Currently telephone companies are generally prohibited by the 1984 Cable
Act and certain FCC rules from operating cable systems in areas in which they
provide telephone service. However Congress, the FCC and the courts are in
varying degrees revisiting this question. The FCC has recommended changes in
the 1984 Cable Act to permit telephone company ownership of co-located cable
systems, and the agency has authorized, subject to judicial review, a
"video-dial-tone" service in which telephone companies would provide video
programming supplied by others. A court decree that prohibited the former Bell
regional operating companies from offering certain information services,
including acting as cable television system operators, has been modified to
eliminate those restrictions, although the modification is being appealed.
This decree modification will have the effect of permitting the former Bell
regional operating companies to provide cable television services out of their
home regions, but the 1984 Cable Act continues to prohibit all telephone
companies from providing cable service in their home regions.
Litigation is pending in various courts in which prohibitions on cable
television operations without a franchise and various franchise requirements
are being challenged as unlawful under the First Amendment, the antitrust laws
and on other grounds. If successful, such litigation could foster the
development and operation of duplicative cable facilities that would compete
with existing cable systems.
During the last three years the FCC has adopted several rule changes
intended to facilitate the development of so-called "wireless cable," a video
service capable of distributing as many as 30 television channels in a local
area by over-the-air microwave transmission.
The regulation of certain cable television rates pursuant to the 1992
Cable Act has negatively impacted the revenues of the Company's cable systems
as discussed above. The Company cannot predict whether the FCC's rate
regulation decisions will in fact be appealed and, if so, whether those
decisions will ultimately be upheld. In addition, the Company is unable to
predict the outcome of the various other matters discussed above or what effect
such matters may ultimately have on its cable television business.
U.K. CABLE TELEVISION OPERATIONS
In September 1993 the Company sold its entire interest in companies
constructing and operating cable television systems in the United Kingdom.
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