Courier-Post from Camden, New Jersey • Page 6

COURIER-POST, Cable TV The Big Picture is Changing ig growth means big losses for cable firms Cable franchise fees Franchise fees paid by cable companies have become art important source of income for the nation cities. (In millions) $800 $700 $600 $500 $400 $300 $200 $100 0 6 9 "The second quarter, while not as robust as the first quarter, in which there were subscriber growth benefits because of the Per- sian Gulf war and the major force of CNN, it looks like the majority-of the industry had modest gains, and most of us believe the industry will grow in subscriber base 3 to 4 -percent a year for some time to come." Cable stocks, Leibowitz said, have outperformed the general market since the depth of Persian Gulf war concerns and coverage last September. Telecommunications Systems Inc. stock has advanced 40 percent and Comcast 46 percent since Sept 30, he said. Other than acquisitions, cable companies get access to new subscribers through municipal applications for non-exclusive franchises, said a spokesman for New Jersey's Board of Public Utilities, which includes the state's cable TV office.

Franchise terms in the state range from three to 15 years, said spokesman George Dawson. Cable firms pay com-munties a royalty equivalent to two percent of basic subscriber revenues, which town governments can use as general tax revenues, Dawson said. year, she said. Cable firms view the prospect of re-regulation as "a paper tiger. We don't think it's a real issue," said Bailey.

However, she added, "the interests of the company are very different from intrests of people on Wall Street They don't necessarily feel the (cable) industry is in danger long-term." A bank credit crunch in the wake of the savings and loan collapse has shut off cable firm growth by acquisition for the past year, but "we really haven't had any problems getting money," said Bailey. Comcast in February issued new stock that yielded $175 million and refinanced bank loans to provide an additional $140 million to the firm, which used $90 million from the refinancing to reduce other long-term debt. "Comcast now has the largest cash balance and credit availability in its history," the firm's 1990 annual report states. Cash and unused credit as of March totaled $500 million, it said. Industrywide, despite recession, "cable continues to compound impressive subscriber revenues and cash flow growth," said industry analyst Dennis Leibowitz of the Donaldson Lufkin Jenrette securities firm in New York.

A cable company's bottom line, Bailey said, is actually its operating cash flow, or earnings before taxes, interest and depreciation. Comcast's operating cash flow in 1990 was $271 million, increasing 21 percent from a year earlier. Because of the company's ability to generate operating income and raise funds externally, "substantial losses for the foreseeable future" aren't expected to affect business activities, Comcast said in its 1990 annual report. Comcast's change in philosophy, from a company that stresses earnings to increased acquisitions that wipe out earnings, came after industry deregulation in 1985, Bailey said. Cable industry investors, largely institutional, "are comfortable with that concept," she said.

But stock of Comcast and other cable firms has been flat or down for the past year. Comcast shares, listed on NASDAQ, traded at 15V in second-quarter 1990 and now is 14. "Industry issues" such as the fear of federal re-regulation and a crunch on lending have affected cable stock prices, Bailey said. In years prior to the regulatory flap that started in 1989, Comcast stock increased about 20 percent a By BERNIE WEISENFELD Courier-Post Staff Americans tuned in to cable television to the tune of nearly $18 billion in subscriber revenue last year, the National Cable Television Association reports. Cable firms, though, say they experience losses despite increasing rates and revenues because of depreciation on new acquisitions.

For example, industry leader Telecommunications Systems Inc. (9.1 million suscribers) had a net loss of $177 million last year. Locally, the dominant multiple-system operator (MSO), Comcast Corp. of Philadelphia, had 1990 revenues of $657 million, up from $562 million in 1989 and $449 million in 1988. Comcast is 50 percent owner of Storer Communications Inc.

and 40 percent owner of Garden State Cablevision which together serve about 483,000 subscribers in Burlington, Camden and Gloucester counties. But despite double-digit revenue growth, Comcast, like a number of major cable companies, also posts big losses from rapid growth. Last year, Philadelphia-based Comcast lost $178 million after depreciation and amortization, primarily the result of size- cf, T1 T- If) tJLA i v--i a I '80 '81 '82 '83 '84 '86 '87 '88 '89 '90 Source: Cable TV Franchising able cable firm acquisitions in recent years. For example, Comcast and a minority investor group acquired Garden State from the. New York Times Co.

two years ago for $420 million. "Every time you purchase a new company, you have to write up depreciation on that company," Dave Mather, Gannett News Service said Comcast investor relations director Marilyn Bailey. And Comcast, said Bailey, has increased in size 10 times in the last 10 years, primarily by acquisition. In 1990, depreciation and amortization costs, which are noncash charges to earnings, totaled $161 million. 5 Subscribers main gripe: Rising rates VHF station 'can't get on cable' By CHUCK DARROW Courier-Post Staff Hr tf -if Itt Hi 1 riliJlK Hfi- I I I iff v- oR I ') jJJ ll 1 Courier-Post photo by At Schell Channels Chief: Paul Engle, president of the channel 8 in Hammonton, says 'it's impossi-company that owns the 6-year-old WOCC-TV, Dle to reach You probably didn't know that Hammonton's WOCC-TV, Channel 8, televised Gov.

Jim Florio's speech about taxes on Aug. 2. Come to think of it, you probably didn't know there was a Channel 8 in Hammonton. And that, says the station's owner, is the result of a boycott of the station on the part of South Jersey's cable system operators who say Channel 8's programming does not merit inclusion on the systems. Channel 8 is South Jersey's only VHF television station and one of two in the state.

(The other is Channel 9 in Secaucus.) It is licensed as a "low-power" station by the Federal Communications Commission (FCC), which means its signal is only about half as strong as that of Philadelphia outlets like Channels 3, 6 and 10. The 6-year-old station offers a mix of syndicated entertainment and sports programming, "info-mer-cials" (those half-hour ads that simulate talk-show formats) and local news and public affairs shows. Its broadcast area covers portions of Atlantic, Gloucester, Burlington and Camden counties. But unless you live within 15 miles or so of the station's Waterford Township transmitter, or have an outdoor antenna hooked to your set, you can't receive it. "We're the only VHF television station in South Jersey, but with cable penetration over 70 percent (in the region), it's impossible to reach viewers," says Paul Engle, president of South Jersey Television which owns and operates Channel 8.

"We're licensed by the FCC to serve the public, but we're not allowed to serve it because we can't get on cable." Recently, Engle thought he'd found a trump card. Section 612 of the federal Cable Act of 1984 stipulates that all cable systems must reserve 10 percent of channel capacity for commercial lease, and must make the space available at "a reasonable rate." According to Engle, the systems agreed to consider the plan, but quoted him lease rates that were economically unfeasible. For instance, Garden State Cable of Cherry Hill, South Jersey's largest system, initially quoted Engle an annual rate of $4 million. The company subsequently lowered it to $1,750,000 which Engle says is still too steep. "Based on Garden State's own advertising rates," he said, "even if I sold out all my advertising, it would still cost 30 percent more than I could gross." By JOSEPH BUSLER Courier-Post Staff The verdict from the state's cable subscribers is in: Cable television costs too much.

"In our experience, through our municipal assistance program and our daily contact with subscribers, a major problem is the rate structure in New Jersey," said Celeste Fasone, executive director of the state Office of Cable Television, which is part of the Board of Public Utilities (BPU). "The absence of effective competition places subscribers who rely on cable at somewhat of an economic disadvantage." Since 1986, none of New Jersey's 50 cable systems has been subject to rate regulations. A change in Federal Communications Commission (FCC) rules announced in June may permit a handful of the state's municipalities Cape May may be one of them to regulate rates, but only a tiny percentage of subscribers would be affected, Fasone said. The BPU has worked with the state's legislators in support of federal legislation to re-regulate cable rates. One such bill, S-12, which is supported by Sen.

Bill Bradley, would restore rate regulation and redraw how the federal government regulates the cable industry. The cable industry, not surprisingly, is not enthusiastic. "We oppose any efforts to impose additional regulation on the cable television industry," said Catherine Miller, a spokeswoman for the J. Cable Television Association. She said that some regulations the state BPU has recently imposed on the industry, such as a requirement that the BPU and subscribers be notified in advance if a cable operator moves its offices, "are onerous." She said the industry does support "reasonable standards." Fasone said that, statewide, rate increases of more than 40 percent have been imposed on 92 percent of cable subscribers since January 1987, when deregula.

tion became effective. Another 7 percent of subscribers experienced increases of 10 to 40 percent during that time. Fasone said price increases typically are steepest when a cable system increases its channel capacity and when systems are sold. "About 45 percent of the state's 50 systems have changed hands since deregulation," she said. The current state average for basic cable service is $18.60.

she said. South Jersey's largest cable company, Garden State Cable Television of Cherry Hill, which serves 176,857 subscribers in 59 communities in five counties, charged $10.75 a month in 1986. It now charges $18.20 ($15.75 in Carneys Point). Storer of Burlington County charged $12.25 in 1986 and $20.35 today. Storer of Gloucester County charged $11.50 in 1986 and $20.15 today.

TKR Cable of Maple Shade charged $10.95 in 1986 and $17.50 today. TKR of Gloucester County cost $12.25 in 1986 and $19.50 today. Jones Intercable was $11 in 1986 and is $17 now. South Jersey Cablevision was $11.50 in 1986 and is now it will rise to $21.45 as of Sept 1. Sammons Communications of Vineland, serving Newfield in Gloucester County, was $8 in 1986 and now charges $15.50.

Tri-County Cable Television was $12.25 in 1986 and is now $20.35. little of interest on Channel 8. "We just don't feel (Channel 8) has the mix of programming we feel our subscribers want," says Irene Picard, general manager of Jones Intercable. And while Picard acknowledges Channel 8 does offer programming of local interest, "We feel very good about the local coverage we already provide on Channel 13." Channel 13 is the local access station on which Jones Intercable airs self-produced programming, including a nightly newscast Ed Pardini, general manager of Storer Burlington, refuses to discuss Channel 8. "It's not our policy to talk about contract negotiations that are ongoing," he says.

"I have no comment." Despite his lack of success, Engle refuses to give up the cable fight However, he hopes to keep his battle out of the courts, even though he feels he'd likely find some measure of legal support. "Other people in my position (around the country) are considering litigation," he says. "I hope to avoid things like that." The figures he cites for other systems are even more extreme. According to Engle's mathematics, to lease a channel on Storer Cable of Gloucester County "would be 1200 percent greater than the potential income Channel 8 can produce." For Storer'8 Burlington County operation, the cost, says Engle, would be "885 percent greater based on their ad rates." So why is South Jersey's cable industry making it so tough on Channel Wouldn't it make sense to offer viewers a local station the only local station? Two area systems believe Channel 8 simply doesn't offer enough alternative programming. "He (Engle) came to us and said, 'Why don't you put my channel said Patrick McCall, general manager of Garden State Cable.

"His mind-set is that cable operators have to create an instant business for him. "The question we had to ask is, 'Do you have anything to give us that will be of interest to the The answer is a loud Tumersville-based Jones Intercable, which covers parts of Gloucester and Atlantic counties, also sees Cable popularity surged as technology grew By JOSEPH BUSLER Courier-Post Staff Cable television dates back to 1950, almost to the birth of commercial broadcast television. But today's cable industry is to those early Community Antenna Television (CATV) operations as the space shuttle is to a bottle rocket CATV originated as a way of bringing broadcast stations to areas where distance or mountainous terrain prevented reception from a normal rooftop antenna. A giant tower picked up the distant stations, and cables were strung to deliver the signal to subscribers' houses. By the mid-1960s, when the cable industry was beginning to realize its technical and commercial 1982, 1,017,942, or about one in seven New Jersey households, were wired.

Deregulation of rates became effective in 1986, but that doesn't seem to have dented the industry's growth. By Jan. 1, 1987, the state's subscribers totaled 1,483,982. At the start of 1990, subscribers were up to 1,831,463. By Jan.

1 of this year, the latest date for which statewide figures are available from the state Office of Cable Television, subscribers totaled 1,923,555, or 70 percent of the state's households. The number of persons who also subscribed to one "premium" cable channel, such as HBO or Prism, rose from 99,123 in 1977 to 1,269,377 as of Jan. 1. potential, only about 6 million households, mostly rural less than 4 percent of the country were wired, for a charge of about $5.50 a month. Tough FCC rules stunted the industry until 1972.

In December 1972, only 156,956 of New Jersey's households had cable, which generally carried 12 channels, including the VHF and UHF broadcast channels. By Jan. 1, 1979, 401,519 households were subscribing, but a big event was about to occur. Satellite transmission of distant stations was beginning, and that year, HBO was launched, bringing in huge numbers of new subscribers who wanted commercial-free, uncensored movies in their homes. By July 1, 1980, 650,463 households were subscribers.

In July km. 1 j' Project Editor Stu Michaelson Reporters: Joseph Busier, Chuck Dar-row, Chuck Gormley, Judith W. Winne, Laura Sutphin, Kimberly Keck Graphics: Rob King, Gannett News Service Photography: Al Schell Layout: Laurie Stuart Copy editors: Alan Jaffe, Ar.drea Kelley, Rick Robinson The rates are too high. I'd like to see more parenting programs about baby care and good nutrition. Kate Mason Mount Laurel I have no problems with it.

I'd prefer to see more sports but I'm probably in the minority. Most people I know like more movies and Mike Yanovitch Cinnaminson Voices I watch a lot of TV HBO (Home Box Office), Prism and the Family Channel. I love it (cable). Nothing needs to be changed. Joe Murray Willingboro 3 -J.