State phone companies want a role in cable TV.

Cable executives are lobbying to cancel the program

With action expected in the next week by both Congress and the Federal Communications Commission on the proposed entry of telephone companies into the cable TV business, the California Cable Television Association is fighting action at the state level that cable operators say would facilitate unfair competition from the phone monopolies.

Laws are in place today prohibiting telephone companies from providing video services in areas where they provide phone service. But the CCTA says Pacific Bell and other California phone companies literally are laying the groundwork to take over the cable business by seeking Public Utilities Commission approval to tear out copper phone wires and replace them with state-of-the-art fiber optics, which can carry computer data and television signals, in addition to audio.

"We believe the telephone company is using this as a vehicle to get into a whole host of things," said Peggy Keegan, vice president of public relations for the CCTA, who says copper wires should be replaced gradually, as they are worn out. "We're not opposed to fiber optics, but it shouldn't be done on a rapid depreciation basis. In the State of California, it is all happening overnight."

So far, the PUC has approved the replacement of phone cable with the new fiber optics only to businesses, not to homes, except for a small test case community in Cerritos, served by GTE California, in cooperation with Apollo Cablevision, said Richard Fish, telecommunications specialist at the PUC.

However, PacBell and GTE both have "rapid depreciation" applications pending, which could speed up their allowed time tables for replacing copper wire. The petitions have been heard by an administrative law judge, who recommended approval of accelerated depreciation, and likely will go before the PUC in early 1992, said Fish. Replacement of copper with fiber optics to homes would require separate PUC approval, said Ramesh Joshi, a ratepayer advocate at the PUC.

While agreeing that GTE wants to get into the cable TV business in the near future, GTE California State Manager of Public Affairs Larry Cox said the cable association's assumption about motives for rapid depreciation "don't make sense."

"That's not the point of it," said Cox. "We're asking that it be accelerated in some cases and decelerated in others. If we were doing what they're suggesting, we'd want to accelerate everywhere."

Keegan pointed out that "in the last 90 days, there have been a series of decisions that open the door" to phone company entry into the cable TV business:

* Last summer, a federal judge lifted court restrictions prohibiting phone companies from providing television service.

* The Federal Communications Commission recently proposed rules to ease its own such restrictions, including allowing "video dial tone" -- the use of a single fiber optic cable that can provide video, audio and data transmission to the home. The FCC is preparing a written statement to be released Nov. 24.

* Congress reportedly is considering a Senate bill amendment allowing phone companies to provide cable television in rural areas.

"The future of telecommunications is such that if we want to be competitive, we need to get into this. Do we want to get into the cable TV business? You bet," said Cox. He described the Cerritos experiment as "a living laboratory of the service of the future."

"This is the future. Rather than deny the inevitable, the answer is to work together," said Cox.

Under existing law, phone companies can buy or build cable TV systems only in geographical regions where they do not provide phone service.

Keegan said cable companies are opposed to competition from phone companies because they suspect that PacBell and others will use telephone revenues to pay their television expenses, giving them an unfair advantage, and taking unfair advantage of phone customers.

"We believe the telephone company has a documented history of consumer abuse in cross-subsidization," said Keegan. Although such intermingling of funds would not be knowingly allowed by the boards that regulate utilities, Keegan said sufficient "consumer safeguards don't exist to prohibit that."

Bill Rosendahl, vice president of operations at Century Cable in Los Angeles, said the phone companies could keep TV signal prices lower temporarily by using telephone revenues, thereby forcing cable companies out of business.

"In the short term, they could get into a bidding war. It could be a long-term strategy of theirs to use their deep pockets to drive out the cable companies," said Rosendahl. "I believe in competition, but not from a huge monopoly called the phone company. You're taking a monopoly and giving it more power."

Cox said that argument "just doesn't wash."

"In California, we have implicit restrictions in the regulatory systems that prohibit cross-subsidy," said Cox. "The commission has very strict regulations."

Rosendahl said cable normally is limited to one area/one provider because of the costs involved in setting up and providing service. But the phone company, if it already had cable lines and a billing system in place, would have less capital costs involved in start-up, Rosendahl said.

John Gibbs, president of the Los Angeles Cable Operators Association and vice president of corporate and legal affairs for Continental Cablevision, maintained that it would be economically unfeasible for phone companies to compete directly against established cable operators.