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                           Before the
               FEDERAL COMMUNICATIONS COMMISSION
                      Washington, D.C. 20554


In the Matter of                   )
                              )
Annual Assessment of the Status of        )   CS Docket No. 96-133
Competition in the Market for the         )
Delivery of Video Programming      )


                        THIRD ANNUAL REPORT

Adopted:   December 26, 1996         Released: January 2, 1997

By the Commission:

                         Table of Contents

                                                          Paragraph

I.    Introduction. . . . . . . . . . . . . . . . . . . . . . .   1

      A    Scope of this Report . . . . . . . . . . . . . . . .   2

      B.   Summary of Findings. . . . . . . . . . . . . . . . .   4

II.   The Telecommunications Act of 1996. . . . . . . . . . . .   5

III. Competitors in Markets for the Delivery of Video Programming      11

      A.   Cable Industry . . . . . . . . . . . . . . . . . .     11

      B.   Direct Broadcast Satellite Service . . . . . . . .     36

      C.   Home Satellite Dishes. . . . . . . . . . . . . . .     49

      D.   Wireless Cable Systems . . . . . . . . . . . . . .     51

      E.   Local Exchange Carriers   . . . . . . . . . . . . .    67

      F.   Satellite Master Antenna Television Systems. . . .     80

      G.   Broadcast Television Service . . . . . . . . . . .     86

      H.   Other Entrants . . . . . . . . . . . . . . . . . .     95

IV.   Market Structure Conditions Affecting Competition . . .    114

     A.   Horizontal Issues in Markets for the Delivery of Video
Programming 114
      B.     Vertical Integration in the Cable Industry . . . .   140

      C.     Technical Advances . . . . . . . . . . . . . . . .   170

V.    Issues. . . . . . . . . . . . . . . . . . . . . . . . .     185

      A.     Legal and Regulatory Obstacles . . . . . . . . . .   185

      B.     Competitive Responses. . . . . . . . . . . . . . .   201

VI.   Administrative Matters. . . . . . . . . . . . . . . . .     234

Appendices

      A.     List of Commenters

      B.     Cable Industry Tables

      C.     DBS and HSD Tables

      D.     FCC MDS Auction Information

      E.     Top Ten SMATV Operators

      F.     Horizontal Issues Tables

      G.     Vertical Integration Tables

      H.     Program Access Matters Resolved
I.   INTRODUCTION

     1.   Section 628(g) of the Communications Act of 1934, as amended,
("Communications
Act") requires the Commission to report annually to Congress on the
status of competition in the
market for the delivery of video programming. Congress imposed this
annual reporting requirement
in the Cable Television Consumer Protection and Competition Act of 1992
("1992 Cable Act"), as
one means of obtaining information on the competitive status of markets
for the delivery of
multichannel video programming delivery that would aid both Congress and
the Commission in
determining when there was competition sufficient to reduce or eliminate
many of the regulatory
restraints imposed on the cable industry by that legislation. This is
the Commission's third annual
report ("1996 Report") to Congress submitted in compliance with this
statutory requirement. In this
1996 Report, we update our two prior reports and provide data and
information that summarizes the
status of competition in the market for the delivery of video
programming. In the two prior reports
we described the methodology and theory underlying our competitive
analysis. We do not repeat
that information in this report other than in an abbreviated fashion, and
provide reference to the
relevant discussion in prior reports. The information and analysis
provided in this third report are
based on publicly available data, filings in various Commission
rulemaking proceedings, and
information submitted by commenters in response to a Notice of Inquiry
("Notice") in this docket.

     A.   Scope of this Report

     2.    Section II of this report contains a brief review of the
Telecommunications Act of
1996 ("1996 Act"). In Section III we examine the cable television
industry, existing multichannel
video programming distributors ("MVPDs") and distribution technologies,
and potential competitors
to cable television. Among the alternative distribution technologies and
providers discussed are
direct broadcast satellite ("DBS") services and home satellite dishes
("HSDs"), wireless cable
systems using frequencies in the multichannel multipoint distribution
service ("MMDS") or local
multipoint distribution service ("LMDS"), local exchange telephone
carriers ("LECs"), satellite
master antenna television ("SMATV") systems, and broadcast television
service. We also consider
several other existing and potential distributors of and distribution
technologies for video
programming, including electric utilities, the Internet, and interactive
video and data services
("IVDS").

     3.   In Section IV of this 1996 Report, we examine market structure
and competition.
We evaluate horizontal concentration and vertical integration between
cable television systems and
programming services. We also discuss in this section program access and
technological advances.
In Section V we discuss some evidence of potential obstacles to the
emergence of a freely
competitive multichannel video programming distribution ("MVPD")
marketplace, and evidence of
competitive responses by industry players that are beginning to face
competition from other MVPDs.


     B.   Summary of Findings

     4.   In this 1996 Report, the Commission makes the following
findings:

þ    The 1996 Act embodies Congress' intent to promote a "pro-competitive
national policy
framework" and eventual deregulation of markets for the delivery of video
programming. Several
of the 1996 Act's provisions are intended to build on prior efforts,
particularly the 1992 Cable Act,
by removing additional barriers to competitive entry in these markets and
establishing market
conditions that promote the process of competitive rivalry. Many
provisions of the 1996 Act, and
the Commission's actions to implement them, have the potential for
fostering increased competition.
The Commission has adopted rules to implement the open video system
provisions of the 1996 Act
and has adopted rules to implement the 1996 Act provision which preempts
certain local government
and non-government restrictions on reception devices, including antennas
and dishes for reception
of over-the-air broadcast, wireless cable and DBS signals. The
Commission has adopted similar
rules with respect to certain home satellite dish services. A change in
the definition of a cable
system made by the 1996 Act now permits SMATV operators to serve
buildings regardless of
ownership without being subject to regulation as cable operators,
provided that public rights-of-way
are not used in the process.
þ    We find that incumbent franchised cable systems continue to be the
primary distributors of
multichannel video programming, although other MVPDs, particularly those
using alternative
technologies (e.g., DBS, wireless cable and SMATV systems), continue to
increase their share of
subscribers in many markets. Subscribership for distributors using
technological alternatives to
traditional cable service now accounts for 11% of total MVPD
subscribership. Non-cable MVPD
subscribership has been increasing an average of 22% per year since 1990,
with cable subscribership
currently down to 89% of all MVPD subscribers. Notwithstanding this
decrease in cable systems'
share of total MVPD subscribers, the actual number of cable subscribers
continues to increase. In
fact, since the 1995 Report, the number of cable subscribers increased by
two million compared to
the increase in combined subscribership for all other MVPDs of 2.3
million.

þ    Local markets for the delivery of video programming generally remain
highly concentrated,
and structural conditions remain in place that could permit the exercise
of market power by
incumbent cable systems. Overall, our conclusion concerning competition
in markets for the
delivery of multichannel video programming remains unchanged from last
year -- it remains difficult
to determine to what extent these markets will be characterized over the
long term by vigorous
rivalry among multiple MVPDs offering closely substitutable services or,
conversely, the extent to
which many of these markets will remain dominated by one or two providers
facing less vigorous
rivalry from MVPDs offering highly-differentiated or niche programming
services.

þ    We find a growing but still very limited number of instances where
incumbent cable system
operators face competition from MVPDs offering services with very similar
attributes (i.e.,
overbuilds/wired delivery). Where such competition exists, such as in
Dover Township, New Jersey,
the effects of competition are readily apparent. We also find a
substantially increased presence of
MVPDs deploying somewhat differentiated services, particularly DBS
service providers. Increased
competition among DBS service providers has led to lower equipment prices
and, possibly, increases
in the number of cable subscribers choosing to drop or reduce cable
services in favor of DBS
services. Moreover, some cable system operators appear to be taking
steps to improve their service
offerings in response to the availablity of DBS service. MVPDs using
other distribution
technologies, such as MMDS, have not posted comparable increases in
subscribership, but are in the
process of testing digital technology that has the potential to
significantly improve the
competitiveness of their services. Consequently, it remains difficult to
predict the extent to which
competition from MVPDs using non-cable delivery technologies will
constrain cable systems' ability
to exercise market power in the future.

þ    As a result of acquisitions and trades, cable multiple system
operators ("MSOs") have
continued to increase the extent to which their systems form regional
clusters. The number of
clusters of systems serving at least 100,000 subscribers increased from
97 to 137, and these clustered
systems now account for service to approximately 50% of the nation's
cable subscribers.

þ    Nationally, concentration among the top cable MSOs has continued to
increase, but still
remains within the moderately concentrated range at 1326 (an Herfindahl-
Hirschman Index ("HHI")
between 1000 and 1800). If all MVPDs are included in the calculation,
national concentration falls
just above the threshold of the moderately concentrated range with an HHI
of 1013. DBS providers
DIRECTV and PRIMESTAR rank among the ten largest MVPDs in terms of
nationwide
subscribership with over 2.0 and 1.5 million subscribers, respectively.

þ    Vertical integration of national programming services between cable
operators and
programmers declined from last year's total of 51% to just 44% this year.
We find, however,
insufficient evidence to make any determination of the effect to date of
these developments. The
decline is due largely to the sale of Viacom's cable system assets. In
addition, of the 16
programming services that were launched since the 1995 Report, 10 are not
vertically integrated.
Access to programming remains one of the most critical factors for the
successful development of
competitive MVPDs. Competing MVPDs have complained about the potential
unavailability of
programming distributed by means other than satellite or produced by
programmers that are not
vertically integrated with cable systems. To the extent that it appears
that the denial of access to
programming serves to deter entry of competitors in markets for the
delivery of video programming,
we will be concerned about these developments.
þ    Technological advances are occurring that will permit MVPDs to
increase both quantity of
service (i.e., an increased number of channels using the same amount of
bandwidth or spectrum
space) and types of offerings (e.g., interactive services). MVPDs
continue to pursue new system
architectures, upgraded facilities, use of increased bandwidth and
deployment of digital technology.


þ    Our findings as to particular distribution mechanisms operating in
markets for the delivery
of video programming include the following:

          Cable Systems: The cable industry has continued to grow in
terms of subscriber
penetration, average system channel capacity, the number of programming
services available,
revenues, audience ratings and expenditures on programming since the 1995
Report.

          DBS Service Providers: Subscribership to DBS services
increased from 1.7 million
homes last year to nearly 4 million homes at the end of October 1996.
This increase is attributable
in part to the development of competition from two new DBS services in
the last year -- AlphaStar
and EchoStar -- and price competition among providers that has
significantly lowered the cost of
receiving equipment.

          Wireless Cable Systems: Although wireless cable systems showed
some growth in
subscribership, the most significant development in 1996 was MMDS
systems' preparation for the
deployment of digital systems in 1997. This will increase the number of
channels that MMDS
systems can offer and permit them to be more competitive with incumbent
cable systems.
Throughout most of the year, LECs continued to expand their investment in
the wireless industry,
but some have recently cut back on that investment. We also observe a
continuation of the trend
toward increased consolidation among wireless companies.

          SMATV Systems: SMATV subscribership increased 10.5% over the
past year in
systems that serve MDUs. Industry analysts attribute the growth, among
other things, to technical
improvements that increased operating efficiencies and to expanded
product offerings, i.e., security
features and diverse programming.
          Broadcast TV: Broadcast service continues to serve as both a
transmission medium
for many households, and a primary source of programming for most viewers
regardless of
distribution media. Regulatory changes and technological advances may,
at some point in the future,
permit the use of broadcast television and other existing and potential
video technologies, such as
low power television, for distribution of multichannel video
programming.

          LEC Entry: The 1996 Act expands opportunities for LECs to
enter markets for the
delivery of multichannel video programming. Since adopting rules
implementing the 1996 Act's
open video system ("OVS") provision, we have certified the conversion of
Bell Atlantic's Dover,
New Jersey, video dialtone system to an OVS and authorized two additional
OVS operators. In the
last year, some LECs have continued to expand franchised cable
operations, both within and outside
their telephone service areas.

          Utilities: Section 103 of the 1996 Act removes regulatory
barriers to entry in
telecommunications and video markets for "registered" public utility
holding companies. On
September 12, 1996, the Commission adopted final rules to implement
Section 103, and, to date, has
granted all 18 applications filed thus far under the 1996 Act.

II.   THE TELECOMMUNICATIONS ACT OF 1996

     5.   The Telecommunications Act of 1996, enacted February 8, 1996,
marks a
fundamental shift toward competition throughout the entire
telecommunications marketplace.
Congress specifically stated its intent to establish a "pro-competitive
de-regulatory national policy
framework" for the telecommunications industry. Consistent with this
philosophy, the 1996 Act
contains several provisions that focus on removing barriers to
competitive entry and on establishing
market conditions that promote competitive firm rivalry. In addition to
encouraging competition in
the local telephone exchange market, the 1996 Act also encourages
competition in the market for
the delivery of multichannel video programming.

     6.   Eliminating a significant statutory barrier to entry, the 1996
Act removes the statutory
provision that prevented local telephone companies from providing video
programming services
directly to subscribers in their telephone service areas. The 1996 Act
also directs the Commission
to eliminate all of its video dialtone rules and attendant policies, and
to eliminate the requirement
that a common carrier obtain authorization pursuant to Section 214 of the
Communications Act for
the provision of video programming. In place of these provisions, the
1996 Act provides for a new
"open video system" or "OVS" framework for the provision by telephone
companies and others of
multichannel video programming. The Commission has promulgated rules
pursuant to this new
statutory provision, including extending the program access requirements
to common carriers
providing video programming pursuant to Section 302(b)(1)(A) of the 1996
Act.

     7.   Several other provisions of the 1996 Act focus on eliminating
regulatory barriers to
entry into markets for the delivery of video programming. For example,
pursuant to Section 207 of
the 1996 Act, the Commission has implemented rules preempting certain
local government and non-
government restrictions on reception devices, including antennas for
reception of over-the-air
broadcast, wireless cable, and DBS. Section 301(a)(2) of the 1996 Act
redefined the statutory
exceptions to a cable system so as to permit more efficient operation by
SMATV operators.
Pursuant to Section 202(f)(1) of the 1996 Act, the Commission has revised
Section 76.501 of the
rules to permit the common ownership of a cable system and a broadcast
television network.

     8.   In addition to removing statutory and regulatory barriers to
competition among actual
and potential MVPDs, the 1996 Act also contains a number of provisions
that directly affect
competition in the cable industry. For example, Section 304 of the 1996
Act contains provisions
affecting cable system operators, such as multiple dwelling unit ("MDU")
bulk discounts and
uniform rate structure rules. Section 301(c) of the 1996 Act contains
immediately effective
deregulatory provisions for small cable system operators and Section
301(b) of the 1996 Act
contains deregulatory provisions for large cable system operators that
take effect within three years
of enactment of the 1996 Act. In addition, Section 301(b)(3) of the 1996
Act broadens the
definition of effective competition so as to increase the ability of
cable operators to assert the
existence of effective competition and avoid rate regulation. Section
301(f) of the 1996 Act,
addressing cable equipment compatibility, provides for narrowly drawn
compatibility requirements
that do not adversely affect the features, functions, protocols or other
products and services options
of such equipment other than those specifically specified in the
equipment compatibility
requirement.

     9.   The 1996 Act also contains provisions to encourage open
competition in MVPD
equipment markets. Section 304 of the 1996 Act tasks the Commission with
adopting regulations
to assure the commercial availability of converter boxes, interactive
communications equipment and
other equipment used by consumers to access multichannel video
programming services. The 1996
Act also provides for the sunset of these provisions when the Commission
determines: (1) the
market for MVPDs is fully competitive; (2) the market for converter boxes
and interactive
communications equipment is fully competitive; and (3) elimination of the
regulations would
promote competition and the public interest.

     10. Finally, we note there are additional provisions aimed at
encouraging market entry.
Pursuant to Section 101 of the 1996 Act, the Commission has instituted a
proceeding to identify and
eliminate market entry barriers for entrepreneurs and other small
businesses in the provision and
ownership of telecommunications services. Pursuant to Section 103 of the
1996 Act, the
Commission established rules that enable public utility holding companies
to enter into
telecommunications markets and has approved exempt telecommunications
company status for 18
companies.

III. COMPETITORS IN MARKETS FOR THE
     DELIVERY OF VIDEO PROGRAMMING

     A.   Cable Industry

     11. This section addressing the performance of franchised cable
system operators   is
divided into three categories: (1) general performance -- both
quantitative measures of the current
amount of cable industry services that are being produced and qualitative
measures of the nature of
the service; (2) financial performance -- the revenues and cash flow that
are generated by the
industry's general performance; and (3) capital acquisition and
disposition -- the amount of funds
that companies have been able to raise and use to improve their existing
physical plant and acquire
new systems, and how they have chosen to allocate those funds. In
addition, this section reports
on the status of overbuilding, one of the first forms of competition to
the cable industry. The term
"overbuild" refers to a situation in which two or more wireline cable
television systems directly
compete for subscribers in a local video programming delivery market.

          1.   General Performance

     12. During 1996, the cable industry's total basic subscribership,
total homes passed, basic
penetration, and premium channel subscriptions have reached all-time
highs. The industry is also
offering more channels, a greater number of individual program services
than at any time in the past,
and higher audience levels.

     13. Cable Industry Capacity and Subscribership. Since release of
the 1995 Report, the
cable industry has continued to expand. The number of homes capable of
receiving service from a
cable system (commonly referred to as homes passed) grew from
approximately 91.6 million at the
end of 1994 to approximately 92.7 million at the end of 1995, a 1.2%
increase. Thus, at year end
1995, cable service was available to 96.7% of all television households
in the United States.

     14. Subscribership grew from a total of 59.7 million at the end of
1994 to 62.1 million
at the end of 1995, a 4.0% increase. This increase is reflected in the
industry's basic cable
penetration level, which rose by 2.8% -- from 65.2% to 67.0% of homes
passed. This increase in
penetration is the second largest annual increase since 1977. According
to at least one analyst,
industry subscribership appears to be growing at approximately a 3%
growth rate during 1996.

     15. The total number of subscriptions to premium channels grew by
6.1% from
approximately 51.1 million at the end of 1994 to approximately 54.2
million at the end of 1995. The
number of homes subscribing to at least one premium channel was
approximately 28.1 million in
1994. No estimates of this statistic are available for 1995 at this
time.

     16. Cable Industry Services.    During 1995, both the number of
systems with large
channel capacity and the number of subscribers   served by such systems
continued to increase. In
1994, cable systems with the capacity to offer   30 or more channels
accounted for over 78% of all
cable systems. The equivalent figure for 1995    was 79.4%.   As a result of
upgrades over the last
year, 123 more systems, or 14% of all systems,   now offer 54 or more
channels. The percentage of
all systems which offered 12 or fewer channels   declined from 6.7% in 1994
to 5.4% in 1995.

     17. During 1995, the number of subscribers served by high capacity
systems (54 or more
channels) grew to 27.7 million (47.9% of all subscribers). This
represents growth of 20.3% over the
23 million subscribers recorded in 1994. Moreover, the number of
subscribers receiving service
from systems with at least 30 channels rose 4.6% to 56.3 million at the
end of 1995, which
accounted for 97.3% of all subscribers.

     18. Over the past decade, the number of television viewing hours of
non-premium cable
programming networks has grown. Comparing the 1984-85 and 1994-95
seasons, the combined,
full-day audience of cable networks increased from an 11% share to a 30%
share of television
viewing hours. Comparing the same two periods, the combined audience of
the network-affiliated,
independent, and public broadcast television stations has decreased from
an 87% share to a 72%
share of television viewing hours. This growth in the viewership of the
cable networks has
continued into the 1996/1997 season. The total prime time share of the
cable networks for the first
week of the 1996/1997 television season increased 11.1% over the first
week of the 1995/1996
season to 30% of television viewing hours. A comparison of the same two
periods shows that the
four largest broadcast networks had their total prime time share decrease
by 5.8% to 65% of viewing
households.

     19. License fees paid by cable system operators to non-premium
cable network
programmers increased by 19% from approximately $2.233 billion in 1994 to
approximately $2.658
billion in 1995. License fees paid by cable system operators to premium
cable network
programmers increased by 2.1% from $1.9 billion in 1994 to $1.94 billion
in 1995. Copyright fees
paid by cable system operators for broadcast signal carriage under
Section 111 of the Copyright Act
increased 2.2% from $161 million in 1994 to $164 million in 1995.
     20. Consumer Satisfaction. In March 1995, the cable industry,
through the National
Cable Television Association ("NCTA"), launched a new on-time guarantee
program to improve
consumer satisfaction. Under this program, operators promise that: (1)
if an installation
appointment is not performed on time, the installation will be done for
free, and (2) if a service
appointment is not performed on time, the customer will receive a $20
refund. According to
NCTA, this program has been adopted by cable systems serving 25 million
subscribers. This year,
NCTA reports that the on-time performance of individual MSOs
participating in the program has
ranged between 76% and 99%.

          2.   Financial Performance

     21. The supply and demand statistics described above provide an
important indicator of
the state of the cable industry. However, these statistics alone do not
reveal how the subscribership
changes have influenced the industry's financial health. This section
examines revenue and cash
flow for the cable industry and shows that in 1995 these two key
financial indicators performed well.

     22. Cable Industry Revenue. Financial analysts who follow the
cable industry report that
after showing slight growth in 1994, the industry's revenue increased by
10.8% in 1995, growing
from $22.79 billion to $25.1 billion. Using these figures, it is
estimated that the cable industry
generated $411.90 in annual revenue per subscriber served in 1995. This
figure is $22 higher than
the $389.50 annual revenue per subscriber generated in 1994. When total
cable system revenue is
broken down by source, between 1994 and 1995, it is estimated that: MSO
revenue from regulated
tiers (referred to by the Commission as the basic service and cable
programming service tiers)
increased by 11.1%; MSO revenue from premium services increased by 12%;
and MSO revenue
from advertising, pay-per-view, and home shopping grew 18.9%, 68.0%, and
13.4% respectively.

     23. For purposes of this report, the Commission calculated its own
estimates of the
annual, industry-wide total revenues from 1992 to 1995. Based on these
estimates, it appears that
the industry generated revenue of over $21.07 billion in 1992, $22.59
billion in 1993, $23.09 billion
in 1994, and $24.46 billion in 1995. Based on the Commission's
estimates, the industry's annual
revenue increased 6.0% from 1994 to 1995.

     24. In Table 8A of Appendix B, we present detailed, quarterly
revenue results for 14
publicly held MSOs, including the eight largest. For each quarter of
1994, 1995, and the first two
quarters of 1996, total revenue growth over the same quarters of the
previous year is calculated for
these MSOs based on their filings with the Securities and Exchange
Commission ("SEC"). As of
December 31, 1995, these 14 MSOs served over 66.9% of the industry's 62.1
million subscribers.
Based on their combined revenues, an estimate of the total industry
revenue was made for each
quarter and is also presented in Table 8A.

     25. Revenue increased in each quarter of 1995 and showed increases
over the equivalent
quarters in 1994. The industry generated 2.9% more revenue in the first
quarter of 1995 than in the
first quarter of 1994; 4.5% more in the second quarter; 8.1% more in the
third quarter; and 10.6%
more in the fourth quarter. While this trend continued into the first
quarter of 1996 (when revenue
growth was 11.4% over the first quarter of 1995), the pace slowed
slightly in the second quarter,
with industry revenues 9.9% higher than in the second quarter of 1995.

     26. Cable Industry Expenditures and Earnings Before Interest,
Taxes, Depreciation, and
Amortization. Measurements of earnings before interest, taxes,
depreciation, and amortization
("EBITDA"), commonly referred to as "cash flow" by the industry, are
often used to value the
financial position of cable firms. Financial analysts who follow the
cable industry report that after
declining by 1.6% to $9.94 billion in 1994, industry wide cash flow
increased 13.1% in 1995 to
$11.2 billion. Using these figures, the cable industry generated
approximately $184.53 in annual
cash flow per subscriber served in 1995, about $15 higher than the
$169.85 generated in 1994.
Based on these estimates, the ratio of cash flow to revenue ("cash flow
margin") increased from
43.6% in 1994 to 44.8% in 1995.

     27. For purposes of this report, the Commission has also calculated
an estimate of annual,
industry-wide cash flows from 1992 to 1995. Based on Commission
estimates, the industry
generated cash flow of $9.72 billion in 1992, $10.31 billion in 1993,
$10.05 billion in 1994, and
$10.63 billion in 1995.   The Commission's 1995 estimate represents a cash
flow increase of 5.7%
from 1994.

     28. An analysis of the industry's cash flow for any one year may
not provide a complete
picture of the trend in the industry's performance. A more informed
analysis may be provided by
comparing each quarter of 1994, 1995, and the first two quarters of 1996,
with the same quarters of
the previous year. These quarterly growth rates are shown in Appendix B,
Table 8B. As in
Appendix B, Table 8A, we present detailed quarterly cash flow for the
same 14 publicly held MSOs.
After exhibiting slow year-over-year cash flow growth in the first two
quarters of 1995 (2.1% and
1.5% respectively), year-over-year cash flow growth was much stronger in
the third and fourth
quarters of 1995 (10.1% and 9.4% respectively). In the first two
quarters of 1996, year-over-year
cash flow growth slowed to 5.6% and 8.0% respectively.

          3.   Capital Acquisition and Disposition

     29. In 1995, the cable industry displayed an increased ability to
acquire financing from
a variety of public and private sources. The industry also made some of
the most substantial capital
investments ever. In recent months, however, there have been reports
that some cable operators have
been having difficulty financing the significant capital investments that
they had been planning to
make. For example, on October 24, 1996, TCI president John Malone was
reported to have said that
"[t]he days of heavy capital spending on cable are behind us" during a
presentation to institutional
investors at which he explained TCI's plans to cut back on system
upgrades in its systems that are
small or less-threatened competitively.

     30. Cable Industry Financing in 1995: The cable industry has
typically relied on various
combinations of private and public financing, with the exact distribution
of these combinations
varying greatly from year to year. Redemptions caused private debt
financing (i.e., debt held by
banks, insurance companies, and institutional investors) to decrease by
$808 million in 1995, while
public debt financing increased by $4.5 billion. The remaining industry
financing is obtained
through a mixture of private equity (i.e., individuals, venture capital
firms, investment banks, limited
partnerships) and public equity offerings (i.e., stock markets). New
private and public equity
offerings totalled $1.1 billion and $4 billion, respectively, in 1995.
Overall, the cable industry
obtained $8.8 billion in new financing in 1995, which is an increase of
$2.1 billion over the 1994
total. This growth in new financing during 1995 helped increase combined
cash flow and new
investment to the highest level ever. The $20 billion total combined
figure in 1995 ($11.2 billion
from cash flow plus $8.8 billion from new financing) was an increase of
20.1% over the $16.7
billion reported in 1994.

     31. Cable Industry Financing: Recent Developments. The cable
industry appears to be
on a pace that will result in it obtaining significantly less in new
capital in 1996 than in prior years.
Cable operators are reported to have raised approximately $1.6 billion in
capital during the first half
of 1996. Included in this total was a net redemption of $1.6 billion of
privately held debt; $2.6
billion raised in the bond market; and $626 million raised in the public
equity market. If the
industry continues to obtain new financing at this rate, it will raise a
total of $3.2 billion in new
financing for 1996, which is less than 45% of 1995's total.

     32. Capital Expenditures. In 1995, the cable industry invested
$5.4 billion in
construction of new plant and equipment (including maintenance,
inventory, system upgrades,
converters, passing of new homes, and rebuilding of existing systems).
This was a 42% increase
over the $3.8 billion spent on construction in 1994. This also
represents the third consecutive year
that cable industry capital expenditures experienced double-digit growth.
Of the $5.4 billion in
capital expenditures, the industry spent $3.4 billion on the upgrade and
build-out of existing systems.
Approximately $1 billion was spent on new set-top converters and other
inventory. In contrast,
it was recently reported that TCI is going to reverse this pattern, and
will begin spending more on
set-top converters and less on system upgrades over the next few years.

     33. Cable System Transactions. The number of mergers,
acquisitions, and exchanges
between MSOs increased from 64 in 1994 to 128 in 1995. The information
for 1995 also marks
a change in the seven year trend reported in prior reports that while
total number of subscribers
served by systems sold increased, the number of systems sold declined.
This past year, the number
of subscribers to, and homes passed by, the systems changing hands in
these transactions both
increased, by 46% and 38%, respectively. In addition, the total dollar
value of the transactions
increased 43% between 1994 and 1995. Consistent with the trend begun in
1994, however, the
average dollar value per subscriber of these transactions decreased, in
1995 by 1.8% (from $1,869
to $1,836) and the average cash flow multiple decreased, in 1995 by 5.8%
(from 10.3 to 9.7).
Overall, the transactions announced in 1995 involved more subscribers and
higher purchase prices
than in any year since 1982.

     34. For the nine months from January to September of 1996, 81
transactions were
announced, involving 7.5 million subscribers, 12.1 million homes passed,
and purchase prices
totaling $15.6 billion dollars (which represents $2,078 per subscriber).
While these totals all
represent decreases over the first nine months of 1995, it is worth
noting that this year's transactions,
on average, have been much larger than those announced last year.
Moreover, the price per
subscribers is, on average, much higher thus far in 1996 than it was in
1995 ($2,078 versus $1,836).
These results, however, appear to be largely the result of a single
transaction, U S West Media
Group's ("U S West") purchase of Continental Cablevision.

          4.   Status of Overbuilding

     35. Finally, as we noted above, overbuilding was one of the first
competitive situations
experienced by incumbent cable operators. Since the 1995 Report, the
development of new
overbuilds by non-LEC entities continues to be limited. We are aware of
only two new such non-
LEC overbuilding plans. In the last year, the city of Raleigh, North
Carolina, granted Fiber South
a franchise to overbuild its incumbent operator, Time Warner. In
addition, the city of Chicago,
Illinois, granted 21st Century Cable TV a franchise to overbuild parts of
the city encompassing
270,000 homes.

     B.   Direct Broadcast Satellite Services

     36.       Direct broadcast satellite ("DBS") operators are like
other MVPDs in that they:
(1) downlink programming from many different satellites pursuant to
contracts with programmers;
(2) package the programming into service offerings; and (3) make those
service offerings available
to subscribers over a proprietary facility. However, DBS services use
satellites instead of broadband
wires or terrestrial microwave stations to transmit their programming to
subscribers. In addition,
we note that DBS operators have a public interest obligation to reserve
between 4% and 7% of their
channel capacity for noncommercial programming.

     37. For the purposes of this 1996 Report, we include Primestar
Partners, L.P.
("PRIMESTAR") and AlphaStar as DBS providers even though they currently
do not use high-
powered Ku-band frequencies allocated for DBS service as defined under
the Commission's rules.
Instead, they provide programming using medium-powered Ku-band
frequencies allocated pursuant
to the Commission's Fixed Satellite Service. Nonetheless, PRIMESTAR's
and AlphaStar's services
share many of the same attributes of the multichannel video programming
services offered by the
other DBS operators, and it appears that consumers and industry
participants view their services as
close substitutes for the services of MVPDs using DBS frequencies, such
as DIRECTV and
EchoStar.

     38. Since we issued the 1995 Report, DBS subscribership has
increased substantially, to
the point that DBS systems have a higher combined subscribership than any
other MVPD alternative
to incumbent cable systems. As discussed below, it appears that the
advent of price competition
among DBS providers has contributed to the increase in DBS
subscribership, with initial equipment
costs dropping to as low as $199 plus installation costs. However, DBS
providers continue to be
unable to provide local broadcast network signals (and network
programming), requiring DBS
subscribers to obtain those signals over the air or through basic cable
subscriptions. In addition, the
first-year annual cost of DBS service remains significantly higher than
for cable service and, if
cable joins DBS systems in the use of digital encryption, many cable
systems will be able to offer
substantially more programming than can be offered by DBS systems.
Nonetheless, most
observers project continued strong growth for the DBS industry through
the end of the decade. For
example, two industry analysts recently projected that there would be a
total of 13-15 million DBS
households by the year 2000. Another observer projects that DBS
operators will account for
service to over 20% of all MVPD subscribers by the year 2000.

     39. Subscribership.   Subscribership to DBS services continued to
increase rapidly over
the past year. In the 1995 Report, the Commission noted that, according
to industry reports, nearly
1.7 million households subscribed to DBS services at the end of September
1995, an increase of
approximately 1.1 million subscribers from the previous year. Based on
the revised total of 1.6
million households, it appears that DBS subscribership increased by
approximately 2.0 million
households during the twelve months between the end of September 1995 and
the end of September
1996, to a total of nearly 3.6 million households. As of the end of
October 1996, there were 3.82
million DBS subscribers.

     40. Since DIRECTV and USSB began offering service in June 1994, DBS
services have
grown at a rate making DBS receiving equipment one of the most successful
new consumer
electronics product introductions in history in terms of units sold. DBS
subscribership is
anticipated to continue to grow rapidly over the next few months, with
some reports over the
summer projecting that over 5 million households may be receiving DBS
service by the end of
1996. The DBS industry appears to have experienced somewhat slower
growth in recent months,
however, with DIRECTV and PRIMESTAR each revising downward their
projections two times
in recent months, and industry observers now projecting a year-end total
of between 4.3 and 4.5
million DBS subscribers. These lower projections may not necessarily
indicate a slower overall
growth rate. As demonstrated in the tables in the appendix to this
report, monthly increases in DBS
subscribership have fluctuated significantly. In its relatively short
history, the DBS industry has
experienced two periods of significantly enhanced monthly increases in
subscribership--October-
December, 1995, and June-July, 1996, possibly due to heightened marketing
during those periods.

     41. Individual DBS Service Providers. DBS subscribers generally
use relatively small
dishes (18-24 inches for DIRECTV/USSB and EchoStar, and 36-39 inches for
PRIMESTAR and
AlphaStar) to receive the programming from the individual orbital
location from which the DBS
operator is transmitting the service. Both services and equipment are
available to subscribers from
a variety of retail outlets, including large national consumer
electronics retailers. Two more DBS
operators, EchoStar (18-24 inch dishes) and AlphaStar (36-39 inch
dishes), initiated service since
the 1995 Report was released. Consumers may now choose DBS services from
four different
sources (DIRECTV and USSB are treated as a single product offering for
this purpose since they are
complementary products).

     DIRECTV offers a high power DBS service to subscribers throughout
the continental United
     States. Subscribers receive the service using the Digital Satellite
System ("DSS"), which
     uses an 18-inch receiving dish "sold under the RCA, SONY, GE, HNS
Insight, Proscan,
     Panasonic, Toshiba and Uniden brand names." DIRECTV reported that
it served
     approximately 1.6 million subscribers at the end of June 1996, which
is an increase of
     167% over the 600,000 subscribers it reported serving at the end of
June 1995. DIRECTV
     had 2.03 million subscribers at the end of October 1996.

     United States Satellite Broadcasting Company, Inc. ("USSB") provides
service to subscribers
     using the same DSS receiving equipment, and one of the same
satellites, as DIRECTV.
     According to USSB, DIRECTV and USSB "share DSS and supporting
technology and offer
     200 channels of complementary programming," and "jointly market and
promote DSS and
     share an overall goal of maximizing DSS penetration of U.S.
television households." The
     programming that USSB offers (and DIRECTV does not) includes HBO,
Showtime, The
     Movie Channel, Cinemax, FLIX, Lifetime, MTV, Comedy Central,
Nickelodeon, and VH-
     1. As of the end of June 1996, USSB was reported to have
approximately 60% as many
     subscribers as DIRECTV (or approximately 960,000 subscribers), with
only a "small
     portion" of those subscribers not included in DIRECTV's subscriber
total.

     PRIMESTAR PARTNERS, L.P. ("PRIMESTAR") currently offers service to
subscribers
     throughout the continental United States using 36-inch dishes.
PRIMESTAR is a joint
     venture of five cable MSOs, and GE American Communications, Inc.
Using a satellite
     operating in the Fixed Satellite Service ("FSS"), PRIMESTAR provides
95 channels of
     programming. PRIMESTAR reported in its comments that it had
1,231,741 subscribers
     as of June 30, 1996, which is an increase of over 145% when compared
with the
     approximately 500,000 subscribers it reported having in June 1995.
PRIMESTAR had
     1.55 million subscribers at the end of October 1996. PRIMESTAR
commented that it
     "plans to continue its service on the medium power successor" to its
current satellite, but
     it has been reported that PRIMESTAR may instead use eleven high-
power DBS transponders
     to provide service using "developing compression technology that
enables delivery of 150
     channels to a dish 14 inches in size."

     EchoStar Communications Corp. initiated service in March 1996 under
the name DISH
     Network, and offers over 100 channels of programming to subscribers
throughout the
     continental United States. EchoStar passed the 200,000 subscriber
mark in early October
     1996, and served over 235,000 subscribers as of the end of October
1996. Directsat
     Corporation, an affiliate of EchoStar, launched its satellite on
September 10, 1996, and the
     combined entity began delivering programming from the second
satellite (which is at the
     same location--119ø) in November 1996. On August 30, 1996, the
International Bureau
     granted an application filed by Direct Broadcast Satellite
Corporation (DBSC) seeking
     permission to transfer to a wholly-owned subsidiary of EchoStar its
DBS licenses at 61.5ø,
     which cannot be used to serve the entire continental United States.
Instead, the licenses
     will permit EchoStar to use an additional eleven transponders to
serve the eastern United
     States. EchoStar has stated that it intends to use those channels
to provide "programming
     complementary to that offered by the DISH Network . . . [and] could
also include Internet
     delivery applications, and in light of recent pronouncements from
the U.S. Copyright Office,
     it may also be possible to include local programming to select large
markets."

     AlphaStar, a subsidiary of Tee-Comm Electronics, Inc., a satellite
dish manufacturer,
     reportedly began offering service on July 1, 1996. According to one
source, AlphaStar
     would not provide subscriber figures, but company executives told
the source that the service
     was adding subscribers at a steady, albeit slow rate, and that the
company projected that it
     would have between 100,000 and 150,000 subscribers by the end of
1996. It is estimated
     that AlphaStar had approximately 12,000 subscribers at the end of
October 1996.

     42. Several other entities plan to initiate DBS services within the
next few years.

     In January 1996, the Commission auctioned licenses for 28 DBS
channels that could be used
     to provide approximately 150 channels of programming to subscribers
throughout the
     continental United States using contemporary digital compression
technology. MCI
     Communications Corp. won that auction, bidding $682 million for the
licenses (EchoStar bid
     $650 million and TCI bid $298 million), and is expected to launch
the first of two satellites
     in October 1997, with video programming service beginning on
November 1, 1997 if the
     launch goes as planned. American Sky Broadcasting ("ASkyB"), a
joint venture
     involving the FOX broadcast network and MCI Telecommunications,
Inc., plans to offer a
     DBS service using MCI's satellites.

     Continental Satellite Corporation ("CSC") has been assigned a total
of 22 DBS channels.
     Eleven of those DBS channels can be used to serve the eastern and
central United States, and
     the other eleven can be used to provide service to the western and
central United States.
     On November 21, 1995, CSC was granted an extension of its
conditional construction permit
     to August 15, 1999, which will allow CSC to construct, launch, and
begin operating its DBS
     system at two orbital locations.

     Dominion Video Satellite, Inc. has been assigned eight DBS channels
that can be used to
     serve the eastern and central United States, and eight DBS channels
that can be used to serve
     subscribers in the western and central United States. On October 7,
1996 Dominion
     withdrew its appeal of that assignment.

     43. Last year, the Commission reported that the prices charged for
DSS equipment used
to receive programming from DIRECTV and USSB had started to decline,
falling to as low as $597,
and that equipment prices were expected to continue to decline as
additional manufacturers began
distributing their models. When EchoStar initiated service in June 1996,
it offered receiving
equipment for $199 to customers that signed up for a full year's
programming (at $300), which was
a significantly lower price than any of the prices offered for DSS
equipment at that time. At least
two DSS manufacturers, Thomson and Toshiba, lowered the prices for their
basic models to $399
later in the summer, and DIRECTV announced on August 26, 1996 that it
would offer a $200 rebate
to subscribers that purchased any brand of DSS equipment and a one-year
subscription to its "Total
Choice" programming package. It has also been reported that price
reductions are expected to
continue, with one cable network CEO quoted as saying "[s]o far, we
haven't heard too much about
[DBS] cannibalizing major urban systems, . . . [b]ut from what they've
told us, we expect [DBS]
prices to fall even more and [cable erosion] to happen on a more
significant basis beginning next
year."

     44. In addition to offering discounted prices, DBS providers are
heavily marketing their
services. According to one commenter, DBS companies are projected to
spend a combined $300
million on advertising in 1996, as well as utilize affiliations with
other major corporations to increase
their market share. USSB, for example plans to launch a new advertising
campaign on movie
theater screens, and its dealers are giving new subscribers a $40
discount in addition to the one
month's free programming when they buy USSB's 12 month programming
package. PRIMESTAR
reportedly indicated in October 1996 that it plans to spend over $20
million on promotional activities
during the remaining months this year, including a renewal of its NASCAR
sponsorship.

     45. Over the past year, the trend toward bundling video programming
with
telecommunications and information services appears to have had an impact
on the DBS industry.
AT&T acquired a 2.5% interest in DIRECTV from Hughes with an option to
increase its holdings
by up to 30% during the next five years. AT&T ran a promotion from
October 9 through October
14 during which it offered a $100 rebate on DIRECTV equipment to its long
distance customers if
they purchased one-year programming subscriptions for $354. On August
29, 1996, Cincinnati
Bell announced agreements to market DIRECTV and USSB services and
equipment to its
customers. DIRECTV has also entered into an "agency agreement" with RCN,
a SMATV
operator using the assets that belonged to Liberty Cable to serve
approximately 40,000 subscribers
in New York City, whereby subscribers in buildings served by RCN can
purchase programming
from DIRECTV after they purchase a digital decoder box.

     46. "Headend in the Sky" Service -- Providing Digital Direct
Broadcast Service to
MVPDs. Last year the Commission reported that TCI proposed to offer a
"headend in the sky"
("HITS") service, which involved providing to other MVPDs the same
programming feed distributed
to PRIMESTAR subscribers. The subscribing MVPDs could then combine HITS
service with
local broadcast channels and transmit the programming package over the
MVPDs' networks to their
subscribers, who would use set top boxes to receive the service. The
Commission also reported that
other DBS operators, such as DIRECTV and EchoStar, suggested that they
may also use their DBS
facilities to provide service to MVPDs. In October 1996, TCI launched a
test of HITS service
delivering 80 channels of digital programming in addition to the analog
programming that was
already available to subscribers at a TCI system in West Hartford,
Connecticut. The service is being
offered without charge for a few weeks to months before a commercial test
is initiated.

     47. Preemption of Local Zoning Regulations. Section 207 of the
1996 Act directs the
Commission to promulgate regulations prohibiting restrictions that
"impair a viewer's ability to
receive video programming services through devices designed for . . .
direct broadcast satellite
services." On August 6, 1996, the Commission fulfilled that requirement
by adopting regulations
that, among other things, prohibit restrictions, including state or local
laws and regulations, that
impair the "installation, maintenance, or use of" direct broadcast
satellite antennas less than one
meter in diameter or located in Alaska.

     48. Developments Concerning Carriage of Local Broadcast Signals.
DBS companies
have commented in the past that they have a competitive disadvantage due
to the fact that they
cannot distribute local broadcast signals, because of technological and
copyright law obstacles.
They have been working on several possible solutions to those problems,
including improved digital
compression and spot beam technology that may permit the carriage of a
large number of local
broadcast channels within the spectrum available on a DBS satellite.
With regard to the effect of
copyright law on DBS operators' ability to carry local broadcast signals,
in July 1996 ASkyB
requested a declaratory ruling from the United States Copyright Office
that DBS systems may, under
the satellite carrier compulsory license, "retransmit the signals of
network affiliated television
broadcast stations to subscribers who reside within the local market
served by those stations."
Such a ruling would permit DBS operators to use some of their capacity to
provide local broadcast
programming in some major markets, which could address what has been
identified as a substantial
competitive disadvantage faced by DBS MVPDs. The Copyright Office
replied:

     The Office has considered your arguments regarding localized
retransmission of
     network stations, and we would not question the reporting of a
network station that
     was retransmitted locally to subscribers. Such an opinion by the
Office is not, of
     course, a resolution of the substantive rights of copyright owners
or users, which, as
     I note above, must ultimately be determined by the federal courts.
I am simply
     stating that inclusion of locally retransmitted network stations is
not subject to
     challenge by the Copyright Office.

It was reported that ASkyB will seek a reduction in copyright fees when
the current fee schedule
expires on July 1, 1997, and that it will also try to negotiate
retransmission agreements with all of
the local affiliates whose signals it plans to carry.

     C.   Home Satellite Dishes

     49. Unlike DBS subscribers, home satellite dish ("HSD") users
employ relatively large
(4-8 foot) dishes and often purchase programming through program
packagers that are licensed by
programmers to facilitate subscribers' receipt of their programming
transmitted from various C-Band
satellites. Because they are typically used to receive programming from
satellites at several different
orbital locations, most HSDs include motors that permit the receiving
dishes to rotate and face the
various satellites. HSD owners have access to more than 265 channels of
programming placed on
C-band satellites by programmers for receipt and distribution by MVPDs,
of which 115 channels are
scrambled and approximately 150 are unscrambled. HSD owners can watch
the unscrambled
channels without paying a subscription fee. To receive scrambled
channels, however, an HSD owner
must purchase an integrated receiver-decoder ("IRD") from an equipment
dealer and pay a
subscription fee to an HSD programming packager. Nationwide,
approximately 30 program
packagers offer packages of scrambled channels to HSD owners. Like DBS
systems, however,
HSD program packagers do not provide local broadcast station signals,
which are generally not
available on C-Band satellites.

     50. As the Commission reported last year, it has proven difficult
to obtain accurate
estimates of the total number of HSD users, which includes: (1) viewers
who subscribe to a
packaged programming service, which affords them access to most of the
same programming
provided to subscribers of other MVPDs; (2) viewers who receive satellite
programming services
illegally without subscribing; and (3) viewers who receive only non-
subscription programming. A
recent estimate by industry analysts is that there are approximately 4.5
million HSD users overall,
which is consistent with many estimates of last year's total, indicating
little overall change in the
number of HSD users. It is perhaps more illuminating to consider the
number of subscribers to
package programming services since they are the only C-band subscribers
that can receive much of
the same programming generally provided to cable subscribers. After
reaching a peak of 2,379,900
authorized subscribers in December 1995, HSD package programming
subscribership declined
to 2,314,900 subscribers at the end of October 1996. Some observers
attribute this decline to the
growth of DBS services, citing in particular the fact that DBS equipment
is substantially less
expensive than the typical HSD, and has become much less expensive over
the past year.

     D.   Wireless Cable Systems

          1.   Multichannel Multipoint Distribution Service

     51. Last year the Commission reported a trend among MMDS sytems
toward the
development of digital technology to boost channel capacity. That trend
continues this year, with
industry participants expressing their belief that digitalization will
permit them to be more
competitive with incumbent cable systems. Digitalized MMDS systems were
authorized by the
FCC in July and are just beginning to be deployed, with some predicted to
become operational in
the first half of 1997. Certain trends reported last year continue,
including increasing
subscribership and consolidations. LEC investment in wireless cable,
which appeared to be
increasing throughout the year, has recently become less certain due to
Bell Atlantic's and NYNEX's
announcement of the suspension of their agreement with CAI Wireless
Systems, Inc. ("CAI").

     52. MMDS Auctions. On March 28, 1996, the Commission completed its
auction of
authorizations to provide MMDS in 493 Basic Trading Areas ("BTAs"),
raising over $216 million
after 181 rounds of bidding. The MMDS auctions were designed to
distribute unused spectrum
through competitive bidding while protecting the service areas of
incumbent MMDS providers
within the BTAs. As shown in Appendix D, Table 1, the ten leading
bidders, in terms of their total
amount bid, were eight publicly held and two privately held wireless
cable companies. Interestingly,
companies with LEC investment generally paid considerably more in this
year's auction than did
other MMDS companies, even after taking into account the size of the
market and other factors. The
top ten bidders made 77% of the total money bids, covering 62% of the
available licenses. In
addition to being high bidders, CAI, Pacific Telesis Group ("PacTel"),
Heartland Wireless
Communications, Inc. ("Heartland"), and People's Choice TV Corp. ("PCTV")
Gold won many of
the licenses for the major population centers. For example, as can be
seen in Appendix D, Table 2,
these operators won the ten largest BTAs, as ranked by population.
Publicly held operators also won
36 of the top 40 markets. Heartland and American Telecasting, Inc. won
the most licenses, 93 and
56 respectively, by concentrating primarily on licenses in small
population BTAs.

     53. Subscribership. Between the end of 1994 and the end of 1995,
the total number of
subscribers to wireless cable systems increased by 41%, from 600,000 to
847,000 subscribers.
While this increase exceeded expectations, growth in 1996 has been slower
than expected and
predictions for the next few years vary greatly. At the beginning of
this year, at least one analyst
predicted subscriber growth would increase at a rate of more than 50% per
year through 1996 and
1997, reaching 3 million subscribers by 1999. WCAI projects that by the
year 2000, the wireless
cable industry's subscribership will grow to over 4 million. Even if
these projections bear out, this
level of subscribership still represents only a fraction of the wired
cable industry's 62.1 million
subscribers served at the end of 1995.

     54. Actual subscriber growth for the first half of 1996, however,
has been less than
20%. In part, this is because operators planning to deploy digital
wireless cable systems chose to
delay heavy marketing efforts until the increased channel offerings made
possible by digital
technology were available. Between the end of 1994 and the end of 1995,
the number of homes
capable of receiving a wireless cable operator's signal (commonly
referred to as homes seen) rose
from 27.3 million to 29.2 million, a 7.% increase. The growth of
subscribership, relative to homes
seen, increased the industry's penetration rate from 2.2% at the end of
1994 to 2.7% at the end of
1995.

     55. Financial Performance. The wireless cable industry's total
revenues for 1995 were
$302 million, a 49% increase from 1994. During 1995 the industry's
negative cash flow decreased
from $14.2 million in 1994 to $3.9 million in 1995. One analyst projects
that the wireless cable
industry will have positive cash flow in 1996.

     56. Status of LEC Investment. In the 1995 Report, the Commission
reported that Bell
Atlantic, NYNEX and PacBell had all invested in wireless cable
operations. In 1996, one new
LEC, BellSouth, entered the wireless cable industry. However, late in
1996, Bell Atlantic and
NYNEX announced a suspension of their investment in wireless. Also late
in 1996, a proposed
acquisition by PacTel of a wireless system in northern California
collapsed, although PacTel states
it is continuing with plans for a southern California digital wireless
system.

     57. On May 29, 1996, BellSouth won, in a court-run auction, the
MMDS licenses for
New Orleans, Louisiana. BellSouth announced its intentions to offer more
than 100 digital channels
of wireless cable programming in New Orleans by mid-1997. In that
auction (in which BellSouth
was the sole bidder), BellSouth agreed to pay $12 million for the rights
to 30 analog wireless cable
channels. BellSouth has also commenced negotiations with National
Wireless Holdings, Inc. to
acquire all of its wireless cable assets in the Miami, Florida area. On
October 28, 1996, BellSouth
announced that it had signed a letter of intent agreeing in principle to
acquire Wireless Cable of
Atlanta, Inc. ("WC of Atlanta") for stock valued at $43.5 million. On
November 5, 1996,
BellSouth announced that it had spent $13.3 million to purchase licenses
in areas surrounding
Atlanta from CS Wireless Systems, Inc. ("CS Wireless") and CAI. The
licenses being
purchased from WC of Atlanta, CS Wireless, and CAI are expected to allow
BellSouth to reach 1.2
million line-of-sight homes in the Atlanta area.

     58. On December 13, 1996, Bell Atlantic, NYNEX and CAI announced a
one-year
suspension of their 1995 joint business agreement and CAI's option to
repurchase Bell Atlantic's and
NYNEX' $100 million investment in CAI securities. The companies also
announced the
suspension of their plans to jointly launch wireless systems in Hampton
Roads, Virginia, and Boston,
Massachusetts.

     59. Consolidation. The trend toward consolidation experienced by
the non-LEC wireless
cable industry in 1995 has continued into 1996. For example, on February
23, 1996, Heartland
announced that it had closed five transactions, acquiring wireless cable
systems with 7.6 million
combined line-of-sight homes and 59,900 subscribers. To complete these
acquisitions, Heartland
issued $180 million in new common stock and assumed $20 million in pre-
existing debt.

     60. Simultaneous to the closing of these acquisitions, Heartland
and CAI announced the
creation of CS Wireless with systems serving 5.7 million line-of-sight
homes and 58,400
subscribers as of March 31, 1996. For Heartland, the combined effect of
the activity described
in the preceding paragraphs resulted in a net increase of one million
line-of-sight homes and 38,900
subscribers.

     61. In addition, on July 29, 1996, Wireless One, Inc. acquired
TruVision Wireless, Inc.,
increasing Wireless One's line-of-sight homes by approximately 2 million
and subscribers by
15,435 as of April 30, 1996.   After this acquisition, Wireless One was
operating in 21 markets
which had, as of April 30, 1996, 34,100 subscribers out of a total of
over 2 million line-of-sight
homes (plus licenses to serve 6.37 million additional line-of-sight
homes).

     62. Digital Developments. On July 10, 1996, the Commission issued
a declaratory ruling
which enables wireless cable operators, MMDS and ITFS licensees to
increase their channel capacity
and service offerings through the use of two digital modulation
techniques, Quadrature Amplitude
Modulation and Vestigial Sideband. The Commission ruled that these
digital modulation
techniques could be implemented without causing harmful electromagnetic
interference to nearby
analog or digital stations. The wireless cable industry hailed this
regulatory development as a
significant improvement in the competitive posture of the industry.
     63. In order for wireless cable operators to provide digital
services, subscribers must use
specialized digital set-top converters. In May 1996, PCTV and American
Telecasting announced
the issuance of a joint request for proposals ("RFP") for a purchase of
up to 500,000 digital set-top
converters. Eight manufacturing companies responded to the RFP. In
addition, PacTel has
announced plans to launch in 1997 a digital wireless cable service in the
Los Angeles and Orange
County area, which encompasses four million homes. While PacTel has not
disclosed any definite
programming plans, it has stated that it will offer approximately 120
channels, including 14
broadcast stations, and 40 channels of near-video-on-demand.

     64. In addition, since the 1995 Report, several wireless cable
operators have begun to test
technology which will allow them to use their systems to provide high-
speed Internet access and
other data services similar to those offered by other MVPDs. In May
1996, CAI began testing
Internet access technology in Washington, DC, using technology capable of
sending information to
users at the rate of ten megabits per second with a normal telephone line
used as the return path.
In June 1996, CAI demonstrated the transmission of a signal which
integrated both digital video
(including local broadcasting stations and national cable television
programming) and 10 megabit
per second Internet access (with a telephony return path). In September
1996, CAI began testing
technology which would allow 27 megabits per second Internet access using
General Instrument
SURFboard modems and a telephony return path. In addition to CAI's
efforts, PCTV and
American Telecasting have been conducting Internet access trials on
American Telecasting's
Lakeland, Florida system with the help of Zenith Electronics Corporation,
Conifer Corporation, and
Comwave. Recently, the Commission issued developmental authorizations to
test two-way
Internet access to American Telecasting for Henderson, Nevada, and to
PCTV for Phoenix and
Tuscon, Arizona. In addition, Atlantic Microsystems, Inc., a wholly-
owned subsidiary of CAI,
received a developmental authorization to develop and test a two-way
digital system on two MDS
channels in Hartford, Connecticut.

          2.   Local Multipoint Distribution Service

     65. LMDS frequencies are microwave channels in the 28 GHz band that
may be used to
deliver two-way multichannel video programming as well as voice and data
service. As with
distribution using MMDS frequencies, LMDS requires that subscribers have
a special antenna. The
propagation characteristics of the 28 GHz band are such that an LMDS
system must operate in
multiple "cells" with radii of three to six miles in order to provide
service to a metropolitan area that
could be covered by a single wireless cable transmitter. With the
exception of CellularVision of
New York, L.P.'s ("CellularVision") 6,500-subscriber LMDS system in
Brooklyn and Queens, New
York, LMDS frequencies are not currently used to distribute video
programming in the United
States. The first fully commercial operation of 28 GHz technology,
however, was launched in
Caracas, Venezuela, in 1994. Canada recently issued licenses for 66
major and 127 lesser markets
for what are known there as "local multipoint communications systems."

     66. On July 17, 1996, the Commission adopted a frequency band plan
that allocated 1000
MHz of spectrum to LMDS and permitted LMDS systems, geostationary and
non-geostationary
Fixed Satellite Service (FSS) systems, and feeder links for non-
geostationary Mobile Satellite
Service (NGSO/MSS or Big LEO) systems to operate in the 28 GHz Band. In
the same order, the
Commission proposed to allocate an additional 300 MHz of spectrum to LMDS
at 31.0 - 31.3 GHz
in order to provide greater technological flexibility for this nascent
industry. The Commission
also sought comment on whether incumbent LECs and cable operators should
be eligible to bid at
auction for a LMDS license in their geographic service area. Service and
auction rules relating
to LMDS will be established in the near future.
     E.   Local Exchange Carriers

          1.   Introduction

     67. The legal and regulatory changes that occurred in the past year
as a result of passage
of the 1996 Act are likely to have a significant effect on LEC entry into
markets for the delivery of
video programming. Given the short period of time since the passage of
the 1996 Act, however,
LEC entry into markets for the delivery of video programming has not
changed dramatically. LECs
represent a major competitive presence in only a few markets for the
delivery of video programming.
LECs continue to weigh their options for entry into markets for the
delivery of video programming
and continue to move toward that entry, by means of the technology (MMDS,
wireline) and method
(cable franchise, MMDS license, open video system) believed to be most
appropriate for each
company and local market.

          2.   Statutory Changes and Commission Action

     68. As noted above, the 1996 Act fundamentally changed the
statutory framework for
LEC entry into markets for the delivery of video programming by repealing
the telephone-cable
cross-ownership restriction that had generally prohibited a common
carrier from providing video
programming directly to subscribers in its local telephone service area.
Pursuant to Section 302
of the 1996 Act, LECs have four regulatory options for entering video
programming delivery
markets within their own regions: (1) Title III radio-based systems,
such as MMDS; (2) Title II
common carriage systems; (3) Title VI cable systems; or (4) new Title VI
open video systems
("OVS"). While opening up new avenues for entry, this provision also
prohibits: (1) a LEC from
acquiring more than a 10% financial or management interest in an existing
cable operator providing
cable service within the LEC's local telephone service area; (2) a cable
operator from acquiring more
than a 10% financial or management interest in a LEC providing local
telephone service in the cable
operator's franchise area; and (3) joint ventures between cable operators
and LECs in the same
market to provide either video programming or telecommunications services
in that market, subject
to certain exceptions.

     69. Section 302 of the 1996 Act and the regulations adopted to
establish OVS provide
that if a LEC certifies compliance with certain non-discrimination and
other requirements established
by the Commission, the open video system will be entitled to reduced
regulation under Title VI.
An open video system's carriage rates are entitled to a presumption that
they are just and reasonable
where one or more unaffiliated video programming providers occupy channel
capacity on the system
at least equal to that of the open video system operator and its
affiliates. Open video systems are
subject to the Commission's rules governing must carry, retransmission
consent, program access,
sports exclusivity, network nonduplication, syndicated exclusivity, and
public, educational and
governmental ("PEG") access channels. In addition, while open video
systems are exempt from
local cable franchise requirements, localities are permitted to assess a
fee on an open video system's
gross revenues at a rate not exceeding the franchise fee imposed by that
locality on the local cable
operator.

          4.   Current and Planned LEC Entry

               a.   Video Delivery

                    i.   Status of VDT Systems

     70. Last year, we reported that 16 applications for permanent,
commercial VDT service
had been approved by the Commission and two applications were pending
before the Commission.
None of the permanent, commercial systems were operational at that time.
Bell Atlantic's Dover,
New Jersey system was constructed and scheduled to begin service shortly
after the release of the
1995 Report. The remaining systems were either in planning or in early
construction stages. We
also reported on the status of eight approved VDT trials.

     71. VDT systems authorized prior to enactment of the 1996 Act had
until November 6,
1996, to effect a transition to one of the four statutorily-recognized
options for provision of video
programming services. No action was required where trials had ended or
were scheduled to end
before the deadline, or where the permanent, commercial VDT systems had
not begun operation.
On October 17, 1996, the Commission approved Bell Atlantic's request for
certification to operate
its VDT system in Dover Township, New Jersey, as an OVS system. U S West
has elected to
pursue cable franchises for its former Omaha, Nebraska, VDT trial.
BellSouth has obtained a
cable franchise in Chamblee, Georgia, for the area served by its former
VDT trial and has filed an
election to utilize the cable regulatory option. Sprint has applied for
cable franchises in Wake
Forest and Wake County, North Carolina, and has notified the Commission
that it will pursue this
option for its VDT trials.

                    ii.   MMDS

     72. In the 1995 Report the Commission noted that Bell Atlantic,
NYNEX and PacBell
had made significant investments in wireless cable. As noted above,
BellSouth entered this
domain this year with its acquisitions of licenses for a wireless cable
system in New Orleans.
However, as also noted above, Bell Atlantic and NYNEX have suspended
their wireless cable
ventures with CAI. Currently, the only operational MMDS system directly
owned by a LEC is the
42,000 subscriber system in Riverside, California owned by PacBell.

                    iii. Cable Franchises

                          a.     In-Region Cable Franchises

     73. In the 1995 Report, we reported that a number of LECs had
pursued cable franchises
in their service areas as a means of providing video services to their
customers. The most aggressive
of the LECs in this area was and continues to be Ameritech. Ameritech
has acquired 27 cable
franchises in Illinois, Michigan, Ohio, and Wisconsin, to serve
communities with a total population
of more than 1.2 million. Seventeen of these cable franchises are
currently operational.

     74. In addition, in the last year, BellSouth has acquired cable
franchises in seven areas
in the southern United States. GTE has received five cable franchises,
which will pass over
400,000 homes. PacBell has obtained cable franchises for San Jose and
the surrounding Santa
Clara County in California. SNET has received a state-wide cable
franchise in Connecticut, where
previously it had applied to provide VDT service. Finally, SBC has
received authorization to
perform an 18-month cable trial in Richardson, Texas, a suburb of Dallas.

                          b.     Out-of-Region Cable Systems

     75. We previously reported on out-of-region cable systems owned by
LECs. The major
development in this area is the acquisition of Continental Cablevision,
Inc., the third largest cable
MSO with nearly 4.2 million subscribers, by U S West. Approximately
280,000 subscribers
involved in the transaction were in-region, and the Commission granted a
temporary waiver on
October 18, 1996, to U S West so that it could complete the acquisition
and subsequently sell these
in-region systems. These systems are in addition to those, described
above, of LECs electing to
convert their VDT authorizations to cable franchises.

                    iv.   OVS

     76. The Commission has certified three OVS operators. As noted
above, on October 17,
1996, Bell Atlantic received approval for its certification to convert
its Dover, New Jersey, VDT
system to OVS. Bell Atlantic subsequently purchased the division of
Futurevision which had been
the only operating program package provider on the Dover system, and has
begun offering
programming on this system using those resources. MFS was granted
certifications on December
9, 1996, for the operation of OVS systems in Boston and New York, both of
which are being used
to provide programming. On October 10, 1996, Digital Broadcasting Open
Video Systems
received approval to offer OVS service in southern California.

                    v.    Switched Digital Video

     77. This year, Bell Atlantic announced plans to upgrade its
infrastructure to a switched
broadband network in Philadelphia and southeastern Pennsylvania, with
eventual service to over 12
million homes and small businesses across the mid-Atlantic region over
the next three years.
NYNEX also recently announced plans for large-scale deployment of
switched fiber networks in the
Boston and New York areas, with plans to be able eventually to provide
video to up to five million
subscribers.

               b.   Video Programming and Packaging

     78. In the 1995 Report, we reported on two LEC joint ventures for
video programming
and packaging: Tele-TV, comprised of Bell Atlantic, NYNEX, and PacTel;
and Americast,
comprised of Ameritech, BellSouth, SBC, GTE, and Disney Corporation.
Throughout most of
the year, it was reported that both companies had made some progress
toward providing video
programming and packaging services. For instance, Tele-TV had begun to
offer an analog-to-digital
conversion service, and Americast announced that it would offer a basic
national package to
program packagers sometime in 1996. Despite this progress, trade press
reports began warning
in the summer of 1996 that the viability of both ventures was precarious,
in part due to the proposed
merger of SBC and PacTel. Recently, in fact, there have been reports
indicating that Tele-TV's
business plan is undergoing fundamental changes. Some reports indicate
that the venture is being
scaled back, and possibly, terminated and the LEC investors are shifting
devotion of their resources
to entry into markets for long distance services. The LEC investors,
however, reportedly deny this
scenerio and PacTel stated that funding will remain unchanged at $300
million a year for the next
three years.

          5.   Conclusion

     79. As with the 1995 Report, both the degree and the method of LEC
planned entry into
video programming services markets remains unclear, but now, as a result
of the 1996 Act, LECs
have four possible modes of entry. A large, nation-wide competitive
presence has not been realized,
and no single technology has been chosen for entry into the markets for
the delivery of video
programming. LECs continue to test various technologies and construct
various types of systems
for video delivery, and it appears that LECs will use different
technologies as each situation
warrants. Bell Atlantic was the only LEC to build and begin operating a
VDT system before passage
of the 1996 Act, and Bell Atlantic and MFS remain the only LECs with
operational OVS systems
in the nation. The other modes of current LEC entry are via wireless
cable and cable franchises.
Overall, while LECs may offer MVPD competition in some local markets in
1997, to date, LECs
have yet to become a significant competitive presence.

     F.   Satellite Master Antenna Television Systems

     80. SMATV systems are private cable systems that do not use public
rights-of-way,
which allows them to operate without being subject to franchise
requirements. SMATV systems are
defined in the Communications Act as an exception to the definition of a
cable system. Historically,
SMATV systems generally served commonly-owned multiple dwelling units
("MDUs") such as
apartments or condominiums, commercial establishments such as hotels,
institutions (i.e., hospitals),
or groups of buildings in close proximity such as universities or resort
facilities. More recently,
some SMATV systems have been using microwave transmissions linked to
system headend(s) to
serve multiple buildings that are not commonly-owned without using public
rights-of-way. The
1996 Act amended that exception by easing the statutory restrictions on
SMATV operators,
permitting them to use wires to connect separately-owned buildings,
provided they do not use public
rights-of-way. This may permit significant SMATV system growth in areas
where many different
residential buildings can be interconnected without crossing public
streets.

     81. Industry estimates place the total number of SMATV residential
subscribers as of
September 1996 at approximately 1.05 million, an increase of 10.5% over
the 950,000 subscribers
reported in the 1995 Report. The estimated number of SMATV operators
serving MDUs had risen
to 5200 operators by December 1995, an increase of 41% since December
1994 when there were
3700 operators. Industry analysts attribute this growth to technical
improvements which now
make it profitable for operators to install SMATV systems in smaller
MDUs. The result has been
an increase in the overall number of systems, although many of these
SMATV systems may serve
only single MDUs. Industry reports suggest that SMATV growth is
strongest in the South and
Southwest, but is also growing in other regions such as New York City,
Boston and
Washington. At the same time, the SMATV industry has continued to
experience system
consolidations. Much of the growth in the larger SMATV operators has
come by acquiring smaller
operators. In fact, for the first eight months of 1996, the value of
mergers and acquisitions has
totaled approximately $65 million as compared with $75 million for all of
1995.

     82. Many SMATV operators are installing more technologically
advanced plant and
equipment, and are moving aggressively with marketing and product
innovations.   Increasingly,
SMATV systems are using 18 GHz microwave facilities to link headends to
rooftop antennas and
to link buildings, which increases efficiencies. While industry analysts
have historically noted that
many SMATV systems have been competitively hampered by limited channel
capacity, a recent
industry survey found that on average, SMATV operators had added six more
channels since last
year, raising total average channel capacity to 39.6 channels. In
addition, some SMATV operators
are experimenting with digitalization, and other SMATV operators are
installing fiber optics to
create the type of hybrid fiber coaxial ("HFC") architecture found in the
most technically advanced
cable systems. Still other SMATV operators are combining technologies to
create "hybrid
systems," such as DBS/SMATV or MMDS/SMATV systems as part of a "niche
market" strategy.
For example, Satellite Connection, a national C-Band programming company,
has contracted with
DIRECTV to provide programming for its 10 channel, all-digital DBS/SMATV
system serving a
120 unit RV Park in Hon-Dah, Arizona. As described above, RCN has a
venture with DIRECTV
to provide programming to subscribers in its MDUs in metropolitan New
York. In Melbourne,
Florida, Coastal Wireless Cable Television has developed an MMDS/SMATV
system to serve the
large residential MDU and hotel/motel markets.

     83.   Increasingly, SMATV operators are also customizing their
products and services to
suit niche markets and MDU subscribers' needs. For example, many SMATV
systems offer
programming not available from their community's local franchise cable
system, such as sports
packages, concerts and other special programming. Some SMATV systems
have added more
advanced electronic features such as "picture-in-picture," "pick-and-pay"
(or pay-per-view
programming), interactive games and video-on-demand ("VOD") programming
as part of their
"custom-designed" programming packages for subscribers. Many of these
SMATV systems also
offer alarm line monitoring and closed circuit security cameras, a
feature particularly important to
many MDU residents. In addition, some of the larger SMATV operators,
like OpTel and MTS,
are also competing with the incumbent LECs to provide local and long
distance telephony and
Internet access to their SMATV subscribers in MDUs.

     84. SMATV Operator Concerns. Several SMATV operators expressed
concern that some
of the provisions of the 1996 Act may affect the competitiveness of SMATV
systems. OpTel raises
concerns over potential interpretations of the 1996 Act's revised
"effective competition" standard
OpTel, RCN and Bartholdi raise concerns over the 1996 Act's provision
exempting from the uniform
rate structure provision cable systems subject to effective competition.
Both of these provisions
are the subject of pending proceedings, thus we decline to address them
further in the context of this
report.

     85. RCN, Bartholdi and WCAI raise concerns over the demarcation
point for inside
wiring and the effect of the Commission's inside wiring rules on SMATV
operators'
competitiveness. The Commission is addressing the issues raised
regarding access to inside wiring
by competing MVPDs in a separate proceeding.

     G.   Broadcast Television Service

     86. Broadcast television service is both a source of video
programming and a
transmission medium for video programming. The number of commercial and
noncommercial
television stations increased to 1550 from 1542 over the last year.
Although the overall audience
for broadcast television programming has declined in the last year, it is
still viewed by a large
majority of the television audience. During the 1995-1996 television
season, the four major
networks (i.e., ABC, CBS, Fox, and NBC) accounted for a combined 62%
share of prime time
viewing among all television households; UPN and WB, the two newest
networks, achieved a
combined 9% share of prime time viewing. The amount of prime time
programming provided by
UPN and WB was six hours and five hours, respectively. The most recent
data available for
households subscribing to cable service indicates that, even in cable
homes, programming
originating on local broadcast television stations accounted for a
combined 61% share of all day
viewing in the 1994-95 television season, while non-premium cable
networks and pay cable services
achieved a combined 50% share of all day viewing.

     87. Broadcast total advertising revenues reached $27.9 billion in
1995. Advertising
revenues for the four major networks alone reached $12.4 billion in 1995,
an increase of 4% over
1994. In addition, for the new season which began on September 15, 1996,
ABC, CBS, Fox, and
NBC received a record $5.8 billion in pre-season advertiser commitments,
despite losing 8% of their
prime time viewers last year. In comparison, cable programming networks
received $3.7 billion
in advertising revenue in 1995, an increase of 14% over 1994.
     88. The role of broadcast television service as a directly-received
transmission medium
has continued to change in recent years, with fewer homes receiving
broadcast signals directly over
the air. Over-the-air broadcast television service continues to serve as
the sole transmission medium
for approximately one-quarter of all television households. It is also
one means by which
subscribers to satellite services (e.g., DBS) receive local signals
because satellite services generally
do not retransmit broadcast television signals or are limited in those
areas that may be served with
broadcast signals.

     89. The ability of the broadcast spectrum to compete as a
transmission medium with
cable is effectively limited by the amount of broadcast spectrum and
channels that are assigned to
television markets. The scarcity of video programming outlets available
via "over-the-air"
broadcasting can have a significant impact on competition. In nearly all
markets, the number of
channels available solely through the broadcast transmission medium is
considerably fewer than
those available on most cable systems. WB attributes its difficulties in
obtaining increased
broadcast television coverage to the scarcity of unaffiliated broadcast
stations in many markets.
Essentially, WB asserts that a sixth broadcast network cannot attain
national coverage solely by
using local broadcast stations as affiliates and that it must rely on
cable carriage.

     90. Recently, the Commission has sought to increase the video
distribution capacity of
the current analog broadcast spectrum. In seeking comment on revisions
to our local broadcast
ownership rules, we noted that in many markets, several television
broadcast station allotments
remain vacant. Currently, local broadcasters in the market are forbidden
from applying for licenses
for these vacant allotments. The Commission invited comment on whether
we should entertain a
waiver request to the local television ownership rule to enable a current
local broadcast television
licensee to apply for a channel allotment that has remained vacant or
unused for a long period, such
as five years.

     91. In making this proposal, we noted that "it may not be in the
public interest to have
allotted broadcast channels lie fallow -- particularly in markets where
it might be possible to allow
additional NTSC stations to come on the air without adversely impacting
the proposed DTV
allotment table and the transition to digital television." We stated
that evidence that the allotment
has remained vacant for a period of years "may suggest that the operation
of another television
station on a stand-alone basis in the community in question is not
economically viable" and that the
public interest may be advanced by permitting an existing licensee in the
market to acquire a license
for the currently-vacant allotment rather than allow the channel to
remain unused.

     92. To the extent that the capacity of the analog broadcast
spectrum is expanded by these
proposals, such expansion may eventually increase the analog broadcast
spectrum's ability to
compete with cable as a transmission medium. However, the amount of
analog capacity available
will still be limited until the transition to digital technology.

     93. The Commission's effort to implement a swift transition to
digital transmission
technology also has the potential to significantly increase the capacity
of the broadcast spectrum, and
such a development might advance the ability of broadcast transmission to
compete with cable.
Most importantly, digital encoding and transmission technology will
permit a station to broadcast
multiple streams of Standard Definition Television ("SDTV") programming,
a single High
Definition Television ("HDTV") signal, a combination of the two, or a
combination of video with
other digital ancillary services. The increase in broadcast spectrum
capacity that digital
technology allows may in the future result in a broadcast transmission
service that is better able to
compete with cable systems.

     94. In previous reports, we noted that low power television
("LPTV") stations can offer
multichannel video programming services on a subscription basis and that
such service exists in a
rural area of Minnesota. Construction permits have been issued to a
multichannel LPTV applicant
in Pinconing, Michigan, and there is an eight-channel LPTV system
operating in Anchorage,
Alaska. However, such service remains extremely limited and does not
appear to have a
significant impact on competition in the video market. In addition, the
potential for even more
multichannel LPTV systems to become operational may be constrained by the
current freeze on
licensing LPTV stations within 100 miles of the 36 largest markets in
order to preserve spectrum
availability for the transition to digital television service.

     H.   Other Entrants

          1.   Electric and Gas Utilities

     95. Section 103 of the 1996 Act removed a significant regulatory
barrier which had
deterred registered public utility holding companies' entry into
telecommunications, information
services, and video markets. Specifically, prior to enactment of the
1996 Act, the Public Utility
Holding Company Act of 1935 ("PUCHA") imposed strict "line of business"
restrictions on
registered public utility holding companies which sought to diversify
into telecommunications or
information services markets. Section 103 of the 1996 Act, which added a
new Section 34 to
PUHCA, now permits registered public utility holding companies to enter
telecommunications
industries without prior SEC permission through the acquisition or
maintenance of an interest in an
"exempt telecommunications company" or "ETC." Congress essentially
eliminated disparate
regulatory treatment among different types of utility companies by this
action.

     96. On September 12, 1996, the Commission adopted final rules to
implement Section
103. Following Congress's mandate, the rules provide a straight-forward
procedure for determining
ETC status, thus expediting the entry of public utility holding companies
into the
telecommunications industry. Since enactment of the 1996 Act, the
Commission has granted all
18 of the applications for a determination of ETC status filed thus far.
Most of these ETCs have
been affiliates of public utility holding companies such as Central and
South West Corporation,
Entergy Corporation, Northeast Utilities, American Electric Power,
Allegheny Power, and the
Southern Company.

     97.       Most registered public utility holding companies are
entering telecommunications
markets by providing service in voice and data markets. There also is
some evidence, however, that
registered public utility holding companies are beginning to contribute
to the performance of MVPD
markets. The Southern Company recently entered into a partnership with a
real estate developer to
develop a 303 unit apartment community in Duluth, Georgia. According to
Southern, this complex
will provide a one-stop utilities package for its residents, including
energy management control,
alarm monitoring, long distance telephone service, and wireless cable.
The wireless cable package
will reportedly be provided by Wireless Cable of Atlanta, and will
provide basic and premium
service, including HBO, Showtime and The Movie Channel.

     98. The 1996 Act has spurred some entry by other utilities. Boston
Edison and RCN
announced an agreement to form a joint venture to provide local and long
distance telephone service,
video, high-speed Internet access and, eventually, energy management and
property monitoring
services. Similarly, KN Energy ("KN") is offering a "one-stop shopping"
service in Scottsbluff,
Nebraska, where KN will offer consumers satellite television service by
the DISH network, as well
as long distance service, wireless internet service, and energy
management systems. A further
example is the project wherein Metricom is working with PEPCO in
Washington, DC, to build a
network to provide wireless access to the Internet.

          2.   Internet Video

     99. Last year we reported that software that would deliver real-
time audio and video over
the Internet was becoming available and that while the Internet had the
potential to affect the video
marketplace, it was too early to assess its impact. We still believe it
is premature to assess the
impact of the Internet on the video marketplace. However, at least one
industry analyst reports that
in the last year the number of Internet users increased by 50% and the
demographic profile of users
has shifted to reflect overall population averages. In addition, in the
past year there have been
developments in the ability of computer hardware and software to deliver
video.

     100. For example, this year Toshiba is offering a personal computer
that offers built-in
television and radio tuners in addition to audio-CD access and embedded
speakers. Rather than
offering television via the Internet, this personal computer reportedly
incorporates existing television
technology into a platform shared by a computer. Such a melding of
television and computer
hardware is presently the exception in video delivery by computer.
     101. In addition, considerable commercial activity has been directed
in the past year at
software that renders video deliverable to any existing computer via an
Internet connection.
Currently there are two primary means to accomplish such video delivery:
(1) downloading a video
file for later playback; and (2) streaming.

     102. Downloading a video file and the necessary software application
to "play" the video
file once it is opened is presently the most common way to receive video
via a personal computer.
While compression techniques used in this process significantly reduce
the size of the video file, a
typical consumer will expend considerably more time downloading the file
than it will take to "play"
it. The time to download a file depends on a number of factors,
including: (1) the speed of the
Internet connection; (2) how busy the server sending the video file is;
and (3) the size of the video
file.

     103. A one-minute video could take 20-30 minutes or more to download
to a personal
computer if the consumer were using a 9600 baud modem connection to the
Internet. Faster
modems, different compression coding techniques, the user's hardware and
software, and the speed
of the actual Internet connection all factor into the time necessary to
download a file. Ideal
combinations of these factors can eliminate the need to download files
before viewing them. A 10-
megabyte file can be downloaded, on average, in the following times for
different modem
speeds, other factors remaining constant.

          Modem Speed/Type                   Transfer Time

          9.6 Kbps modem                2.3 hours
          14.4 Kbps modem                    1.5 hours
          28.8 Kbps modem                    46 minutes
          128 Kbps IDSN                 10 minutes
          1.54 Mbps T-1 connection           52 seconds
          4 Mbps cable modem            20 seconds
          10 Mbps cable modem           8 seconds
          1.5 to 6.4 Mbps ADSL technology     12 to 53 seconds

     104. "Streaming" is a means of receiving video from the Internet
that eliminates both the
wait time associated with downloading a video file and the storage of
that file on the consumer's hard
disk. Video using a streaming format can be viewed in real time by a
consumer using a 28.8 Kbps
telephone modem (or faster) connection.   At least four Internet video
consumer products have
attracted attention and comment.

     105. StreamWorks from Xing Technology of Arroyo Grande, California,
permits both
real time and on demand viewing of video by allowing users to access
"streams" of encoded video
packets from either a live feed or an encoded file. A viewer connected
to a StreamWorks Internet
server would view a video through a personal computer as though watching
a TV obtaining its
programming from a VCR. CU-SeeMee from White Pine offers a streaming
tool used primarily for
live videoconferencing, but which also permits viewing of recorded
programming on a fixed
schedule for all viewers. VDOnet Corporation of Palo Alto, California,
offers VDOLive, a
product incorporating adaptive streaming technology.

     106. A third mechanism for video delivery is being developed for
Java-enabled
browsers. OnlineTV reports that in July it began offering real-time live
video through its Internet
site to anyone with a Java enabled browser. Online TV states that its
video offerings do not
require downloads, plug-ins, or installations. The company states that
its goal is to become the
first digital television network to bring regularly scheduled video
content to the Internet.

     107. Despite the technological advances embedded in these commercial
services, it appears
that consumer reaction to them continues to be tempered by issues related
to the capacity and
reliability of the Internet backbone and the speed at which an individual
can receive data. The ability
of the Internet to significantly impact the market for the delivery of
video programming will likely
remain tangential at least until higher data transfer speed becomes
widely available.

     108. Bundling of Video Services with Cable Modem and Other Services.
As discussed in
several places above, many MVPDs are beginning to combine their video
service offerings with
other services (e.g., local or long distance telephony, Internet access,
cellular service, paging, music,
etc.) in packages designed to win customers. Cable system operators and
other MVPDs have
shown considerable interest in deploying modems that permit subscribers
to receive high-speed
access to the Internet and, perhaps, other data transmission services.
For example, a number of cable
system operators recently announced large orders for cable modems, and
the near-term deployment
of Internet access services was one of the most discussed topics at a
recent industry trade show.

     109. The commercial viability of bundled services is unknown, but
will depend on a
number of factors, including consumer demand, service quality and the
technical requirements of
the bundled components. For example, some analysts maintain that the
success of services offering
access to the Internet through broadband cable wires may be threatened by
technological issues.
To the extent that bundling does emerge as technologically feasible and
economically desirable for
MVPDs, it has the potential to substantially affect competition in
markets for the delivery of
multichannel video programming. For example, according to one recent
research report, nearly
80% of American households would like to receive these telecommunications
services from a single
provider, if the overall cost remained the same.

          3.   Interactive Video and Data Services

     110. The interactive video and data service ("IVDS") is a point-to-
multipoint, multipoint-
to-point, short distance communications service in which licensees may
provide information, or
services to individual subscribers at locations within a service area,
and subscribers may provide
responses. This radio-based interactive service is available for a
variety of uses that may be
delivered by, and coordinated with, broadcast television, cable
television, MMDS, DBS, or any other
future television delivery technology. By itself, however, the service
is not capable of delivering
voice or full-motion video. Among the types of services that IVDS
licensees may offer, in
conjunction with video or data delivery systems, are polls, educational
classes, home banking, and
home shopping.

     111. The Commission awarded 18 IVDS licenses by a lottery in 1993
and auctioned an
additional 594 licenses in 1994. Each license permits service within a
specified service area,
which is equivalent to a cellular radio service area.

     112. During 1996, the Commission made two significant revisions to
its rules concerning
IVDS. First, it revised the IVDS "build-out" requirement to eliminate
the one-year requirement
(requiring service to 10% of the population or area within the license
service area), while retaining
the three-year and five-year requirements (30% and 50%, respectively).
Second, the Commission
revised the rules to permit full mobile use of IVDS Response Transmitter
Units ("RTUs"), which
are the customer units. This latter change, especially, is expected to
assist licensees in becoming
competitive in the general telecommunications market.

     113. At this time, however, it appears that IVDS services are not
available to sufficient
numbers of consumers to affect the video marketplace. The Commission
intends to hold a second
IVDS auction in early 1997 (current estimate), which will award an
additional 856 licenses. This
will permit additional licensees to fill-out the geographic areas in the
country that currently have no
licensees or service.

IV.   MARKET STRUCTURE CONDITIONS AFFECTING COMPETITION

     A.   Horizontal Issues in Markets for the Delivery of Video
Programming

     114. In this section of the 1996 Report, we examine several issues
concerning horizontal
structure and rivalry in markets for the delivery of video programming.
First, we discuss the market
definition we used in the 1995 Report, and have used again here. Next,
we examine changes since
the 1995 Report in concentration and the extent of competition in local
markets. Finally, we
examine changes in concentration at the national and regional levels,
including the effects of some
recent cable mergers and acquisitions.


           1.   Market Definition

     115. We begin our examination of horizontal issues by recalling our
definition of the
relevant market, which consists of two elements, a relevant product
market ("relevant product") and
a relevant geographic market ("relevant geographic area"). In the 1995
Report, we reaffirmed our
use of the 1992 Cable Act's definition of "multichannel video programming
service" as a starting
point for the definition of the relevant product. We also repeated our
belief that the relevant
geographic area is local, rather than regional or national, because
buyers' alternative sources of
delivered video programming are limited to those sources available in the
immediate area where
buyers live. We also noted that commenters generally agreed on the cable
franchise area as the
relevant geographic area.

     116. In the Notice, we invited comment on changes in the structure
of markets for the
delivery of video programming, including changes in the definition of the
relevant product.
Although no commenters explicitly addressed the definition of the
relevant product in their filings,
they relied (as in previous years) on the 1992 Cable Act's definition of
"multichannel video
programming service." As a result, we will continue to use this
definition as the basis for the
relevant product in the 1996 Report. We also sought comment in the
Notice on the relevant
geographic area and whether it has changed since the 1995 Report. As in
past Reports, most
commenters have generally relied on the cable franchise area as the
relevant geographic area.

     117. Because cable system operators, the largest distributors of
multichannel video
programming, remain subject to the franchise process, it is clearly
necessary to take into account the
cable franchise area in developing a definition of the relevant
geographic area. However, we also
need to consider other geographic areas because the service areas of
rival MVPDs may be larger or
smaller than cable franchise areas. Broadcast television and MMDS
deliver multiple channels of
video programming to entire metropolitan areas -- areas generally much
larger than a cable franchise
region. A SMATV may offer service to only one apartment building -- an
area much smaller than
a cable franchise. Satellite providers such as DIRECTV and Echostar
offer service to the entire
nation. These supply-side geographic areas, which are based on the
"footprint" of the relevant
supplier, are relevant because they influence the range of choices
available to consumers (the
demand side of the market). Because most customers cannot reasonably be
expected to move to
another community simply to receive better video programming, perhaps the
most relevant starting
point for the definition of the relevant geographic market is an
assessment of the range of choices
a typical consumer has among MVPD offerings to his or her home.

     118. Based on these considerations, we find that the relevant
geographic area for assessing
MVPD competition is local and that its extent can be defined by the
overlap of the "footprints" of
the various service providers. This area of overlap determines the
number of MVPD choices
available to a typical household. Of equal importance is the relative
attractiveness of the MVPD
choices to the household. A rough approximation of their attractiveness
is provided by the
subscriber shares of the MVPDs in the local area. In order to obtain a
summary measure of
horizontal concentration in the typical local area, we will focus, in the
next section, on aggregate
national subscribership data, which generally reflect the amount,
significance, price and quality of
choices available to a typical American household.

          2.   Concentration in Local Markets

     119. In both the 1994 and 1995 Reports, we concluded that local
markets for the delivery
of video programming were highly concentrated and characterized by
substantial barriers to entry
by potential distributors. We noted that, in general, sellers in highly
concentrated markets may
be able to coordinate their conduct, lessen competition, and increase
their rates of return. As a result,
a high degree of concentration accompanied by substantial barriers to
entry may result in prices
above competitive levels and sub-optimal product quality, innovation, and
service.

     120. In order to obtain a summary measure of concentration in local
markets for the
delivery of video programming, we calculated a Herfindahl-Hirschman Index
("HHI") for an average
local market using national subscribership numbers as a surrogate for
market share in the HHI.
As we noted in the 1995 Report, the HHI is a measure of horizontal
concentration that is calculated
by summing the squared market shares of the sellers in a market. The
United States Department of
Justice ("DOJ") and Federal Trade Commission ("FTC") regularly use the
HHI to evaluate the
effects of proposed mergers on competition. The DOJ and FTC consider
markets with an HHI
below 1000 as "unconcentrated;" markets with an HHI between 1000 and
1800 are "moderately
concentrated;" and markets with an HHI above 1800 are "highly
concentrated."

     121. This concentration measure suggests that, on average, local
markets for the delivery
of video programming remain highly concentrated. Using the nationwide
total number of
subscribers to cable and non-cable MVPDs found in Appendix F, Table 1, as
a surrogate for
measuring the availability and attractiveness of various options
available to the average local market,
we calculate an HHI of 7905, a decrease from the HHI of 8395 in September
of 1995. While the
HHI has decreased, an HHI of 7905 remains several times greater than the
1800 threshold at which
a market may be considered "highly concentrated." The HHI decrease can
be attributed to the
measurable increase in the non-cable MVPD share of subscribers, which
rose from less than 5% in
1992, to 9% at the end of September 1995, and 11% at the end of September
1996.

     122. As noted in the 1995 Report, an alternative approach to
measuring concentration in
the average local market is to assign equal market shares to all MVPDs
that have similar capabilities
to serve subscribers in such a market. Under this approach, a market
with five or fewer firms that
have similar abilities to serve customers would be highly concentrated
for purposes of a merger
analysis. In most markets for the delivery of video programming, there
are currently one cable
operator and up to four rival DBS service providers. Thus, under this
approach, a local market
served by five video distributors with roughly comparable levels of
deployed capacity would have
an HHI of 2000, which is still in the highly concentrated range. In some
programming delivery
markets, there may also be, in addition to the cable operator and DBS
providers, one or more of the
following: (1) an overbuilder, (2) an MMDS provider, (3) some SMATV
operators, and/or (4) some
additional HSD providers. If these additional competing MVPDs have
similar levels of capacity
deployed in a market, then, the HHI in these markets would lie below the
1800 threshold for a highly
concentrated market. It should be noted that this approach to assessing
competition rests on the
assumption that the available non-cable MVPDs offer services that are
viewed as closely
substitutable for cable services by subscribers. The actual degree of
substitutability between cable
and non-cable multichannel services is discussed above in the sections on
the individual distribution
technologies and below in the section on product differentiation.

          3.   Extent and Nature of Competition in Local Markets

     123. Whether cable operators can exercise market power under the
local conditions
described above depends on other factors that affect the extent of
competition. Two important
factors that affect both the extent and nature of competition in video
programming delivery markets
are the ability of the existing alternative distributors to offer
differentiated programming services and
the conditions of entry.

     124. Product Differentiation. The ability of MVPDs to create
varieties of service offerings
is an important factor that affects the extent of competition in video
programming delivery markets.
Such product differentiation affects the nature of competition and the
benefits to consumers. On the
one hand, consumers benefit from product differentiation by video
programming distributors because
more consumers will be satisfied by varied programming than would be
satisfied if all distributors
offered the same programming. On the other hand product differentiation
allows a firm to raise
prices without losing as many of its customers. To the extent there are
few firms offering similar
products and entry is difficult, individual firms may be able to
differentiate their products to the
point that there are few, if any, close substitutes. This allows them to
exercise market power and
reap economic profits and returns on investment that are greater than can
be obtained in competitive
markets. Where there are other products that consumers would switch to
in response to relatively
slight price changes or where entry is relatively easy, however, other
firms will seek to obtain some
of those profits, resulting in a product market where consumers have
greater choices and pay prices
that equal the average costs of production (which includes a normal
return on investment).

     125. Different MVPDs appear to be pursuing different strategies with
regard to product
differentiation relative to cable service. For example, DBS providers,
which generally are unable
to carry local broadcast programming at present, are emphasizing both the
technical superiority of
their digital service and their unique program offerings (e.g., their
comprehensive sports packages)
to differentiate their services from those of cable. By contrast, MMDS
and SMATV systems
generally provide programming and other services similar to those of the
incumbent cable operator,
and compete with the operator on price. Some SMATV operators, however,
are attempting to
differentiate their product by providing unique services such as security
monitoring. LECs appear
to be competing with incumbent cable operators on the basis of both price
and product differentiation
in those limited areas where LECs have begun to offer video distribution
service. Cable
overbuilders appear to compete principally on price.

     126. Entry. The conditions of entry include any impediments that
would-be sellers face
in order to enter a market. To the extent that MVPDs face substantial
impediments to entry into a
video programming delivery market, consumers will have fewer potential
new supply sources. Thus,
the existence of impediments to entry, combined with the high
concentration noted above, could
enable incumbent cable operators to exercise market power by charging
higher prices, being less
responsive to customer desires, and/or being less efficient and
innovative than a successful seller in
a competitive market might be.

     127. Potential entrants into video programming delivery markets face
several substantial
impediments. In order to distribute multichannel video programming, an
entrant may (1) incur
significant sunk costs, (2) have to obtain a license or certification
from federal authorities or a
franchise from local authorities, (3) face resistance at the local level
from governmental agencies or
bodies, and (4) face incumbent-generated regulatory or litigation
challenges. Such impediments
may be why new (non-DBS) entrants have not yet made major inroads into
incumbent cable
operators' share of subscribers. The 1996 Act attempts to promote entry
into markets for the delivery
of video programming. It remains to be seen, however, whether the 1996
Act and other
developments will enable potential entrants to overcome these
impediments. Examples of entry
during the past year are discussed above in the sections on distribution
technologies.

     128. In all but a few local markets for the delivery of video
programming, the vast majority
of consumers still subscribe to the service of a single incumbent cable
operator. The resulting high
level of concentration, together with impediments to entry and product
differentiation, mean that the
structural conditions of markets for the delivery of video programming
are conducive to the exercise
of market power by cable operators. The continuing expansion of DBS,
MMDS, and overbuilding
is beginning to create an alternative to cable. It is difficult to
precisely ascertain the impact DBS
may be having on cable prices, program offerings and services in a
particular local market. While
at least one major cable MSO has announced that it is upgrading its
systems to offer increased
channel capacity and new programming in response to the nationwide
presence of DBS, we note
that on the other hand the US Bureau of Labor Statistics reports that the
cable services segment of
the Consumer Price Index has increased at a 8.5% compound annual rate for
the eleven months from
January 1996 to November 1996. At the same time, cable subscribership
continues to increase,
albeit at a reduced pace from last year.   We do, however, see a definite
competitive response
benefitting consumers in the few local markets where, in addition to an
incumbent cable operator
and DBS, there is direct facilities based competition from MMDS or a
cable overbuilder. In these
markets, cable operators are adopting several strategies in response to
new entry and increased
competition, including lower prices, expanded program packages, and
improved services.   As
non-cable video programming distributors expand further in the future,
consumers may be able to
rely more on competition for the benefits of lower prices and improved
programming choices and
less on regulation. However, as we noted in the 1995 Report, it is
difficult to predict whether non-
cable MVPDs ultimately will provide vigorous rivalry for cable operators
or will remain competitors
with small market shares or services that are highly differentiated from
those of cable systems.

          4.   Concentration of Cable Systems at the National Level

     129. In the 1995 Report, we noted that the 1992 Cable Act was
concerned with, and placed
limits on, the concentration of cable systems at the national level.
These concerns and limits
reflect the possibility that concentration in the distribution of video
programming may have
anticompetitive effects on the supply of programming networks to MVPDs.
For example, if a few
cable operators own a large fraction of multichannel distribution
capacity and subscribers, they may
be able to exercise "monopsony" buying power that would distort the
market for the provision of
programming networks to all MVPDs.

     130. In assessing the potential for monopsony buying power in the
MVPD programming
network market, we have in prior Reports examined the percentage of cable
subscribers of cable
MSOs on a national basis. Between 1995 and 1996, concentration of cable
systems at the national
level increased, whether measured by the subscriber share of the four
largest MSOs or by the HHI.
In the 1995 Report, we found that the four largest cable MSOs served 55%
of all cable subscribers
nationwide, with TCI (with a subscriber share of 26%), Time Warner (16%),
Continental (7%), and
Comcast (6%) being the four largest. In the past year, the percentage of
cable subscribers served
by the four largest MSOs has risen to 61.40%, with TCI (27.94%), Time
Warner (18.94%),
Continental/U S West (7.69%), and Comcast (6.83%) remaining the four
largest. Examination
of changes in the national HHI for cable MSOs reveals a similar increase
in concentration. These
shares indicate a nationwide cable industry HHI of 1098 in 1995, a figure
that increased
significantly this year to 1326.

     131. However, in assessing the true impact national concentration
may have in the MVPD
programming network market, we believe that it is now appropriate to
consider the presence of allMVPDs and MVPD subscribers in national
concentration figures, and not just cable MSOs and cable
subscribers. As their subscribership increases, the significance of DBS,
MMDS and SMATV
operators in the MVPD programming network market also increases. As a
result, in this and future
Reports, we will examine national concentration measures for all MVPDs.
While our focus has
shifted, Appendix F, Table 2, demonstrates that cable MSOs continue to be
the main distributors of
multichannel video programming, with 89% of total MVPD subscribers.
Significantly, Table 2
demonstrates the rapid growth of DBS systems such as DIRECTV/USSB and
PRIMESTAR --
indeed, both DIRECTV/USSB and PRIMESTAR count among the top ten MVPDs
nationwide.
However, despite the significant inroads non-cable MVPDs have made in
subscriber penetration, the
largest cable MSOs remain the largest MVPDs.

     132. Table 2 demonstrates that the share of the top four MVPDs (the
four largest cable
MSOs) of the nationwide MVPD subscribership market has increased in the
past year. In 1995, the
four largest cable MSOs (TCI, Time Warner, Continental, and Comcast),
with almost 55% of all
cable subscribers, served just under 50% of all MVPD subscribers. Table
2 demonstrates that
these same four firms now serve 53.3% of all MVPD subscribers nationwide.

     133. Increased national concentration among the four largest MVPDs
is largely the result
of merger and acquisition activity. Since the 1995 Report, each of the
four top MVPDs has
increased subscriber reach through acquisitions. TCI closed its purchase
of Viacom's cable systems
in July 1996, and Time Warner closed its purchase of Cablevision
Industries Corporation ("CVI")
in December 1995. In addition, U S West purchased Continental, the third
largest MSO, with
more than 4.2 million subscribers. When added to U S West's existing
cable holdings, this
acquisition makes US West the third largest MSO, with more than 4.7
million subscribers.
Finally, Comcast acquired the cable television operations of the E.W.
Scripps Company.

     134. To assess the potential for monopsony power resulting from
concentration in the
MVPD programming network market, the shares in Table 2 can appropriately
be translated into HHI
figures because MVPD programming networks are often purchased on a "per-
subscriber" basis.
Table 2 shows the nationwide purchaser MVPD or HHI to be 1013 --
"moderately concentrated"
under the Merger Guidelines approach.

     135. The still relatively small nationwide share of subscribers to
non-cable MVPD service
-- 11% -- implies that MVPD programming networks generally cannot rely
exclusively on these
distributors as an outlet for their programming. The available evidence
suggests that a successful
launch of a new mass market national programming network -- that is, the
initial subscriber
requirement for long-term success -- requires that the new channel be
available to at least ten to
twenty million households. Non-cable MVPDs currently serve fewer than
eight million
subscribers nationwide, a figure that appears to be too small an audience
in most circumstances
to provide programmers a distribution mechanism that can substitute for
cable. However, the
presence and continued growth of these non-cable distribution channels
may mitigate the
dependence of programming networks on cable MSOs.

     136. Our reexamination of national MVPD concentration reveals a
moderate and
increasing level of concentration at the national level. Continued non-
cable MVPD growth --
especially from smaller firms such as Echostar and MMDS suppliers -- may
tend to decrease national
concentration levels. On the other hand, continued growth from larger
non-cable MVPDs such as
DIRECTV and PRIMESTAR could increase national MVPD concentration.
However, in the event
that non-cable MVPD subscribers increase, it may be possible that new
MVPD programming
networks will be able to substitute non-cable MVPDs for cable as a
successful initial distribution
outlet.

          5.   Regional Concentration of Cable Systems

     137.      In the 1995 Report, we noted that the desire of cable MSOs
to develop "clusters" of
contiguous cable systems appeared to be a major factor underlying many
cable mergers, acquisitions,
and exchanges ("swaps"). Cable MSOs continue their trend towards
creating large regional
system clusters. The number of clusters of systems serving at least
100,000 subscribers increased
from 97 at year-end 1994 to 137 by year-end 1995. The latter number of
clusters accounted for
50% of all cable subscribers. Among the largest MSOs, Time Warner had 32
clusters, TCI 32, Cox
9, and Comcast 6. Small MSOs continued to expand their clusters, too.
In the past year, clusters
have been created through both the sales of systems and also system-for-
system swaps between
MSOs. The three largest system-for-system swaps since the 1995 Report
occurred when
Continental swapped its systems in Illinois and Missouri for TCI's
systems in eastern
Massachusetts, and its systems in Virginia and Rhode Island for Cox's
system in Weymouth and
western Massachusetts, and TCI swapped its Springfield, Missouri, system
for the Washington Post
system in Santa Rosa, California.

     138. In the 1995 Report, we noted that clustering could have both
pro-competitive and
anti-competitive effects. In response to the Notice, commenters
reiterated the arguments in favor
of the pro-competitive effects. For example, the NCTA and others
continue to view clustering as
creating scale economies through better engineering and system
architecture, more efficient customer
service, centralized administration, regional programming and advertising
opportunities, and
improved personnel management. It is also claimed that cable providers
will be more competitive
across a range of markets (e.g., video programming delivery,
telecommunications, Internet access)
if they are "full service providers" competing in all such markets and
that they can best achieve that
goal if their "core" cable subscribership is clustered. Finally,
clustering also makes cable MSOs
more similar in geographic scope to the Bell LECs. This, the MSOs say,
levels the playing field
on which they must enter telecommunications markets. To the extent that
this last effect is pro-
competitive, it exists principally in telecommunications markets, as
opposed to video programming
delivery markets.

     139.      Clustering could have an anti-competitive aspect to the
extent that it reduces the
amount of entry into video programming delivery markets. As noted in the
1994 Report, clustering
eliminates the operators of adjacent cable systems as potential
overbuilders. These operators are
relatively low-cost potential overbuilders -- because they can use their
existing headend and parts
of their existing trunk lines to serve the new markets -- compared to
overbuilding by the operator
of a distant cable system. The potential cost saving is significant
because the headend and trunk
lines comprise about 25% of the capital investment of a cable system.
However, the significance
of any effect on the amount of entry appears small. First, overbuilding
has not proved a major means
of entry into video programming delivery markets. In addition, in recent
instances where
overbuilding has occurred or is planned, many of the overbuilders (e.g.,
LECs) have not been the
operators of existing adjacent cable systems. Thus, while the Commission
will continue to monitor
the development of clusters of cable systems, this development does not
appear to pose a significant
risk to the growth of competition in video programming delivery markets,
and may enable cable
operators to compete more effectively in local markets for telephone and
other telecommunications
services.

     B.   Vertical Integration in the Cable Industry

     140. In this section, we provide information regarding the status of
vertical integration in
the cable industry by updating the information provided in the 1995
Report regarding the extent to
which video programming services are affiliated with cable operators. We
also provide
information on the Commission's enforcement activities relating to the
program access, program
carriage, channel occupancy, and leased access rules implementing the
1992 Cable Act.

     141. Competitive issues raised by vertical integration in the cable
industry continue to be
an important element of our analysis. As we noted in the 1995 Report,
although vertical
relationships can often have pro-competitive effects, under certain
market conditions, strategic
vertical restraints (achieved by vertical integration, exclusive
distribution contracts or monopsonistic
pressure) can also deter entry into the market for multichannel video
programming distribution.
These issues are discussed more fully below.

          1.   Status of Vertical Integration

     142. The degree of vertical integration between cable system
operators and satellite-
delivered programming providers declined over the past year. Whereas 51%
of the national satellite-
delivered cable programming services were vertically integrated last
year, this year we find that
44% of such programming services are vertically integrated, a decrease of
nearly 14%. The
decline in vertical integration appears to be largely the result of two
factors. First, one of the largest
programming providers, Viacom, sold its cable systems to TCI, which means
that the following
programming services are no longer vertically integrated: All News
Channel, The Movie Channel,
MTV, MTV Latino, Nickelodeon, Nick at Nite, Sci-Fi Channel, Showtime, USA
Network, and VH-
1. Second, based on information available to the Commission, we find
that 10 of the 16
programming services that have been launched since the 1995 Report are
not vertically integrated.
As a result of these two developments, 64 of the 145 (45%) national
programming services in
operation today, are vertically integrated. Last year, we found that 66
of the 129 (51%) services
in operation were vertically integrated. Although the overall percentage
of programming services
that are vertically integrated has fluctuated since 1990 instead of
following a clear trend, we note that
the total number of non-vertically integrated programming services has
increased in each of the past
three years.

     143. Overall, the size of vertically-integrated ownership interests
has remained nearly the
same. Cable MSOs, either individually or collectively, own 50% or more
of 47 national cable
programming networks, compared with 45 networks last year.

     144. However, fewer of the most popular programming services are
vertically integrated
than was the case last year, although nearly half of the most popular
networks remain affiliated with
a cable MSO. In terms of subscribers, 12 of the top 25 most popular
cable programming networks
are vertically integrated, compared with 15 last year. The decline is
the result of Viacom's sale
of its cable systems, offset by the fact that a vertically-integrated
network, Comedy Central, replaced
a non-integrated network, WGN, on the list. Two more of the top 25
services (C-SPAN and C-
SPAN 2), while not owned in the usual sense by cable operators, were
developed with significant
involvement by the cable industry. In terms of prime time ratings, eight
of the top 15 cable
programming networks are vertically integrated, which is a significant
decline from last year when
11 of the 15 highest-rated cable networks were vertically integrated.

     145. Vertical integration continues to involve principally the
largest cable system
operators. The eight largest cable MSOs have a stake in 63 of the 64
vertically-integrated services,
or in 98% of all such services. TCI, the largest MSO, holds ownership
interests in 34 national
programming services, approximately 23% of all national cable programming
networks. This
represents a decrease in TCI's level of vertical integration since last
year, when we reported that TCI
held interests in 29.5% of all national programming services, due in part
to the restructuring of the
Time Warner-Turner transaction. Time Warner, the nation's second largest
MSO, holds interests in
22 national programming services, or approximately 15.3% of all national
programming services.
This represents an increase from Time Warner's 14% in 1995.

     146. Another change since the 1995 Report was the merger of Time
Warner and Turner
Broadcasting. However, the merger does not account for any increase in
vertical ownership in this
year's Report because last year cable system operators already had a
combined ownership interest
of greater than 40% in the Turner networks. On September 12, 1996, as a
result of the merger
review process, the FTC required a restructuring of the transaction. The
FTC restructuring
required the cancellation of long-term carriage agreements between TCI
and several Turner
networks. The consent agreement also forbids Time Warner from bundling
carriage of "marquee"
or "crown jewel" networks -- Time Warner cannot bundle HBO with any
Turner networks, and Time
Warner cannot bundle CNN, TNT and WTBS with any Time Warner networks.
Time Warner is also
prohibited from discriminating on the prices it offers for Turner
programming networks to rival
MVPDs, is required to report information on carriage agreements by its
cable systems, and its cable
systems are required to carry an all-news rival to CNN.

     147. One other significant development in the past year has to do
with the ownership of
several regional sports programming networks. In 1996, News
Corporation's Fox Television ("Fox
TV") entered into a 50/50 joint venture with TCI and Liberty Media. Fox
TV contributed cash and
the fX national programming network into the joint venture, and Liberty
contributed its Liberty
Sports division, consisting primarily of Prime Sports regional cable
sports network operations.
The Prime Sports regional cable network, relaunched this Fall as Fox
Sports Net, consists of nine
regional sports networks with a combined 25 million subscribers
nationwide.

     148. Since the 1995 Report, 44 new cable services have made
announcements about their
plans to begin offering service. Of these 44 new networks, 25 plan to
launch service during the
fourth quarter of 1996.   In addition, several services that had planned
to launch service during the
year since the 1995 Report did not do so. One reason given for not
launching is that delays in the
deployment of digital compression by cable systems have slowed their
deployment. Without such
compression, there is less channel capacity to accommodate a large number
of new channels.

          2.   Access to Programming

     149. The Commission established rules pursuant to the 1992 Cable Act
concerning
programming arrangements between MVPDs and satellite-delivered
programming vendors (the
"program access" and "program carriage" rules). These rules prohibit
unfair competition and
discriminatory practices by cable operators and vertically-integrated
programmers that may inhibit
competition from other MVPDs. In addition, the program access rules
prohibit vertically-
integrated programmers from entering into exclusive contracts with cable
operators unless the
arrangements are found by the Commission to be in the public interest.
In making that public
interest determination, the Commission is required to consider, and
balance, five enumerated factors
concerning the effect and duration of the exclusivity arrangement.

     150. As the Commission has consistently noted, exclusive
arrangements can be used to
deter entry and inhibit competition from other MVPDs in markets for the
delivery of multichannel
video programming. We have also consistently recognized, however, that
exclusive arrangements
can often produce efficiency benefits for the parties involved, and may
increase competition, which
can produce lower prices and increased choice for consumers in
programming and distribution
markets. When it created the program access regime, Congress struck a
balance between these
opposing effects of exclusive programming arrangements, and the
Commission has implemented
that balance in its rules and determination of program access complaints.
By targeting and
eliminating those vertical restraints that can impair competition in
markets for the distribution of
multichannel video programming, the Commission's enforcement of these
rules is designed to
contribute to the long-term performance of both distribution markets and
programming markets.
Indeed, the program access rules have been credited as having been a
necessary factor in the
development of both the DBS and MMDS industries.

     151. Commission Enforcement Activities. The Commission has resolved
ten program
access disputes since the 1995 Report. The Commission also denied a
Petition for
Reconsideration of a program access decision issued in 1995. These cases
are described in detail
in Appendix H.

     152. Issues of Concern to Commenters in 1996. Many parties agree
that the program
access rules have helped emerging competitors to cable obtain access to
programming, although
other parties continue to argue that the rules are unnecessary. As
discussed below, some
commenters allege that denials of access to programming continue to
inhibit competition and urge
expansion of the program access rules. In particular, these parties
argue for application of the
program access regime to non-satellite delivered programming services and
to programming services
of non-vertically integrated vendors, both of which are issues that we
have addressed in prior
Reports. In addition, commenters urge expedited review of program access
complaints, clarification
of the exception for pre-existing exclusive contracts, expansion of the
program access rules to allow
the recovery of damages, and application of the program access rules to
exclusive arrangements
between vertically-integrated programmers and non-cable MVPDs.
     153. Terrestrial Delivery. A number of commenters urge the
Commission to expand the
application of the program access rules to include all programming --
regardless of how it is
distributed. In particular, they argue that, as fiber-optic wiring
becomes cheaper and easier to
deploy and use, delivery of programming by terrestrial means instead of
via satellite may permit
cable operators to abuse vertical relationships between themselves and
programmers. This fear
is raised particularly with regard to local sports networks. Other
commenters, however, oppose
the application of the program access rules to programming delivered by
means other than satellite,
arguing that it would be an unwarranted extension of the program access
rules.

     154. We recognize that improved technology and lower costs are
improving the efficiency
of terrestrial distribution of programming, particularly over fiber-optic
facilities. As a result, it
appears that it may become possible for a vertically-integrated
programmer to switch from satellite
delivery to terrestrial delivery for the purpose of evading the
Commission's rules concerning access
to programming. If a trend of such conduct were to occur, we would have
to consider an
appropriate response to ensure continued access to programming. To date,
however, we have seen
no evidence that such strategic conduct has actually occurred.

     155. Non-Vertically Integrated Programming. Several parties argue
for an extension of
the program access rules to non-vertically integrated programmers. For
example, Ameritech New
Media requests that the Commission recommend to Congress that the law be
clarified or changed
to ensure that new MVPDs have access to non-vertically integrated video
programming. In support,
it cites press reports which state that two broadcast networks are
offering exclusive carriage terms
to incumbent cable operators for their new 24-hour news channels and
asserts that such contracts
could have a stifling effect on competition. In addition, WCAI filed an
ex parte letter on
November 18, 1996, alleging that several non-vertically integrated
programmers are refusing
outright to provide service to MMDS operators, and that other non-
vertically integrated programmers
expect to be paid surcharges by MMDS operators. WCAI argues that cable
operators have the
same power and incentive to induce non-vertically integrated programmers
to deny competing
MVPDs access to their programming as they do with respect to vertically-
integrated programmers.
Consequently, WCAI argues that the program access rules should be applied
to all programming
without regard to the degree of integration between programmers and cable
operators.

     156. Other commenters urge the Commission to reject these calls for
expansion of the
program access rules to cover non-vertically integrated programmers,
arguing that such an
interpretation is inapposite to both legislative intent and the policies
underlying the rules. These
commenters argue that Congress clearly intended to limit the power of
cable operators and their
affiliates rather than seeking to regulate programmers per se, and that
Congress reaffirmed this
intent by limiting the program access provisions in the 1996 Act to
vertically-integrated
programmers. They also argue that no meaningful evidence has been
presented indicating that
non-cable MVPDs are being denied access to programming from non-
vertically-integrated
programmers. Finally, commenters opposing extension of the program
access rules to non-
vertically-integrated programmers argue that such an extension would only
impede the development
of new programming, and would not promote competition with incumbent
cable systems.

     157. As in prior years, we recognize the concern raised by some
parties that access to
programming from non-vertically integrated programmers may inhibit
competition in markets for
the distribution of multichannel video programming. The evidence before
us, however, is
insufficient for us to make any determination concerning the effect, if
any, that exclusive
arrangements involving non-vertically integrated programmers may have on
competition in local
markets for the delivery of multichannel video programming.

     158. Pre-Existing Exclusive Arrangements. Several commenters argue
that the
"grandfathering" provision of Section 628(h) of the Communications Act --
which exempts exclusive
contracts entered into on or before June 1, 1990, and renewed or extended
before October 5, 1992,
from the public interest inquiry of exclusive contracts -- raises serious
competitive concerns. For
example, Ameritech New Media submits that local exchange carriers and
their affiliates typically
do not have any exclusive distribution contracts because LECs generally
were barred at that time
(before June 1, 1990) from providing video programming services. Thus,
Ameritech New Media
contends that it is disadvantaged vis-a-vis cable operators, in that
cable operators are able to take
advantage of the grandfathering provision, while LECs and their
affiliates are not. After review,
we find that we do not have -- and Ameritech New Media has not provided -
- sufficient information
to permit us to make any decision at this time regarding the alleged
anti-competitive effects resulting
from the grandfathering provisions of Section 628(h).

     159. Expedited Enforcement. To improve enforcement of the existing
rules, some
commenters urge expedited review of program access complaints. As a
preliminary matter, we
believe the procedures established in our rules for program access
complaints already provide for
an expedited procedure to resolve such disputes, and that commenters have
not presented any
additional evidence to suggest that revising these procedures would
further accelerate this process.
Nonetheless, we reaffirm our commitment to follow Congress's clear
mandate in both the 1992 Act
and, most recently, the 1996 Act to promote competition as quickly as
possible. Consequently, the
Commission will continue both to process program access complaints in the
most expeditious
fashion possible, and to continue vigilant and meaningful enforcement
policies in this area.

     160. Penalties and Damage Awards. Several commenters argue that the
Commission
should provide for damage awards against parties found to have violated
the program access rules.
According to these parties, without a meaningful penalty, the program
access provisions are
insufficient, standing alone, to deter strategic vertical conduct by
cable operators. Other parties
disagree, arguing that a damages remedy is neither necessary nor
appropriate under the program
access rules. Although we recognize the concerns of the commenters,
these parties have not
provided sufficient evidence to persuade us that penalties are necessary
at this time to ensure
effective enforcement of our program access rules.

     161. Sublicensing. OpTel, RCN and others assert that in markets
where they compete
against vertically integrated cable MSOs, the MSOs have refused to
sublicense popular cable
network programming, particularly local and regional sports and other
popular satellite cable
programming. OpTel and RCN contend that this refusal precludes them from
offering an
attractive program lineup. As a result, they claim to be disadvantaged
in trying to attract subscribers
and not to be able to compete effectively against the incumbent cable
franchisee.
     162. The parties raising these sublicensing concerns have filed
program access complaints
with the Commission concerning the same facts that form the basis for
their assertions. We
believe that those complaint proceedings are the appropriate arenas for
examining the particular
merits of their claims, and decline to interfere with those proceedings
by addressing the comments
in this Report.

     163. Exclusive Arrangements with Non-Cable MVPDs. National Rural
Telecommunications Cooperative ("NRTC") argues in its comments that it is
unable to obtain the
right to distribute programming it deems critical for competitive success
because that programming
is covered by exclusive arrangements with other non-cable MVPDs in areas
unserved by cable.
NRTC argues that its failure to receive the desired programming is the
result of efforts by the
vertically-integrated cable industry to stifle competition from non-cable
MVPDs. TCI responds to
NRTC's argument by pointing out that the Commission has explicitly
rejected this concern, and
argues that NRTC is in no position to complain about exclusive
arrangements with its competitors
since it also is the beneficiary of exclusive arrangements for access to
programming.

     164. As we discussed in response to NRTC's argument last year, the
Commission has
denied a petition by NRTC to include exclusive contracts between DBS
operators (which are non-
cable MVPDs) and vertically-integrated programmers within the per se
prohibition of Section
628(c)(2)(C) of the Communications Act and Section 76.1002(c) of the
Commission's rules.
Instead, the Commission noted that NRTC, or any other aggrieved party,
may pursue relief from
such exclusive arrangements through other provisions of the program
access and program carriage
rules. We see no reason to revise our determination based on the record
before us this year.


              b.   Additional Competitive Issues Relating to Vertical
Integration
     165. Channel Occupancy Comments. In the Notice, we sought comments
on the channel
occupancy rules and their effect on competition. Pay-Per-View Network,
Inc. d/b/a Viewer's
Choice ("Viewer's Choice") states that the channel occupancy rules are
unwarranted and are an
artificial restraint that may deprive consumers of programming they
prefer. Viewer's Choice
claims that, while it is difficult to quantify the precise impact of the
channel occupancy rules, these
restrictions have limited the ability of affiliated cable systems to
offer as many of its pay-per-view
services as they might otherwise choose to do in response to consumer
demand. It asserts that this
limit also affects its ability to maximize its subscriber base and
adversely affects its ability to obtain
quality programming. Viewer's Choice concludes that the channel
occupancy rules do not strike
the intended balance between the risks of vertical integration and the
benefits of the development
of diverse programming.

     166. We note that an appeal to the United States Court of Appeals
for the District of
Columbia Circuit by Bell Atlantic and Time Warner of the Commission's
1995 reconsideration
decision of its channel occupancy rules is being held in abeyance by the
court pending Commission
resolution of certain reconsideration petition issues applicable to the
channel occupancy rules. In
light of this procedural status, it would be inappropriate to comment on
the merits of these comments
in this Report.

     167. Leased Access. A further attempt to address concerns relating
to media diversity is
found in the statutory leased access requirements of cable operators.
ValueVision International
("ValueVision"), references the Commission's tentative conclusion that
the 1993 rules implementing
the leased access provisions have failed to promote diverse sources of
programming, and then
asserts that it has "actually lost access to hundreds of thousands of
cable subscribers under the
implicit fee formula for leased access . . . ." Video Information
Providers for Non-discriminatory
Access ("VIPNA") recently conducted a survey of 149 cable systems in the
top 100 markets and
found that only eight percent of cable operators indicated that they were
currently leasing capacity.
Others have provided information suggesting that a market for leasing
channel capacity does in fact
exist, particularly for the provision of part-time programming. For
example, in the leased access
proceeding Cox Cable submitted information relating to such leasing on 13
of its systems.
However, systematic information on the use of leased access channels was
not available to us in the
course of this proceeding and does not appear to be otherwise available.

     168. In March of this year, the Commission stated its belief that
the highest implicit fee
formula is likely to overcompensate cable operators, and does not
sufficiently promote the goals
underlying the leased access provisions of the Communications Act, and
proposed an alternative
rate formula.   In the Leased Access Further Notice, the Commission also
considered a number
of other issues relating to leased access: a possible transition period,
the rate for part-time
programming, tier and channel placement, and preferential treatment for
nonprofit programmers.
In general, leased access programmers support the Commission's proposed
rate formula in
opposition to cable operators and non-leased access programmers. For
example, ValueVision
supports the reforms proposed in the Leased Access Further Notice as a
means to promote the
carriage of leased access programming and seeks prompt action in that
proceeding. However,
independent non-leased access programmers such as Lifetime Television and
Viacom claim that the
pending proposals to provide a "regulatory boost for leased access
programming only result in a
further squeeze on channel capacity" and make it more difficult for
independent programmers to gain
cable carriage. As noted in the Leased Access Further Notice, the
challenge before the
Commission in completing the rulemaking is to promote leased access
without adversely impacting
the operation, financial condition, or market development of cable
systems.

     169. 1996 Telecommunications Act. In the Second OVS Report and
Order, the
Commission concluded that, pursuant to Section 653(c)(1)(a), the program
access restrictions should
apply to the conduct of open video system operators in the same manner as
they currently apply to
cable operators and common carriers or their affiliates that provide
video programming directly to
subscribers.   The Commission concluded that it was appropriate to apply
Section 628 to open
video system operators by creating parallel provisions for cable
operators and open video system
operators. The Commission also determined that, in order to effectuate
the purposes of the program
access statute in the open video system context, open video system
programming providers should
be subject to the program access provisions. Specifically, we concluded
that we would extend our
program access rules to prohibit cable-affiliated satellite programmers
and cable-affiliated open
video system programming providers from entering into exclusive
programming agreements, unless
the Commission first determines that the exclusive arrangement is in the
public interest under the
five public interest factors listed in Section 628(c)(4). Finally, we
found that open video system
programming providers that provide more than one channel of programming
clearly fit within the
definition of an MVPD and are therefore entitled to the benefits of the
program access provisions.

     C.   Technical Advances

     170. In the 1995 Report, the Commission noted that in anticipation
of emerging
competition in markets for the delivery of video services, many MVPDs
were planning to enhance
standard services and expand offerings to include new services, many of
which require increased
bandwidth and two-way network capabilities. We discussed the two primary
strategies MVPDs
were employing to increase capacity: upgrading wired network architecture
and deploying digital
compression. In this section, we update the status of MVPD efforts to
develop and deploy new
architectures and technologies to accomplish their competitive goals, and
report on recent
developments in subscriber interface products such as set-top boxes and
modems.

          1.   Upgrading Wired Architectures

     171. Deployment of fiber optic cable remains one of the key
components of network
upgrades for both cable companies and LECs. During the past year, the
cable industry's deployment
of fiber optic cable in its networks grew by over 18%, for a total of
81,323 route miles. During
1995, LEC deployment of fiber optic cable in their networks increased by
12%, or 22,871 sheath
miles, to a total of 218,737 sheath miles of fiber optic cable in their
networks.
     172. Hybrid Fiber Coaxial Cable. As reported in the 1995 Report,
both cable operators
and LECs are deploying hybrid fiber coaxial cable ("HFC") architectures
to upgrade their
networks. Industry analysts report that HFC network architecture
currently exists in
approximately 35 percent of all cable systems, and that over one-third of
all cable subscribers are
served by systems employing HFC architecture.

     173. Switched Digital Video. The other principal architecture
primarily supported by
LECs to upgrade video delivery capability in their networks is Switched
Digital Video ("SDV").
 Last year we noted that HFC advocates emphasized the lower cost of the
HFC solution relative to
installing fiber-to-the curb in an SDV architecture. We note here that
at least one analyst asserts that
while HFC is more cost effective when service penetration (percent of
customers who actually buy
the new video service) is low, once penetration reaches 40-60% SDV is the
more cost-effective
architecture.

     174. HFC and SDV architectures each have their separate proponents.
Currently GTE,
Ameritech, Pacific Bell, BellSouth, Southern New England
Telecommunications and U S West
appear to favor deployment of HFC based architecture, while Bell
Atlantic, NYNEX and SBC
Communications appear to prefer SDV.

     175. Fiber Optic Rings. MSOs are increasingly deploying regional
hubs for
interconnection of headends using high capacity fiber optic rings.
According to NCTA, sharing
main switching facilities potentially reduces equipment costs by as much
as $7 million per switch.
Proponents of the regional hub concept claim that it not only shares with
other MSOs the economic
costs and benefits but also speeds the deployment of advanced services
such as telephony and
interactive two-way services by allowing cable companies to interconnect
with other
telecommunications networks.

          2.   Digital Compression

     176. As noted in the 1995 Report, digital compression, which
radically reduces storage
and transmission costs, is the other key strategy for increasing
communications capacity. Last
year we reported that various compression techniques had ratios as high
as 10:1. This year, ratios
as high as 24:1 have been tested.

     177. DBS and MMDS. In the past year, DBS providers have continued
to increase their
use of digital technologies while MMDS operators were authorized to use
digital transmission on
ITFS, MDS and MMDS frequencies.

     178. Digital Programming. By the end of this year, digital
programming will be available
from many major program suppliers. HBO reports that it has begun
offering all of its HBO and
Cinemax feeds in digital format.

     179. In October, TCI launched an initial digital video rollout in
Hartford, Connecticut,
delivering 40 pay-per-view, 25 premium and 18 special interest basic
channels. Other digital
video sources that will reportedly be available by year end include:
HBO/Cinemax - six channels
(per time zone); Showtime/The Movie Channel -- five channels (per time
zone); Sundance Channel
and Flix -- one channel each; Viewer's Choice -- 11 channels.
Additionally, in October, three
cable programming services:   Discovery Communications (TCI is a major
investor), Arts &
Entertainment and ESPN, launched new, digital only cable services.

          3.    Subscriber Interface

     180. Set-Top Boxes. Set-top boxes or digital television receivers
are necessary for
customers to receive digital programming. The boxes on top of customers'
TV sets will enable cable
companies to offer as many as 300 channels and interactive digital
television services including
Internet access, video on demand, pay-per-view TV broadcasting, home
shopping and electronic
commerce, over the same cables by unscrambling information-packed
digitized signals. While
widespread deployment of digital set-top boxes has not yet occurred with
the exception of DBS set-
top boxes, various other entities are developing and deploying set-top
boxes in limited areas. While
the cost of digital set-top boxes has been a significant factor in
delaying the implementation of
digital technology, silicon-chip producers are predicting that advances
in technology will result in
decreased prices for mass produced digital set-top boxes.

     181. On October 3, 1996, Cable Television Laboratories Inc.
announced, along with
representatives of the two major suppliers of digital video equipment,
General Instruments and
Scientific-Atlanta ("SA"), a set of de facto private sector standards
(including encryption security)
for digital cable equipment, which will allow set-top terminals and data
modems built by different
manufacturers to work together (interoperate) on the same cable system.
     182. Universal Set-Top Box. Universal or "unity" boxes are
envisioned as being capable
of handling wireless cable, asymmetrical digital subscriber line (ADSL),
switched digital video,
fiber-coaxial and DBS services thereby promoting the universal
compatibility and operability of
digital cable and satellite TV systems. While there has been significant
investment in digital set-top
box technology during the past year, the production of a digital set-top
package that is universally
compatible, consumer affordable and provides adequate signal security has
so far proven elusive.


     183. There currently is disagreement between video retailers and DTH
satellite providers
regarding the protection of signal security in universal set-top boxes.
The Satellite Broadcating and
Communications Association of America ("SBCA") argues that if all
security circuitry is hardwired
into set-top boxes mass produced by third party manufacturers, the
manufacturers will only have a
vested interest in selling the boxes, not in maintaining the security of
the encoded signal. To the
contrary, Circuit City, a major retailer of video products, asserts that
instead of hardwiring all
security circuitry into universal set-top boxes, signal security can be
maintained by using a common
security interface that would allow all security circuitry to be placed
on an item such as a card that
could be inserted in the universal set-top box by the subscriber.

     184. Asynchronous Digital Subscriber Line. Asynchronous digital
subscriber line
("ADSL") is seen by some as a rival to ISDN and cable modems and is being
tested by telephone
companies for the delivery of information in video and multimedia
formats. Currently, however,
no LEC or cable system has begun commercial ADSL operations. In the past
year, Ameritech,
Pacific Bell, U S West Communications, Bell Atlantic Corp., BellSouth
Corp. and GTE Corp. all
announced Internet access trials using ADSL technology.

V.   ISSUES

     A.   Legal and Regulatory Obstacles

          1.   Local and State Laws and Regulations

     185. In the 1995 Report, the Commission noted that some local laws
and regulations may
create impediments to entry and competition in markets for the delivery
of video programming.
We cited local franchise regulations and zoning restrictions on video
receiving equipment as
examples of such impediments. The Commission voiced its continued
support for clarification of
Section 621(a) of the Communications Act, which prohibits the
unreasonable denial of a competitive
franchise. Specifically, we recommended that Congress clarify that
Section 621(a) applies to all
exclusive franchises, regardless of when they were adopted. Congress has
not acted on this
recommendation. The Commission also noted that local zoning regulations
may inhibit competition
in the video programming delivery market by preventing direct-to-home
distributors' customers from
installing receiving dishes.

     186. In Section 207 of the 1996 Act, Congress required the
Commission to promulgate
rules prohibiting restrictions on viewers' ability to receive video
programming from over-the-air
broadcasts, MMDS services, or DBS services, and the Commission modified
its rules to
implement Section 207. In response to the Notice, commenters generally
voiced concerns that
local restrictions on receiving equipment have unreasonably restrained
competition in markets for
the delivery of video programming and expressed agreement with the
responses by Congress and
the Commission. In addition, NRTC urges the Commission to extend its
preemption policy to
protect renters and other viewers who do not own the property on which
DBS equipment would be
placed. NRTC also urges the Commission to replace its rebuttable
presumption policy with a per
se preemption standard for both government and non-government
restrictions.

     187. Commenters argue that other local and state laws and
regulations impede entry into
markets for the delivery of video programming. BellSouth generally
identifies local franchising
obstacles or delays as a substantial obstacle to successful entry.   SBC
notes that Texas imposes
more requirements on LECs wishing to offer video service than the 1996
Act does. For example,
Texas requires these LECs to offer video service through a separate
subsidiary. In addition, LECs
offering equipment or services to their video programming subsidiary must
provide the same
equipment and services to other video programming providers. SBC argues
that these provisions
of Texas law may deter entry by LECs and reduce competition in video
delivery markets.
          2.   Federal Laws and Regulations

     188. In the 1995 Report, the Commission cited its efforts and those
of the courts to
eliminate or reduce legal and regulatory impediments to entry into video
programming delivery
markets. Earlier in this Report, we reported on implementation items
that may further reduce
these impediments. In response to the Notice, a number of parties
suggest additional changes to
further promote competition in markets for the delivery of video
programming.

               a.   Cable Home Wiring

     189. Several commenters argue that the Commission's cable home
wiring rules continue
to impede entry and competition. According to RCN, the Commission's
rules establish a
demarcation point in MDU buildings that is often inaccessible to
competing video programming
providers because it is imbedded inside the building's walls. RCN
requests that the Commission
change its rules to make the demarcation point accessible to all video
programming providers.
WCAI and Ameritech New Media agree with RCN's suggestion, arguing that
entrants should have
access to wiring dedicated to individual dwellings inside MDUs. GTE
argues that the current rules
concerning inside wiring in MDUs encourages incumbent cable system
operators to use loop-
through wiring, in which a single wire is used to serve multiple
subscribers. The Commission's
home wiring rules do not apply to loop-through wiring.

     190. NCTA voices its opposition to proposals to allow rival video
programming
distributors to use a cable operator's inside wiring in MDU buildings.
In general, NCTA argues
that by leading to a single wire rather than multiple wires, these
proposals will impede rather than
promote competition.    In particular, NCTA argues that moving the
demarcation point will deter
cable investment by increasing the risk that future upgrades will have to
be given to rivals.

     191. The comments addressing issues related to cable home wiring
raise significant issues
concerning cable operators' ability, under the Commission's current home
wiring rules, to impede
or prevent the entry of rival MVPDs by denying them access to cable
wiring in MDU buildings. The
Commission is currently addressing these issues in another proceeding,
and we will not prejudice
that proceeding by considering the issue in this proceeding.

               b.   Copyright Act

     192. In response to the Notice, commenters argue that federal laws
and regulations prevent
non-cable video programming providers from offering the range of
programming choices that cable
offers. In particular, although the Library of Congress, not the
Commission, has jursidiction over
the Copyright Act, several commenters argued that application of that law
inhibits competition in
markets for the delivery of video programming. In particular, NRTC
argues that the Copyright Act
creates a barrier to competition by preventing DBS services from offering
network broadcast
programming to most of their subscribers. NRTC suggests that the
Commission petition Congress
to eliminate this restriction.

     193. The Broadcast Network Affiliates argue in opposition that the
Satellite Home Viewer
Act restricts DBS access to network programming in order to protect both
the relationship between
networks and their affiliated local stations and the copyright that the
affiliates have purchased in free
market transactions. The Broadcast Network Affiliates further argue that
DBS providers are free
to negotiate with the networks for a secondary retransmission license,
but are not granted a
compulsory license.

     194. USTA raises a different argument about copyright law,
expressing concern about
inconsistencies between the Commission and the United States Copyright
Office regarding the
treatment of open video systems. USTA asserts that, while the Commission
has determined that
open video systems will be treated like cable operators for the purposes
of applying the cable
compulsory license of broadcast programming, the Copyright Office has
asked for comments on
this issue. USTA argues that exclusion of open video systems from the
cable compulsory license
will raise their costs and reduce competition with incumbent cable
operators. As we noted earlier
in this Report, the Copyright Office has been asked to issue a
declaratory ruling on this issue.

               c.   Pole Attachments

     195. In the 1994 Report, the Commission suggested that the need of
many cable operators
to enter into "pole attachment agreements" in order to lease space on
utility poles had reemerged as
a potential impediment to competition in video programming delivery
markets. The 1996 Act
created a distinction between pole attachments used by cable systems
solely to provide cable service
and pole attachments used by cable systems or by telecommunications
carriers to provide any
telecommunications service. Section 703 of the 1996 Act amended Section
224 of the
Communications Act to, among other things, make the existing just and
reasonable pole attachment
rate formulas temporarily applicable to telecommunications carriers and
cable operators providing
telecommunications services. Congress directed the Commission to issue
new pole attachment
formulas within two years of the effective date of the 1996 Act. Section
703 also mandated access
to utility poles, ducts, conduits, and rights-of-way, except in certain
specified situations. The
Commission is currently considering issues related to pole attachments in
separate proceedings.

          3.   Incumbent Behavior

     196. In the 1995 Report, the Commission noted that strategic
behavior by incumbent firms
can create impediments to entry and competition by rival service
providers. Strategic behavior
may be designed to raise rivals' costs or decrease their access to
customers. Because of the
substantial sunk costs that entrants often must incur, strategic behavior
by incumbents can deter
entry by creating a credible threat that entry would be unprofitable. In
that case, the entrants would
be unable to recover their sunk costs because their systems could not be
shifted to some other use.

     197. In response to the Notice, commenters argue that cable
operators are filing nuisance
lawsuits, maintaining perpetual contracts, and offering selective
discounts to disadvantage their
rivals. Ameritech suggests that incumbents are engaging in strategic
behavior to raise rivals' costs
by nuisance lawsuits over franchise awards. In particular, Ameritech
reports that incumbent cable
operators have filed lawsuits seeking to block, delay, or invalidate
competing cable franchises
awarded to Ameritech. In another instance, it has been reported that the
New England Cable
Telecommunications Association filed suit in the Connecticut Supreme
Court to appeal a decision
by the Connecticut Department of Public Utility Control to grant a
statewide cable television
franchise to Southern New England Telephone.

     198. Several commenters assert that cable operators have "perpetual"
exclusive contracts
with MDU owners that foreclose competition from new video distributors.
OpTel claims that such
contracts are "perpetual" because they are tied to the term of the MSO's
franchise and any renewal
or extensions thereof. In other words, argues OpTel, because franchise
renewals and extensions for
MSOs are all but automatic, the terms of these agreements are, for all
practical purposes, "perpetual."
Accordingly, OpTel urges the FCC to create a "fresh look" procedure which
would permit MDU
owners to "opt out" of "perpetual" MDU contracts for other competitive
alternatives.

     199. The NCTA counters that OpTel is in error when it suggests that
exclusive cable
agreements with MDUs are the result of a "monopoly" while agreements
between non-cable MVPDs
and MDUs are not. NCTA asserts that there is no evidence to suggest that
the process by which a
franchise cable operator negotiates with MDUs differs from negotiations
between, for example, a
SMATV operator and an MDU, nor does labelling such contracts as
"perpetual" make them less
valid. Furthermore, the NCTA notes that since there were SMATV operators
in existence when
many of these contracts were signed in the 1980s, SMATV operators could
have competed for them
then. In addition, TCI argues that "perpetual MDU contracts" do not
exist. Instead, TCI states,
cable agreements to serve MDU buildings are often negotiated for a term
equal to the life of the
existing franchise term. At the end of the existing franchise term, TCI
asserts, the MDU manager
is free to renew, renegotiate, or terminate the agreement.

     200. Commenters also disagree as to whether incumbents are engaging
in strategic
behavior to decrease the returns to new entrants by selectively offering
lower prices to those
subscribers who have switched, or are likely to switch, to the entrants'
video services. RCN asserts
that incumbent cable operators offer discounts selectively to individual
MDU residents who
subscribe to, or are negotiating with, non-cable video programming
providers. WCAI and OpTel
argue that the "bulk discount" exception to the Commission's uniform rate
structure rules should
apply only where the discount is deducted from a bulk payment by the MDU
building owner on
behalf of the individual residents. NCTA states in opposition to WCAI
and OpTel that the bulk
discount exception is the subject of a separate proceeding, where NCTA
has presented its
arguments.

     B.   Competitive Responses to Overbuilding

     201. Entry into a video programming delivery market by a new
distributor has elicited
several different types of responses from the incumbent cable operator.
An incumbent may respond
to such a new rival by: (1) offering subscribers improvements in
programming and other services;
(2) reducing its prices by offering selective price discounts to some of
its current subscribers, general
discounts to all of its subscribers, or discounting a portion of its
services (e.g., an upper tier, the
Disney channel, etc.); (3) engaging in marketing efforts (e.g.,
advertising and telemarketing) to
provide current and potential customers with information about its prices
and services; and (4)
seeking removal of regulations that limit its ability to respond to new
entrants.

     202. Although entry by a new video programming distributor using
wireline delivery to
subscribers may involve some duplication of assets (i.e., headend,
distribution network, etc.) the
gains to consumers in the form of lower prices and better services for
customers of both the new
entrant and the incumbent may outweigh the costs of such duplication. A
recent study estimated that
a franchise served by two cable systems (an overbuild area), on average,
will have a 14% higher cost
(including the cost of capital) than a single cable system serving the
same franchise area.
Nevertheless, the competition between the operators may result in lower
prices and better services.

     203.   Preliminary evidence on how incumbent cable operators have
responded to entry
in a few markets is provided in the case studies below. We note that
much of the evidence described
below was obtained through press reports and thus must be viewed with
caution. However, these
case studies do provide some impression of the nature of competition in
video programming delivery
markets and how incumbent cable operators may respond to additional entry
as it occurs in more
markets in the future.

          1.   Case Studies
               a.   Dover Township, New Jersey

     204. Adelphia is the incumbent cable operator in Dover Township, New
Jersey with a
subscriber base between 26,000 and 27,000 customers.   In January 1996,
FutureVision, a division
of Digital Broadband Applications Corp, leased the current LEC facilities
of Bell Atlantic ("BA")
and began to provide 62 channels of programming services in the Township.
As of mid-October
1996, FutureVision (now acquired by BA) had signed up 2,600 customers
from a marketing base
of 3,125 homes. In addition, BA plans to expand its LEC facility by
adding 323 digital channels
to serve 16,000 homes by the end of 1996 and 28,000 homes by the end of
1997. Seven competing
video programming providers have already reserved a total of 304 of the
planned 323 digital channel
expansion.

     205. Since January 1996, both the incumbent cable operator and
FutureVision have
engaged in price competition resulting in a significant drop in their
monthly services rates. Before
FutureVision's entry, Adelphia charged $25.28 per month for its 66
channel basic service package.
FutureVisions's initial monthly rate for its 62 channel basic service
package was $19.95. After
FutureVision's entry, Adelphia reduced its basic service rate by 25% from
$25.28 to $18.95 and
planned to offer 11 more channels to the subscribers in the area served
by FutureVision.
FutureVision in turn reduced its monthly rate to $14.95, a 21% reduction
below the reduced price
charged by Adelphia.

     206. In addition to a reduction in monthly rates, Adelphia has
announced that it will offer
several expanded services, such as high-speed Internet access, local
telephone service, a new analog
set-top box with interactive features and future capability to offer up
to 200 digital TV channels.
Preliminary evidence on Adelphia's cable prices and services reported
above suggests that Adelphia
is offering selective price discounts to its current customers.

     207. Adelphia has argued, in a separate proceeding, that its ability
to respond to
FutureVision's entry has been hampered by state and federal regulations.
For example, Adelphia
argues that the 30-day notice requirement for price changes imposed by
the New Jersey Board of
Public Utilities and delays resulting from the Commission's regulations
governing programming
changes disadvantage Adelphia in its ability to compete with
FutureVision. In addition, Adelphia
argues that the general consumer notice provisions requiring advance
notice to its customers increase
its costs and limit its ability to respond to changes initiated by
FutureVision.

     208.      Adelphia petitioned for decertification and a finding of
LEC effective competition
under Section 623(1)(1)(D) of the 1996 Act. Under this provision, the
presence of a video
programming delivery provider (FutureVision) offering comparable cable
service using the facility
of a LEC (Bell Atlantic) subjects the incumbent cable operator (Adelphia)
to effective competition
and thus justifies deregulated rates. In October 1996, the Commission
issued an order finding
effective competition in Dover Township and deregulated cable service
prices for Adelphia.    In
the Order, the Commission noted that competition in the Township had
reduced monthly basic
service rates. Also, the Commission found that cable subscribers are
well aware of the availability
of competitive video distribution services. Although BA's ability to
serve some parts of the
franchise area remains somewhat restricted, we concluded that competitive
service was being offered
in a manner sufficient to comply with the 1996 Act.

               b.   Columbus, Ohio

     209. Before June 1996, Coaxial Communications ("Coaxial") and Time
Warner cable
companies served the east and west sides of Columbus, Ohio, respectively.
In June 1996,
Ameritech started overbuilding in the Columbus area and launched a 78
channel cable service in
direct competition with Time Warner and Coaxial. Ameritech first started
to construct in Coaxial's
service territory. By the end of 1998, 600,000 Columbus residents are
expected to have access to
Ameritech's cable services. Ameritech is currently offering 60 channel
expanded basic service for
$27.95 a month. This monthly charge is $1.95 less than Time Warner's
charge for a 51 channel basic
service and $2.00 more than Coaxial's rate for a 54 channel extended
basic service. For the 16,000
subscribers in areas where Time Warner has upgraded its system, Time
Warner reduced its basic
service price to $26.95.

     210. After Ameritech's entry, both Time Warner and Coaxial responded
by adding the
Disney channel to their expanded basic package at no additional charge.
Ameritech includes the
Disney channel in its expanded basic channel line up. Unlike the case in
Dover, however, where
subscribers were offered price reductions by both the incumbent and
entrant, in Columbus, neither
Ameritech nor the incumbent cable companies have engaged in sharp price
discounting. Instead,
they are engaged in an intense marketing effort to limit each other's
penetration in the market. For
example, to create demand for its service, Ameritech is using targeted
telemarketing and direct mail
to encourage Coaxial's subscribers to switch to Ameritech. Coaxial has
responded by spending
$250,000 in telemarketing and direct mail to Ameritech's subscribers
pointing out Coaxial's price
advantages. It has also initiated an incentive plan or ". . . bounty
system that gives Coaxial installers
and technicians a reward for every derailed [cancellation of] disconnect
service call." Coaxial
estimates that Ameritech has taken between 150 and 200 subscribers from
its subscriber base of
98,000.

     211. Both Time Warner and Coaxial, citing entry by Ameritech in
their service areas, have
filed for relief from cable rate regulations under the new provisions of
the 1996 Act. In their
petitions, Time Warner and Coaxial argue that they face effective
competition in Columbus because:
(1) Ameritech is a LEC; (2) Ameritech does not have any technical and
regulatory impediments to
entry into the Columbus franchise area and potential subscribers are
aware of it; and (3) Ameritech
offers video programming that is comparable to the incumbent's
programming line up. On
December 9, 1996, the Commission issued an order finding effective
competition in the area served
by Time Warner and deregulated cable services prices for Time Warner.

     212. In this case, the competitive responses in the Columbus area
were twofold: (1) the
incumbents added a premium program to the extended channel line up; and
(2) both incumbents and
the entrant engaged in intensive marketing efforts. This type of non-
price response is not surprising
since overbuilding requires large start-up expenses which limit the
entrant's ability to lower its
rates. One of the incumbents, Coaxial, actually has a relative price
advantage over Ameritech.

              c.   Chamblee, Georgia
     213. Scripps Howard Cable Company ("SH") has been providing cable
services to the City
of Chamblee, Georgia since 1984. Its system passes 2,887 homes in
Chamblee and 44,491 homes
in neighboring Dekalb County. In April 1996, BellSouth was granted a
cable franchise by the City
of Chamblee, and it began offering cable services utilizing the
facilities it had constructed for the
purpose of providing VDT service. BellSouth's facility passes
approximately 700 homes that are
in SH's service area.

      214.     The announced capacity of BellSouth's Chamblee cable
system is 80 channels.
BellSouth's channel lineup, the "Americast Programming Package," includes
many popular cable
channels, such as CNN, ESPN, the Disney Channel and the History Channel.
BellSouth plans to
include two-way video technology, video on demand, and high speed
personal computing services
as a part of its total package. It also plans to expand its service area
to eventually encompass about
8,000 homes in Chamblee currently served by SH.

     215. Information provided by BellSouth and SH indicates that both
are competing on the
basis of new service and limited term price discounts. For example,
BellSouth and SH have
undertaken major marketing initiatives to announce free new services and
price discounts. After
BellSouth's entry, SH announced that it would make substantial upgrades
to its existing cable system
and provide additional services at no extra charge to the cable
subscribers in BellSouth's service area.
It also offered a $3 per month discount to subscribers who signed a 12
month service commitment
and added popular channels similar to those offered by BellSouth. In
addition, SH promised to offer
free cable service to its customers for June 1996 and reduce its rates to
half price for the month of
July.

     216. BellSouth, in an apparent attempt to protect its subscriber
base, offered its current
cable subscribers several "free gifts" including Olympic Sponsorship Pin,
free Caller ID telephone
service, one free month of "Premiercast" basic cable service, and one
free month of its advantage
cable premium package to subscribers currently taking this package.

     217. As a result of BellSouth's entry into the Chamblee market, SH
has petitioned for relief
from rate regulation, citing the new LEC effective competition provisions
of the 1996 Act. In its
petition, SH argues that since BellSouth, a LEC, is offering comparable
cable programming, its
Chamblee system is subject to "effective competition."

               d.   Clearwater, Florida

     218. Time Warner is the incumbent cable operator in Clearwater,
Florida with 700,000
subscribers. Time Warner offers a (limited) basic service, which
includes local broadcast stations,
for $6.50. Its standard cable service, which includes the basic service
plus 24 additional channels
(including Disney, MTV, ESPN, TNT and USA) is offered at $21.95. In June
1996, GTE was
granted a competing cable franchise in the City of Clearwater. The GTE
network already passes
50,000 homes in the Clearwater-St. Petersburg area. GTE plans to expand
service to 150,000 homes
by the end of 1996. The monthly charge for GTE's 23 channel basic
service tier is $10.95. A 63
channel cable programming service ("CPS") tier, (including Disney, MTV
and Turner Classic Movie
channel) is available at $25.95 per month.

     219. According to GTE, Time Warner is offering additional
programming services by
adding premium programming to its most popular cable line up only to
those households capable
of receiving GTE's cable service. For example, GTE's most popular cable
programming lineup
included a number of premium channels like Disney, Turner Classic Movies
and Cartoon Network.
After GTE's entry, Time Warner announced that it would provide the Disney
Channel for no
additional charge to its basic subscribers in GTE's service areas. Time
Warner has denied that it
is reacting to the entry by GTE and claims that it will provide the same
expanded services to its
entire service area soon. In January 1997, however, Time Warner's west
central Florida division
rates will rise 10% everywhere except in Clearwater, in an attempt to
keep and win back customers
from GTE.

     220. As a result of GTE's entry into the Clearwater market, Time
Warner petitioned for
relief from rate regulation in that market, citing the LEC effective
competition provision of the 1996
Act. On December 12, 1996, the Commission released an order finding
effective competition in
Clearwater market and deregulated cable service prices for Adelphia.

               e.   Omaha, Nebraska
     221. In September 1995, U S West began a market trial of its VDT
system in Omaha,
Nebraska. The system currently passes approximately 50,000 homes and
serves parts of the
franchise areas of three incumbent cable operators, Cox, Time Warner, and
TCI. TCI is the smallest
incumbent with about 4,500 subscribers before the entry by U S West. U S
West's subscriber base
is estimated at 15,000, most of whom are former cable subscribers.
According to industry
observers, U S West's success in gaining subscribers in Omaha has been
attributed to: good customer
service; a new technology that uses cable-ready TV sets to provide cable
services without the use
of set-top boxes; and new services including fast cable modem access to
the Internet.

     222. In response to U S West's entry, some incumbent cable operators
are offering
expanded video programming, lower prices, and improved services. Both
Cox and Time Warner
have responded to U S West's entry. Douglas County Cablevision, owned by
Time Warner, reduced
its monthly rates to match the $19.95 rate charged by U S West for its
most popular package. Cox
has responded by offering a free "broadcast basic" service that includes
C-SPAN and The Learning
Channel, free cable installation, two months of free basic and expanded
basic services, and two
months of free HBO and Cinemax channels.

               f.   Richardson, Texas

     223. Southwestern Bell Video Services, Inc. ("SBVS"), a subsidiary
of Southwestern Bell,
has undertaken a video marketing trial in Richardson, Texas. The purpose
of the trial is to determine
the profitability of entering the market currently served by TCI, the
incumbent cable company.

     224. Information provided by SBVS indicates that TCI is responding
to its entry by
providing improved quality of service and special promotional incentives
in selective parts of the
service area. For example, Southwestern Bell points out that prior to
the commencement of SBVS's
market trial, TCI stepped up its promotional efforts. Specifically, SBVS
alleges that TCI went
door-to-door in the trial area, offering customers free pay-per-view
movie coupons and video
cassette tapes.

               g.   Riverside County, California
     225. In late 1991, Cross Country, an MMDS provider, entered the
market and began
providing service to part of Riverside County. Comcast is one of the
many cable operators serving
this area. It currently passes 210,000 homes.

     226. Cross Country initially offered the lowest price service in the
area. Although the
service included a smaller number of channels than Comcast, 20,000 of
Comcast's 93,000
subscribers switched to Cross Country within two years. The loss of
subscribers by Comcast was
attributed to two factors: customer dissatisfaction and Cross Country's
$12.95 price for 21 channels
of service compared to Comcast's higher price of $22.50 for 34 channels.
Beginning in mid-1993,
Comcast began to respond by improving its customer services and system
reliability. The incumbent
has also engaged in targeted telemarketing, advertising "blitzes" and a
special door-to-door sales
campaign to bring back lost subscribers. By the end of 1995, Comcast's
subscribership level was
back up to the level from prior to Cross Counrty's entry into the market.

     227. Recently, Comcast started to offer discounts for a limited time
to all former Comcast
and current Cross Country subscribers. Under this "spring initiative,"
basic, expanded basic,
Cinemax and three channels of HBO were offered at a price of $29.95 a
month. This is a $10 per
month discount from the regular price of $39.95. As a result, Comcast
reported a gain of 1000
new subscribers.

          2.   Preliminary Findings

     228. As competition has been emerging in the few markets described
above, our
observations appear to confirm initially that competition is developing
along the lines predicted in,
among other places, prior reports. In 1994, we wrote that we expected
competition in markets for
the delivery of video programming to be strongly affected by the fact
that the provision of many such
services requires substantial sunk cost investment. Last year we
discussed the fact that the
availability of close substitutes in the form of MVPDs offering services
that share similar service
attributes may be a significant factor in increased competition and
improved market performance in
markets for the delivery of multichannel video programming. As we
explain above, this is
because firms naturally seek to differentiate their products or services
to minimize competition for
their services. As competitors emerge, however, this becomes
increasingly difficult, and firms are
forced to compete with each other for customers. One recent example of
this is the developing
competition among DBS systems, which has led to strengthened competition
between DBS systems
and cable systems.

     229. The actual case studies detailed above address competition
between incumbent cable
systems and MVPD entrants (in addition to the DBS operators that are
operating in most local
markets), many of whom are using similar wired delivery systems. In
these cases, incumbents are
facing competition from other MVPDs in addition to competition from DBS
operators, and the
evidence is largely consistent with our prior predictions concerning the
likely development of
competition in these markets. In the case studies, incumbent cable
operators facing competition
from MVPDs using wired delivery or MMDS technology in addition to DBS
competitors appear to
be responding in two principal ways: (1) by offering better customer
services, new services, and new
products; and (2) by offering lower prices or some form of price
discounting. Similarly, MVPD
entrants appear to be focusing on these two strategies in their efforts
to win customers.

     230. In the markets studied, incumbents generally increased their
service offerings in an
attempt to protect or maintain customer bases in the face of entry.
Operators added new channels
in Columbus, Chamblee, Clearwater, and Omaha. Although the numbers of
channels offered by
incumbents and entrants are obviously largely dependent on their
respective system capacities
(bandwidth), it appears that these incumbents may not have been fully
utilizing their capacities prior
to competitive entry. The experiences in Columbus and Chamblee also
suggest that entrants may
tend to enter the market with a larger channel line-up than the
incumbent, perhaps as a result of
newer technology or the need to offer a superior service in order to win
customers.

     231. There is also some evidence that incumbent cable operators have
lowered prices to
a limited extent when competing with LEC and other wired cable
overbuilds. Unlike many other
markets subject to emerging competition, in which the incumbents and
competitors have responded
by engaging in "price wars," however, it appears that both the cable
operators and their LEC
competitors initially have limited their use of price discounts to win
new subscribers or to keep
current subscribers, except in Dover and Omaha. Incumbent cable systems
in Chamblee, Clearwater,
Richardson, and Riverside appear to be limiting price reductions by
discounting only for a short
period of time, to only those customers who can switch to a competing
service, or only if additional
services are taken.

     232. The incumbent operators in Dover, Chamblee, Columbus, and
Clearwater have
already petitioned for relief from current cable rate regulations on the
ground that they face effective
competition. In Dover and Columbus, the incumbents' petitions have been
granted. We expect
incumbents and entrants to compete differently where these petitions are
granted by the Commission.
Since the current rate regulations under certain circumstances prohibit
cable operators from
providing selective rate discounting, a deregulated cable operator may be
more inclined to make
such changes to maintain its subscriber base in the market.

     233. We will continue to monitor the extent of competition as
incumbent operators
compete with new cable and operators and other MVPDs to gain
subscribership. We believe that
implementation of the 1996 Act together with technological improvements
(e.g., digital technology
and enlarged channel capacity) could make new entrants more effective
competitors. Such
competition in the marketplace is just emerging, however, making it
impossible for us to predict the
extent to which competition will develop over time and constrain cable
systems' exercise of market
power.

VI.   ADMINISTRATIVE MATTERS

     234. This 1996 Report is issued pursuant to authority contained in
Sections 4(i), 4(j), 403,
and 628(g) of the Communications Act of 1934, as amended, 47 U.S.C.
154(i), 154(j), 403, and
548(g).

     235. It is ORDERED that the Secretary shall send copies of this 1996
Report to the
appropriate committees and subcommittees of the United States House of
Representatives and the
United States Senate.

     236. It is FURTHER ORDERED that the proceeding in CS Docket No. 96-
133 IS
TERMINATED.


              FEDERAL COMMUNICATIONS COMMISSION




                  William F. Caton
                  Acting Secretary
                           APPENDIX A

                       List of Commenters

Comments

Ameritech New Media, Inc.
Bartholdi Cable Company, Inc.
Bell Atlantic
BellSouth Corporation and BellSouth Telecommunications, Inc.
CellularVision USA, Inc.
DIRECTV, Inc.
General Instrument Corporation
Home Box Office
National Cable Television Association, Inc.
National Rural Telecommunications Cooperative
OpTel, Inc.
Pay-Per-View Network, Inc. d/b/a Viewer's Choice
Primestar Partners L.P.
Residential Communications Network, Inc.
Satellite Business and Communications Association of America
SBC Communications, Inc.
TelQuest Ventures, L.L.C.
The WB Television Network
Time Warner Cable
ValueVision International, Inc.
Wireless Cable Association International, Inc.

Reply Comments

Ameritech New Media, Inc.
Association of Maximum Service Television, Inc.
Bartholdi Cable Company, Inc.
Circuit City Stores, Inc.
ESPN, Inc.
GTE Service Corporation
Lifetime Television
Multi-Channel TV Cable Company, d/b/a Adelphia Cable Communications
National Cable Television Association, Inc.
National Rural Telecommunications Cooperative
NBC Television Affiliates Association, CBS Television Affiliates
Association and
     ABC Television Affiliates Association
OpTel, Inc.
Primestar Partners L.P.
Scripps Howard Cable TV Company
Superstar Satellite Entertainment
Tele-Communications, Inc.
TELE-TV
United States Telephone Association
U S WEST, Inc.
Viacom, Inc.
APPENDIX B

TABLE 1
Cable Television Industry Growth: 1990 - 1995
(in millions)




U.S. Television
Households ("TH")

Homes Passed
("HP")

Basic Cable
Subscribers ("Subs")




Year

Year-End
Total
Change
From
Previous
Year

Year-End
Total
Change
From
Previous
Year

Year-End
Total
Change
From
Previous
Year

National
Saturation
(HP/TH)
TV
Households
Subscribing
(Subs/TH)
U.S.
Penetration
(Subs/HP)




1990

93.1
1.1%

86
3.9%

51.7
4.9%

92.4%
55.5%
60.1%


1991

    92.1 (*)
-1.1%

88.4
2.8%

53.4
3.3%

96.0%
58.0%
60.4%


1992
93.1
1.1%

89.7
1.5%

55.2
3.4%

96.3%
59.3%
61.5%


1993

94.2
1.2%

90.6
1.0%

57.2
3.6%

96.2%
60.7%
63.1%


1994

95.4
1.3%

91.6
1.1%

59.7
4.4%

96.0%
62.6%
65.2%


1995

95.9
0.5%

92.7
1.2%
62.1
4.0%

96.7%
64.8%
67.0%


(*)     Revised penetration figure based on 1990 Census

Sources:
     U.S. Television Households - A.C. Nielsen Co. as of January of the
following year. Taken
     from Veronis, Suhler & Associates, Subscribers to Subscription Video
Services, The
     Veronis, Suhler & Associates Communications Industry Forecast,
August 1996, at 128.
     Homes Passed and Basic Cable Subscribers - 1990 to 1994 - Paul Kagan
Assoc., Inc.,
     History of Cable and Pay-TV Subscribers and Revenues, Cable TV
Investor, June 30, 1995,
     at 5; - 1995 - Paul Kagan Assoc., Inc., Pay TV Subscriber History,
The Cable TV Financial
     Databook, July 1995, at 8.
                              TABLE 2
                Premium Cable Services: 1990 - 1995
                            (in millions)



Premium Cable Service
Subscribers

Premium Units


Year

Year-End
Total
Change From
Previous Year

Year-End
Total
Change From
Previous Year




1990

23.9
1.3%

41.5
1.0%


1991

24
0.4%

43.1
3.9%


1992
24.7
2.9%

44.4
3.0%


1993

26.4
6.9%

46.0
3.6%


1994

28.1
6.4%

51.1
11.1%


1995

N/A


54.2
6.1%



Sources:
     Premium Cable Service Subscribers - Paul Kagan Assoc., Inc., History
of Cable and Pay-TV
     Subscribers and Revenues, Cable TV Investor, June 30, 1995, at 5.
     Premium Units - Paul Kagan Assoc., Inc., Pay TV Subscriber History,
The Cable TV
     Financial Databook, July 1996, at 8. Premium Units refers to the
number of premium
     services subscribed to by a home, whereas Premium Cable Services
Subscribers refers to the
          total number of homes subscribing to one or more premium
services.
                              TABLE 3
           Channel Capacity of Cable Systems: 1994 - 1995



1994*

1995*

94-95 Change


Channel Capacity

Number of
Systems
Percent of
Systems

Number of
Systems
Percent of
Systems




54 and over

1,435
14.3%

1,558
15.6%

8.57%


30 to 53

6,376
63.7%
6,376
63.8%

0.00%


20 to 29

1,167
11.7%

1,104
11.0%

-5.40%


13 to 19

356
3.6%

353
3.5%

-0.84%


6 to 12

653
6.5%

588
5.9%

-9.95%


5 or less

17
0.2%

14
0.1%

-17.65%


Not available

1,212
1,133




Total

11,216


11,126




Systems with capacities of
30 or more channels

7,811
78.08%

7,934
79.40%

1.57%


Systems with capacities of
fewer than 30 channels
Channe

2,193
21.92%

2,059
20.60%

-6.11%
*    Figures are as of October 1, 1994 and October 1, 1995.   "Percentage
of Systems" calculation excludes "not
     available" data.

Sources:
     1994 - Warren Publishing, Inc., Channel Capacity of Existing Cable
Systems, Television &
     Cable Factbook: Cable Volume No. 63, 1995 Edition, at I-77.
     1995 - Warren Publishing, Inc., Channel Capacity of Existing Cable
Systems, Television &
     Cable Factbook: Services Volume No. 64, 1996 Edition, at I-81.
                    TABLE 4
Channel Capacity for Subscribers: 1994 - 1995
                (in millions)




                    1994*

                    1995*

                 94-95 Change


               Channel Capacity

                  Subscribers
                 Percent of
                 Subscribers

                  Subscribers
                 Percent of
                 Subscribers




                 54 and over

                    23.02
                    41.5%

                    27.69
                    47.91%

                    20.29%


                   30 to 53

                    30.75
                    55.4%
   28.56
   49.41%

   -7.12%


  20 to 29

    1.37
    2.5%

    1.20
   2.08%

  -12.41%


  13 to 19

    .11
    0.2%

    .13
   0.22%

   18.18%


  6 to 12

    .24
   0.04%

    .22
   0.38%

   -8.33%


 5 or less

    .00
    0.0%

    .00
   0.00%

   0.00%


Not available

    .87
                              1.50




                             Total

                             56.36


                             59.29




                   Systems with capacities of
                      30 or more channels

                             53.77
                             96.9%

                             56.25
                             97.32%

                             4.61%


                   Systems with capacities of
                     fewer than 30 channels

                              1.72
                              3.1%

                              1.55
                             2.68%

                             -9.88%


* Figures are as of October 1, 1994 and October 1, 1995.
Sources:
     1994 - Warren Publishing, Inc., Channel Capacity of Existing Cable
Systems, Television &
     Cable Factbook: Cable Volume No. 63, 1995 Edition, at I-77.
     1995 - Warren Publishing, Inc., Channel Capacity of Existing Cable
Systems, Television &
          Cable Factbook: Services Volume No. 64, 1996 Edition, at I-81.
               TABLE 5
Growth By Network Type: 1994 - 1995




               1994

               1995

           94-95 Change


           Network Type

            Number of
             Networks
           Percent of
             Networks

            Number of
             Networks
           Percent of
             Networks

           In Number of
             Networks




         Basic/No-Charge

                 94
               73.44%

                102
               74.45%

               8.51%


             Premium

                 20
             15.63%

               21
             15.33%

             5.00%


          Pay Per View

               8
             6.25%

               8
             5.84%

             0.00%


          Combination

               6
             4.69%

               6
             4.38%

             0.00%




             Total

             128


             137


             7.03%


Source:
     National Cable Television Association, National Cable Video Networks
By Type of Service:
     1976 - 1995, Cable Television Developments, Spring 1996, at 6.
                             TABLE 6
       Cable Industry Revenue and Cash Flow: 1993 - 1995




1993

1994

1995




Year-
End
Total
% Change
From
Previous
Year

Year-
End
Total
% Change
From
Previous
Year

Year-
End
Total
% Change
From
Previous
Year
Average Number of Basic
Subscribers (mil.)


56.2
3.5%

58.5
4.1%

60.9
4.1%




Revenue Segments (mil.)
(mil.
Regulated Tiers

$15,169
12.9%

$15,164
0.0%

$16,858
11.1%



Pay Tiers

$4,625
-7.1%

$4,522
-2.2%

$5,063
12.0%
Advertising

$984
15.5%

$1,077
9.5%

$1,281
18.9%



Pay-Per-View

$452
11.9%

$484
7.1%

$813
68.0%



Home Shopping

$113
25.6%

$127
12.4%

$144
13.4%



Miscellaneous +
Installations

$1,123
-12.4%

$1,412
25.7%

$926
-34.4%
Total Revenue (mil.)


$22,466
6.7%

$22,786
1.4%

$25,085
10.1%


Revenue Per Avg. Sub


$399.75
3.2%

$389.50
-2.6%

$411.90
5.8%




Cash Flow   (mil.)


$10,100
4.1%

$9,936
-1.6%

$11,238
13.1%


Cash Flow per Sub
$179.72
0.1%

$169.85
-5.5%

$184.53
8.6%




Cash Flow/Total Revenue


44.9%
-2.6%

43.6%
-2.9%

44.8%
2.8%


Sources:
     1993 and 1994 - Paul Kagan Assoc., Inc., History of Cable and Pay-TV
Subscribers and
     Revenues, Cable TV Investor, June 30, 1995, at 5 and Paul Kagan
Assoc., Inc., Estimated
     Capital Flows In Cable TV, The Cable TV Financial Databook, July
1995, at 92.
     1995 - Paul Kagan Assoc., Inc., Paul Kagan's 10-Year Cable TV
Industry Projections, The
     Cable TV Financial Databook, July 1996, at 10-11; Paul Kagan
Assoc., Inc., Pay TV
     Subscriber History, The Cable TV Financial Databook, July 1995, at
8; and Paul Kagan
     Assoc., Inc., Estimated Capital Flows In Cable TV, The Cable TV
Financial Databook, July
          1996, at 115.
                      TABLES 7A, 7B, 7C, and 7D
Annual Cable Industry Revenue, Cash Flow, and Subscriber Informtion
                            1992 - 1995

    The following pages contain tables detailing the data and the
calculations used in the Commission's
estimates of the cable industry's annual revenue and cash flow.

    To calculate the industry-wide estimates of revenue, we first
calculate an average revenue per
subscriber figure for each year by dividing the total revenue of the
companies in the group by the total
average subscribers of these companies for that year. Second, multiply
this average revenue per subscriber
figure by an estimate of the industry's average subscribership for the
year. The same methodology was
followed to calculate the industry-wide estimates of cash flow.

    The estimates differ from those released in the 1995 Report, due in
part to the deletion this year
of subscribers attributable to partially held and foreign subsidiaries
and in part to the Commission having
been able to collect additional data since last year's report which
allows for more accurate estimates.

Sources:

     Unless otherwise noted, the data used in these tables came from the
companies' public filings with
     the Securities and Exchange Commission, their press releases, or
discussions with company
     personnel. Some of the data taken from these sources have been
adjusted to take into account
     acquisitions which occurred during each year. These adjustments are
described in the notes for
     each table. Due to lack of data, adjustments have not been made for
all acquisitions.
     The year-end industry subscriber estimates for 1992 to 1995 were
taken from Table 1 of this
     Appendix

General Notes:

     Unless otherwise noted, all "Year-End Subscribers" numbers are as of
December 31 of the year in
     question. All "Average Subscribers", "Cable Revenue", and "Cable
Cash Flow" numbers are for the
     fiscal year ending December 31 of the year in question.
     Unless otherwise noted, all data are for the companies'
consolidated, domestic cable operations.
     Some data have been adjusted to remove subscribers, revenue, and
cash flow from other sources
     (e.g. satellite operations.)
     Each company's "Average Subscribers" figure came from one of the
three following sources: a
     company reported figure, an average of quarterly subscribership
information, the mid-point of two
     year-end subscriber numbers.
      In each of the tables, the company referred to as "Enstar
Partnerships" represents the combined
     results of ten separate partnerships associated with Falcon Holding
Group. The partnerships are:
     Enstar Income Growth Program Five-A, Enstar Income Growth Program
Five-B, Enstar Income
          Growth Program Six-A, Enstar Income Growth Program Six-B,
Enstar Income Program 1984-1,
     Enstar Income Program II-1, Enstar Income Program II-2, Enstar IV-1,
Enstar IV-2,
     Enstar IV-3.
      In each of the tables, the company referred to as "Jones
Partnerships" represents the combined
     results of 21 separate partnerships associated with Jones
Intercable. The partnerships are: Cable
     TV Fund 11-A Ltd, Cable TV Fund 11-B Ltd, Cable TV Fund 11-C Ltd,
Cable TV Fund 11-D Ltd,
     Cable TV Fund 12-A Ltd, Cable TV Fund 12-B Ltd, Cable TV Fund 12-C
Ltd, Cable TV Fund 12-
     D Ltd, Cable TV Fund 14-A Ltd, Cable TV Fund 14-B Ltd, Cable TV Fund
15-A Ltd, IDS/Jones
     Growth Partners 87-A Ltd, IDS/Jones Growth Partners 89-B Ltd,
IDS/Jones Growth Partners II
     LP, Jones Cable Income Fund 1-A Ltd, Jones Cable Income Fund 1-B
Ltd, Jones Cable Income
     Fund 1-C Ltd, Jones Growth Partners LP, Jones Growth Partners II LP,
Jones Intercable Investors
     LP, Jones Spacelink Income Growth Fund 1-A.
      In the tables for 1994 and 1995, the company referred to as
"Northland Partnerships" represents
     the combined results of 5 separate partnerships associated with
Northland Communications
     Corporation. The partnerships are: Northland Cable Properties Four
LTD Partnership, Northland
     Cable Properties Five LTD Partnership, Northland Cable Properties
Six LTD Partnership,
     Northland Cable Properties Seven LTD Partnership, and Northland
Cable Properties Eight LTD
          Partnership.
                             TABLE 7A
     1992 Cable Industry Revenue and Cash Flow Calculations


Company
Year-End
Subscribers
Average
Subscribers
Annual
Cable
Revenue
(mil.)
Monthly
Cable
Revenue Per
Subscriber
Annual
Cable Cash
Flow
(mil.)
Annual
Cable Cash
Flow Per
Subscriber
Average
Cash Flow
Margin


TCI Communications, Inc.
9,900,000
9,811,500
$3,871.834
$32.89
$1,772.252
$180.63
45.8%


Time Warner
5,554,000
5,463,250
$2,091.000
$31.89
$977.000
$178.83
46.7%


Continental Cablevision
2,730,134
2,697,887
$1,113.475
$34.39
$488.330
$181.00
43.9%


Comcast
2,583,000
2,528,500
$1,023.493
$33.73
$500.513
$197.95
48.9%


Cox Communications
1,722,007
1,699,888
$652.100
$31.97
$275.100
$161.83
42.2%


Cablevision Systems
1,262,000
1,317,000
$543.403
$34.38
$262.365
$199.21
48.3%


Times Mirror
1,182,581
1,148,791
$423.130
$30.69
$164.984
$143.62
39.0%


Viacom
1,116,300
1,101,550
$411.087
$31.10
$190.542
$172.98
46.4%
Century Communications
907,000
905,800
$294.814
$27.12
$171.975
$189.86
58.3%


Cablevision Industries
904,648
894,912
$359.803
$33.50
$173.790
$194.20
48.3%


Adelphia Communications
814,688
803,685
$296.568
$30.75
$169.905
$211.41
57.3%


Jones Partnerships
808,679
794,174
$342.103
$35.90
$114.625
$144.33
33.5%


Providence Journal
722,000
512,500
$199.680
$32.47
$77.981
$152.16
39.1%


Telecable
690,000
675,800
$268.400
$33.10
$116.393
$172.23
43.4%


EW Scripps
673,100
659,375
$238.118
$30.09
$101.165
$153.43
42.5%


KBLCOM
577,000
568,000
$235.258
$34.52
$95.016
$167.28
40.4%


Lenfest Communications
477,130
458,588
$166.081
$30.18
$83.449
$181.97
50.2%


Washington Post Co.
463,000
457,090
$174.098
$31.74
$77.535
$169.63
44.5%


TCA Cable TV, Inc.
442,356
434,860
$141.887
$27.19
$70.399
$161.89
49.6%


Multimedia Inc (Gannett)
410,000
387,500
$144.383
$31.05
$73.079
$188.59
50.6%


Falcon Holding Group
332,207
329,664
$128.336
$32.44
$74.072
$224.69
57.7%


Jones Intercable, Inc.
304,800
281,800
$82.033
$24.26
$34.150
$121.19
41.6%


C-TEC Corp
217,382
212,369
$85.299
$33.47
$40.937
$192.76
48.0%


Charter Comm. SE, LP
214,488
210,551
$69.261
$27.41
$35.658
$169.36
51.5%
Garden State Cablevision
187,496
185,487
$84.877
$38.13
$48.083
$259.23
56.7%


Bresnan Communications
157,553
152,877
$46.347
$25.26
$21.122
$138.16
45.6%


Summit Communications
150,400
153,350
$59.600
$32.39
$35.800
$233.45
60.1%


Marcus Cable
138,274
110,006
$38.310
$29.02
$19.982
$181.64
52.2%


Insight Communications
133,816
129,758
$47.023
$30.20
$20.470
$157.76
43.5%


Falcon Cable Systems
131,228
130,765
$50.616
$32.26
$25.556
$195.43
50.5%


Rifkin Acquisition Partners
108,991
105,762
$36.935
$29.10
$17.911
$169.35
48.5%


Enstar Partnerships
82,199
81,688
$27.810
$28.37
$11.740
$143.72
42.2%


Galaxy Telecom
78,460
77,450
$25.919
$27.89
$10.116
$130.61
39.0%


Falcon Classic Cable
43,868
41,911
$14.496
$28.82
$5.822
$138.91
40.2%


Mercom, Inc.
34,118
33,905
$11.986
$29.46
$4.790
$141.28
40.0%
Total For Group
36,254,903
35,557,989
$13,799.563
$32.34
$6,362.606
$178.94
46.1%




Total For Industry
55,200,000
54,300,000
$21,073.078
$32.34
$9,716.227
$178.94
46.1%
Notes:

- TCI and Comcast -
           On December 2, 1992, Storer Communications, Inc., which had
been jointly owned
           by TCI (50%) and Comcast (50%), was consolidated into those two
companies.
           Storer's revenue ($595.668 million) and cash flow ($288.503
million) for 1992 up
           to that date was split and added into TCI and Comcast's totals.
TCI and Comcast's
           average subscribership for 1992 was calculated assuming each
had half of Storer's
           1991, year-end subscribership (1,646,000) for the whole year.

- Continental -
          When Continental reports its basic subscribership, it includes,
on an equity basis,
          subscribers from its partially owned affiliates. Those
subscribers were removed from
          the 1991 (118,361) and 1992 (125,866) year-end subscriber
numbers. Therefore, the
          1992 average subscribers number has been adjusted as well

- Century -    Revenue and cash flow are for the 12 months ending
November 30, 1992. Its year-
               end subscriber number is as of May 31, 1992.

- Adelphia -   Adelphia's average subscribers, revenue, and cash flow are
for the 12 months ending
               December 31, 1992. Its year-end subscriber number is as
of that date.

- Jones Partnerships, Garden State, Enstar Partnerships -
          Year-end 1991 and 1992 average subscribership figures were
estimated using the
          growth exhibited from 1992 to 1995.

- TCA -   TCA's average subscribers, revenue, and cash flow are for the
12 months ending
          January 31, 1993. Its year-end subscriber number is as of that
date.
                            TABLE 7B
     1993 Cable Industry Revenue and Cash Flow Calculations


Company
Year-End
Subscribers
Average
Subscribers
Annual
Cable
Revenue
(mil.)
Monthly
Cable
Revenue Per
Subscriber
Annual
Cable Cash
Flow
(mil.)
Annual
Cable Cash
Flow Per
Subscriber
Average
Cash Flow
Margin


TCI Communications, Inc.
10,285,000
10,092,500
$4,153.000
$34.29
$1,858.000
$184.10
44.7%


Time Warner
5,756,000
5,683,500
$2,208.000
$32.37
$1,035.000
$182.11
46.9%


Continental Cablevision
2,763,229
2,746,682
$1,175.408
$35.66
$527.592
$192.08
44.9%


Comcast
2,648,000
2,615,500
$1,092.746
$34.82
$551.971
$211.04
50.5%


Cox Communications
1,784,337
1,753,172
$692.779
$32.93
$270.059
$154.04
39.0%


Cablevision Systems
1,379,000
1,337,138
$633.207
$39.46
$281.352
$210.41
44.4%


Times Mirror
1,208,398
1,195,490
$470.410
$32.79
$198.123
$165.73
42.1%


Viacom
1,094,100
1,105,200
$416.000
$31.37
$181.696
$164.40
43.7%
Cablevision Industries
957,508
942,377
$391.710
$34.64
$191.600
$203.32
48.9%


Century Communications
934,000
932,000
$311.151
$27.82
$181.455
$194.69
58.3%


Adelphia Communications
868,195
844,219
$318.293
$31.42
$177.664
$210.45
55.8%


Jones Partnerships
850,409
829,544
$354.462
$35.61
$115.314
$139.01
32.5%


Providence Journal
738,000
730,000
$281.590
$32.14
$114.110
$156.32
40.5%


Telecable
717,000
703,500
$286.680
$33.96
$123.832
$176.02
43.2%


EW Scripps
701,000
687,950
$251.792
$30.50
$105.260
$153.01
41.8%


KBLCOM
605,000
591,000
$244.067
$34.41
$95.742
$162.00
39.2%


Lenfest Communications
550,703
513,917
$197.630
$32.05
$100.476
$195.51
50.8%


Intermedia Partners IV
493,000
452,050
$171.800
$31.67
$70.800
$156.62
41.2%


Washington Post Co.
482,000
472,500
$185.721
$32.76
$81.917
$173.37
44.1%


TCA Cable TV, Inc.
457,061
451,761
$154.920
$28.58
$77.670
$171.93
50.1%


Multimedia Inc (Gannett)
417,000
413,500
$164.598
$33.17
$85.462
$206.68
51.9%


Falcon Holding Group
329,902
331,055
$137.769
$34.68
$79.444
$239.97
57.7%


Jones Intercable, Inc.
313,800
309,300
$99.438
$26.79
$35.097
$113.47
35.3%


Charter Comm. SE, LP
226,110
220,299
$77.013
$29.13
$39.340
$178.58
51.1%
C-TEC Corp
224,849
221,116
$93.550
$35.26
$44.328
$200.47
47.4%


Garden State Cablevision
192,222
189,859
$90.824
$39.86
$52.810
$278.15
58.1%


Bresnan Communications
174,009
165,781
$51.902
$26.09
$22.925
$138.28
44.2%


Summit Communications
157,000
153,700
$61.229
$33.20
$37.400
$243.33
61.1%


Insight Communications
142,317
138,067
$51.008
$30.79
$24.455
$177.12
47.9%


Marcus Cable
141,323
139,799
$52.307
$31.18
$26.841
$192.00
51.3%


Falcon Cable Systems
129,740
130,484
$53.743
$34.32
$26.585
$203.74
49.5%


Rifkin Acquisition Partners
115,793
112,392
$41.470
$30.75
$20.015
$178.08
48.3%


Helicon Group
82,184
82,184
$29.448
$29.86
$12.633
$153.72
42.9%


Enstar Partnerships
81,880
82,040
$30.026
$30.50
$12.752
$155.44
42.5%


Galaxy Telecom
77,618
78,039
$27.285
$29.14
$11.305
$144.86
41.4%
Falcon Classic Cable
45,533
44,701
$16.785
$31.29
$6.169
$138.01
36.8%


Mercom, Inc.
34,714
34,416
$12.606
$30.52
$5.116
$148.65
40.6%




Total For Group
38,157,934
37,526,727
$15,082.367
$33.49
$6,882.310
$183.40
45.6%




Total For Industry
57,200,000
56,200,000
$22,587.343
$33.49
$10,306.943
$183.40
45.6%


Percent Change From
Previous Year
3.62%
3.50%
7.19%
3.56%
6.08%
2.49%
-1.03%
Notes:

- Continental -     When Continental reports its basic subscribership, it
includes, on an equity
                    basis, subscribers from its partially owned
affiliates. Those subscribers were
                    removed from the 1993 (131,771) year-end subscriber
number. Therefore,
                    the 1993 average subscribers number has been adjusted
as well.
                    Continental's revenue results were adjusted for the
removal of its satellite
                    operations. This reduced its revenue by $1.755
million.

- Cox -        Cox's revenue and cash flow were adjusted for the removal
of its satellite
               operations. This reduced its revenue by $15.195 million
and increased its
               cash flow by $1.533 million.

- Century -          Revenue and cash flow are for the 12 months ending
November 30, 1993.   Its
                     year-end subscriber number is as of May 31, 1993.

- Adelphia -        Adelphia's average subscribers, revenue, and cash
flow are for the 12 months
                    ending December 31, 1993. Its year-end subscriber
number is as of that date.

- TCA -         TCA's average subscribers, revenue, and cash flow are for
the 12 months
               ending January 31, 1994.   Its year-end subscriber number
is as of that date.
                             TABLE 7C
     1994 Cable Industry Revenue and Cash Flow Calculations


Company
Year-End
Subscribers
Average
Subscribers
Annual
Cable
Revenue
(mil.)
Monthly Cable
Revenue Per
Subscriber
Annual
Cable Cash
Flow
(mil.)
Annual
Cable Cash
Flow Per
Subscriber
Average
Cash Flow
Margin


TCI Communications, Inc.
11,121,000
10,703,000
$4,288.000
$33.39
$1,789.000
$167.15
41.7%


Time Warner
6,000,000
5,864,000
$2,242.000
$31.86
$989.000
$168.66
44.1%


Comcast
3,307,000
3,252,500
$1,328.355
$34.03
$630.968
$193.99
47.5%


Continental Cablevision
2,938,550
2,850,890
$1,191.948
$34.84
$526.993
$184.85
44.2%


Cox Communications
1,851,726
1,818,032
$714.208
$32.74
$269.357
$148.16
37.7%


Cablevision Systems
1,768,000
1,632,650
$754.393
$38.51
$334.248
$204.73
44.3%


Times Mirror
1,274,908
1,241,653
$497.690
$33.40
$205.074
$165.16
41.2%


Viacom
1,139,100
1,123,275
$406.200
$30.14
$155.200
$138.17
38.2%
Cablevision Industries
1,001,927
982,982
$402.863
$34.15
$189.519
$192.80
47.0%


Adelphia Communications
957,954
934,401
$347.606
$31.00
$184.389
$197.33
53.0%


Century Communications
945,000
955,000
$321.681
$28.07
$174.474
$182.70
54.2%


Jones Partnerships
907,323
878,866
$364.461
$34.56
$108.995
$124.02
29.9%


Providence Journal
771,000
754,500
$284.990
$31.48
$111.973
$148.41
39.3%


Telecable
751,000
734,000
$302.000
$34.29
$131.000
$178.47
43.4%


EW Scripps
739,200
722,575
$255.356
$29.45
$100.128
$138.57
39.2%


KBLCOM
690,000
647,500
$255.356
$32.86
$99.688
$153.96
39.0%


Lenfest Communications
577,377
564,040
$212.800
$31.44
$105.711
$187.42
49.7%


Intermedia Partners IV
528,000
509,817
$190.200
$31.09
$74.000
$145.15
38.9%


Washington Post Co.
498,000
490,000
$182.140
$30.98
$80.525
$164.34
44.2%


TCA Cable TV, Inc.
468,662
462,265
$166.326
$29.98
$81.852
$177.07
49.2%


Multimedia Inc (Gannett)
432,000
425,000
$165.406
$32.43
$84.124
$197.94
50.9%


Falcon Holding Group
340,681
335,292
$138.229
$34.36
$79.518
$237.16
57.5%


Jones Intercable, Inc.
309,300
311,550
$103.335
$27.64
$40.019
$128.45
38.7%


Charter Comm. SE, LP
242,124
234,117
$82.854
$29.49
$39.632
$169.28
47.8%


C TEC Corp
238,201
231,525
$95.078
$34.22
$44.583
$192.56
46.9%


Marcus Cable
222,735
182,512
$63.629
$29.05
$31.129
$170.56
48.9%


Bresnan Communications
202,636
188,323
$61.380
$27.16
$25.783
$136.91
42.0%


Garden State Cablevision
195,966
194,094
$92.514
$39.72
$52.265
$269.28
56.5%


Summit Communications
165,000
161,000
$62.873
$32.54
$37.400
$232.30
59.5%


Insight Communications
153,523
148,537
$52.820
$29.63
$25.645
$172.65
48.6%


Falcon Cable Systems
133,249
131,495
$52.896
$33.52
$24.639
$187.38
46.6%


Rifkin Acquisition Partners
124,059
119,926
$44.889
$31.19
$20.879
$174.10
46.5%


Northland Partnerships
95,355
87,500
$28.932
$27.55
$12.567
$143.62
43.4%


Helicon Group
84,573
84,573
$31.664
$31.20
$15.281
$180.68
48.3%


Enstar Partnerships
84,218
83,049
$30.107
$30.21
$12.130
$146.06
40.3%
Galaxy Telecom
80,287
78,953
$27.285
$28.80
$10.237
$129.66
37.5%


Falcon Classic Cable
46,912
46,223
$17.382
$31.34
$7.885
$170.59
45.4%


Cencom Inc. Cab. Prtnrs II
43,000
41,800
$16.258
$32.41
$6.698
$160.25
41.2%


Mercom, Inc.
37,324
36,019
$12.927
$29.91
$5.052
$140.26
39.1%




Total For Group
41,466,870
40,243,430
$15,889.031
$32.90
$6,917.560
$171.89
43.5%




Total For Industry
59,700,000
58,450,000
$23,077.403
$32.90
$10,047.141
$171.89
43.5%


Percent Change From
Previous Year
4.37%
4.00%
2.17%
-1.76%
-2.52%
-6.27%
-4.59%
Notes:

- TCI -
     TCI's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $30 million and its cash flow by $12 million.

- Comcast -
     In December, 1994, Comcast acquired the cable holdings of Maclean
Hunter. Comcast's
     revenue and cash flow assume the acquisition had occurred at the
beginning of the year.
     Comcast's average subscriber number was calculated assuming that it
had controlled the
     Maclean Hunter subscribers (550,000) for the entire year.

-Continental -
     When Continental reports its basic subscribership, it includes, on
an equity basis, subscribers
     from its partially owned affiliates. Those subscribers were removed
from the 1994 (142,335)
     year-end subscriber number. Therefore, the 1994 average subscribers
number has been
     adjust as well. Continental's revenue and cash flow were adjusted
for the removal of its
     satellite operations. This reduced its revenue by $6.029 million
and increased its cash flow
     by $1.9 million.

- Cox -
     Cox's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $22.1 million and increased its cash flow by
$0.831 million.

- Century -
     Revenue and cash flow are for the 12 months ending November 30,
1994. Its year-end
     subscriber number is as of May 31, 1994.

- Adelphia -
     Adelphia's average subscribers, revenue, and cash flow are for the
12 months ending
     December 31, 1994. Its year-end subscriber number is as of that
date.

- TCA -
     TCA's average subscribers, revenue, and cash flow are for the 12
months ending January 31,
     1995. Its year-end subscriber number is as of that date.
                             TABLE 7D
     1995 Cable Industry Revenue and Cash Flow Calculations


Company
Year-End
Subscribers
Average
Subscribers
Annual
Cable
Revenue
(mil.)
Monthly
Cable
Revenue Per
Subscriber
Annual
Cable Cash
Flow (mil.)
Annual
Cable Cash
Flow Per
Subscriber
Average
Cash Flow
Margin


TCI Communications, Inc.
12,494,000
12,183,000
$4,936.000
$33.76
$2,081.800
$170.88
42.2%


Time Warner
9,769,000
9,545,500
$3,743.440
$32.68
$1,549.000
$162.28
41.4%


Continental Cablevision
4,066,795
4,002,805
$1,695.263
$35.29
$705.272
$176.19
41.6%


Comcast
3,407,000
3,357,000
$1,454.932
$36.12
$718.455
$214.02
49.4%


Cox Communications
3,248,759
3,215,878
$1,287.016
$33.35
$510.998
$158.90
39.7%


Cablevision Systems
2,061,200
1,904,425
$905.155
$39.61
$392.416
$206.05
43.4%


Viacom
1,179,500
1,165,000
$444.400
$31.79
$182.900
$157.00
41.2%


Marcus Cable
1,154,718
1,110,352
$325.414
$24.42
$173.597
$156.34
53.3%
Century Communications
1,100,000
1,046,000
$349.641
$27.86
$177.210
$169.42
50.7%


Cablevision Industries
1,041,768
1,028,942
$423.212
$34.28
$203.133
$197.42
48.0%


Adelphia Communications
1,002,760
993,284
$390.413
$32.75
$204.145
$205.53
52.3%


Jones Partnerships
902,345
904,834
$391.772
$36.08
$122.852
$135.77
31.4%


EW Scripps
766,400
756,850
$279.482
$30.77
$118.074
$156.01
42.2%


Lenfest Communications
596,366
586,872
$232.155
$32.97
$115.361
$196.57
49.7%


TCA Cable TV, Inc.
574,473
529,512
$200.867
$31.61
$99.982
$188.82
49.8%


Intermedia Partners IV
554,000
539,100
$211.800
$32.74
$87.000
$161.38
41.1%


Media One (US West)
527,000
513,500
$215.000
$34.89
$100.000
$194.74
46.5%


Washington Post Co.
518,000
508,000
$194.142
$31.85
$81.988
$161.39
42.2%


Multimedia Inc (Gannett)
458,000
452,250
$174.941
$32.24
$89.703
$198.35
51.3%


Jones Intercable, Inc.
439,400
374,350
$135.350
$30.13
$49.428
$132.04
36.5%


Falcon Holding Group
419,288
379,985
$142.608
$31.27
$95.442
$251.17
66.9%


C TEC Corp
333,920
286,061
$127.079
$37.02
$57.858
$202.26
45.5%


Charter Comm. SE, LP
249,106
245,615
$88.624
$30.07
$42.842
$174.43
48.3%


Bresnan Communications
209,459
206,048
$70.389
$28.47
$28.555
$138.58
40.6%


Garden State Cablevision
200,086
198,026
$92.815
$39.06
$51.176
$258.43
55.1%


Insight Communications
163,923
159,293
$57.108
$29.88
$28.115
$176.50
49.2%


Galaxy Telecom
162,400
161,663
$57.459
$29.62
$22.800
$141.03
39.7%


Falcon Cable Systems
135,475
134,362
$52.935
$32.83
$23.915
$177.99
45.2%


Rifkin Acquisition Partners
132,271
128,165
$50.208
$32.65
$23.429
$182.80
46.7%


Northland Partnerships
102,766
99,061
$35.181
$29.60
$14.579
$147.17
41.4%


Helicon Group
87,632
86,615
$35.225
$33.89
$17.141
$197.90
48.7%


Enstar Partnerships
85,342
84,780
$31.405
$30.87
$13.022
$153.60
41.5%


Falcon Classic Cable
47,957
47,435
$18.363
$32.26
$8.263
$174.20
45.0%


Cencom Inc. Cab.   Prtnrs II
44,500
43,750
$17.046
$32.47
$7.245
$165.59
42.5%


Mercom, Inc.
38,853
38,089
$13.939
$30.50
$5.191
$136.29
37.2%
Total For Group
48,274,462
47,016,397
$18,880.779
$33.46
$8,202.886
$174.47
43.4%




Total For Industry
62,100,000
60,900,000
$24,456.137
$33.46
$10,625.139
$174.47
43.4%


Percent Change From
Previous Year
4.02%
4.19%
5.97%
1.71%
5.75%
1.50%
-0.21%
Notes:

- TCI -
     On January 26, 1995, TCI acquired Telecable. TCI's results have
been adjusted as though
     the transaction took place on January 1, 1995. This increased TCI's
revenue by $25 million
     and its cash flow by $10.8 million (calculated by applying
Telecable's 1994 cash flow
     margin to the $25 million.) TCI's average subscribership was
calculated assuming that this
     acquisition occurred at the beginning of the year.

     TCI's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $207 million and its cash flow by $10
million. TCI's cash flow was
     increased by $38 million to account for special strategic
initiatives and a customer retention
     program.

- Time Warner -
     During 1995, Time Warner (TW) completed four acquisitions. TW's
revenue, cash flow,
     and average subscribers were all adjusted as though these
acquisitions had taken place at the
     beginning of the year. On April 1, 1995, TW entered into a
partnership with
     Advance/Newhouse which had 1.5 million subscribers at the time of
the deal. This added
     $137 million to TW's 1995 revenue and $46 million to its 1995 cash
flow. On May 2, 1995,
     TW acquired Summit Communications which had 165,000 subscribers at
the end of 1994.
     This added $22 million to TW's 1995 revenue and $11 million to its
cash flow. On July 6,
     1995, TW acquired KBLCOM, a subsidiary of Houston Industries Inc.,
which had 690,000
     subscribers at the end of 1994. This added $139 million to TW's
1995 revenue and $72
     million to its cash flow. On July 6, 1995, TW acquired from Houston
Industries the half of
     Paragon Communications which TW did not already own, which had
967,000 subscribers
     at the end of 1994. This added $179 million to TW's 1995 revenue and
$45 million to its
     cash flow.

- Continental -
     On October 5, 1995, Continental acquired the cable holdings of the
Providence Journal
     Company. In addition, Continental made several other smaller
acquisitions during the year
     (Cablevision of Chicago, Columbia Cable of Michigan, Consolidated
Cablevision of
     California, and N-COM). Continental's data have been adjusted as
though these transactions
     took place at the beginning of the year. This increased
Continental's revenue by $289.919
     million ($221.998 million for Providence and $67.921 million for the
other acquisitions) and
     its cash flow by $104.421 million ($79.107 million for Providence
and $25.314 million for
     the other acquisitions.) Continental's average subscribership was
calculated assuming that
     these acquisitions had occurred at the beginning of the year. This
increased Continental's
     1994 year-end subscriber number by 1,000,265 (771,000 for Providence
and 229,265 for the
     other acquisitions.)

     When Continental reports its basic subscribership, it includes, on
an equity basis, subscribers
     from its partially owned affiliates. Those subscribers were removed
from the 1995 year-end
     subscriber number (123,364). Therefore, the 1994 average
subscribers number has been
     adjusted as well.

     Continental's revenue and cash flow were adjusted for the removal of
its satellite operations.
     This reduced its revenue by $37.048 million and its cash flow by
$4.3 million.

- Cox -
     On February 1, 1995, Cox acquired Times Mirror's cable holdings.
Cox's results have been
     adjusted as though this transaction took place at the beginning of
the year. Cox's revenue and
     cash flow assume the acquisition had occurred at the beginning of
the year. Cox's average
     subscriber number was calculated assuming that it had controlled the
Times Mirror
     subscribers for the entire year.

     Cox's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $41.084 million and increased its cash flow
by $0.598 million.

- Marcus -
     On January 1, 1995, Marcus acquired cable systems from Crown Media,
Inc., which added
     193,300 subscribers to its 1994 year-end subscriber figure. On
November 1, 1995, Marcus
     acquired cable systems from Sammons Communications, Inc. Marcus'
results have been
     adjusted as though this transaction took place at the beginning of
the year. Marcus' revenue
     was increased by $129.32 million ($116.388 million for the first
nine months of the year plus
     one-ninth of that number for October) and its cash flow was
increased by $77.327 million
     ($69.594 million for the first nine months of the year plus one-
ninth of that number for
     October.) Marcus' year-end 1994 subscriber figure was increased by
650,000 subscribers
     (the subscribership of the acquired systems on March 30, 1995.)

- Century -
     Revenue and cash flow data are for the 12 months ending November 30,
1995. Its year-end
     subscriber number is as of May 31, 1995.

- Adelphia -
     Adelphia's average subscribers, revenue, and cash flow are for the
12 months ending
     December 31, 1995. Its year-end subscriber number is as of that
date.

- TCA -
     TCA's average subscribers, revenue, and cash flow are for the 12
months ending January 31,
     1996. Its year-end subscriber number is as of that date.
                         TABLES 8A and 8B
   Quarterly Cable Industry Revenue and Cash Flow Informtion
              1st Quarter 1994 - 2nd Quarter 1996

     These pages contain tables detailing the data and the calculations
used in the Commission's
estimates of the cable industry's annual revenue and cash flow.

     To calculate the industry-wide estimates of revenue, we first
calculate an average revenue
per subscriber figure for each quarter by dividing the total revenue of
the companies in the group by
the total average subscribers of these companies for that quarter.
Second, multiply this average
revenue per subscriber figure by an estimate of the industry's average
subscribership for the quarter.
The same methodology was followed to calculate the industry-wide
estimates of cash flow.

     The data in the tables adheres to the following guidelines:

     Unless otherwise noted, all revenue and cash flow numbers are for
the quarters ending March
     31, June 30, September 30, and December 31 of the year in question.
     Unless otherwise noted, all of the data used in these tables came
from the companies' public
     filings with the Securities and Exchange Commission, their press
releases, or discussions
     with company personnel.
     Some of the data taken from these sources have been adjusted to take
into account
     acquisitions which occurred during the year. Due to lack of data,
adjustments have not been
     made for all acquisitions.
     Whenever possible, each company's end of quarter subscriber data
were used. However,
     when such data were not available on a quarterly bases, they were
estimated using a strait
     line average of year-end subscriber figures.
     Unless otherwise noted, all data are for the companies'
consolidated, domestic cable
     operations. Some data has been adjusted to remove subscribers,
revenue, and cash flow from
     other sources (e.g. satellite operations).
     All company and industry revenue and cash flow numbers are in
millions of dollars. All per
     subscriber revenue and cash flow numbers are in dollars, per
subscriber, per year.
     The two tables are sorted in descending order by the companies'
year-end, 1995
     subscribership.
  The estimates differ from those released in the 1995 Report, due in
part to the deletion this year
of subscribers attributable to partially held and foreign subsidiaries
and in part to the Commission
having been able to collect additional data since last year's report
which allows for more accurate
estimates.
                            Table 8A
Quarterly Revenue for Cable System Operators: 1st Quarter, 1994 - 2nd
Quarter, 1996
                        ($ in millions)




1994



1995


1996


Operator


1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter

1st
Quarter
2nd
Quarter
TCI


$1,060.0
$1,075.0
$1,065.0
$1,088.0

$1,170.0
$1,225.0
$1,253.0
$1,288.0

$1,303.0
$1,406.0


Time Warner Inc


$551.0
$560.0
$552.0
$579.0

$885.3
$930.3
$941.0
$987.0

$1,164.0
$1,191.0


Continental Cable


$293.9
$294.6
$294.9
$308.5
$312.4
$323.5
$332.6
$436.8

$452.1
$460.2


Comcast


$260.6
$267.0
$265.6
$272.0

$347.0
$362.5
$368.5
$376.9

$382.3
$396.0


Cox Communications


$300.0
$302.7
$297.5
$311.9

$305.0
$319.0
$324.6
$338.5

$339.8
$338.1


Cablevision Systems


$168.7
$182.3
$193.6
$209.8

$211.4
$226.1
$230.6
$237.1

$251.8
$263.2


Viacom


$100.7
$103.5
$100.4
$101.6

$106.0
$110.0
$114.0
$114.4

$116.7
$120.0


Marcus Cable


$13.2
$12.8
$17.7
$20.9

$37.0
$38.5
$38.7
$97.0

$102.7
$107.0


Cablevision Industries


$100.0
$101.7
$103.0
$103.7

$103.6
$106.4
$108.7
$110.1
-
-


Adelphia Comm.


$80.1
$84.0
$90.8
$92.7

$94.0
$96.9
$97.1
$102.5

$107.1
$111.0


EW Scripps


$62.4
$63.3
$63.9
$65.8

$67.0
$69.8
$71.1
$71.6

$76.3
$77.2


TCA Cable TV Inc


$39.8
$41.1
$42.1
$43.3

$44.0
$49.1
$52.8
$55.0

$57.6
$69.4
Multimedia Inc


$41.2
$42.0
$40.9
$41.3

$41.9
$43.6
$44.3
$45.2

$47.2
$48.0


Insight Comm.


$13.0
$13.1
$13.2
$13.5

$13.8
$14.3
$14.4
$14.7

$15.3
$15.4




Total for Group
$3,084.8
$3,143.1
$3,140.7
$3,252.0

$3,738.3
$3,914.9
$3,991.4
$4,274.7

$4,416.0
$4,602.5


Total for Industry


$5,789.9
$5,900.8
$5,800.0
$5,867.1

$5,955.4
$6,166.7
$6,278.9
$6,495.7

$6,633.4
$6,777.0


% Change From Prev
Year's Quarter


3.9%
2.9%
1.5%
2.5%

2.9%
4.5%
8.3%
10.7%

11.4%
9.9%
                            Table 8B
Quarterly Cash Flow for Cable System Operators: 1st Quarter, 1994 - 2nd
Quarter, 1996
                        ($ in millions)




1994



1995


1996


Operators


1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter

1st
Quarter
2nd
Quarter
TCI


$450.0
$452.0
$423.0
$476.0

$508.8
$518.0
$526.0
$540.0

$502.0
$549.0


Time Warner Inc


$244.0
$256.0
$242.0
$247.0

$371.3
$370.6
$390.0
$400.0

$480.0
$494.0


Continental Cable


$133.6
$129.2
$128.1
$136.0
$135.8
$137.9
$142.7
$181.5

$187.3
$194.9


Comcast


$127.0
$130.0
$129.0
$131.9

$165.0
$182.6
$182.0
$188.8

$184.3
$200.0


Cox Communications


$121.8
$123.7
$110.0
$118.7

$123.5
$126.6
$127.8
$135.9

$134.3
$134.0


Cablevision Systems


$73.6
$84.3
$89.0
$87.3

$94.4
$91.7
$103.5
$102.7

$102.0
$111.1


Viacom


$40.2
$40.8
$36.5
$37.7

$42.3
$45.0
$47.7
$47.9

$45.6
$47.8


Marcus Cable


$6.5
$5.8
$8.5
$10.4

$18.4
$19.3
$19.1
$47.2

$45.9
$49.8


Cablevision Industries


$47.4
$47.5
$48.2
$46.4

$48.0
$49.7
$52.2
$53.4

-
-


Adelphia Comm.


$42.2
$44.4
$49.0
$48.7

$48.9
$51.5
$50.3
$53.4

$55.8
$58.8


EW Scripps


$24.3
$23.1
$24.3
$25.5

$27.2
$29.0
$29.9
$32.2

$31.4
$33.7


TCA Cable TV Inc


$19.1
$20.2
$20.8
$21.8

$21.8
$24.1
$26.4
$27.6

$28.2
$31.6
Multimedia Inc


$21.3
$21.5
$20.2
$21.2

$20.8
$22.6
$22.7
$23.6

$24.0
$24.1


Insight Comm.


$6.3
$6.2
$6.4
$6.7

$6.7
$7.0
$7.2
$7.2

$7.7
$7.9




Total for Group
$1,357.3
$1,384.7
$1,335.1
$1,415.3

$1,632.9
$1,675.6
$1,727.5
$1,841.4

$1,828.6
$1,936.6


Total for Industry


$2,547.5
$2,599.7
$2,465.5
$2,553.4

$2,601.4
$2,639.4
$2,717.5
$2,798.1

$2,746.8
$2,851.6


% Change From Prev
Year's Quarter


-2.1%
-3.4%
-6.5%
0.6%

2.1%
1.5%
10.2%
9.6%

5.6%
8.0%
Notes:

                               1994

- TCI -
     TCI's revenue was adjusted for the removal of its satellite
operations. This reduced its
     revenue by $6 million in the second quarter, $7 million in the third
quarter, and $17
     million in the fourth quarter.

- Continental -
     Continental's revenue and cash were adjusted for the removal of its
satellite operations.
     This reduced its revenue by $0.421 million in the first quarter,
$0.437 million in the
     second quarter, $1.3 million in the third quarter, and $3.871
million in the fourth quarter.
     Continental's cash flow increased by $0.422 million in the first
quarter, $0.422 million in
     the second quarter, $0.456 million in the third quarter, and $0.6
million in the fourth
     quarter.

- Cox -
     Cox's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $4.3 million in the first quarter, $4.7
million in the second quarter,
     $6 million in the third quarter, and $7.2 million in the fourth
quarter. Cox's cash flow was
     increased by $0.3 million in the second quarter, $0.7 million in the
third quarter, and
     reduced by $0.3 million in the fourth quarter.

- TCA -
     TCA's revenue and cash flow are for the quarters ending April 30,
July 31, and October
     31, 1994, and January 31, 1995.

                               1995

- TCI -
     TCI's revenue was adjusted for the removal of its satellite
operations. This reduced its
     revenue by $24 million in the first quarter, $37 million in the
second quarter, $57 million
     in the third quarter, and $89 million in the fourth quarter.

     On January 26, 1995, TCI acquired Telecable. TCI's results have
been adjusted as though
     the transaction took place on January 1. This increased TCI's first
quarter revenue by $25
     million and its first quarter cash flow by $10.8 million (calculated
by applying Telecable's
     1994 cash flow margin to the $25 million). TCI's average
subscribership was calculated
     assuming that this acquisition occurred at the beginning of the
year.

     TCI's cash flow in the fourth quarter was increased by $38 million
to account for special
     strategic initiatives and a customer retention program.

- Time Warner -
     During 1995, Time Warner (TW) completed four acquisitions (for
details, see the notes
     to        Table 7D.) TW's revenue and cash flow were adjusted as
though these acquisitions
     had taken place at the beginning of the year. TW's revenue was
increased by $307.31
     million in the first quarter and 170.335 in the second quarter of
1995. TW's cash flow
     was increased by 115.317 in the first quarter and $51.603 million in
the second quarter.

- Continental -
     Continental's revenue and cash flow were adjusted for the removal of
its satellite
     operations. This reduced its revenue by $6.202 million in the first
quarter, $7.977 million
     in the second quarter, $9.8 million in the third quarter, and
$13.069 million in the fourth
     quarter. Continental's cash flow was reduced by $0.6 million in the
first quarter, $0.6
     million in the second quarter, $0.9 million in the third quarter,
and $2.2 million in the
     fourth quarter.

- Cox -
     Cox's revenue and cash flow were adjusted for the removal of its
satellite operations. This
     reduced its revenue by $8.1 million in the first quarter, $9.1
million in the second quarter,
     $10.5 million in the third quarter, and $13.4 million in the fourth
quarter. Cox's cash flow
     was increased $0.7 million in the first quarter and by $1.1 million
in the second quarter
     and decreased by $0.6 million in the third quarter and by $0.6
million in the fourth
     quarter.

- Marcus -
     On November 1, 1995, Marcus acquired cable systems from Sammons
Communications,
     Inc. Marcus' fourth quarter results have been adjusted as though
this transaction took
     place at the beginning of the quarter. Marcus' revenue was
increased by $12.932 million
     (one-ninth of Sammons' revenue for the first nine months of the
year) and its cash flow
     was increased by $7.733 million (one-ninth of Sammons' revenue for
the first nine months
     of the year.) Marcus' fourth quarter average subscribers was
calculated assuming it had
     Sammons' 664,700 subscribers for the entire quarter (the
subscribership of the acquired
     systems on the acquisition date.)

- TCA -
     TCA's revenue and cash flow are for the quarters ending April 30,
July 31, and October
     31, 1995, and January 31, 1996.
                       TABLE 9
Acquisition and Disposition of Capital: 1989 - 1995
                   ($ in million)


                       Year

                   Private Debt

                   Public Debt

                   Private Equity

                   Public Equity

                   Total Capital
                    Raised From
                     Financing
                      Sources*




                        Sum
                       Raised
                        % of
                       Total

                        Sum
                       Raised
                        % of
                       Total

                        Sum
                       Raised
                        % of
                       Total

                        Sum
                       Raised
                        % of
                       Total
 1989

$6,494
  80%

 $840
  10%

 $726
   9%

 $108
   1%

$8,168


 1990

$4,637
  81%

 $490
   9%

 $597
  10%

 $0
  0%

$5,724


 1991

 $689
  16%

 $912
  22%

$1,290
  30%
$1,350
  32%

$4,241


 1992

($1,762)
  -69%

$2,400
  93%

$1,710
  67%

 $220
   9%

$2,568


 1993

($3,583)
 -186%

$5,280
  274%

 $62
  3%

 $165
   9%

$1,924


 1994

$4,772
  71%

$1,089
  16%

 $409
   6%

 $461
   7%
   $6,731


     1995

     ($808)
      -9%

     $4,500
      51%

     $1,109
      13%

     $3,976
      45%

     $8,778




Total: 1989-1995

   $10,439


   $15,511


   $5,903


   $6,280


   $38,134
                     Share of 7 Year Total

                              27%


                              41%


                              15%


                              16%


                              100%


                    Average Raised Per Year

                             $1,491


                             $2,216


                              $843


                              $897


                             $5,448


*     Total Capital Raised From Financing Sources = Private Debt + Public
Debt + Private
      Equity + Public Equity

Sources:
     - 1989 -
     Paul Kagan Assoc., Inc., Estimated   Capital Flows in Cable TV, The
Cable TV Financial
     Databook, Jun. 1993, at 86.
     - 1990 -
     Paul Kagan Assoc., Inc., Estimated   Capital Flows in Cable TV, The
Cable TV Financial
     Databook, Jun. 1994, at 92.
     - 1991 -
     Paul Kagan Assoc., Inc., Estimated   Capital Flows in Cable TV, The
Cable TV Financial
     Databook, Jul. 1995, at 92.
     - 1992 to 1995 -
     Paul Kagan Assoc., Inc., Estimated   Capital Flows in Cable TV, The
Cable TV Financial
Databook, Jul. 1996, at 115.
            TABLE 10
System Transactions: 1994 - 1995




             1994

             1995

             94-95
             Change

           1/95 to
             9/96

           1/96 to
             9/96

             94-95
             Change




     Number of Systems Sold

               64

             128

             100%

             110

               81

             -26.4%
Total Number of Subscribers

         7,504,177

         10,937,652

           45.8%

         9,568,648

         7,494,095

           -21.7%


    Average System Size

         117,253

           85,450

           -27.1%

           86,988

           92,520

           6.4%
  Number of Homes Passed

        12,492,997

        17,216,963

          37.8%

        14,986,646

        12,148,059

          -18.9%


  Avg. # of Homes Passed

         195,203

         134,507

          -31.1%

         136,242

         149,976

          10.1%




Total Dollar Value (mil.)

        $14,025.3
     $20,083.2

       43.2%

     $17,498.5

     $15,574.4

       -11.0%


Average Dollar Value

      $219.1

       $156.9

       -28.4

       $159.1

       $192.3

       20.9%




Dollar Value Per Home
        Passed

       $1,123

       $1,166

        3.8%

       1,168

       $1,282
                              9.8%


                  Dollar Value Per Subscriber

                             $1,869

                             $1,836

                             -1.8%

                             1,829

                             $2,078

                             13.6%


                       Cash Flow Multiple

                              10.3

                              9.7

                             -5.8%

                              9.6

                              10.0

                              9.4%


Source:    1994 and 1995 -
      Paul Kagan Assoc., Inc., Year-To-Date Cable System Sale Summary,
Cable TV
      Investor, Jan. 26, 1996, at 11.

      1/95 to 9/95 and 1/96 to 9/96 -
      Paul Kagan Assoc., Inc., Year-To-Date Cable System Sale Summary
(Through
            September 1996), Cable TV Investor, Oct. 21, 1996, at 12.
                            APPENDIX C



                            TABLE 1
                     Subscribers to DBS &
                    HSD Programming Services




Source:   Industry trade association research based on company self-
reporting. DTH Subscribers, SkyREPORT,
          Feb. 1996, at 8 (table); DTH Subscribers, SkyREPORT, Oct. 1996,
at 8 (table).
                            TABLE 2
                 Monthly Subscriber Growth of
                 DBS & HSD Programming Services




Source:   Derived from industry trade association research based on
company self-reporting. DTH Subscribers,
          SkyREPORT, Feb. 1996, at 8 (table); DTH Subscribers, SkyREPORT,
Nov. 1996, at 8 (table).
                   APPENDIX D
          FCC MDS Auction Information

Table 1: Top Ten Bidders by Total Value of Bids



                    Bidder
                    Bidder
                 Description

                    Total
                  Amount Bid
                  Number of
                 Licenses Won


                  CAI Wireless
                 Publicly Held
                  $48,824,000
                       32


                Pacific Telesis
                      LEC
                  $20,758,000
                       11


               Heartland Wireless
                 Publicly Held
                  $19,785,000
                       93


                  Wireless One
                 Publicly Held
                  $16,013,000
                       36


                   TruVision
                 Publicly Held
                  $13,641,000
                       27


                   PCTV Gold
                 Publicly Held
                  $10,960,000
                       28


          Satellite Microcable Corp
      Private
    $10,539,000
         4


  Wireless Telecom
      Private
     $9,930,000
         15


American Telecasting
   Publicly Held
     $9,370,000
         56


Wireless One of NC LLC
    Publicly Held
      $6,724,000
          6


 Total for all BTAs

    $216,300,000
        493
      Table 2: Winning Bids in Top Ten Markets by Population



Basic Trading Area
POPS
Bidder
Bidder
Description

Bid


New York
18,051,000
CAI Wireless
Publicly Held
$18,410,000


Los Angeles
14,550,000
Pacific Telesis
LEC
$10,657,000


Chicago
8,182,000
PCTV Gold
Publicly Held
$351,000


San Francisco
6,421,000
Pacific Telesis
LEC
$6,000,000


Philadelphia
5,899,000
CAI Wireless
Publicly Held
$747,000


Detroit
4,705,000
PCTV Gold
Publicly Held
$233,000


Dallas
4,330,000
Heartland Wireless
Publicly Held
$1,285,000


Boston
4,134,000
CAI Wireless
Publicly Held
$1,405,000


Washington
4,119,000
CAI Wireless
Publicly Held
$4,242,000


Houston
4,054,000
PCTV Gold
Publicly Held
$285,000
                              APPENDIX E

TOP TEN SMATV OPERATORS
(Ranked by Number of Units Passed)



1996
RANK
                               COMPANY
                             (1995 Rank)
                              NUMBER OF
                             PROPERTIES
                                (MDUs)
                                UNITS
                               PASSED*



                                 1
                   Interactive Cable Systems   (1)
                                700

                                                     230,000



                                  2

OpTel (2)
                                550

                                                     197,130



                                 3

Cable Plus (4)**
                                337

                                                     119,200



                                 4

Mid-Atlantic Cable (7)
                                114

                                                     70,000
                                 5

CAI Wireless
                                211

                                      57,410



                                 6

Liberty (10)
                                190

                                      42,000



                                 7

MultiTechnology Services (14)
                                115

                                      35,000



                                 8

Edward Rose & Sons (12)

                                 60

                                      32,830



                                 9

Telecom Satellite (15)
                                 41

                                      17,400



                                 10

Wireless Cable of Atlanta (30)
                                 35

                                      14,500
TOTAL
2,353
        815,470
   NOTES:

   * The data do not include information on hospitals, hotels/motels and
prisons.
   ** The statistics for Cable Plus have been revised to reflect the
acquisition of Apollo Cable's
      systems in Northern California, Arizona and the Pacific Northwest.
See Paul Kagan
      Associates, Apollo Cable Sale Complete, Private Cable Investor,
May 31, 1996 at 5.

   SOURCES:

      Paul Kagan Associates, Inc., Top 20 Private Cable Operators,
Private Cable Investor,
      Dec. 31, 1994 at 5; Top Private Cable Operators, Dec. 31, 1995 at
2; Paul Kagan
      Associates, Apollo Cable Sale     Complete, Private Cable
Investor, May 31, 1996 at 5.
                            APPENDIX F

              ASSESSMENT OF COMPETING TECHNOLOGIES




                         Technology Used

                        Subscribers (i)



                                                               1992
                                                               1993
                                                               1994
                                                         Sept. 1995
                                                         Sept. 1996


(1) TV Households
       Pct. Change
                                                        93,100,00
                                                   94,200,000
                                                            1.18%

                                                  95,400,0001.27%
                                                  95,900,0000.52%
                                                       97,000,000
                                                            1.15%


                                           (2) MVPD Households(ii)
                                                       Pct. Change
                                                Pct. of Households
                                                       57,530,000

                                                           61.79%
                                                       60,283,000
                                                            4.79%
                                                           63.99%


                                                       63,936,620
                                                            6.06%
                                                           67.02%
                                                       67,275,350
                                                            5.22%
                                                             70.15%
                                                       71,628,540
                                                            6.47%
                                                             73.84%
(3) Cable Subs. (iii)
       Pct. Change
       Pct. of MVPD Total
                                    55,200,000

                                          95.95%
                                    57,200,000
                                         3.62%
                                          94.89%

                                    59,700,000
                                         4.37%
                                        93.37%
                                  61,500,0003.
                                           02%
                                          91.42%
                                    63,525,000
                                         3.29%
                                        88.69%


                                (4) MMDS Subs.
                                 Pct. Change
                            Pct. of MVPD Total
                                        323,000

                                         0.56%

                                       397,000
                                        22.91%
                                         0.66%
                                  600,00051.13
                                             %
                                         0.94%
                                       800,000
                                        33.33%
                                         1.19%
                                     1,206,250
                                        50.78%
                                         1.68%


                              (5) SMATV Subs.
                                Pct. Change
                            Pct. of MVPD Total
                                       984,000

                                         1.71%
                                     1,004,000
                                         2.03%
                                         1.67%
                                       850,000
                                       -15.34%
                                         1.33%
           950,000
            11.76%
             1.41%
         1,050,000
            10.53%
             1.47%


      (6) HSD Subs.
     Pct. Change
Pct. of MVPD Total
          1,023,000

               1.78%
         1,612,000
            57.58%
             2.67%
         2,178,000
            35.11%
             3.41%
         2,341,000
             7.48%
             3.48%
         2,320,100
            -0.89%
             3.24%


    (7) DBS Subs.
     Pct. Change
Pct. of MVPD Total

          < 70,000

             0.12%
           602,000
           760.00%
             0.94%
         1,675,000
           178.24%
             2.49%
         3,525,000
           110.45%
             4.92%



 (8) OVS Subs. (iv)
     Pct. Change
Pct. of MVPD Total
                      2,190

                       0.0%


(9) VDT Subs. (Trials) (v)
             Pct. Change
         Pct. of MVPD Total



                      6,620

                     0.01%
                     9,350
                    41.24%
                     0.01%
                         0
                  -100.00%
                     0.00%
NOTES:

(i) Totals for number 1992-94 are year-end totals unless otherwise
indicated. Some numbers
     have been rounded.

(ii) The total number of MVPD households is likely to be somewhat less
than the given figure
     due to households subscribing to the services of more than one MVPD.
See e.g. 1994
     Report, 9 FCC Rcd 7480   74 (1994). The number of such households
is likely low,
     however, so the given total can be seen as a reasonable estimate of
the number of MVPD
     households.

(iii)          The Cable subscriber count for 1995 was revised to reflect
the September estimate for that
               year.

(iv)           This system was formally Bell Atlantic's VDT system in
Dover Township, New Jersey,
               which has been converted to an OVS system. See footnote
(v) below.

(v) The 1996 Act repealed the VDT framework. Telephone companies have
been given four
     options as MVPD providers: the cable franchise, MMDS, common carrier
or OVS. For
     details, see Supra Section I.D. These trials were converted to an
OVS format and cable
     franchises. See footnote (iv) above.

SOURCES:

(1) United States Television households: 1992-94 from A. C. Nielsen Co.
as of January of the
     following year cited by Veronis, Suhler & Associates, Homes Passed
by Cable and
     Incidence of Subscription, The Veronis, Suhler & Associates
Communications Industry
     Forecast, July 1995, at 145; 1995 from Nielsen Media Research as
cited in Broadcasting &
     Cable, Oct. 23, 1995, at 62; and 1996 from Nielsen Media Research as
cited in Broadcasting
     & Cable, Oct. 7, 1996 at 34. The 1995-96 figures are for September.

(2) Total MVPD households were calculated by summing the total number of
subscribers listed
     under each of the categories of the various technologies. Because
there were no permanent
     VDT subscribers, trial VDT subscriber figures were used in 1994-95.
(3) Cable subscribers: 1992-94 from Paul Kagan Associates, Inc., History
of Cable and Pay-TV
     Subscribers and Revenues, Cable TV Investor, June 30, 1995, at 5;
1995-96 from Paul Kagan
     Associates, Inc., Paul Kagan's 10-Year Cable TV Industry
Projections, The Cable TV
     Financial Databook, 1996 at 11. The 1995 figure was updated to
reflect information from
     the 1996 Databook. The FCC estimated the September 1995 and 1996
figures.

(4) MMDS subscribers: 1992-94 from Paul Kagan Associates, Inc., Wireless
Cable Industry
     Projections,1992-2002, The 1995 Wireless Cable Databook, Jan. 1995,
at 23; and 1995 from
     WCAI Comments, at 2. The 1995 figure is for June. The 1996 figure
is from Paul Kagan
     Associates, Inc., Wireless Cable Futures, Wireless Cable Investor,
Jan. 31, 1996, at 2. The
     FCC estimated the September 1996 figure.

(5) SMATV subscribers: 1992-1994 based on discussion with John Mansell,
Senior Analyst,
     Paul Kagan Associates, Inc. and reference to Cable & Pay TV Census -
- December,
     Marketing New Media, Dec. 19, 1994, at 4; and 1995-96 from
discussions with John
     Mansell, Senior Analyst, Paul Kagan Associates, Inc., Private Cable
Investor, Oct 19, 1995,
     and Nov. 5, 1996.

(6) HSD subscribers: 1992 from C-Band Subscriptions in the Sky (Chart),
SkyREPORT, 1st Q
     1994 at 12, and information provided by the SkyTRENDS research staff
based on the
     number of General Instrument authorizations for receipt of scrambled
programming; 1993
     from Subscription Data from General Instrument VC II+ Authorizations
(Chart),
     SkyREPORT, Oct. 1994, at 21; 1994 from 1994 Net Authorizations
(Chart), SkyREPORT,
     Feb. 1995, at 9; 1995 from DTH Subscribers, SkyREPORT, Oct. 1995, at
6. (The 1992-95
     HSD subscriber figures were reduced by 1% to account for the
estimated number of
     Canadian subscribers.); and 1996 from Harry Thibeadeau, Manager of
Industry Affairs,
     SBCA, Oct. 15, 1996 and DTH Subscribers Chart, SkyREPORT, Oct. 1996,
at 8. The 1995-
     96 figures are for September.

(7) DBS subscribers: 1993 from Let the Games Begin, SkyREPORT, May 1994,
at 2; 1994 from
     Kent Gibbons, DBS: We're Walking the Walk, Multichannel News, Jan.
16, 1995, at 3, 52;
     1995 from DTH Subscribers, SkyREPORT, Oct. 1995, at 6; and 1996 from
DTH Subscribers
     Chart, SkyREPORT, Oct. 1996, at 8. The 1995-96 figures are for
September.

(8) OVS subscribers: 1996 from Bell Atlantic Comments at 5.   The 1996
figure is for
     September.

(9) VDT Trial subscribers: 1994-95 from Section 214 Applications, ex
parte letters and
     associated filings with the FCC. The 1994 and 1995 figures are for
October.
                              TABLE 2

1996 Cable MSO Horizontal Concentration Nationwide

 Rank               Company                          Pct. of Subs.

                1   TCI                                       27.94
                2   Time Warner                                    18.94
                3   Continental                                    7.69
                4   Comcast                                   6.83

        Top 4                                             61.40

            5       Cox                                       5.32
            6       Cablevision Systems                              4.47
            7       Adelphia                                  2.75
            8       Jones Intercable                                 2.40
            9       Marcus                                    2.02
           10       Falcon                                    1.89

        Top 10                                           80.24

        Top 25                                            91.47

        Top 50                                           96.59

           HHI                                                1326
                             TABLE 3

1996 MVPD Horizontal Concentration Nationwide

         Rank      Company                      Pct. of Subs.

               1   TCI                               24.25
               2   Time Warner                                 16.44
               3   Continental/US West                         6.68
               4   Comcast                           5.93

       Top 4                                    53.30

           5       Cox                                  4.62
           6       Cablevision Systems                         3.88
           7       DirecTV/USSB                      2.95
           8       Adelphia                          2.39
           9       Primestar                         2.18
          10       Jones Intercable                            2.08

       Top 10                                   71.40

       Top 25                                   83.86

       Top 50                                   89.68

          HHI                                        1013
                              TABLE 4

      Changes In Concentration Of The Cable Industry 1990-1996



                       1990           1991          1992          1993
1994            1995           1996
Top Share              24.0           24.5          25.2         24.3
24.8            25.9           28.0
Top 2 Share            36.7           37.1          37.9          36.9
37.3            42.1           46.9
Top 3 Share            42.0           42.3          43.2         42.3
42.4            48.9           54.6
Top 4 Share            45.6           46.0          48.2         47.2
47.2            54.6           61.4
Top 10 Share           61.6           61.4          64.6         63.2
63.3            73.2           80.2
Top 25 Share           80.8           80.2          84.5         83.1
83.4            88.5           91.5
Top 50 Share           91.2           90.9          94.5         93.1
92.4            95.2           96.6

HHI                    866              872          928           880
898            1098           1326

Data for 1996 taken from The Kagan Media Index, August 31, 1996 at 8, 14;
Paul Kagan Assoc.,
     Top 100 Cable System Operators as of March 31, 1996, Cable TV
Investor, June 20, 1996
     (Insert); Paul Kagan Assoc., Top Private Cable Operators, Private
Cable Investor, December
     31, 1995 at 2; Paul Kagan Assoc., Apollo Cable Sale Complete,
Private Cable Investor, May
     31, 1996, at 5 and SEC documents.

Data for 1995 taken from, supra, App. G, Tbls. 2-3. Data for 1990
through 1994 were calculated
     from information contained in Paul Kagan Assocs., Inc., Cable TV
Financial Databook 14
     (1991); Paul Kagan Assocs., Inc., Pay TV Subscriber History, Cable
TV Financial Databook
     12 (1992); Paul Kagan Assocs., Inc., Pay TV Subscriber History,
Cable TV Financial
     Databook 12 (1993); and Paul Kagan Assocs., Inc., Pay TV Subscriber
History, Cable TV
     Financial Databook 14 (1994), Paul Kagan Assoc., Inc.

The data for the years 1990-94 have been recalculated after discussions
with Paul Kagan Associates
     personnel concerning that company's methodology for including
consolidated, non-
     consolidated and international subscribers. International
subscribers have been deducted
     from TCI's subscriber totals in 1991-93 and the estimate of TCI's
subscribers in 1994 was
     similarly modified assuming continuation of historical trends. The
figure for TCI's
     subscribership in 1990 is based on information contained in
TeleCommunications, Inc.,
          Form 10-K, Dec. 31, 1990, at I-2 to I-4.
                               TABLE 5

         Cable System Transactions November 1995 - October 1996


DATE
BUYER
SELLER
                                  SYSTEM(S)
                                   PRICE**
                                   (MIL.)
                                    BASIC
                                    SUBS.
                                   PRICE/
                                   SUB.***
                                    CASH
                                    FLOW
                                    MULT.
                                TRANSACTION
                                   DETAILS


                                   Nov. 95
                                 Cablevision
                                Systems (CVS)
                              United Video
                                 Cablevision
                             Westchester Co., NY
                                   $13.81
                                   5,400
                                   $2,557
                                    10.3



                                   Nov. 95
                               FrontierVision
                                  Operating
                                Partners, LP
                                  C4 Media
                                  Southeast
                                 GA; TN; VA
                                   $44.70
                                   40,400
                                   $1,107
                                    8.5



                                   Nov. 95
                               FrontierVision
                                  Operating
                                Partners, LP
                                     Cox
 Communications
     KY; OH
    $118.80
     77,900
     $1,525
      10.4



     Nov. 95
 FrontierVision
    Operating
  Partners, LP
  United Video
   Cablevision
     ME; OH
    $120.39
     88,000
     $1,368
      8.5



     Nov. 95
     Halcyon
 Communications
 Cablevision of
   TX; Empire
 Communications
 & Empire Cable
      of AR
     AR; OK
     $8.71
     8,675
     $1,003
      6.7
Sale includes 29
    systems


      Dec. 95
 Anderson Pacific
       Corp.
   Douglas Cable
  Communications
IA; IL; KS; NE; MO
      $17.07
      16,000
      $1,067
       8.1



     Dec. 95
       Charter
   Communications
   Premiere Cable/
       Masada
         SC
       $36.00
       21,300
       $1,690
        9.1
 Acquisition adds 10
 systems and 21,300
subs. to Charter's SC
      cluster.


       Dec. 95
   Falcon Holdings
        Group
 Falcon First, Inc.
     AL; GA; NY
      $133.12
       54,950
       $2,423
        12.2



       Dec. 95
    Mediacom, LLC
Benchmark
     Cablevision
Ridgecrest,
  Trona & Kern, CA
       $20.80
       11,000
       $1,891
        7.5



       Dec. 95
     TCA/Donrey
     Media Group
     Partnership
    Donrey Media
        Group
     AR; CA; OK
      $101.61
       60,000
       $1,693
        9.6
    TCA & Donrey
  Media Group form
 partnership to own
 Donrey's 5 systems


       Dec. 95
 Universal   Cable
   Communications
       Douglas
     Cablevision
      Mason, TX
       $0.94
        800
       $1,100
        8.3



       Jan. 96
     Century
   Communications
   Chino Valley
     Cablevision
      Chino, CA
       $40.60
       20,700
       $1,961
        10.1



       Jan. 96
      Charter
   Communications
    Genesis Cable
   Picken Co., SC
       $8.40
       4,500
       $1,872
        9.2
 Acquisition boosts
Charter's SC cluster


       Jan. 96
    Continental
    Cablevision*
        TCI*
 Andover, Cape Cod,
   Nantucket &
     Waltham, MA
      $172.40
      100,600
       $1,714
        9.9
    Systems raise
Continental's eastern
    MA cluster to
    780,000 subs.
                            DATE
                            BUYER
                           SELLER
                          SYSTEM(S)
                          PRICE**
                          (MIL.)
                            BASIC
                            SUBS.
                           PRICE/
                           SUB.***
                            CASH
                            FLOW
                            MULT.
                        TRANSACTION
                           DETAILS


                            Jan. 96
                             TCI*
                         Continental
                         Cablevision*
                      Belleville & Scott
                           AFB, IL;
                      metro St. Louis, MO
                            $172.40
                            95,800
                            $1,800
                              9.8
Systems raise TCI's
MO & IL clusters to
250,000 subs.


Jan. 96
Friendship Cable
of AR
Cablevision of
TX III, LP;
Empire Cable of
AR, Inc.
AR; MO
$4.50
4,700
$970
6.4



Jan. 96
Friendship Cable
of TX
Center Cable of
St. Augustine
Center &
St. Augustine, TX
$3.90
3,000
$1,285
13.0



Jan. 96
Galaxy Telecom,
LP
Vista LP, Vista
Narrag.
AL; LA; MS; TN
$21.30
17,400
$1,225
7.6



Jan. 96
GTR, Inc.
Fulton TV Cable
Co.
Fulton, Mantachie,
Tremont, &
Itwamba Co., MS
$3.00
3,300
$900
6.8



Jan. 96
High Mountain
Westar Group
Darby, Ennis &       W.
Yellowstone, MT
$1.40
2,000
$708
5.5



Jan. 96
Intermedia
Partners
Annox, Inc.
Robertson, TN
$4.70
2,300
$2,100
9.4



Jan. 96
Rifkin
Acquisition
Partners
Mid-Tennessee
Cable
Hickory Hill,
Lebanon &
McMinnville, TN
$62.00
32,800
$1,851
10.4



Jan. 96
Rifkin
Acquisition
Partners
Rifkin
Cablevision of NJ
Pulaski, TN
$10.20
12,100
$843
7.6



Feb. 96
Continental
Cablevision
Meredith Cable
MN-based MSO
$124.00
74,400
$1,667
10.1



Feb. 96
FrontierVision
Operating
Partners, LP
Americable of
ME
St. Francis, Canton,
Trenton, Columbia
Falls, Levant,
Glenburn, Denmark
and Sebago, ME
$3.50
3,200
$1,111
8.0



Feb. 96
Post-Newsweek
Columbus TV
Cable
Columbus, MS
$23.00
15,700
$1,465
9.5



Feb. 96
US West Media
Group
Continental
Cablevision
16 States
$9,631.00
4,200,000
n/a
10.5



Feb. 96
Wander
Telecomm.
Cablevision of
TX III, LP;
Empire Comm.,
Inc.
Pinal, Navajo & Gila
Cos., AZ; NV
$2.50
2,800
$911
6.0



Feb. 96
Wander
Telecomm.
Phoenix,
Blackrock
NV; CA
$2.20
2,000
$1,075
7.5



Mar. 96
Cox
Communications
*
Time Warner*
Hampton &
Williamsburg, VA
$78.80
45,300
$1,740
9.4
Systems add to Cox's
Hampton Road's
cluster


DATE
BUYER
SELLER
                            SYSTEM(S)
                            PRICE**
                            (MIL.)
                              BASIC
                              SUBS.
                             PRICE/
                             SUB.***
                              CASH
                              FLOW
                              MULT.
                          TRANSACTION
                             DETAILS


                              Mar. 96
                           Time Warner*
                         Cox
                          Communications
                                 *
                       Myrtle Beach, SC; TX
                              $78.80
                              44,600
                              $1,767
       10.4
 Additions to TW's
clusters in SC & TX


     Mar. 96
      Fanch
   Cablevision
   Tele-Media
     NC; VA
    $240.50
    160,000
     $1,503
      9.0



      Mar. 96
  Galaxy Telecom,
        LP*
  TCI of Kansas*
    Northern MS
      $15.40
      10,000
      $1,537
       9.0
System trade gives
  Galaxy Telecom
30,000 subs. in MS
     cluster


     Mar. 96
 TCI of Kansas*
 Galaxy Telecom,
       LP*
  Shawnee Co. &
   Topeka, KS
     $15.40
     7,000
     $2,195
      11.9



     Mar. 96
     General
 Communications
 Prime Cable of
   AK;Alaskan
 Cable Network;
 AK Cablevision
  Anchorage, AK
    $280.60
     101,000
      $2,778
       11.8



       Mar. 96
 Olympus
   Communications
      Adelphia
      South FL
      $110.00
       54,000
         n/a
         n/a
     Adelphia is
  restructuring its
  partnership with
 Telesat Cablevision


       Mar. 96
     Prime Cable
       Apollo
   Communications,
         SW
    Las Vegas, NV
       $7.10
       5,400
       $1,309
        8.3



       Mar. 96
         TCI
    Knight-Ridder
     KY; NJ; NY
      $770.00
      370,000
       $2,081
        9.1
    TCI acquires
    remaining 50%
interest in TKR Cable
Co., and 15% share in
   TKR I, II & III
  partnerships from
    Knight-Ridder


      Apr. 96
 Cable Plus, Inc.
      Apollo
   Communications,
         SW
     WA; OH; CA
       $12.10
       11,600
       $1,052
        6.8



       Apr. 96
       Charter
   Communications
    Cencom Cable
  Income Partners,
         LP
   Ft. Carson, CO;
   Ft. Gordon, GA;
   Ft. Riley, KS;
  Hopkinsville, KY;
 Maryville, IL; Camp
  LeJeune & Tryon,
    NC; Ashland &
Clarksville, TN; TX
      $211.10
      100,000
       $2,111
        9.3



       Apr. 96
    Continental
    Cablevision*
     Cox
   Communications
          *
    Weymouth and
     Western MA
       $83.70
       47,700
       $1,756
        9.9
Acquired systems are
    contiguous to
   Continental's
  systems in Quincy
 and Springfield, MA
       DATE
       BUYER
      SELLER
     SYSTEM(S)
     PRICE**
     (MIL.)
       BASIC
       SUBS.
      PRICE/
      SUB.***
       CASH
       FLOW
       MULT.
   TRANSACTION
      DETAILS


       Apr. 96
         Cox
   Communications
          *
     Continental
    Cablevision*
James City/York Cos.,
        VA;
    Pawtucket, RI
       $83.71
       48,700
       $1,718
         9.3
Acquired systems add
  to Cox's 260,000
  subs. in Hampton
   Roads/ Newport
  News, VA cluster


       Apr. 96
        Fanch
   Cablevision, IN
       Simmons
   Communications
       KY; IN
      $133.00
       83,300
       $1,598
        8.8



       Apr. 96
   Galaxy Telecom,
         LP
  Cablevision of
    TX; Empire
  Communications;
    High Plains
 Cablevision, Inc
 KS-based systems
      $9.60
      9,000
      1,066
       7.0



       Apr. 96
   Galaxy Telecom,
         LP
    Midcontinent
    Cable Systems
      Co. of NE
Cedar Rapids, Genoa,
  Newman Grove, St.
   Edwards, Silver
  Creek, IA; Meadow
     Grove, NE
       $1.70
       1,300
       $1,296
        8.9



       Apr. 96
       Lenfest
  Jones Intercable,
     Inc. (Jones
   Communications)
  Turnersville, NJ
       $84.50
       36,000
       $2,347
        10.1
   Systems add to
  Lenfest's 900,000
subs. cluster in PA,
     NJ and DE


       Apr. 96
 RW/
    Fanch-One Co.
        Fanch
  Cablevision of IN
      15 States
      $373.50
     243,300
      $1,536
       8.9



       Apr. 96
   Teleview, Inc.
   Falcon Holdings
   GA based system
       $15.00
       9,500
       $1,579
        12.6



       Apr. 96
     TimeWarner/
       Fanch/
   Blackstone Grp.
     Cablevision
   Partnership (TW
       Fanch)
     Time Warner
       PA; WV
      $205.20
      130,000
       $1,578
        9.0
  TW will own 49.5%
 of this partnership
with 373,000 subs. in
      17 states


      May 96
    Cablevision
  Systems (CVS),
  Cablevision of
    Framingham
     A-R Cable
   Services;
 A-R Cable Ptnrs;
  Cablevision of
     Newark; &
  Cablevision of
    Framingham
  Holdings, Inc.
      NJ; MA
     $593.00
     297,800
      $1,991
       10.4
  Cablevision Systems
    (CVS) acquires
    Warburg Pinkus
  Investors' minority
  interest their A-R
     Cable Systems
 partnership, adds to
   100,000 subs CVS
 already controls, for
total of 420,000 subs.


       May 96
     InterMedia
      Partners
   Tellico Cable,
        Inc.
  Loundon City, TN
       $1.70
       1,460
       $1,164
        7.0
 Acquisition adds to
   Intermedia's TN
 cluster; InterMedia
also has clusters in
western Carolinas and
   eastern Georgia
       DATE
       BUYER
      SELLER
     SYSTEM(S)
     PRICE**
     (MIL.)
       BASIC
       SUBS.
      PRICE/
      SUB.***
       CASH
       FLOW
       MULT.
   TRANSACTION
      DETAILS


       May 96
     Starkville
 Cablevision, Inc.
      Torrence
     Cablevision
   Southeast, Inc.
     Scooba, MS
       $0.20
        200
       $1,000
        7.0



       May 96
    TCI (acquires
  remaining 50% in
   joint venture)
   US Cable Group
        (USC)
  Lake Co, IL; IN;
     Allamuchy &
    Paterson, NJ
      $213.80
       87,500
       $2,443
        10.7
    TCI acquires
  remaining 50% of
partnership's 175,000
 subs. Partners will
  sell systems with
 60,000 subs. in FL,
  GA, NY & SC; Deal
  removes USC, the
  34th largest MSO,
  from US cable
   industry.


     Jun. 96
Anderson Pacific
      Corp.
  Douglas Cable
 Communications
     IL; IA
     $9.40
     7,600
     $1,237
      7.5



      Jun. 96
     Charter
  Communications
        TCI
   Columbus, GA
      $15.80
      13,000
      $1,215
       7.0
Acquisition adds to
 Charter's 400,000
 subs. cluster in
     Southeast


     Jun. 96
 Falcon Holdings
      Group
  Falcon Cable
     Systems
 CA; western OR
    $247.40
    135,600
     $1,825
      9.7



      Jun. 96
Helicon Partners I
   PCI Sun Cable
    Jasper, TN
      $11.40
      8,200
      $1,382
       7.6
       Jun. 96
      New Path
   Communications
    Great Plains
    Fontanell, IA
       $0.20
        200
       $1,027
        7.0



       Jun. 96
        TCA*
        TCI*
   Ft. Smith, AR;
    Sallisaw, OK
       $50.30
       30,000
       $1,676
        9.5
 TCA adds to its AR
       cluster


        Jun. 96
         TCI*
         TCA*
      Vallejo, CA
        $50.30
        28,000
        $1,796
         9.5
  TCI adds to its San
Francisco area cluster


       Jun. 96
         TCI
      Columbine
     Cablevision
    Columbine, CO
       $54.00
       31,000
       $1,742
         n/a
   TCI adds to its
  Colorado cluster


       Jun. 96
      Torrence
     Cablevision
    Gulf-American
        Group
 AL; FL; GA; LA; MS
       $5.10
       8,000
        $638
        5.3



       Jul. 96
   FrontierVision
 Operating
    Partners, LP
       Phoenix
     Grassroots
       ME; NH
       $9.60
       7,000
       $1,371
        8.4



       Jul. 96
 Helicon Partners I
   Clear-Vu Cable
Summerville, GA; &
 Trenton/
     Dayton, OH
       $18.20
       12,300
       $1,530
        8.1



       Jul. 96
 Helicon Partners I
   FrontierVision
     Operating
     Partners LP
 Chartsworth, Eton &
   Murray Co., GA
       $8.60
       5,700
       $1,509
        8.2



       Jul. 96
     InterMedia
     Partners
  Cablevision Co.
    Davidson &
Williamson Cos., TN
      $1.70
      1,300
      $1,283
       8.0
        DATE
        BUYER
       SELLER
      SYSTEM(S)
      PRICE**
      (MIL.)
        BASIC
        SUBS.
       PRICE/
       SUB.***
        CASH
        FLOW
        MULT.
    TRANSACTION
       DETAILS


        Jul. 96
     Marcus Cable
  Frankfort Cable
    Communications,
         Inc.
     Frankfort, IN
        $6.70
        5,600
        $1,196
         9.5
   System increases
Marcus's IN cluster to
    110,000 subs.


       Jul. 96
    Marcus Cable
   FrontierVision
      Operating
    Partners, LP
   Brookhaven, MS
       $2.60
       2,400
       $1,079
        7.5



       Jul. 96
    Mediacom LLC
 Booth
      American
   Kern Valley, CA
       $11.00
       7,000
       $1,571
       8.8



       Jul. 96
     Raystay Co.
     Americable
  N. Middleton &
Carlisle Barracks, PA
       $0.80
        600
       $1,393
        7.5



       Jul. 96
    Roy L. Baker
    Clinton Cable
   Clinton Co., KY
       $1.40
       1,300
       $1,111
        7.1



      Jul. 96
  TCI Cablevision
       of GA
   Balkin Cable
   Holdings, LP;
       W.A.V
 San Francisco Bay
     Area, CA
      $19.60
      12,300
      $1,594
       8.8



       Jul. 96
        TCI*
     Washington
        Post*
   Santa Rosa, CA
       $76.50
       48,000
       $1,542
        8.7
      Jul. 96
Washington
       Post*
       TCI*
  Springfield, MO
      $76.50
      53,000
      $1,442
       9.1



      Aug. 96
      Century
  Communications
   Jones Growth
    Partners II
  Anaheim, Yorba
Linda & Orange Co.
    (part), CA
      $36.00
      17,000
      $2,102
       10.5
 Acquired systems
increase Century's
Los Angeles cluster


      Aug. 96
     Century
  Communications
 Jones Intercable,
    Inc. (Jones
  Communications)
   Oxnard & Los
 Angeles & Ventura
 Cos. (parts), CA
     $104.00
      59,000
      $1,750
        9.9
 Acquired systems
increase Century's
Los Angeles cluster


      Aug. 96
     Charter
  Communications
     KC Cable
   Associates LP
       (KKR)
Long Beach, Signal
Hill & Los Angeles
  Co. (part), CA
     $150.00
      70,000
      $2,143
       8.6
 Acquired systems
increase Charter's
souther California
cluster to 250,000
    subscribers


     Aug. 96
 FrontierVision
    Operating
  Partners, LP
 American Cable
     KY; IN
    $146.00
     83,400
     $1,751
      14.0



     Aug. 96
 FrontierVision
    Operating
  Partners, LP
   SRW, Inc.'s
 Pennsylvania/
   Ohio Cable
     OH; PA
     $3.80
     3,300
     $1,152
      7.5



     Aug. 96
 FrontierVision
    Operating
  Partners, LP
      Triax
     OH; KY
     $85.00
     53,800
     $1,580
      10.2
       Aug. 96
     InterMedia
      Partners
         TCI
    Greenville &
   Spartenburg, SC
      $196.20
      115,000
       $1,693
        8.6
   Systems add to
InterMedia's 150,000
subscribers southeast
       cluster
       DATE
       BUYER
      SELLER
     SYSTEM(S)
     PRICE**
     (MIL.)
       BASIC
       SUBS.
      PRICE/
      SUB.***
       CASH
       FLOW
       MULT.
   TRANSACTION
      DETAILS


       Aug. 96
        Jones
   Communications
   (formerly Jones
     Intercable)
   Maryland Cable
      Partners
Prince George's Co.,
         MD
      $235.00
       87,000
       $2,701
        9.5
 Acquired system is
 adjacent to Jones'
160,000 subs. system
 in southern Prince
 George's County &
  increases Jones'
   Washington, DC
 cluster to 400,000
     subscribers


       Aug. 96
      Northland
   Communications
    Marcus Cable
   Moses Lake, WA
       $20.00
       12,500
       $1,568
        9.5
     Aug. 96
   Shenandoah
      Cable
 FrontierVision
    Operating
  Partners, LP
Woodstock & New
   Market, VA
     $8.50
     5,000
     $1,700
      9.4



      Sep. 96
     Cambridge
   Classic Cable
Albuquerue, NM;
  southwest WA;
   northwest OR
      $22.90
      13,000
      $1,760
       8.5



     Sep. 96
   InterMedia
    Partners
       OCB
Cablevision, Inc.
    Bogart &
 Watkinsville, &
 Clarke & Oconee
    Cos., GA
     $8.30
     6,300
     $1,333
      8.1
     Sep. 96


     Sep. 96
     Moffet
 Communications
    Benchmark
 Communications
 Palm Coast, FL
     $29.70
     10,000
     $2,965
      9.2
       Sep. 96
     Pine State
       Gateway
     Cablevision
  Chesterfield, NH
       $2.90
       2,500
       $1,170
        7.9



        Sep. 96
       Pine Tree
       Highland
Stoddard, Harrisville,
   Marlow, Nelson &
     Sullivan, NH
        $0.80
         800
        $1,037
         7.2



       Sep. 96
      Roseville
   Communications
     Corp. (RCC)
  Jones Intercable,
     Inc. (Jones
   Communications)
    Roseville, CA
       $32.00
       16,000
         n/a
         n/a
 LEC buys in-region
    cable system


       Sep. 96
         TCA
    Classic Cable
Van Buren et al., AR
       $9.60
       8,000
       $1,199
        8.1
       Sep. 96
         TCI
   Jones Spacelink
    Rosenburg, TX
       $5.50
       2,900
       $1,896
        10.8



       Sep. 96
         TCI
     Jones Cable
     Income Fund
    1-B/C (Jones
   Communications)
Brighton, Broomfield,
  & Adams & Boulder
      Cos., CO
       $33.80
       18,500
       $1,825
        9.5
Systems add to TCI's
  415,000 subs. in
   Denver cluster


      Oct. 96
       Fanch
    Cablevision
   Northern Ohio
    IN; OH; PA
      $9.40
      6,800
      $1,387
       8.3




   1995-96 TOTAL
    $16,341.84
     7,510,860
      $2,070
1996 TOTAL
$15,725.90
7,895,285
  $2,094
                             NOTES:

                       *    System swaps
**   The transaction prices are from Kagan. The transaction price is
dependent upon the terms
            of each deal and may or may not include debt.
*** The calculations of Price/Subscriber are from Kagan. These
calculations are subject to
               rounding and reporting inconsistencies.

                            SOURCES:

CEA Represents Companies in Sammons Transactions, Private Cable &
Wireless Cable, May 1996,
at 28;
D & A Announces Systems Sales, Independent Cable News, Jan. 1996, at 21;
Daniels & Associates Represents Sellers, Private Cable & Wireless Cable,
Jun. 1996, at 42;
     Price Colman, Indie Telco Buys Cable System, Broadcasting & Cable,
Oct. 21, 1996, at 44;
          Deals, CableFAX Daily, Jul. 31, 1996, at 1;
John M. Higgins, KKR Finally Exiting Cable, Multichannel News, Aug. 26,
1996, at 51;            InterMedia Concentrates on Clusters in Southeast,
Multichannel New, Jul. 15, 1996, at 60;
Paul Kagan Associates, Inc., Announced/Proposed Cable System Sales, Cable
TV Investor, Dec.
     18, 1995, at 7; Jan. 26, 1996, at 11; Feb. 29, 1996, at 10; Mar. 15,
1996, at 7; Apr. 12, 1996,
     at 9; May 21, 1996, at 13; Jun. 20, 1996, at 8; Jul. 23, 1996, at 8;
Aug. 21, 1996, at 10; Sept.
                 20, 1996, at 11; Oct. 21, 1996, at 12
Paul Kagan Associates, Inc., Second Half 1995 Announced/Proposed Cable
System Sales Ranked
          by Price, Cable TV Finance, Feb. 21, 1996, at 4;
HPC Puckett Handles Refinancing, System Sales, Private Cable & Wireless
Cable, Jun. 1996, at
                                 43;
Jones Sells Systems for $140 million, Broadcasting & Cable, Aug. 26,
1996, at 47;
Jones, TCI Cut Deal for Denver Systems, Cable World, Sept. 16, 1996, at
3;
Jim McConville, Cable Concentrates on Future, Broadcasting & Cable, Jun.
24, 1996, at 54;
Marcus Completes System Buy, Broadcasting & Cable, Aug. 12, 1996 at 68;
Mass Media, Comm. Daily, Dec. 1, 1995; Dec. 8, 1995; Dec. 15, 1995;
Jan.16, 1996; Jan. 17,
     1996; Jan. 19 1996; Jan. 28 1996; Feb. 13, 1996; Feb. 26, 1996; Mar.
1, 1996; Mar. 11,
     1996; Mar. 27, 1996; Mar. 29, 1996; Apr. 2, 1996; Apr. 5, 1996; Apr.
16, 1996; Apr. 19,
     1996; Apr. 25, 1996; Apr. 29, 1996; May 2, 1996; May 3, 1996; May
14, 1996; May 21,
     1996; May 28, 1996; Jun. 4, 1996; Jun. 10, 1996; Jul. 3, 1996; Jul.
10, 1996; Jul. 25, 1996;
     Jul. 31, 1996; Aug. 2, 1996; Aug. 5, 1996; Aug. 6, 1996; Aug. 20,
1996; Aug. 21, 1996; Sep.
     16, 1996; Sep. 17, 1996;Sep. 18, 1996; Oct. 1, 1996 at 5; Oct. 3,
1996 at 5; Oct. 8, 1996 at
                   5; Oct. 21, 1996; Oct. 28, 1996;
   KC Neel, System Sales, Cable World, Jun. 3, 1996, at 37;
Consolidation: MSOs Execute More System Trades, Cable World, Aug. 26,
1996, at 50;
US West Media Group and Continental Cablevision Close Merger (Press
Release), U S West
                         Media Group, Nov. 15, 1996
                   APPENDIX G

                   Table 1

MSO Ownership in National Programming Services



             Programming Service

                 Launch Date
             Ownership Percentage


           Action Pay-Per-View
                  Sept-90
         TCI (22) Time Warner (15)


                    AMC
                    Oct-84
           Cablevision Systems (75)


                Animal Planet
                    Jun-96
             TCI (49), Cox (24.7)


                   BET
                   Jan-80
         TCI (22) Time Warner (15)


                BET on Jazz
                   Jan-96
         TCI (22) Time Warner (15)


                  The Box
                    Dec-85
                   TCI (5)


                   Bravo
                    Feb-80
           Cablevision Systems (50)


              Cartoon Network
                    Oct-92
              Time Warner (100)
                           Catalog 1
                              Apr-94
                         Time Warner (50)


                              Cinemax
                               Aug-80
                         Time Warner (100)


                               CNN
                               Jun-80
                         Time Warner (100)


                       CNN International
                              Jan-95
                        Time Warner (100)


                  CNNfn (The Financial Net.)
                            Dec-95
                       Time Warner(100)


                           Comedy Central

                         Time Warner (50)


                          Court TV
                            Jul-91
                TCI (33.3) Time Warner (33.3)
                      Continental (33.3)


                      The Discovery Channel
                               Jun-85
                        TCI (49) Cox (24.6)


                       E! Entertainment
                             Jun-90
                 Time Warner (49.0) Continental
                (10.3) Comcast (10.3) Cox (10.4)
                           TCI (10.3)


                             Encore
                               Apr-91
TCI (90)


Encore Love Stories
Jul-94
TCI (90)
Programming Service

Launch Date
Ownership Percentage


Encore Westerns
Jul-94
TCI (90)


Encore Mysteries
Jul-94
TCI (90)


Encore Action
Sept-94
TCI (90)


Encore True Stories and Drama
Sept-94
TCI (90)


Encore WAM! America's Youth Network
Sept-94
TCI (90)


The Family Channel
Apr-77
TCI (20)


Faith & Values
Jun-84
TCI (49)


FIT TV
Oct-93
TCI (20)


fX
Oct-94
TCI (50)


FXM
Oct-94
TCI (50)
Gems International Television
Apr-93
Cox (50)


The Golf Channel
Jan-95
Continental (20.2), Comcast,
Cablevision Systems, Adelphia


Great American Country
Dec-95
Jones (**)


HBO
Nov-72
Time Warner (100)


HBO 2
Dec-75
Time Warner (100)


HBO 3
Oct-93
Time Warner (100)


Headline News
Jan-82
Time Warner (100)


Home Shopping Network
Jul-85
TCI (80)


Home Shopping Network II
Sept-86
TCI (80)


Independent Film Channel
Sep-94
Cablevision Systems (50)


The International Channel
Jul-90
TCI (45)


Intro Television
Sept-94
TCI (100)


Jones Computer Network
Sept-94
Jones (81)
Programming Service

Launch Date
Ownership Percentage


The Learning Channel
Nov-80
TCI (49) Cox (24.7)


Mind Extension University
Nov-87
Jones (66)


Much Music USA
Jul-94
Cablevision Systems (50)


Newsport
Feb-94
Cablevision Systems (25)


Outdoor Life Channel
Jul-95
Cox (41), Continental (23),
Comcast (22.5)


Ovation: The Fine Arts Network
Apr-96
Time Warner (**)


Prime Deportiva
Mar-95
TCI (100)


Prime Network
                              Jan-93
TCI (33) Cablevision Sys. (25)


Product Information Network
Apr-94
Cox (50) Jones (**) Adelphia
(**)


QVC
                                Nov-86
Comcast (57.4) TCI (42.6)


Q2
Sept-94
Comcast (57.4) TCI (42.6)


Request Television
Nov-85
TCI (40)


Request 2
Jul-88
TCI (40)


Request 3-5
Sept-93
TCI (40)


Sega Channel

TCI (33), Time Warner (33)


Speedvision
Dec-95
Cox (39.0) Continental (22.1)


Starz!
Feb-94
TCI (49.9)


The Sunshine Network
Mar-88
Cox (5.3)


TBS

Time Warner (100)


Television Food Network
Nov-83
Continental (15), Scripps-Howard
(13.17),Cox (1.9) Adelphia, C-
TEC (**)
TNT
Oct-88
Time Warner (100)


Turner Classic Movies
Apr-94
Time Warner (100)


Programming Service

Launch Date
Ownership Percentage


Viewers Choice

Nov-85
Cox (20), Time Warner (17)
Continental (12), Comcast (11),
TCI (10)


Viewers Choice:   Hot Choice

Jun-86
Cox (20), Time Warner (17)
Continental (12), Comcast (11),
TCI (10)


Viewers Choice:   Continuous Hits 1,2,3

Feb-93
Cox (20), Time Warner (17)
Continental (12), Comcast (11),
TCI (10)


*    Denotes ownership percentage of less than 5%.
**   Ownership percentage not available.

     Source: Annual Reports of various MSOs.
                              Table 2

              Existing National Programming Services
      Without A Cable Operator Holding An Ownership Interest


                         Programming Service
 Launch Date


A&E Television Network
Feb-84


Adam & Eve Channel
Feb-94


All News Channel
Nov-89


America's Health Network
Mar-96


ANA Television Network
Unavailable


Asian American Satellite TV
Jan-92


C-SPAN 2*
Jun-86


C-SPAN*
Mar-79


Cable Video Store
Apr-86


Canal Sur
Aug-91


Canal de Noticias NBC
Mar-93
Channel America Television Network
Jun-88


Children's Cable Network
May-95


CineLatino
Dec-94 (in U.S.)


Classic Sports Network
May-95


Classic Arts Showcase
May-94


CMT: Country Music Television
Mar-83


CNBC
Apr-89


Consumer Resource Network
Dec-94


Crime Channel
Jul-93


Deep Dish
Jan-86


Disney Channel
Apr-83


DRAGnet
Dec-95
                         Programming Service
Launch Date


Employment Channel
Feb-92


ESPN
Sep-79


ESPNEWS
Nov-96


ESPN2
Oct-93


Ethnic-American Broadcasting Co.
1992


EWTN: The Catholic Network
Aug-81


Flix!
Apr-91


Foxnet
Jul-91


Fox News Channel (FNC)
Oct-96


Galavision
Oct-79


Gay Entertainment Television
Nov 95


Home & Garden
Dec-94


Jewish Television Network
Jan-81
Kaleidoscope: America's Disability Network
(incorporating the Silent Network)
Jun-90


Lifetime Television
Feb-84


Lottery Channel
Nov-95


Mor Music TV
Aug-92


MTV: Music Television
Aug-81


MTV Latino
Oct-93


MSNBC (replaces America's Talking)
Jul-96


NASA Television
Jul-91


National & International Singles Television
Network
Apr-95


NET - Political NewsTalk Network (formerly
National Empowerment Television)

Dec-93


Nickelodeon
Apr-79
                          Programming Service
Launch Date


Nick at Nite
Jul-85


Nostalgia Channel
Feb-85


The 90s Channel
Nov-89


The Game Show Network
Dec-94


The Inspirational Network (INSP)
Apr-78


The Filipino Channel
Apr-94


The History Channel
Jan-95


The Movie Channel (TMC)
Dec-79


Playboy Network (formerly Playboy Channel)
Nov-82


Popcorn Channel
Nov-95


Prevue
Feb-88


Sci-Fi Channel
Sep-92


SCOLA
Aug-87
Showtime
Jul-76


SingleVision
Jun-94


Spice
May-89


Sundance Channel
Feb-96


Telemundo
Jan-87


TNN: The Nashville Network
Mar-83


The Travel Channel
Feb-87


Trinity Broadcasting Network
Apr-78


Trio
Sep-94


TV Asia
Apr-93


TV-Japan
Jul-91


U Network
Oct-89


Univision
Sep-76
                        Programming Service
Launch Date


ValueVision
Oct-91


VH-1
Jan-85


Via TV Network
Aug-93


Video Catalog Channel
Oct-91


The Weather Channel
May-82


Worship Network
Sep-92


Z Music
Mar-93




* Currently, there are no MSO ownership interests in C-SPAN and C-SPAN
2. However, several
MSOs support C-SPAN and are represented on the board of directors as
voting members. 1995
Competition Report.

Source:   NCTA Comments, 1996; Broadcasting and Cable, April 29, 1996, at
61-78.
                               TABLE 3

                   Planned National Programming
                Services With Ownership Interests
Held by a Cable Operator



                          Programming Service
MSO Affiliation
 Expected Launch Date


BET Movies/STARZ!3
TCI & Time Warner
Feb-97


CNNSI
Time Warner
Dec-96


Jones Health Network
Jones Cable
1996


Jones Language Network
Jones Cable
TBA


M2: Music Television
Cablevision Systems
TBA


The Parents Channel
Malofilm Communications
1996


Soap TV
Fifth Dimension Communications
Dec-96


The Singles Network
Rainbow Programming
1996


TCI/Microsoft Channel
TCI
1996


World African Network
Time Warner
1996


TBA - To Be Announced

Sources:   NCTA Comments, Table 9 July 19, 1996.
                                TABLE 4

              Planned National Programming Services
                    Without A Cable Operator
                  Holding An Ownership Interest


                        Programming Service
Expected Launch Date


Air & Space Network
TBA


American West Network
TBA


Animal Vision: The Animal Channel
2nd Qtr 97


Anti-Aging Network, The
4th Qtr 96


Applause Networks
Dec-96


Arena (formerly Classic Music Channel)
4th Qtr 96


Art & Craft Network
TBA


Arts & Antiques Network
Dec-96


Axon (formerly XTV)
4th Qtr 97


The Auto Channel
1st Qtr 97


Automotive Television Network (ATN)
Dec-96
Benefit Network
1998


Biography Channel, The
TBA


Boating Channel
2nd Qtr 97


Booknet
Jan-97


The Cable Consortium
TBA


Career & Education Opportunity Network
3rd Quarter 1997


Catalogue TV
Jan-97


CEO Channel
4th Qtr 96


Channel 500
TBA


CHOP TV
4th Qtr 96


Collectors Channel
Spring 97


FAD TV (Fashion & Design Channel)
Late 96


Fashion Network
TBA (Launched regionally in NY & CT)
                          Programming Service
Expected Launch Date


Fitness Interactive Television (formerly FXTV
Fitness and Exercise Television)

4th Qtr 1996


Gaming Entertainment Television
Oct-96


Global Village Network
4th Qtr 96


Golden American Network
4th Quarter 1996


The Gospel Network
4th Quarter 1996


Hobby Craft Network
1996


Home Improvement TV Network
TBA


Horizons Cable Network
TBA


Jackpot Channel, The
TBA


Kid City
4th Qtr 97 - 1st Qtr 98


The Love Network
Dec-96 (or Apr-97)


MBC Movie Network, The
TBA
New Science Network
1997


ORB TV
1997


Parent Television
4th Qtr 96


Merchandise Entertainment Television
TBA


Parenting Satellite TV Network
4th Quarter 1996


The Pet Television Network
1st Qtr 97


Premiere Horse Network
Jan-97


Prime Life Network
TBA


Real Estate TV Network
2nd Qtr 97


Recovery Net/The Wellness Channel
Limited Launch Feb 96 (Dec-96)


The Seminar Channel
TBA


Sewing & Needles Arts Network
TBA


The Success Channel
1996


Talk TV Network
1997
                          Programming Service
Expected Launch Date


Technology Channel, The
TBA


TRAX Television Network
Late 1996


TV 5
Sep-97


Sources:    NCTA Comments, 1996; Broadcasting and Cable, April 29, 1996,
at 61-79.
                                TABLE 5

         Top Eight Major MSO Ownership in National Programming
                    MSO Rank in Order by Subscribers




Services

Subs.
(Mil.)


TCI

Time
Warner
Contin-
ental
Cable-
vision


Comcast


Cox
Cable-
vision
Sys.


Adelphia

Jones
Cable


Action Pay-
Per-View1/
7.2
22.0%
15.0%




Animal
Planet
              49.0%




   24.7%




   AMC
   61.0




   75.0%




   BET 1/
    45.0
   22.0%
   15.0%




BET Jazz 1/
    0.8
   22.0%
   15.0%




 The Box
   21.1
   5.5%
  Bravo
   22.5




  50.0%




Cartoon 2/
    28.1

  100.0%




Catalog 1


  50.0%




 Cinemax
   8.9

  100.0%
 CNN 2/
   68.6

   100.0%




CNNfn - The
 Financial
Network 2/
    6.2

   100.0%




CNN Int'l 2/
    5.5

   100.0%




  Comedy
 Central
   40.8

   50.0%




 Court TV
   26.7
  33.3%
     33.3%
     33.3%




 Discovery
     68.0
    49.0%



     24.6%




     Encore
    Thematic
Multiplex:
  Love Stories
      9.3
     90.0 %




   Encore 2:
    Westerns
       *
     90.0%
Services

 Subs.
 (Mil.)


  TCI

  Time
 Warner
Contin-
 ental
 Cable-
 vision


Comcast


  Cox
 Cable-
 vision
  Sys.


Adelphia

 Jones
 Cable


Encore 3:
 Mystery
    *
  90.0%




Encore 4:
  Action
    *
  90.0%
         Encore 5:
        True Stories
             *
           90.0%




         Encore 6:
            WAM!
         America's
           Youth
          Network
             *
           90.0%




              E!
        Entertainment
             40.0
            10.3%
            50.0%
            10.3%
            10.3%
            10.4%




          Faith &
           Values
          Channel
             25.7
49.0%
The Family
Channel
             65.4
20.3%




FIT TV
7.2
20.3%




fX

50.0%




FXM

50.0%
GEMS
Television
6.0




50.0%




The Golf
Channel 3/
3.0


20.2%
                3/

                3/
                3/



              Great
             American
             Country
                *




                x


              HBO 1
               20.8

              100.0%
  HBO 2
    *

  100.0%




  HBO 3
    *

  100.0%




Headline
 News 2/
   61.1
  22.6%
  18.6%
    x
    x
 Services

   Subs.
   (Mil.)


   TCI

   Time
  Warner
 Contin-
  ental
  Cable-
  vision


 Comcast


    Cox
   Cable-
   vision
    Sys.


 Adelphia

   Jones
   Cable


    Home
  Shopping
 Net. (HSN)
    49.2
   80.4%




    Home
Shopping II
     *
   80.4%
Independent
Film Channel
    3.0




   50.0%




International
   Channel
     7.5
    45.0%




   Intro
 Television
    9.2
   100.0%




   Jones
  Computer
  Network
    1.5
  81.0%


Learning
Channel
  48.5
 49.0%



  24.6%




   Mind
Extension
University
   26.0




  66.0%


MuchMusic
   4.0




  50.0%




Newsport
  6.5
 33.0%




  25.0%
Outdoor Life
    3.9


   23.0%
   22.5%
   41.0%




 Ovation: The
Fine Arts Net.
      *




   Prime
 Deportiva
    2.7




   Prime
  Network
    48.4
   33.0%




   25.0%
  Product
Information
  Network
    5.4




   50.0%

     5/
     5/


    QVC
    56.1
   42.6%


   57.4%




     Q2
    11.3
   42.6%


   57.4%
 Services

   Subs.
   (Mil.)


   TCI

   Time
  Warner
 Contin-
  ental
  Cable-
  vision


 Comcast


    Cox
   Cable-
   vision
    Sys.


 Adelphia

   Jones
   Cable


  Request
Television:
 Request 1
    35.0
                    40.0%




                  Request
              Television:
                Request 2
                        *
                    40.0%
    Request
Television:
Request 3-5
          *




Sega Channel
           *
       33.0%
       33.0%




Speedvision
    Network
        1.2


       22.1%

       39.0%
           x




     Starz!
        3.3
       48%
         The Sunshine
              Network
                  3.8


                7.5%

                5.3%




              TBS 2/
                68.5

              100.0%




             TV Food
         Network 4/
                17.0


                15.0%

                  4/

  4/



TNT 2/
  67.5

100.0%
   Turner
  Classic
 Movies 2/
    10.0

                 100.0%




  Viewers
   Choice
    16.0
   10.0%
   17.0%
   12.0%
   11.0%
   20.0%




   Viewers
   Choice:
 Continuous
Hits 1, 2, 3,4
      **
    10.0%
    17.0%
    12.0%
    11.0%
    20.0%




  Viewers
Choice: Hot
   Choice
     **
   10.0%
   17.0%
   12.0%
   11.0%
   20.0%
Sources:

     Subscriber count was obtained from Paul Kagan Assocs., Inc., Cable
TV Programming, July
     31,1996 at 12 and National Cable Television Assoc., Cable Television
Developments,
     Spring 1996. Ownership percentages were obtained from MSO's 10K
Reports; Cablevision,
     July 15, 1996 at 66; Ownership interests reported for earlier
periods may not reflect current
     ownership.

Notes:

  x Indicates percentage of ownership is less than 5%.
  * Indicates subscriber amount is not available.
  ** Subscribership of 16.0 million includes all six Viewers Choice
channels (See NCTA Cable
     Television Developments, Spring 1996, at 82).

  1/ A programming service of BET Holdings, Inc. See BET Holdings, Inc.,
7/31/94 Annual
     Report at 34.
  2/ Previously a Turner Broadcasting programming service.
  3/ Official ownership percentages of Comcast, Cablevision Systems, and
Adelphia, in The Golf
     Channel are not available.
  4/ Voting partners in Television Food Network & percentages of
ownership include Scripps
     Howard (13.17%) and Landmark (12.00%). Others having less than 5%
interest are:
     Adelphia Communications, Times Mirror, and C-TEC. Percentages
provided by Mr. John
     Davis of Wiley, Rein, and Fielding, Sep 21, 1995.
  5/ Percentage of ownership is not available.
                             TABLE 6

            Vertical Integration:    Top 25 Programming
 Services by Subscribership




                              Rank

                      Programming Network
                            (Top 25)
                           Number of
                          Subscribers
(Millions)
                     MSO Ownership Interest
in Network


1
CNN
68.6
Time Warner


2
ESPN
68.6
None


3
TBS
68.5
  Time Warner


4
C-SPAN
64.5
None


5
USA Network
68.0
None


6
Discovery
68.0
TCI, Cox
7
TNT
67.8
Time Warner


8
Nickelodeon/Nick at Nite
66.7
None


9
TNN (The Nashville Network)
63.0
None


10
The Family Channel
65.4
TCI


11
Arts & Entertainment (A&E)
65.1
None


12
Lifetime
 64.6
None


13
MTV
64.1
None


14
The Weather Channel
63.3
None


15
Headline News
61.4
Time Warner
                   Rank

           Programming Network
                 (Top 25)
                Number of
               Subscribers
                (Millions)

          MSO Ownership Interest
                in Network


                    16
      AMC (American Movie Classics)
                   61.0
           Cablevision Systems


                    17
                   CNBC
                   58.6
                   None


                    18
                   QVC
                   56.4
               Comcast, TCI


                    19
                   VH-1
                   55.1
                   None


                    20
HSN
                   49.7
                    TCI


                    21
        The Learning Channel (TLC)
                   49.5
                 TCI, Cox


                    22
                C-SPAN II
                   45.2
                   None
                               23
                              BET
                              45.0
                        TCI, Time Warner


                               24
                         Prevue Channel
                              44.1
                              None


                               25
                         Comedy Central
                              40.8
                              TCI


                  Current as of July 31, 1996

Sources: Paul Kagan Associates, Cable TV Programming, July 31, 1996, at
10.
                              TABLE 7

Vertical Integration: Top Fifteen Programming Services by Ratings
                       By Prime Time Rating

Rank
Programming Service
MSO with Ownership Interest


1
TNT
TCI, Time Warner (others have 5% or less)


2
TBS
TCI, Time Warner (others have 5% or less)


3
ESPN
None


4
USA Network
  None


5
Lifetime
None


6
Cartoon Network
TCI, Time Warner (others have 5% or less)


7
Arts & Entertainment
None


8
The Family Channel
TCI


9
Discovery
TCI, Cox
10
TNN (The Nashville Network)
None


11
CNN
TCI, Time Warner (others with 5% or less)


12
The Learning Channel
TCI, Cox


13
BET
TCI, Time Warner


14
Sci-Fi Channel
None2


15
The Weather Channel
None


Sources: Paul Kagan Associates, Cable TV Programming, Prime-Time
Ratings, July 1996, at
10.
                            APPENDIX H

                 Program Access Matters Resolved

     1.   In a program access complaint involving exclusivity decided in
1996, Corporate
Media Partners d/b/a Americast ("Americast") and Ameritech New Media,
Inc. ("New Media")
alleged that they had been denied access to Home Box Office ("HBO")
programming as a result of
Continental Cablevision, Inc.'s ("Continental") and HBO's exclusive
contract. In denying the
complaint, the Cable Services Bureau concluded that parties to an
exclusive contract may enforce
an exclusivity provision with respect to newly-acquired systems, where
the contract included an
after-acquired systems provision that was made part of the contract prior
to June 1, 1990.

     2.   The Cable Services Bureau denied a program access complaint
filed by the American
Cable Company ("American Cable") against TeleCable of Columbus, Inc.
("TeleCable") alleging
violations of Section 628(b). The Cable Services Bureau found that
TeleCable's exclusive
programming agreements with Sci-Fi and ESPN were permissible under
Section 628(h)'s exemption
of exclusive programming contracts because neither service was vertically
integrated at the time the
complaint was filed.

     3.   The Bureau also dismissed several complaints alleging
violations of the
Commission's program access rules on video dialtone ("VDT") platforms.
Interface
Communications Group, Inc., Digital Broadband Applications Corp. and
Residential
Communications Network of Massachusetts, Inc. separately filed complaints
against Cablevision
Systems Corp., Rainbow Programming Holdings, Inc., and American Movie
Classics Co., alleging
violations of the Commission's program access rules. Because the 1996
Act repealed the
Commission's VDT rules and policies and the Commission now requires
operating VDT systems
to convert to one of the four options available under the 1996 Act, the
Bureau dismissed the above
referenced complaints as moot.

     4.   Two other cases were dismissed in the last year after
complainants filed to withdraw
their complaints. CAI Wireless Systems, Inc. ("CAI") and Connecticut
Choice Television, Inc.,
("CCT") filed a program access complaint against Cablevision Systems,
Inc., Rainbow Programming
Holdings, Inc., SportsChannel New England and SportsChannel New York,
alleging that defendants
refused to provide SportsChannel New England and SportsChannel New York
programming to CCT
for use by Southern New England Telephone's ("SNET") video dialtone trial
service and refused to
provide SportsChannel New England programming to CAI for its wireless
cable system. Because
SNET withdrew its plans to offer VDT service, CAI and CCT filed on
February 1, 1996 to
withdraw their program access complaint. On March 4, 1996, the Bureau
dismissed the complaint
without prejudice. Similarly, CAI and CCT filed a program access
complaint against Cablevision
Systems, Inc., and Madison Square Garden Network, Inc., alleging that
defendants refused to
provide programming to CAI and CCT. On February 1, 1996, CAI and CCT
filed to withdraw their
complaint and on March 4, 1996, the Bureau dismissed the complaint
without prejudice.

     5.    In a discrimination case resolved in 1996, Consumer Satellite
Systems, Satellite
Receivers, Ltd, Galaxy Satellite Services, Inc., A&L Satellite, Inc.,
Programmers Clearing House,
Inc., American Programming Service, Inc., ("Complainants") filed a price
discrimination complaint
in 1994 against United Video Satellite Group, Inc., and its wholly owned
subsidiary UV Corp.,
d/b/a/ Superstar Satellite Entertainment ("Superstar"), alleging that
Superstar had discriminated
against complainants with respect to rates for programming purchased from
Superstar in violation
of Section 628. The parties, assisted by Commission staff, settled the
matter and the case has been
dismissed.

     6.   In an appeal of a 1995 Order, the Cable Services Bureau denied
a Petition for
Reconsideration by SportsChannel Associates ("SportsChannel"), seeking
reconsideration of the
Cable Services Bureau's decision in CellularVision of New York v.
SportsChannel Associates.   In
the CellularVision Order, the Cable Services Bureau found that
SportsChannel, an affiliate of
Cablevision Systems, discriminated against CellularVision in the sale of
SportsChannel New York
("SCNY") programming in violation of Section 628(c)(2)(B) of the
Communications Act and
Section 76.1002(b) of the Commission's rules. As a result, the Bureau
ordered SportsChannel to sell
its SCNY programming to CellularVision on non-discriminatory terms within
45 days from the
release date of the Order. In denying the Petition for Reconsideration,
the Cable Services Bureau
found, based on the record, that SportsChannel's arguments did not
warrant reversal of the Cable
Services Bureau's decision, and that SportsChannel's stated concerns
regarding signal security did
not constitute a legitimate business reason for refusing to provide
programming to CellularVision.

     7.   Finally, two other cases were dismissed in the last year after
the parties filed Joint
Stipulations of Dismissal.   In one matter, OpTel, Inc. ("OpTel") filed a
program access complaint
against Century Southwest Cable Television, Inc. ("Century"), alleging
that Century had denied
OpTel access to Prime Ticket Networks, L.P. ("Prime Ticket") programming
pursuant to an
exclusivity agreement that was not validly grandfathered pursuant to
Section 628(h). OpTel also
alleged that Century had violated Section 628(c)(2)(B) by unreasonably
refusing to sell OpTel its
Prime Ticket programming. In the other matter, TELE-TV Media L.P.
("TELE-TV") and Pacific
Bell Video Services ("Pacific Bell") filed a complaint alleging similar
violations against Century
Communications Corporation and Prime Ticket Networks, L.P. (d.b.a. Prime
Sports West).   With
respect to the OpTel matter, with assistance from Commission staff, the
parties filed a Joint Stipulation of Dismissal requesting dismissal of
the complaint, resulting in an
agreement by Century to waive its exclusive rights to Prime Ticket's
programming with respect to
all other MVPDs, including, but not limited to OpTel. Shortly after
resolution of the OpTel matter,
the parties filed a similar Joint Stipulation with respect to the
complaints by TELE-TV and Pacific
Bell. Thus, the Cable Services Bureau issued orders dismissing both
matters.

				
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