're being •reed to raise rates beyond their control, that they're lying for the $100 million contract with some basketball ayer or they're paying for some movie that the cable rctpany has to buy that Julia Roberts is in. I would say to you that, number one, ComCast snt out and bought the Philadelphia 76ers with my iighbor's money. They went and — not now my neighbor's iney because we didn't have them before. But ComCast went it and bought the Philadelphia Flyers, the Sixers, the .rst Union Center.

Time Warner went out and hired Julia Roberts

TROUTMAN REPORTING SERVICE (570) 622-6850 30 do the movie that they own. And they own these operties. They're taking their cable subscribers' money d buying sports teams, they're buying sports buildings, ey're buying movie stores and movies. And it's all ntent and property that they then own. So they're making conscious decisions that are rcing rates up not being forced upon them. It's cisions that are being made business-wise. And my ighbors aren't happy with 23 percent raise in two years. ey think it's wrong, and they want an explanation. And then when they hear your people rolling in d say, Well, we're not going to roll that high-speed ble modem if you require us when you renegotiate your mtract to have open access. We're not going to do it cause we can't afford to do it. And they say, Wait a minute. They bought the yers and the Sixers and the First Union Center, but they n't afford to roll this out because you won't ask for en access in the negotiated contract that you have a ght as a municipality to negotiate. Why doesn't the cable company get up and walk ay from the table then and say, We don't want your mtract anymore, find someone else to provide cable rvice, instead of strong-arming and forcing local nicipalities and cities to cave in and not go to court

TROUTMAN REPORTING SERVICE (570) 622-6850 31 id fight you folks? If you'd like to respond. MR. COLOGIE: Sure. On ComCast's part, their rchase of sports teams was really a strategic investment i their part which means they're no longer at the mercy of team owner. Now they are a team owner. That guarantees iem affordable access to programming. A lot of cable operators are going out and >oking to acquire a little bit of vertical integration ere so that they are no longer at the mercy of others. REPRESENTATIVE RAYMOND: So instead of anplaining about that big bad person out there, they come the big bad person.

MR. COLOGIE: Well, it gives them some control er what they have to pay to obtain programming. And it tarantees they'll have quality programming for their ±>scribers. REPRESENTATIVE RAYMOND: And it gives erybody in the Philadelphia area who has to subscribe to >mCast an increase in rates so that they can go out and come owners of properties and sports franchises and Eric ndros's contract and people like that that are out of mtrol that you're complaining about. You can't have it >th ways.

They can't be complaining about that and ying, Well, we're being forced to because of crazy

TROUTMAN REPORTING SERVICE (570) 622-6850 32 Tiers, and then become a crazy owner yourself. That tesn't make sense to me. MR. COLOGIE: It's the opposite of having it >th ways. It's taking control of the situation and making L acquisition that gives you control. And I applaud their icision to do that. I think it was a brilliant business icision.

REPRESENTATIVE RAYMOND: You might applaud it, it my neighbors that are paying 23 percent, on an average > percent more — and some of them are paying more than iat — aren't applauding it because they don't think it's good move. And they don't have a choice of where else to i for cable yet. MR. COLOGIE: Again, if we look at it broader ian cable and look at it as multichannel video, your iighbors do have a right to go and get satellite dishes. id being you're in Southeastern Pennsylvania, RCN is kely mapping out your neighborhood and will soon be fering service there.

And in addition, I don't know how far outside dladelphia Popvision reaches, if they do reach outside iladelphia. But there are alternatives. REPRESENTATIVE RAYMOND: And this is from a y who pays 80-some dollars a month for his cable because

likes the Flyers and the Sixers and all that stuff.

TROUTMAN REPORTING SERVICE (570) 622-6850 33 iafs me. That's my choice. But my neighbors, a lot of iem senior citizens, they can't afford this stuff. They n't afford their rates being bounced up like that for lings like this. And I just — I just feel that you're asking >r it both ways by complaining about the franchise fee to ie municipalities who have granted you people franchises irever since you came on the scene to buying sports anchises and paying salaries for people like Eric ndros. I just think it's contradictory. MR. COLOGIE: I think you're characterizing my sntioning that as complaining about it. And I don't think was complaining about it. I was merely reporting it as a ict of doing business in the cable industry is that you're ting to pay franchise fees. It was not whether I like it

: don't like it. It's a matter of fact. And one of the things ! deal with and one of the things we have to consider when s're competing is that our competitors aren't paying that id we've got to make economies elsewhere. REPRESENTATIVE RAYMOND: I think one of the sasons this resolution was done — and I'm a isponsor — was to get this information out to the .ewers out there, the consumers out there that are paying tese high rates because they want to know why.

TROUTMAN REPORTING SERVICE (570) 622-6850 34 And they get these things in the mail that ally don't explain it very well to them, and they'd like know why. And part of the reason we want to get to the >ttom of it is why are the rates going up so much? And lu've explained some of it. And I think — I appreciate at, your candor and what you're saying with regards to orts franchises and business decisions. I guess that's their place to do that. So I ank you. That's all the questions I have. Thanks. MR. COLOGIE: Thank you. CHAIRPERSON WOGAN: The Chair recognizes presentative Lawless.

REPRESENTATIVE LAWLESS: Thank you, Mr. leaker. I promoted you. I'm particularly interested in ge 3 of your testimony, the area of taxes. On a typical ble bill, cable subscriber's bill, am I adding these .gures up that most, if not all, municipalities get a 5 rcent basic tax? Is it all? MR. COLOGIE: No. REPRESENTATIVE LAWLESS: But it's most? MR. COLOGIE: There's some that don't charge ything. REPRESENTATIVE LAWLESS: But do most charge? MR. COLOGIE: Most charge, yes.

REPRESENTATIVE LAWLESS: In addition to that,

TROUTMAN REPORTING SERVICE (570) 622-6850 35 ere's a 6 percent sales tax? MR. COLOGIE: On premium cable services, not sic. REPRESENTATIVE LAWLESS: Are there any other ixes? MR. COLOGIE: Reflective on the bill? REPRESENTATIVE LAWLESS: Correct. MR. COLOGIE: Oh, there would be a sales tax i equipment if you're renting equipment, just like any .siness that rents you equipment, yes.

REPRESENTATIVE LAWLESS: But there's a 6 ircent sales tax, there's a 5 percent tax to the local micipality? MR. COLOGIE: Right. That's it. REPRESENTATIVE LAWLESS: But there's no other ideral taxes or anything? MR. COLOGIE: No. REPRESENTATIVE LAWLESS: So basically on •ur — MR. COLOGIE: Well, there is an FCC subscriber :e of 48 cents per year per subscriber. REPRESENTATIVE LAWLESS: Okay. So it might be

MR. COLOGIE: Four cents a month.

REPRESENTATIVE LAWLESS: Yeah. It might be 11

TROUTMAN REPORTING SERVICE (570) 622-6850 36 id a half percent of your bill per month is taxes. Would iat be correct? Five percent, your 5 percent — MR. COLOGIE: No, it's only 6 percent of the emium service if you take a premium service. So there y or may not be sales tax. REPRESENTATIVE LAWLESS: But there is a srtain percentage of this —

MR. COLOGIE: Sure. REPRESENTATIVE LAWLESS: — $28 average or atever you came up with is taxes — MR. COLOGIE: Yes. REPRESENTATIVE LAWLESS: — approximately 10 xcent of it. On top of that — and I have a Public ility background. So maybe I understand a little bit •re about how a monopoly and a ratepayer pays versus a ivate industry such as cable TV who subscribers pay cause there is a difference between a subscriber and a itepayer.

But having said that, if you go to page — and I think the cable argument is that they have a pital investment that they put into their company and ey should be able to get a return on their investment. I ppen to agree with that because it's not the rate payers. 's the subscribers that are paying for the capital vestment, the pole attachments.

TROUTMAN REPORTING SERVICE (570) 622-6850 37 But having said that, page 4, your first xagraph where you talk about the expenses that you go trough to have these shows and to have these sporting rents, why does a basic cable subscriber pay for those rtras as part of their rate that they don't receive if you uly believe that you're in a business who only pays for lat you get? So in other words, if I just had basic — if I ve in a terrible area, maybe in the city or where iception is not good for TV, why am I burdened with paying >r the $100 million athlete? Shouldn't you just provide s with the cost of what it is plus a profit margin to give : regular basic cable and not split — not make me pay for imething I don't get?

Isn't that really the cable mentality that's it there? MR. COLOGIE: Well, it's kind of the same tntality of the newspapers. We try to put together a ickage that's desirable to lots of people. You may get a dladelphia Inquirer on Sundays. And since you're imfortable in your house, you never look at the real :tate section.

Maybe you're not a sports fan. So you don't

•ok at the sports page, but you pay for it whether you use

. or not. And it's just part of the aggregation of a

TROUTMAN REPORTING SERVICE (570) 622-6850 38 ickage that — I'm sure the Inquirer spends a lot of time linking, How can we make our product desirable to the xgest number of people? And that's essentially what we did. We've ien doing it for years. The technology really wasn't lere to do anything but bundle this stuff rather than go it and sell it a la carte for the longest time. It was isentially just, you know, sell everything for many, many sars. And the contracts cable signed with cable itworks require us to bundle a lot of these networks into ie basic tier because they're making money not only on illing the product to the cable company for resale to ibscribers but also in ad revenues. And they feel they'll be attracting more eballs in aggregating a bigger audience if they're on the isic tier. So we really don't have the flexibility to, iu know, take out ESPN and TNT and put them together on a tparate sports tier. But I would suspect we'll be moving at way going forward. REPRESENTATIVE LAWLESS: Yeah. Just a closing unment. I think you're going to have to because I think e — the part that makes your opposition, the issue that ey have to raise most frequently, what makes it sexy is e fact that these athletes are making outrageous amounts

TROUTMAN REPORTING SERVICE (570) 622-6850 39 : money. And some mom and pop who can barely afford leir cable TV in some certain section of Pennsylvania and ley can't get reception with the rabbit ear — the old Lbbit ears, they're forced to pay that. And that's coming rom somebody, I mean, I voted against the $390 million for ;adiums. So I understand what you're up against. But I Link sooner or later, that's what the opposition is mcerned about, is the price that the subscribers have to iy and what's driving that up. And I think that's really ly we're here, if you read the resolution, is what's riving the rate up. And the members here should know that it's not le — you know, you pay a lot of money probably per month i pole attachments to either PECO down in — I'm from the ratheast — from PECO or from Bell Atlantic. You're lying an exorbitant amount per month for cable TV :tachments to each pole. People don't realize that, who may be watching lis at home tonight or today, there are a lot of expenses tat drive the price of cable TV up, including taxes. But think when it comes down to it, you could control the >st by saying, you know what, Sixers, we're not going to it — we're not going to pay an athlete $50 million if you

TROUTMAN REPORTING SERVICE (570) 622-6850 40 int us — if you want to be on our cable network. Thank >u, Mr. Speaker. CHAIRPERSON WOGAN: The Chair recognizes spresentative Fichter. REPRESENTATIVE FICHTER: Thank you, Mr. lairman. Could you tell me what — how do cable systems icide what programming they're going to have? For istance, if you go down into Montgomery County, some cable roviders give us C-SPAN I. Other cable providers give us •SPAN I and II, ESPN I, ESPN II, all that. How is all that determined? Is that driven by le public, or is that some decision made in the boardroom : the local cable operator? MR. COLOGIE: It's generally driven by the iblic. Cable companies do want to be responsive to their istomers. There are some instances where if a local cable >mpany is part of a big MSO, Multiple System Operator, the >0 will cut a deal with the programming company at the ttional level. And, you know, like there's a start-up network ly when Cor-TV is being launched. And Time Warner signs a sal with Cor-TV at the national level and says, We're >ing to guarantee you carriage on this many cable systems id into this many, you know, thousands of homes.

And, you know, for local cable — if a local

TRODTMAN REPORTING SERVICE (570) 622-6850 41 me Warner system has channel capacity available at the me the deal is written, you know, chances are Cor-TV will i carried on that channel system. But it seems just about ery cable company in Pennsylvania where the managers have one autonomy and some say as to what gets carried, they do rtensive surveying of subscribers. I know I've seen test runs where they'll put ogramming from a different network on for a week and then k people to vote. Which one did you like the best? And ey do extensive surveying of customers. And we get .lis. Our member companies get calls from people because tey'll read in the newspaper about Comedy Central and have ver seen Comedy Central. The Sci-Fi Channel had enormous following ifore it was ever carried in most communities just because ience fiction fans seemed to, you know, be pretty devout •out their hobby. And there were a lot of calls for the li-Fi Channel before it was launched. Same with the Golf Channel. Golfers seem to ke to watch golf on TV. And we get a lot of phone calls, id we keep track of who calls and wants what.

REPRESENTATIVE FICHTER: So basically what >u're saying is, if I understand what you said, is that .*s the consumer that dictates to the cable company what Ley want to see and that's what you program and that's

TROUTMAN REPORTING SERVICE (570) 622-6850 42 at you show. Is that correct or incorrect? MR. COLOGIE: For the most part, yeah. We nt to be responsive to consumers. REPRESENTATIVE FICHTER: Well, what do you an by the most part? MR. COLOGIE: Again, I mentioned — REPRESENTATIVE FICHTER: Suppose I wanted PCN i the 70th Legislative District. Part of it has it, as I call. I think Upper Gwynedd Township does, and the rest it doesn't. So we don't have PCN, C-SPAN II. We have

SPAN I but not C-SPAN II. So what you're saying for that to happen is I iuld have to get quite a number of people to go to the ical cable operators and say this is what we want, and iey'11 do it then, right? MR. COLOGIE: I would think people will pay tention if you got a number of your constituents to send itters or call the cable company and say they wanted those srvices, yes. REPRESENTATIVE FICHTER: Then the bottom line j the public — you're saying the public does dictate to ie cable operators that this is what we want to see and ds is what you're going to program; is that correct? MR. COLOGIE: Yes. REPRESENTATIVE FICHTER: Thank you very much,

TROUTMAN REPORTING SERVICE (570) 622-6850 43 -. Chairman. CHAIRPERSON WOGAN: The Chair recognizes ipresentative Wojnaroski. REPRESENTATIVE WOJNAROSKI: Thank you very ich, Mr. Chairman. Bill, on page 4 of your testimony, you ate, "Up until 1984, cable's rates were regulated by inicipalities." MR. COLOGIE: Correct. REPRESENTATIVE WOJNAROSKI: Okay. For the cord, who controls the cable rates right now? MR. COLOGIE: Okay. In 1984, cable rate gulation ended. It was reimposed in 1992, and inicipalities had control over basic rates. And the FCC id control over the next tier. The CPST is what it's illed in the law, the Cable Programming Services Tier. id that would be the tier above basic. In the Telecommunications Act of 1996, the tte regulation ended at — yeah, there is still municipal igulation of the basic rate only. But the FCC stopped igulating the — the tier above that. And there is not tsic rate regulation in places where there is competition. REPRESENTATIVE WOJNAROSKI: May I ask you imething then? Do you enter into any contract with (proximately the 2,600 municipalities that you do business .th?

TRODTMAN REPORTING SERVICE (570) 622-6850 44 MR. COLOGIE: Do — REPRESENTATIVE WOJNAROSKI: Cable, do you iter — MR. COLOGIE: Do local cable companies? REPRESENTATIVE WOJNAROSKI: Yes. MR. COLOGIE: Yeah. Well, they all have gned franchise agreements. REPRESENTATIVE WOJNAROSKI: Franchise [reement. Can you explain for us quickly what are some of ie terms and conditions of these agreements? MR. COLOGIE: The FCC spells out in the Cable it what's allowed to be covered. And of course, basic ites would be covered. And there are operators here who e going to be appearing after I do who actually sit down id negotiate these franchises who are far better able to iswer the question than I.

But it — the FCC gave the municipalities the ght to set service standards, customer service standards id technical standards that surpass those levels stated in ie Cable Act at the national level. So they could be in ie franchises. There's likely language in there governing ilationships between the municipality and the cable impany.

In terms of notices going back and forth, you

IOW, we'll give you 30 days' notice if we want to open a

TROUTMAN REPORTING SERVICE (570) 622-6850 45 reet, -things like that. Franchise fees are covered, .ghts of ways, things like that. REPRESENTATIVE WOJNAROSKI: One last question. ; a — MR. COLOGIE: And just one other thing is micipalities have the right to have language in there for iat we call PEG Programming, and that's Public Educational * Governmental Programming. If they have a public access tannel or an educational access channel or a government icess channel, that would appear in the franchise [reement as well. REPRESENTATIVE WOJNAROSKI: My line of testioning comes from my experience as a former city mtroiler in Johnstown, and I played a part in these tntracts in years past. Are these agreements that you ist spoke of, are they agreements open to the public for i to scrutinize?

MR. COLOGIE: Yeah, it's essentially a inicipal ordinance. REPRESENTATIVE WOJNAROSKI: And the length of te contract — one last question — as a rule, standard lie, a contract with the municipalities is what, 5 years, i years?

MR. COLOGIE: Ten years.

REPRESENTATIVE WOJNAROSKI: Ten years. Thank

TRODTMAN REPORTING SERVICE (570) 622-6850 46 »u, Mr. Chairman. CHAIRPERSON WOGAN: And thank you, Mr. ilogie, for your comprehensive overview of cable industry i Pennsylvania. Next on our schedule is listed Tom Carey, meral Manager, Adelphia Communications from Erie. Good irning, Mr. Carey. MR. CAREY: Good morning. Thank you for the iportunity to speak to you today regarding House isolution 64. My name is Tom Carey, and I am the General mager of the cable system serving suburban Erie County. will be talking to you today about Adelphia, myself and • career, and our commitment to the Erie community.

Adelphia is a Pennsylvania-based company with s corporate headquarters in Coudersport, PA. The company i owned by the John Rigas Family of Coudersport. Mr. .gas has been in the cable television business since the Lrly '50s when he acquired his first cable television anchise to serve the Coudersport area. His commitment to the community is seen nearly i years later as he operates the country's fifth largest ible system operator from this small town in Pennsylvania. lelphia acquired the cable system in suburban Erie from II in August of 1998.

Together with the company's extensive holdings

L western New York, including Buffalo, and its purchase of

TRODTMAN REPORTING SERVICE (570) 622-6850 47 ie Cleveland, Ohio cable system as announced last week, my 'stem in Erie is poised to be an integral part or ystone, if you will, in Adelphia's Great Lakes Region. We are now completing a fiber optic iterconnect that connects these three cities, and that mnection passes right through my office and technical inter in Harborcreek Township. As for me, I began my ireer in the cable television industry in 1979. As a cable installer, I installed many homes i the area with 12 channels of service, consisting of if-air broadcasts from Erie, Cleveland, Buffalo and also inada. I am told that we were the third cable system in ie country to offer HBO when it began broadcasting in the jrly 1970's. In those days, cable television was an easy isiness to be in. The technology was simple, and everyone inted more programming. The cable guy was welcomed into ie home with a handshake, and the whole family watched us >rk. In the early 1980's, new technologies made it issible for our system to begin offering a whole new range : programming that was being broadcast from satellites. Even though the quality of programming may ive been lacking in some respects, our customers were ill very anxious for new programming. And we added lannels like the Christian Broadcasting Network, WTBS, the

TRODTMAN REPORTING SERVICE (570) 622-6850 48 itellite Program Network, and an early ESPN that depended L sports like volleyball and frisbee-throwing for their rogramming. Looking back, it is easy for me to think that le '70s and '80s were the good old days. But when you >rk in and believe in an industry as dynamic as cable TV ; telecommunications, as it's now called, looking back is »t something that we have a lot of time to do.

Over the years, this industry has been charged .th keeping up with changes and advancements in schnology, while maintaining fair rates and delivering new rogramming that our customers demand. In response to iese stringent demands, our industry has had to not only sep up with technology but also force its development. In Erie County, we recently spent in excess of .6 million to build a state-of-the-art telecommunications ifrastructure to deliver services to our customers. This rstem is comprised of nearly 1,000 miles of coaxial cable id more than 150 miles of fiber optic cable. We currently offer our customers 60 channels : basic service, 6 premium services, Pay Per View, and 30 lannels of digital music. We also offer digital cable .th more than 40 channels, and we plan to expand those .gital offerings in the first quarter of 2000.

Cable has become a full-blown entertainment

TRODTMAN REPORTING SERVICE (570) 622-6850 49 dustry during the 20 years that I have been affiliated th this cable system. What else is Adelphia doing to hance our service offerings and better the community we ve in and share? Let me highlight some of our other ojects and programs we're involved in. As I speak, our technicians are preparing for r launch of Powerlink, Adelphia's high-speed Internet rvice. Beginning next week, we will offer our customers ±>le modems, which will allow Internet access at speeds ster than those currently available through any other ovider. In order to offer this product, a further ivestment in excess of $3 million has been made in our Jble system. This system upgrade is being accomplished trough the use of a local cable contracting company and is resulted in the creation of jobs. We are in the final stages of a million dollar pansion of our main office and technical facility. This oject is also being completed using all local ratractors, local labor and local suppliers. We provide tree channels on our cable system to Mill Creek Township id Mill Creek School District for educational and ivernment access programming that they produce.

This provides an excellent learning tool for e students and provides the community with vital

TROUTMAN REPORTING SERVICE (570) 622-6850 50 formational programming. This programming is supported th a fee of 20 cents per month per customer that we bill d collect for the township. This support to supplement the operation of ese channels approaches $40,000 per year. Speaking of hools, Adelphia provides free basic cable service to arly 50 school buildings in 7 districts in Erie County. d we provide the schools with a free monthly guide and hedules and tips on how to best use this complimentary rvice. We have also joined the National Cable levision Association's initiative to supply one free ble modem connection to each school. And with our launch

high-speed Internet service, we'll be able to fulfill .at commitment. Through a 3-year partnership with a local oduction company called Image Sports, we have been able > produce and broadcast 20 to 30 local sporting events per iar that would otherwise never be televised. These sports nge from game-of-the-week high school football and boys id girls basketball to college-level basketball and >ckey.

We also televise a few of the local Ontario >ckey League "Erie Otters" games each season. In October, i added a channel to our service which we named the

TROUTMAN REPORTING SERVICE (570) 622-6850 51 lelphia Community Network. By utilizing this channel, •cal organizations are able to place public service inouncements on the channel by logging onto the Internet id typing their message as they want it to appear. Qualified organizations are not charged for iblic service announcements. For-profit businesses can so purchase advertising on this channel. In the first tarter of 2000, we will produce and maintain an Internet ib site that will interact with the Adelphia Community itwork where Internet users can go for all sorts of realized Erie information.

As for community volunteerism, Adelphia irrently employs approximately 70 people locally in Erie tunty. And our employees participate in numerous events ich as the March of Dimes, Walk America, Big Brothers and g Sisters, Bowl for Kids Sake, MDA Jail and Bail events, id the American Heart Association events, just to name a sw. Also, I was just elected to my second term as the esident of the Harborcreek Area Chamber of Commerce.

In closing, I would like to say that Adelphia ; a company that has grown larger while continuing its nmnitment to improve the communities it operates in. tether it is through the programs that I have mentioned or ie fact that it pays $600,000 per year in franchise fees i the municipalities for the right to conduct business in

TROUTMAN REPORTING SERVICE (570) 622-6850 52 .e public rights of way, Adelphia's contribution is gnificant and real. Thank you again for the opportunity to istify. I'm happy to answer any questions you may have. CHAIRPERSON WOGAN: The Chair recognizes presentative Smith. REPRESENTATIVE SMITH: Thank you, Mr. tairman. I appreciate your testimony. I'd like to follow i on some questions that were asked to the previous stifier relative to the — how the packages are veloped. It seems to me that it's frustrating sometimes lenever I buy a basic package from Adelphia versus the emium channels, that I'm probably paying for a lot of lannels that I never, you know, never look at or have any iterest in. In some regards, I may — I may be benefiting ' I may be paying for more than I get. I don't know. And I guess my question is, Does the ichnology allow for you to do a better job of giving kind : customized packages? And can you actually go down the .st of channels and say that, like, ESPN actually iflected on my bill represents $1 of my cable bill, ESPN : is 95 cents, the learning channel is 12 cents, or some xiation of that? Is that something that can be done? MR. CAREY: I would have to say that in

TROUTMAN REPORTING SERVICE (570) 622-6850 53 eory, the technology exists. Although, test systems ere that method of providing service has been tested the sts have not gone well. Generally, programers that pply channels like ESPN and CNN and so on have very tight reements that require us to provide them with a package th other services. So your traditional — REPRESENTATIVE SMITH: Excuse me. MR. CAREY: Yes. REPRESENTATIVE SMITH: They're requiring >u — if you're going to get ESPN, you're going to take ur other less desirable, less high profile, is that what u mean? MR. CAREY: Well, they say if we carry — if : provide an expanded basic package, we want to be in the panded basic package and not — not in a tier with three ' four other channels that nobody is going to want to buy. REPRESENTATIVE SMITH: Now, who are they? MR. CAREY: They? REPRESENTATIVE SMITH: The people that you id, the guy that's going to sell you — MR. CAREY: Well, the programers. The impanies that produce the programming for ESPN and CNN, S. Those are all other programers that purchase that and ckage that programming to create a network.

REPRESENTATIVE SMITH: Because what I'm

TROUTMAN REPORTING SERVICE (570) 622-6850 54 'llowing up on a little bit is Representative Raymond was ying, you know, why is this cable company buying that? I ess in that situation it's a little different where the ble company actually owns the sports franchise. MR. CAREY: Right. REPRESENTATIVE SMITH: But in some cases, it pears to me that there's a third party, an in-between tat would be, you know, requiring that to be passed on. id I guess I just want to — I guess what's frustrating, i I mentioned, is that over half the channels that are ovided on my system — I have pretty much, you know, one ep above basic. I don't have all the premium channels or ivthing like that because I never would have time to watch iem. But I don't watch half of what's there anyhow. So m thinking, Why am I paying for all this? And just lat's what I'm looking for.

MR. CAREY: Well, you know, the industry began ; a system to deliver signals from distant cities to lople in rural areas. That's how cable television was tveloped. And at that time, they sold basic service, dch was, as I mentioned, the signals from distant cities ch as Buffalo, Cleveland, Canada, Pittsburgh, when we iuld receive it on an antenna.

And in the '80s when we had access to other

TROUTMAN REPORTING SERVICE (570) 622-6850 55 ograms, other channels to add to the system, they were nd of put on a different tier called expanded basic rvice in most areas so that — so that a customer could ill take the basic level of service if they wanted it. they could sign up for basic and an expanded basic level service that would give them more channels. And we ill offer that today. In my system, a customer can get basic rvice, which is mainly the local broadcast stations and SPAN, Discovery Network and a couple other message-type annels in there for $10.70 a month. And that price is ill pretty comparable to what we were offering back — back in the early '80s before all this programming s developed. REPRESENTATIVE SMITH: Can — and I appreciate at. I, you know, I realize the question isn't so much a estion as a comment. Can you actually break out what I id, like, each franchise costs this much and that much?

MR. CAREY: Well, sure. We have contracts th the individual channels. You know, we are not sitting ere — REPRESENTATIVE SMITH: Is that something you uld provide us is what I'm asking?

MR. CAREY: It's not my place to do that. I ess that would have to be a question for our corporate

TROUTMAN REPORTING SERVICE (570) 622-6850 56 fice. And they maintain all the contracts. But I mean, ere is a contract. And of course, there's a cost tied to dividual channels. And, you know, just so that — so that it's ear, we purchase those channels to put on our cable stem. We aren't sitting with a warehouse of programming at we decide. Oh, tonight we're going to show reruns of int Eastwood all night or anything like that. That's ogramming that — we're paying for the right to carry at. REPRESENTATIVE SMITH: I'll pay for that one. MR. CAREY: Yeah. We're paying for the right • carry that individual channel. REPRESENTATIVE SMITH: Okay. Thank you. I ipreciate your comments. MR. CAREY: You're welcome. CHAIRPERSON WOGAN: The Chair recognizes ipresentative Fichter. REPRESENTATIVE FICHTER: Thank you, Mr. [airman. I'd just like to clarify a point. Let's assume at Wogan Enterprises comes up with a new program. And iey do a lot of advertising, and now they're going to try i get it on a local cable company.

Does Wogan Enterprises come to Adelphia and iy, We have this program and here's the rate we're going

TRODTMAN REPORTING SERVICE (570) 622-6850 57 > charge you. It's going to be X dollars or X cents ir subscriber. And you hem and haw. And then Wogan iterprises does the full-blown advertising campaign • — I guess it's called pull-through advertising. Then your customers start calling you, and ten you see the demand that maybe you should be signing up .th Wogan Enterprises and sign up, and then you program it id show it. Is that how that works? MR. CAREY: I believe Wogan Enterprises would iproach us with a channel, a network rather than an idividual program. Adelphia does not own any cable itworks and cannot, therefore, insert a particular program L those networks. One little correction. We do own the Empire torts Network, which is the regional sports network in the iffalo area. But other than that, Adelphia can't take >gan Enterprises' infomercial or fishing program and put : on the Nashville Network, for instance. REPRESENTATIVE FICHTER: You're saying Wogan iterprises has to have their own channel? MR. CAREY: Or they would approach an existing ible network and have that program put on the cable stwork. REPRESENTATIVE FICHTER: Fine. Thank you, Mr. tairman.

TROUTMAN REPORTING SERVICE (570) 622-6850 58 CHAIRPERSON WOGAN: Thank you. I like the way lis hearing is developing. I'm Speaker of the House and I Lve my own cable company, except I'll probably end up in .lenwood. Thank you, Mr. Carey — MR. CAREY: You're welcome. CHAIRPERSON WOGAN: — for taking the time to 'ive down here from Erie and testifying before our tmmittee this morning. MR. CAREY: You're welcome. It's my pleasure. CHAIRPERSON WOGAN: Next on our agenda, we ive Dale Albright, General Manager, CableCOMM from .toona. Good morning. MR. ALBRIGHT: Good morning. My name is Dale .bright, and I am the General Manager of CableCOMM in .toona. CableCOMM, which was recently acquired by Charter >mmunications, provides cable television service to proximately 100,000 households throughout Pennsylvania.

We operate cable systems in the communities of .toona, Johnstown, Clearfield, Bradford, Warren and .fflinburg. Each of these systems has recently been (graded or is in the process of being totally upgraded in :der to provide a higher quality and more reliable service > our customers.

These upgrades will, of course, also expand ie capacity of our systems, enabling us to provide more

TROUTMAN REPORTING SERVICE (570) 622-6850 59 annels and new services such as digital programming ckages and high-speed Internet access. Earlier this iar, our Johnstown system completed a $10 million upgrade d launched the RoadRunner high-speed online service via ±>le modems. The system currently has over 700 RoadRunner stomers enjoying Internet access at speeds of up to 20 mes faster than a standard telephone modem. In Altoona, i are in the process of completing a $10 million upgrade our entire 750-mile cable system serving over 40,000 stomers in 22 communities throughout Blair and Bedford iunties. The new system will be a state-of-the-art 750 gahertz 2-way active system with over 250 miles of fiber •tic cable. The project is scheduled for completion this rating March and will allow us to introduce a high-speed line cable modem service beginning in April or May.

We're very anxious to launch this new service, ; we have received literally hundreds of requests for such service in just the past few months. Plans also call for : to begin offering customers a digital package of about i new cable networks early in the third quarter of next tar, and we have similar plans in place for the rest of x systems in Pennsylvania and throughout the country.

At CableCOMM, we are very excited about the

TROUTMAN REPORTING SERVICE (570) 622-6850 60 pidly developing technological advances in our industry id are staying on the cutting edge of new developments. i will continue to upgrade our facilities as necessary in der to provide a robust telecommunications network that .11 allow us to compete in the ever-increasingly impetitive communications industry. We will also continue to explore exciting new irvices as they are developed and will introduce them to x customers when they become available. All of us at ibleCOMM are very proud of the service we provide to our stomers. In Altoona, we currently offer a 21-channel sic service for under $10 a month. Beyond the basic service, we have various ickages of quality programming available to our customers .th a total of 77 different channels offered on the system . reasonable prices. We believe that cable television imains an entertainment value that is unmatched by any her product or service.

And our service is backed by a dedicated team local professionals including courteous and towledgeable customer service representatives, installers id service technicians. Our service department is on call : hours a day to respond to any service system problems we .y experience.

Our continuing commitment to customer service

TROUTMAN REPORTING SERVICE (570) 622-6850 61 demonstrated by the results of our on-time guarantee ogram. Over the last three years, we have met our heduled appointments more than 99 percent of the time. x telephone answering response time has also exceeded dustry standards over this time. We are equally proud of our role as an active d responsible member of the local business community and e seriously committed to making a difference in the mmunities we serve. Some of the charitable organizations sisted by CableCOMM in the Altoona area in recent years elude the United Way, Blair Senior Services, the St. ncent DePaul Society, the Blair County Association for e Blind, Junior Achievement, March of Dimes, Family xvices of Blair County, Pennsylvania Special Olympics, ie MS Society, the Blair County Arts Foundation, local [CAs, and various Little League programs.

The assistance we gave to these and other ganizations was provided in several forms including event onsorships, fund-raisers, food drives, cash donations, e free production and airing of public service mouncements, and the volunteering of time and talent. CableCOMM is equally committed to education. i addition to providing free cable service and monthly ble in the Classroom guides to 42 public and private hools in our service area, we also donate time and

TROUTMAN REPORTING SERVICE (570) 622-6850 62 terial to rewire and connect schools. We hold an annual Cable in the Classroom open iuse workshop for local educators, conduct critical .ewing workshops for teachers and parents, and participate i local career exploration fairs for junior high school :udents. Each year in the Altoona area, we also award i to three minigrants to local teachers who propose inovative approaches to utilizing Cable in the Classroom ogramming. In addition, we provide up to six iholarships to local high school seniors to assist them .th their college expenses.

In recognition of our community service iforts and accomplishments last year, the Blair County lamber of Commerce honored CableCOMM and its employees .th their 1998 Award of Distinction for Community Service. \ have also been very honored to be one of the proud tcipients of the Pennsylvania Cable and Telecommunication ssociat ion's annual Community Service Awards each of the Lst three years.

So it is with good cause that all of us at ibleCOMM are very proud of the service we provide to our istomers and to the local communities we serve throughout snnsylvania. With that, I will thank you for your time. id I would be happy to answer any questions you may have.

TROUTMAN REPORTING SERVICE (570) 622-6850 63 tank you. CHAIRPERSON WOGAN: Mr. Albright, it seems as : many cable companies are beginning to offer these .gital packages. I don't know too much about them. They sem — they're relatively new I assume.

MR. ALBRIGHT; They are relatively new. There e several operators, I think, in Pennsylvania who, over te past year or so, have begun offering them. And we have »t yet, but I understand that probably by mid next year, s will and that it will be made up of a package of about I different cable networks for an additional charge of Lybe $10 a month.

That will include channels such as Speed .sion, the Food Network, networks that we may not carry .ready but we have had some requests for from customers. : would also include, as I understand it, multiplexed pay srvices so that if you subscribe to HBO and then you got lis $10 package, you would all of a sudden now receive, in Idition to HBO, HBO II, III, IV, V, as well as a package : basic-type networks. CHAIRPERSON WOGAN: So with your present Lcilities and network, you couldn't do that. Is that why tere's a move to offer digital cable services?

MR. ALBRIGHT: That's correct. We don't have le channel capacity. Many of the systems in the state

TRODTMAN REPORTING SERVICE (570) 622-6850 64 dn't have the channel capacity. And the technology sally, I guess, has just been developed in the last few :ars. As we complete our system upgrades and rebuilds, we >w have a lot more channel capacity to use. And actually, the packages, these digital Lckages use the space of just a few normal channels. So s can — we can crowd, if you will, several digital lannels into the space of one analog channel. That schnology is relatively new. CHAIRPERSON WOGAN: Briefly, what sort of •grades to your facilities must you institute in order to diver digital cable? MR. ALBRIGHT: I believe basically we need >re channel capacity. We need more channel space, analog »ace. The upgrades we're doing, though, are very rtensive. We're replacing much of our coaxial cable. i're replacing all of our electronics, all of our lplifiers, all of our passive electronics, tap units, >litters. We're adding over 200 miles of fiber optics to ir system. We're getting — and we're adding something in le neighborhood of 60 fiber nodes out in the system. In isence, we're getting each customer closer to our head end : the origination of our signals so that the system is >re reliable and the picture quality is better.

TROUTMAN REPORTING SERVICE (570) 622-6850 65 CHAIRPERSON WOGAN: Must Adelphia run a new .re to a consumer's home in order to give them digital ible? MR. ALBRIGHT: No. CHAIRPERSON WOGAN: No? MR. ALBRIGHT: No. In many cases, the wire to ie home is adequate. You know, we are, though, as a part : our system upgrades, going through and systematically langing out individual service drops that are maybe 15, 20 ars old, the old copper style. We're updating those for ie — for the increased bandwidth. But most drops already e updated.

CHAIRPERSON WOGAN: Thank you. The Chair tcognizes Representative Lawless. REPRESENTATIVE LAWLESS: Thank you, Mr. [airman. You know, you're the fourth person, as you know, > testify here. And we're sort of hearing the same thing. id I'm from Montgomery County, and I have Suburban Cable i my legislative district.

And I'll be the first one to defend that iburban Cable does a great job in being immunity-oriented. I mean, I have a youth organization ind-raiser coming up this weekend. They're taking a part i that. I mean, they're there all the time for the immunity. And that's a good thing.

TRODTMAN REPORTING SERVICE (570) 622-6850 66 And I'm not a cosponsor of this resolution; t obviously, a number of my colleagues are. And the stimony is on — so far has been on basically the value iat a cable company offers to a community. And I agree toleheartedly with that. But the resolution is — obviously, there are woe of my colleagues and other people across the state who e not happy with the cost. MR. ALBRIGHT: Right. REPRESENTATIVE LAWLESS: Do you anticipate in e future costs rising as dramatically as they have i — it's been stated in previous testimony 20 percent er the last two — wherever these figures are coming om. And again, I don't get these complaints in my office guess because Suburban Cable does such a good job being immunity-minded and people don't have those problems.

But you say right here in your second xagraph, you're going to enable us to provide more tannels. Well, if I look at the economics here, more Lannels cost more programming for you folks to pay the lople. You're going to provide me with more channels tat, frankly, I don't want to watch, as Representative dth had said earlier.

I mean, I don't want my kids watching MTV; but pay for it every week — every month. And yeah, you can

TROUTMAN REPORTING SERVICE (570) 622-6850 67 y, Well, I can put a chip in there and cut that out. I'm ill going to pay for it. MR. ALBRIGHT: Right. REPRESENTATIVE LAWLESS: Getting back to this isolution, to help some of my colleagues answer their estion on why we're here, how are we going to drive costs hear is how are we going to control cost because that's tat the resolution's about. And by you saying you're iding more channels, you're not going to control costs. >sts are going to go up. Can I have your comment on that?

MR. ALBRIGHT: Yes. I think most of the new

TROUTMAN REPORTING SERVICE (570) 622-6850 68 annels that you'll see us adding will be to additional ckages that you can choose to subscribe to or not. Very iw — I see very few channels being added to our current panded basic package. And, you know, we do — all of us or most of t at least, I think, have a basic package. We have in toona a 21-channel basic package for about $10 a month. iu know, that's not going to change. We're not adding lannels to that. That package is not growing. That's — we will maintain that for, you know, ie hundreds of subscribers who want just good clear sception on 15 or 20 channels. But as far as all of the Lditional channel capacity we're making available on our stem, a lot of that will be used for digital packages and •r new services like online — high-speed online services.

I see very little of that space being used to id to the existing expanded basic service. It will — REPRESENTATIVE LAWLESS: Will that drive the »st to the subscriber up? MR. ALBRIGHT: I'm saying that I expect that ; won't continue to drive the cost up as much as it has in te past because I see those packages as staying pretty able and that we're adding new packages now, making new ickages available.

I can't foresee the future. I don't really

TROUTMAN REPORTING SERVICE (570) 622-6850 69 LOW what our cost increases are going to be. Our rate Lcreases are based on our increased costs, our operating >sts of labor, gasoline, vehicles, a number of overhead

:ilitiesf pole attachment — pole attachments and other tings. The one uncertain figure for us really is •ogramming. That's where we have problems controlling it. id all cable operates are aware of the concern for icreased rates, and we're all working to try to control tr programming costs. We're trying to hold — hold tough .th the programers and trying to limit how much we add to te existing packages. So I think you'll see us creating new packages t opposed to expanding our current packages. So I think tat will help hold rates down. REPRESENTATIVE LAWLESS: Thank you, Mr. lairman. CHAIRPERSON WOGAN: Thank you, Mr. Lrey — I'm sorry — Mr. Albright. I apologize. Thank >u, Mr. Albright. You also came a great distance to be »re. We appreciate that. MR. ALBRIGHT: You're welcome. CHAIRPERSON WOGAN: Next on our agenda is Lou :ott, Suburban Cable of Oaks, Pennsylvania.

MR. SCOTT: Good morning, Mr. Chairman. I

TROUTMAN REPORTING SERVICE (570) 622-6850 70 tank you for the opportunity to come and say hello to you >day. My background is and still is education, and you se that in the first paragraph or so of this report that >u have. And I'm not going to read word for word rerything in here. But I would like to comment on several topics tat are involved, maybe just stating my background. You in see I've been in education a long time. We won't say iblicly the number of years, but it's in that first iragraph. And I've served in a variety of capacities. I've been a teacher, a coach, an athletic .rector. I was a high school principal for 30 years. I >rk now as an assistant to a president in a community >llege, and I've done that for the last 10 years. During lose 10 years, I also — and that's part time. During these last 10 years, I've also worked .th Suburban Cable doing workshops for them and being ivolved in a variety of programs that I'll talk about as i go through this today. I've also done a little msulting and work for the Weather Channel. So I've had >me experience with some of the other parts of the isiness as well.

My goal today is to explain to you the snefits that I have seen that cable companies provide

>r schools, and specifically Suburban Cable. As the

TROUTMAN REPORTING SERVICE (570) 622-6850 71 ble — as cable technology becomes more sophisticated, so ies the contribution that cable companies provide to hools and to libraries. In my experience, this is an industry that is rongly committed to supporting education in the immunities that it services with a variety of initiatives >th locally and nationally. And I'll speak about a few of iose as well.

Cable in the Classroom is a program that's >ne on for about 10 years now, in fact a little over 10 tars. And it involves about 42 channels. It started out th maybe 12 or 15 and now has grown to about 42. There e 540 hours every single month of commercial-free lucational programming available. And this programming is available to about ,000 schools. And the estimated number of schools in the tuntry is 100,000. So it gives you a ballpark figure of •w deep this program has gone into the school systems. >r the past 10 years, I've done workshops in schools. I've probably done 250 of them or something Jce that where I'll go in and talk to the staff. I'll plain to them that the cable company hooks up their ihool to the cable free. They do provide monthly cable irvice free. They do send out a magazine.

This magazine has a circulation of well over

TROUTMAN REPORTING SERVICE (570) 622-6850 72 10,000. And in the magazine/ it lists by curricular area 1 of the materials that are available that particular >nth. It also has articles written by teachers who are ling some of these programs so that they get some [formation from people who are in the field that is •plicable for them as well. And I also — the cable company provides the irkshops that I do when I go out and meet with the :achers and explain to them about the materials that are ailable. I got into this sort of by accident. As I was saving the principalship, a friend of mine was with iburban Cable. And he said, We have all these good materials, id we'd like it in the schools. And we don't have a way • talk to people in there. We don't know them. Would you tip us? My first question was or my first statement was, d have to see the materials to make sure I think they're •rthwhile or I can't help you. And even though the program was very new, the terials were very good. The important thing to know •out the materials that are being used, most of them are itten by teachers, even though they're on CNN or C-SPAN - wherever they are, ESPN, so forth and so on.

Teachers who have — right now practitioners. iod part about that, of course, they have a feel for what

TROUTMAN REPORTING SERVICE (570) 622-6850 73 ; applicable in the classroom. Next thing I wanted to LOW was what does it cost because I'm not interested in tiling class rings or yearbooks or TV for that matter. id they were free. Having found out those two things, I felt that could help; but I didn't know enough educators where I >uld get in the door and talk to them about these Lterials and see if they were interested and then provide ie workshops if they wanted to continue with it. And of course, I've been doing this now, as I sntioned, for 10 years. Another thing that's come out iat'8 relatively new — and you've heard about it — the .gh-speed modems. I don't think I have to spend much time Liking about that because you've heard about that. Suburban Cable is providing one free cable idem. It's high speed. It saves a lot of time. Things m move quickly in the classroom. Also, it encourages tachers, I believe, to become more familiar with the Lternet. You know, in the past, they have — well, when I .rst started working with this program, I would talk with sachers. And they would say, My VCR blinks 12:00 all ie time. What do I do about it? That's about where we ire with technology. And teachers would tell me how they :re getting students to set the VCR and tape programs for

TROUTMAN REPORTING SERVICE (570) 622-6850 74 em. And almost all of the material that's used in that ogram is on tape. Nothing is used live. Teachers have to tape it, take a look at it, icide what they're going to use. But gradually, they can ild up a library of materials that they can use. So it's little more work, obviously, initially. But down the iad, you have some lessons you continue with and have some terials that can juice these lessons up quite a bit. And iey really can. But the high-speed modem is somewhat helpful, ; I mentioned. Back to the VCR for just a moment. One of e Cable in the Classroom magazines about that time was a rtoon. It looked like a young high school young lady. id the caption above her said, "I was born cable ready." Lat's probably true. But many of the staff members were »t.

Suburban Cable has now developed a workshop, id you can see at the bottom of that page that I' m on. I m't see a number on that page. Maybe you have a number. burban Cable has developed a companion workshop where now ! go in and work with the Internet, teach them how to get to Web sites like the Discovery Channel or CNN.

There's a wealth of curriculum material ailable for teachers when they get in there, lesson ans, vocabulary lists. They could look up their subject

TROUTMAN REPORTING SERVICE (570) 622-6850 75 ea and decide where they want to go and find information at will be helpful for them. Another program that's now available is family d community critical viewing, and there we work primarily th parents. And we talk about teaching your youngsters

When we got involved in this, one of the tapes : showed right up front is a promo for a film that's very olent. And we talked with parents and say let's assume at we give them different age groups. Whether you're an ementary school parent or you're a middle school parent - you're a high school parent, how do you react to this?

came on. You're all sitting in the living room gether. Now what do you do, and what do you say? It's interesting how many parents will say, I n't say anything. And that's certainly one road to go iwn. It's the easiest one but maybe not the best one. d it's probably even very important. And we're teaching renting skills to some degree there. If they develop some kind of a dialogue with eir kids about things like this — and this is a good portunity. In fact, it's an opportunity you almost can't ford to let go by. Down the road, there will be more

TROUTMAN REPORTING SERVICE (570) 622-6850 76 ntroversial issues to have to deal with, whether it's bacco, alcohol, drugs, sex, whatever. And you better have some kind of a working rangement with your kids so that you can discuss these ings with them because we want to influence them. We nt to develop values that are positive and wholesome for em. And this workshop, I think, contributes to some gree in helping some of that develop. You see at the bottom there, we've presented of these workshops in the last year. There was so — back further when I talked about Cable in the assroom, I'm sure you saw the number of workshops that 've done over the years. You might want to take a look at that because at is a program that's in great depth. The Suburban ble Scholars Program, that's one I enjoy tremendously. I t into an awful lot of schools, into community colleges. get into all the high schools in Delaware and Chester unty. With Suburban Cable, I get into a variety of her schools, middle schools and elementary schools. The ason I mention that, there's so much apprehension about hools and what's going on today and kids today. All hools that I get into are filled with lots and lots of od kids.

TROUTMAN REPORTING SERVICE (570) 622-6850 77 It's always been that way. I'm confident it ways will be that way, even though there are many oblems that are very serious that have to be dealt with. ie Scholars Program is an opportunity for students who are •llege-bound seniors to apply for scholarship money. lere are 50 winners each year. This year, the Suburban Cable will give away 17,500. And they've given away about $500,000 in the last i years. I get the opportunity to interview the last 50. id we have an awards presentation program with parents, ihool officials and so forth. And I introduce them and iterview them a little bit and find out about them. I don't want to go into great depth about any : them. But I'll tell you about one that was not atypical iat I interviewed last year. It was a young man who was xst in his class and president in his class. And that's it uncommon for some of these people who apply for these iholarships. He also played on two teams. He was captain : one and all-league on another. He writes poetry. He's L dramatics. He plays the piano. His college boards in th grade were 1,600, which we found pretty impressive as ill. But that's not uncommon for some of these candidates i interview. But it's a wonderful opportunity to reward em for their achievement.

TROUTMAN REPORTING SERVICE (570) 622-6850 78 And they can get anywhere from 1,000 to ,000 — yeah. Wouldn't that be nice? — $3,500 toward eir college. And the parents are very happy with that ogram, I think. There's some other initiatives below burban Cable is launching. The fourth annual Mr. Wizard Series Assembly, don't know whether you're familiar with that program or ve seen it. Elementary students submit posters, and ey're judged. And that's how they determine which school tts the assemblies. The posters are hung all over the Oaks Center > above King of Prussia there in the headquarters. And e employees and people visiting get a big kick out of em because they are well-done. I've seen some of the semblies, and I've seen the excitement of students and e teachers as they watch these assemblies. Teacher recognition award is another one you e down below. This award was developed to recognize ose teachers who incorporate cable programming in an novative way. Ten teachers this year were honored. They ch received a $1,200 gift certificate toward the purchase a computer.

Some additional partnerships, and I'll comment

. some of them briefly. Suburban partnered with Knowledge

' to award three scholarships to International University

TROUTMAN REPORTING SERVICE (570) 622-6850 79 >r certificate courses "Using the Internet in K-12 lucation." When we come to the question area, don't ask i questions about that because I don't know much about it. But I know they are doing it and they are ivolved with it. They're also working with A & E Network i an event in conjunction with Washington crossing the ilaware. And that's pretty interesting. And that's lining up now. They've developed a contest called "Just ;k George" in which students submit questions they would tve asked George Washington if they could have interviewed jn.

Our two winners, one from Souderton and one •am Schwenksville — tomorrow morning at 7:30, I'll be dng a workshop in Schwenksville as a matter of ict — they'll travel with their parents to Mount irnon and ask George, a well-known Washington iterpreter — impersonator, rather, their question.

Their interview will be broadcast on Channel i — on January 10th, 2000 when A & E broadcasts their tecial, "The Crossing." That's pretty interesting. There e a number of other things that I've seen and trticularly when I first came with Suburban Cable. When I was over in — I'm from the Media area i Delaware County. And they were in Wallingford, and I've irked out of that office a little bit when I was going out

TROUTMAN REPORTING SERVICE (570) 622-6850 80 do workshops. And so many things I saw them involved in obably don't get much publicity. They used, for example, students and schools do the commercials for the scholarship program because *s a great experience for them and everybody sees them on And the kids get a big kick out of it, as you can Lagine. I don't know how many times I've heard schools .11 and ask, Can you do some wiring for us free, and I've en them do it. We've been in schools doing workshops where ey had real VCR problems, one school where several were olen. And they made a commitment on the spot to replace veral of them. Last year, you may recall PennCrest High hool in Delaware County — and that's where I was incipal — had five students killed in an accident. And in fact, 10 students in that class have en killed during their time in school. And that's a very usual number. But nevertheless, those things do happen xough accidents, deaths, suicides, and so forth, the dngs that do happen in our society. But they needed help for sound systems and ping some of these various things. Some of them right in ie church. And I wasn't even aware of this. They didn't mtact me. They went straight to Suburban Cable who commodated all of those requests and of course did them

TROUTMAN REPORTING SERVICE (570) 622-6850 81 ee of charge and didn't publicize it. I had tennis listed on here because when vanta comes into Villanova every year with the rls — ladies professional tennis players, they round up e of their players every year. This past year, it was ndsay Davenport. The year before, it was Martina Hingis. id they take them over to the Health-Plex in Springfield, id they bring in all the local girls high school tennis ams. They hit balls with the pros. They talk with e pros. The teams take pictures with the pros. They gn a variety of things. And they were telling me how ey never get publicity for it. And I noticed it was vered on all the channels, and nobody mentioned Suburban ble.

Not that they have to, but I think it's nice > know they are doing those kind of things with or without blicity. I guess that's all I really want to talk to you iout today. There are other things I could tell you more •out, but I think I've spent enough time giving you some avor for the things that do go on with Suburban Cable and e schools.

And I'm very impressed, and that's why I've ntinued to work with them. Obviously, I don't make a eat deal of money doing that. But it's an enjoyment to

TROUTMAN REPORTING SERVICE (570) 622-6850 82 >rk with the teachers and the kids in the schools and to > something that will help them. And I thank you for the opportunity to be with »u today, and I'd be happy to answer any questions that I tow the answers to. CHAIRPERSON WOGAN: Thank you, Mr. Scott. The iburban Cable Scholars Program, is that available to, say, udents from Monsignor Bonner or Cardinal O'Hara? MR. SCOTT: We had a winner last year from •nsignor Bonner and Cardinal O'Hara as well. Bill iCusker's principal, as you probably know, at O'Hara. And ds year, it's Tom Rooney now that's principal at msignor Bonner. And Father Denny has moved up to resident. And I deal with all of the principals in these iunties and particularly in Chester and Delaware County. id the scholarships are available anywhere — to anyone 10 lives in the Suburban Cable area, and they do not have i be subscribing to Suburban Cable.

CHAIRPERSON WOGAN: Correct me if I'm wrong. m not an educator. But in meeting many students and some udents from overseas, I'm struck by the — by the rather >or quality of foreign language instruction in our schools id by the high quality of what appears to be the foreign mguage instruction in, say, European schools.

TROUTMAN REPORTING SERVICE (570) 622-6850 83 Is there anything that you think that the ble industry could do to help better prepare American udents, say, to learn foreign languages, where as I said rlier, I think we're woefully inadequate in that area? MR. SCOTT: I think it probably varies emendously from school to school and from community to mmunity. The school where I was high school principal,

had five years of five languages. And I think the udents went through those programs, had a working — had speaking relationship with the language. We used to say for a while, you know, we want teach all students a language other than their own. And is year, we're working on English. But we do think it's portant that they learn a foreign language. It's obably not as critical in our country as it is in the reign countries where everybody's so close and they have i communicate with them.

I think we've been snobs a little bit, too, d not spending more time in devoting the energies to the portance of learning foreign languages. I think we're nding more of this to be true, though, particularly as e Hispanic community moves into the various parts of the untry, California, Florida. You'll find more bilingual ople in areas where they have to use the language.

Cable in the Classroom does have some language

TROUTMAN REPORTING SERVICE (570) 622-6850 84 ograms that are available. I think schools would be en, and Suburban Cable as well, to suggestions that would beneficial along that line. CHAIRPERSON WOGAN: I'll tell you where I'm ming from. And I don't meet a whole lot of foreigners, t foreigners whom I do meet oftentimes speak excellent glish. MR. SCOTT: That's true. CHAIRPERSON WOGAN: And I often question them. id they often speak virtually unaccented English. And en I look at what our students are doing in foreign nguages. And — MR. SCOTT: It's important. CHAIRPERSON WOGAN: — I often question them. id they tell me it's true they had very good language istruction in school, whether it's Germany or the therlands or France or wherever. But they tell me they sally perfected their English by watching English movies, ich apparently are incredibly available in Europe. So I guess what I'm driving at is that even if e schools are doing a good job in trying to teach foreign nguages, there don't seem to be many opportunities for terican students to watch foreign movies and really get e inflection and learn the language to the degree that, y, the European students are. So do you have any

TROUTMAN REPORTING SERVICE (570) 622-6850 85 oughts? MR. SCOTT: I think to be successful in arning a foreign language, maybe one of the most iportant things to do is start early. When elementary hools offer foreign languages and kids are not hesitant i make mistakes in trying to pronounce words, they obably do a better job in getting started. And that ilps. I think if you can live for a while in an area lere that language is spoken — and we have a number of :change students in programs from all of our schools — I link that's a big help as well. They have an opportunity, obably more readily than we do, to observe our language tan we do of theirs. So I think those two factors are very iportant. And I think many schools encourage and do start nguages very early. And then they do encourage the inester or whatever it may be in another country or .siting the other country, and they run programs off them Lere they'll take them over there for a while. If you lived where the people are speaking at language all the time, there's no question you'll pick . up faster and the accent better. My personal experience ; somewhat limited. I studied Latin. I got to meet Pope .us XII when I was in the Marine Corps, and fortunately he

TROUTMAN REPORTING SERVICE (570) 622-6850 86 uld speak English. CHAIRPERSON WOGAN: I'll be more blunt then. > you think it would be helpful if there were more foreign ograms available? MR. SCOTT: I don't know. I really don't know e answer to that question. Could be. Will they watch em is the question, and will they learn from them without me additional instruction? I'm not sure. Tou know, they e foreign movies with subtitles. I don't know whether at helps or not. But they have some idea, if they don't derstand the language, what's going on. And you can pick i. If you know something about the language, I think that n be very helpful.

CHAIRPERSON WOGAN: All right. Thank you, Mr. ott. MR. SCOTT: My pleasure. CHAIRPERSON WOGAN: Last on our agenda, we ve Carol Rosebrough, General Manager of Susquehanna mmunications, Williamsport, Pennsylvania. Good ternoon. Thank you. MS. ROSEBROUGH: Thank you. Chairman Wogan, sobers of the Committee and guests, I am Carol Rosebrough, neral Manager of Susquehanna Communications in lliamsport, Pennsylvania. And it's a pleasure to be

TROUTMAN REPORTING SERVICE (570) 622-6850 87 re. I will be shaxing something about myself, our mpany, and our commitment to improving the quality of fe in our community. Susquehanna Communications is a local nnsylvania-based company, a subsidiary of Susquehanna dia Company and owned by the Susquehanna Pfaltzgraff rcnpany with headquarters in York, Pennsylvania. Also, the .lliamsport cable operation has a full management team th as many decisions as possible made locally to reflect e interests of the community. Susquehanna Communications acquired the cable stem in Williamsport in April 1996 and in December 1996 quired two neighboring cable systems offering services in e adjacent communities of Hughesville, Muncy, Jersey ore, Avis and Renovo, Pennsylvania, all primarily rural rkets.

It is important to note that when Susquehanna immunications acquired the Williamsport location, that ey retained all existing associates. In June of 1997, squehanna Communications made a commitment to rebuild all tree cable systems in Lycoming and Clinton Counties with ate-of-the-art fiber optic technology and interconnect em into one system throughout the Susquehanna Valley.

At this time, we are approximately 70 percent impleted with this rebuild. The original cable system in

TROUTMAH REPORTING SERVICE (570) 622-6850 88 eater Williamsport has the rebuild totally completed, and .e Hughesville/Muncy portion will be completed within the ixt two weeks. The Jersey Shore, Avis and Renovo markets .11 be completed next year. The final cable system will consist of over 0 miles of cable plant totally rebuilt with a hybrid ±>er coaxial 750 megahertz cable system with 550 analog, 0 digital, and an interactive return path. This chitecture is important, as it provides the full pability of broadband technologies to be deployed in the immunity.

In November of this year, in the rebuilt cable ant portions, we launched high-speed data services via ro-way cable modem technology with DOCSIS head end [uipment and cable modems. At the end of the first arter next year, we will launch digital cable television rvices with interactive capabilities.

Our company is making a $20 million capital vestment in the future of our community to make these new chnologies available. By making this investment, we insider our company an asset for the local business immunity to keep and to attract new businesses. This feature is extremely important, as in the st, the community had an economic base with the lumber tdustry and some manufacturing. Now the employment base

TROUTMAN REPORTING SERVICE (570) 622-6850 89 ; hospitals, nursing homes and service jobs. The ailability of advanced telecommunication services today affordable prices will serve as a great recruiting tool ir new industries, a sustaining one for retention, and an set to motivate the brightest of our high school seniors i stay in the area or return to it for employment in Ivanced technical fields. The employment of the cable system has grown om 38 to 70 due to adding territory, rebuilding the cable stems, and the addition of new businesses. ibcontractors are also being used for the rebuild instruction, and all those dollars are being infused into ie local economy. We also have a policy to shop locally wherever issible. And even with our rebuild materials, we are able i purchase some equipment locally from Cable Services impany, a local supplier for the industry that is located L Williamsport. ACD, a national CATV design and mapping unpany headquartered in Williamsport, was also selected to isign and map the entire rebuild of the Susquehanna Valley ir the company.

They were so pleased to acquire this business tat they purchased a local ad stating they were proud to i selected and working with Susquehanna Communications

.th this major project. In addition to the capital

TROUTMAN REPORTING SERVICE (570) 622-6850 90 ivestment and the fiscal infrastructure, the associates at ie local system make a contribution to the community in .me, money, and utilization of the cable system as a immunity resource. As general manager of the cable system, I ;rve on the boards of the Williamsport/Lycoming Chamber of >mmerce and the Lycoming United Way, the Corporate Lvisory Board of the Pennsylvania College of Technology, id the Vocational Advisory Committee of the Williamsport :ea High School, as well as other special task forces as te need arises.

I'm also a trained sexual assault and domestic .olence counselor volunteer through Wise Options for >men, the local emergency shelter for battered women. All imbers of the management team also serve as volunteers in ie community with membership on such boards as the Habitat >r Humanity and the Williamsport Symphony.

Several associates serve as loan executives, icesetters and committee members for the United Way. We roduce their local story every year for their campaign. id in addition to our generous corporate pledge to the lited Way, associates personally pledge a donation each sar that earns the system a Gold Fair Share Giving Award :om the United Way.

Some even serve as a big brother with a

TROUTMAN REPORTING SERVICE (570) 622-6850 91 unmitment to younger disadvantaged youths in the immunity. The cable system serves as a community resource trough its franchise fees and its ability to donate air me for nonprofits. Nearly $300,000 annually is paid to fferent municipalities in franchise fees. Up to $200,000 annually is donated for mprofit PSAs that are inserted on 16 different networks. ! also televise local city council meetings and budget tarings live, and we provide free cable construction and mnections for primary and secondary schools on the cable stem as well as free cable television service to each e.

A free Cable in the Classroom program guide is itually mailed to schools every month to assist teachers L the planning and full utilization of all the cable ilevision services that are available for use in the assroom. For the Lycoming County Career Consortium, we ovide a shadowing program each year for their high school miors.

In the rebuilding of the cable system, we have built the cable system at schools — and I mean the itire interior — at no cost to the schools. These newly ibuilt systems will make it possible for schools to easily cess these new technologies and high-speed data services ten they are ready.

TROUTMAN REPORTING SERVICE (570) 622-6850 92 We even offer a 20 percent cable television scount for the severely disadvantaged that are recipients : SSI or recipients of Medicaid that are 65-plus to make : more affordable to have lifeline services in their home. ical programming is an important element in the .lliamsport cable system with local sports highlighting, .gh school and college football and basketball games. Other local programming is also provided with iucational and informative topics as the need arises. rery month, we also provide free airtime to play sgislative tapes for our local state representatives. We -en make the most of our Christmas marketing campaign and »nate all of our installation proceeds for Toys for Tots ogram which yields over 1,000 toys that are donated to teal agencies for distribution to needy children. This program has been offered consecutively >r over 10 years now. And each year, it seems to grow in ipularity. We've had an emergency alert system on the ible system since 1989, long before the government indated such a service. However, with the rebuild of the cable system, I've instituted a new EAS system which will be operational t both counties and will be used for national and local lergencies. In 1996, this emergency alert system was itical during our local emergency flooding. And I'm

TROUTMAN REPORTING SERVICE (570) 622-6850 93 srtain our evacuation notices helped to save lives. The local county governments are extremely .eased with our ability to serve as a resource in this rea. We have even joined with Lycoming County as a Lrtner in Project Impact and work directly to help reaming County become disaster-resistant.

Myself and one other associate serve on task trees with this group on a regular basis and donate .rtime to promote Project Impact. As you might imagine, I've received some wonderful recognition for being such a >od corporate citizen and working in so many ways to iprove the quality of life in our community. For nearly 10 consecutive years, we have sceived the Community Service Award from the Pennsylvania ible and Telecommunications Association. And from our >mpany, we have received numerous awards for customer srvice and operating initiatives.

The City of Williamsport even provided a >rmal commendation for our televising their meetings and srving as a community resource. We're very proud of our >mmitment to the community and the superior level of istomer service we provide.

We stay in touch with our locally elected ificials in all 38 municipalities by sending out a regular ible update at least once per quarter. And we also have a

TROUTMAN REPORTING SERVICE (570) 622-6850 94 ofessional research firm conduct a customer service search survey every quarter to understand what our issues th customers are, if any. We analyze the results of the surveys and make iy adjustments necessary in our operations based on the .ndings. I am pleased to report that the overall customer itisfaction remains very high with at least 93 percent of x customers reporting that they are very and/or somewhat itisfied with customer service overall. We even go the extra distance when selecting !W channels to offer on our lineup. We track customer squests for new services and then preview the most tquested ones and then let the customers help us decide tat new networks to add. I'm certain this element goes a »ng way to help us satisfy customer needs for new ogramming.

During my time as general manager of the .lliamsport cable system, I have been fortunate to be sleeted as one of the Pennsylvania's best 50 Women in isiness, as the Williamsport American Business Women's isociation Business Associate of the Year.

I've also received a resolution from the mate of Pennsylvania through Senator Hadigan for my local sadership with the company and in the community; tcognized by my industry with the A-Plus Management Award

TROUTMAN REPORTING SERVICE (570) 622-6850 95 om the Cable Television Human Resource Association; and st recently selected as a Betsy Magness Leadership stitute Fellow, an industry recognition for selected men executives who have already demonstrated leadership . the business and community. The Pennsylvania Business Central regional siness newspaper has also recognized me for three nsecutive years as one of the top 100 most influential ople in the area. As you can see, we have used our fluence in the area to donate our time, money and company sources to improve the quality of life in the community.

We are proud of our commitment and are excited > be part of an industry that is on the leading edge with chnology and a company that is committed to making the vestment to share this technology with the community to lp it grow and remain extremely competitive going rward.

Thank you for the opportunity to share my oughts with you, and I'm available for questions. CHAIRPERSON WOGAN: The Chair recognizes presentative Barrar. REPRESENTATIVE BARRAR: Thank you, Mr. airman. Can you explain to me how the cable franchise e is collected and distributed?

MS. ROSEBROUGH: Yes, I can. First of all,

TROUTMAN REPORTING SERVICE (570) 622-6850 96 e — not all communities collect a franchise fee. proximately 38 percent of our franchise authorities tually collect a fee. And that amount ranges from atever percent they choose to charge up to a maximum of 5 rcent on any cable television-delivered service. If the — at least our billing system in our unpany — and I think most companies are this way — are dress driven and have a database so that each address in given community is coded with the particular municipality . which they reside. And on that particular bill, if that nicipality chooses to have a franchise fee, it will be sted as a line item on the bill, local franchise fee or cal tax, and the amount of that. And then depending on e agreement with that particular municipality, it could i paid either on a quarterly basis or on an annual basis. And because it is computerized and the counts are database driven, then that amount rolls up to the accounting records at our corporate office. And a x officer then determines the amount to be paid based on .e amount collected. REPRESENTATIVE BARRAR: So it's added on most in the same way as the sales tax would be added onto • bill if I went and bought a shirt —

MS. ROSEBROUGH: Yes, it is.

TROUTMAN REPORTING SERVICE (570) 622-6850 97 REPRESENTATIVE BARRAR: — and 6 percent is ded on? MS. ROSEBROUGH: Correct. REPRESENTATIVE BARRAR: So the contribution at — I think every testifier had basically said that ey're making a contribution. It's really just you're Electing it. You're not really paying it. You're llecting it and then distributing it to the nicipalities.

But it's not like a tax, like a corporate come tax comes out of your profits? MS. ROSEBROUGH: That's correct. But that is sically a relatively new element, being able to pass it rough as a line item. And I'm not sure which ngressional bill that that was passed. Prior to that, sically, it came out of the rate, whatever the community d.

And there was relief given to the cable erators and enabled them to pass it through as a line em. REPRESENTATIVE BARRAR: In two municipalities, th — one having the fee and one not having the fee — MS. ROSEBROUGH: Correct.

REPRESENTATIVE BARRAR: — will the cable bill

different?

TROUTMAN REPORTING SERVICE (570) 622-6850 98 MS. ROSEBROUGH: Yes. REPRESENTATIVE BARRAR: Okay. So it does fleet then if one — so if I have — I'm paying 5 percent my cable rate in a franchise fee and my neighboring nicipality isn't, their rate then would be 5 percent eaper then? MS. ROSEBROUGH: That is correct. REPRESENTATIVE BARRAR: Okay. I didn't know. MS. ROSEBROUGH: And that 5 percent to your ighbor might be 1.7 percent and only on a portion of the rvices. REPRESENTATIVE BARRAR: Okay. Thank you. MS. ROSEBROUGH: It varies in municipality. REPRESENTATIVE BARRAR: I wasn't sure if there s a windfall there for the cable companies if one nicipality collects it and one doesn't. MS. ROSEBROUGH: There's no windfall. REPRESENTATIVE BARRAR: Okay. Thank you, Mr. airman. CHAIRPERSON WOGAN: Thank you, Ms. Rosebrough. d thank you to Susquehanna Communications for sending you wn from Williamsport. MS. ROSEBROUGH: My pleasure.

CHAIRPERSON WOGAN: Thank you to everyone who rticipated in today's hearing. I wish you all a happy

TROUTMAN REPORTING SERVICE (570) 622-6850 99 liday. This concludes today's hearing on House solution 64. (Whereupon, at 12:37 p.m., the hearing adjourned.)

* * * *

TROUTMAN REPORTING SERVICE (570) 622-6850 100 I hereby certify that the proceedings and idence are contained fully and accurately in the notes ken by me during the hearing of the within cause and that is is a true and correct transcript of the same.

^y^nnjju P. lUAjJ-mrtA JENNIFER P. TROUTMAN Registered Professional Reporter

Commission Expires: April 30, 2001

NNIFER P. TROUTMAN, RPR 0. Box 1383 d & W. Norwegian Streets •ttsville, Pennsylvania 17901

TROUTMAN REPORTING SERVICE (570) 622-6850