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Altrio Commlmicalions, Inc., Los Angeles California a Competitive

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Altrio Commlmicalions, Inc., Los Angeles California a Competitive Belorc the FHIJERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of Tmplementation ofthe Cable Television ) Consumer Protection and Competition ) Act of 1992 ) CS Docket No. 01-290 ) ) Development ofCompetition and Diversity) In Video Programming Distribution: ) Section 628(c) ofthe ComIlllmications Act: ) ) Sunset ofExclusive Contract Prohibition ) REPLY COMMENTS OF ALTRIO COMMUNICATIONS, INC Altrio Commlmicalions, Inc., Los Angeles California 18 a competitive telecommunications provider that in Dect:mber of 2001 began offering analog and digital video, high-speed Internet and voice services to residential subscribers in the Los Angeles market. Altrio is offering such services in the City ofArcadia and will be soon providing such services in Pasadena and Monrovia (encompassing approximately 100,000 homes). AUrio has franchise applications pending ill Burbank, Glendale, Sierra Madre, and La Cal1ada Flintridge and portions of the City and County of Los Angeles. As such it has a vital interest in the preservation uf the program exclusivity ban set forth in Section 628 (c)(2)(D) ofthe Cable Consumer Protection Acl of 1992. 1. INTRODUCTION. As a preliminary matter, Altrio notes that it has participated in filing initial cornment(s) along with a consortium of other parties in the initial round of comments for this docket.] Reply comments are also being filed today which reflect the collective views of the Altrio and its fellow commentcrs. Altrio's purpose in 1iling today is not to repeat the arguments reflected in those pleadings, but to relate some specific instances of conduct by the incumbent cable television operators that suppOli continuation of the ban on exclusive contracts by vertically integrated program providers. 2. HISTORY OF ALTRIO. Altrio is perhaps the newest telecommunications services operator in the country. It was founded in mid 2000 with the specific purpose of providing service in the greater Los Angeles market. Tn contrast to a number of other competitive providers, Altrio has focused on using its committed finances (which now exceed 180 million dollars) and an experienced management team to provide voice, video and data in a single market. Altrio is not only pursuing local authorizations for cable television franchises, but has been authorized in Pasadena and Monrovia to operate Open Video System(s) (OVS). Tt has OVS applications pending in Sierra Madre and La Canada Flintridge. Cable television franchise applications are pending in the rcmainingjurisdiclions noted above. Altrio also holds a Certificate of Public Convenience and Necessity from the California Public IAltrio participated in [he Juint Comments and Joint Reply Comments filed by Wilkinson Barker Knauer, H LLP, along with Bell SOLlth Entertainment, LLC; the Independent Multi.Family Communications Council ("[MCC ); Qwest Oroadband Services, Inc, ("QwC'st"); and The Wireless Communications Association International, Inc, ("WCA"). Altrio bas joined as a member ofthe Broadbllnd Service Providers Association ("BSPA") in filing Page 2 of 9 Utility Commission to provide telephone service. 3. EXCLUSIVITY IN PROGRAMMING. Exhibit 1 is a copy of Alliio's current video servlce offering in Arcadia. In addition, a summary of Altrio's Internet and telephony services with sample pricing lor all of its services are attached as Exhibit 2. A number of the largest multiple system operators ("MSOs") have, as noted in the Joint Reply Comments, made much of the decrease in the number of vertically owned programming networks from 1992 (when the sunset provision was adopted) to the present. It is clear from Exhibit 1 that some nineteen analog channels out of eighty television and other video channels (about 25%), and an additional fourteen channels on the digital tier are controlled by vel1ically integrated programmers, such as Cox Cable, Cablevision, and AOL Time Wamer Inc. An additional thirty-one premium channels are similarly owned. This constitutes an important part ofthe programming offered hy Altrio, WitllOut which it could not compete with the incumbent cable operators in Los Angeles.2 Any decrease in thc level of vertical integration is attributable most likely to the sale by Viacom ofits cable television systems and the AT&T spin off of Liberty, which in tum holds an attributable ownership interest in Fox. It is not simply the number of channels but their unique nature - such as CNN, the premium cable television news and information channel, and tlle vast number of premium HBO and Cincmax channels as well as In Demand, Ahtio's primary pay-per­ view provider, which illustrate the value of these channels. wmmcnts. Page30f9 It is disingenuous for the MSOs to argue that the denial of this important progranlming would allow a terrestrial competitor sueh as Altrio to compete with the incumbent monopolists. For the same MSOs to argue that competition is now mature and robust based solely on the succcss of Direct TV and EchoStar is again without foundation. The two sets of joint reply comments noted above, deal more fully with these arguments. The real world situation that AHrio faces is put into sharper focus by the direct attempts by MSOs to use their market power to deny Altrio programming. The following two examples clearly demonstrate the dangers faced by Albia in this regard. Prior to the signing of an agreement with Fox, and while Fox was still subject to the prohibition against exclusive program agreements, Fox representatives urged Altrio to sign agreements for Fox Sports Atlantic, .Fox Sports Central and Fox Sports Pacific immediately. These three vital digital sports channels were heing sought by Charter Communications, a direct competitor of Altrio in Pasadena, Burbank and Glendale, on an exclusive basis. Such a deal with Charter would have been possible once the Liberty spin-off took place and Fox was no longer prohibited from signing an exclusive ab'Tccmcnt. Altrio acted quickly to sign an agreement in the summer of2001, ensurmg access under the current contract telTIl to this very popular local programming. As other commenters have mentioned, sports programming stands high on the list of valuable , The incumhents include Charter Communications, AOL Time Warner Inc., Adelphia CommunicatIOns and AT&T Uroadband. Page4of9 services for which powerful MSOs will pressure programmers to provide on an exclusive basis, ,md without which Altrio cannot compete with the incumbent. The second concrete example involves the negotiations between AUria and AHClDisney involving retransmission rights to the local ABC owned and operated station in Los Angeles (KABC). One ofthe initial demands for compensation related to a demand for carriage of the Soap Network, and that demand was made on a number of occasIOns. As discussions continued on the actual temlS of the retransmission agreement, Altrio was informed that it would no longer be permitted to carry Soap Network because the network had negotiated an exclusive agreement for certain areas (denoted hy zip codes) in the Los Angeles market. While we were never lold with whom the agreement was reached, the zip codes do correspond to areas served by Charier Communications and include the cities ofPasadena, Glendale and Burbank, which AItno will serve. The Commission is aware that ABC/Disney is not a vertically integrated programmer and thus could enter into such an agreement. The point Altrio wishes to make is that incumbent MSOs can and will seek such agreements as a means of stilling competition as they try to take hold in the Los Angeles market. ABC network programming is about as essential a program network as one can imagine and this kind of conduct, if penllitted, will make it extremely difficult for a terrestrial competitor to succeed. While nol necessarily germane to this proceeding, Adelphia, one of the other principal video competitors in this market, has engaged in selective price cutting in Arcadia and Monrovia where Altrio has begun to compete. The new prices are Page 5 of 9 approximately one half of the existing video prices in Adelphia's other nearby cable communities and came just six months after a substantial price increase of $4 (a 12% increase). At the same time, Adelphia added extensively to its 811alog and digital lineup, obviously incurring substantial programming cost increases. Such conduct is again a clear indication that incumbent MSOs have the market power and resources to engage in aggressive competitive conduct of all types. Having the ability to deny important programs to competitors would be an additional, powerful weapon. 4. IMPACT ON THE TELECOMMUNICATIONS ACT OF 1996. Altrio also wishes to point out that it is not simply a cutting edge video provider of analog and digital services and video on demand - it provides the public with residential, facility based competition in the telephony arena and Internet data services at speeds unavailable in almost any market in the United States (sec .Exhibit 2). Tt is precisely this kind of facility based competition that the Telecommunications Act of 1996 sought to promote. The provision of all three services is essential to enable Altno and other similarly situated competitors to spend the billions of dollars necessary to bui ld their state of the art telecommunications networks. While the revenue from all three services is important, video programming is the most important clement that enables Altrio to convince consumers to switch providers. Of course, without a full array of programming, in most cases the consumer will not consider a change of video providers. Consumers will not switch if their favorite sports, news and information and premium channels are not made available by a competitor. Page6of9 5. CONCLUSION. For all ofthe reasons noted above and the points made in the Joint Comments and Reply Commenls noted above, AItrio supports the Commission's continuation of the program exclusivity ban as set forth in Section 628(c)(2)(D). The ban has proven to be a positive factor in the development afDBS competition and is essential to development of terrestrial competition, not only in the video arena but for residential telephony and high speed data.
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