Depo Carl Pilnick v1

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
PREFERRED COMMUNICATIONS, INC., )
)
PLAINTIFF, )
)
vs. )
NO. 83 5646CBM <BX)
)
CITY OF LOS ANGELES, ET AL., )
)
DEFENDANTS. )
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LOS ANGELES, CALIFORNIA
WEDNESDAY, JULY 13, 1988
REPORTED BY:
CINDY BELMONTE
CSR NO. 6387
.l./Luiwig Court 9(eporters, Inc.
10868 KLING STREET
TOLUCA LAKE. CALIFORNIA 91602
JOB NO.
(818) 508-7794 (213) 651-4117
FSW2821
/
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.-.--________>=..L=UD""-'WJG COURT REPORTERS INC.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
PREFERRED COMMUNICATIONS, INC., )
)
PLAINTIFF, )
)
VS.
) NO. 83 5646CBM (BX)
)
CITY OF LOS ANGELES, ET AL.,
)
)
DEFENDANTS.
)
----------------------------------,
DEPOSITION OF CARL PILNICK, VOLUME I, TAKEN ON
BEHALF OF THE PLAINTIFF, AT 200 NORTH MAIN
STREET, 16TH FLOOR, LOS ANGELES, CALIFORNIA,
COMMENCING AT 9:20 A.M., ON WEDNESDAY, JULY 13,
1988, BEFORE CINDY BELMONTE, CSR NO. 6387, A
NOTARY PUBLIC IN AND FOR THE STATE OF CALIFORNIA
AND COUNTY OF LOS ANGELES.
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LUDWIG COURT REPORTERS. INC.
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FOR THE PLAINTIFF:
FARROW, SCHILDHAUSE & WILSON
BY: ROBERT M. BRAMSON
ATTORNEY AT LAW
2125 OAK GROVE ROAD
SUITE 120
WALNUT CREEK, CALIFORNIA 94598
FOR THE DEFENDANT CITY OF LOS ANGELES:
MILLER, YOUNG & HOLBROOKE
BY: LARRINE S. HOLBROOKE
ATTORNEY AT L.AW
1225 NINETEENTH STREET, N.W.
WASHINGTON, D.C. 20036
AND
SHELLEY ILENE SMITH, ASSISTANT CITY ATTORNEY
AND
ED PEREZ, ASSISTANT CITY ATTORNEY
1800 CITY HALL EAST
200 NORTH MAIN STREET
LOS ANGELES, CALIFORNIA 90012
ALSO PRESENT: PERRY PARKS, JR.
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LUDWIG COURT REPORTERS INC.
MR. BRAMSON

(NONE:)
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LUDWIG COURT REPORTERS, INC.
LOS ANGELES, CALIFORNIA; WEDNESDAY, JULY 13, 1988
9:20 A.M.
CARL PILNICK,
HAVING BEEN FIRST DULY SWORN, WAS
EXAMINED AND TESTIFIED AS FOLLOWS:
EXAMINATION
BY MR. BRAMSON:
Q GOOD MORNING, MR. PILNICK.
A GOOD MORNING.
Q I UNDERSTAND THAT YOU HAVE BEEN RETAINED BY THE
CITY OF LOS ANGELES TO PROVIDE SOME EXPERT OPINION IN THE
A THAT'S CORRECT.
Q I WAS SUPPLIED YESTERDAY WITH TWO DOCUMENTS,
ONE OF WHICH IS ENTITLED -PHYSICAL AND TECHNICAL
CHARACTERISTICS OF CABLE SYSTEMS.- IT'S A THREE-PAGE
OUTLINE. THE OTHER DOCUMENT IS ENTITLED -OVERVIEW OF CABLE
SYSTEM OVERBUILDS - CARL PILNICK.
DO YOU RECOGNIZE THOSE TWO DOCUMENTS?
A YES, I DO.
Q IS IT YOUR UNDERSTANDING THAT THE FIRST
DOCUMENT HERE, BEGINNING WITH THE PHYSICAL AND TECHNICAL
OURT REPORTERS, INC.
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AREAS OR SUBJECT MATTERS YOU EXPECT TO TESTIFY ON. YOU'VE
TOLD ME THAT YOU BELIEVE THE OUTLINE HERE, THE PHYSICAL AND
TECHNICAL CHARACTERISTICS, COVERS PART OF YOUR TESTIMONY.
AND YOU'VE TOLD ME THIS DOCUMENT CALLED "OVERVIEW OF CABLE
SYSTEM OVERBUILDS" COVERS PART OF WHAT YOU EXPECT TO TESTIFY
ABOUT OVERBUILDS.
A WELL, I THINK IT SUMMARIZES ACCURATELY WHAT
DO EXPECT TO TESTIFY ON, AND I WOULD EXPECT WITH QUESTIONS
FROM BOTH PARTIES I MIGHT EXPAND ON SOME OF THE MATERIAL IN
THERE.
I THINK IT IS A SUMMARY OF MY POSITION ON
OVERBUILDS, AND I THINK THE TWO PRIMARY AREAS THAT I'M
EXPECTED TO TESTIFY ABOUT ARE, FIRST, THE GENERAL PHYSICAL
AND TECHNICAL CHARACTERISTICS OF CABLE SYSTEMS AS INDICATED
BY THE OUTLINE. AND THEN MORE SPECIFICALLY, THE QUESTION OF
OVERBUILDS, OVERLAPPING FRANCHISES AND CABLE AS A POSSIBLE
NATURAL MONOPOLY.
Q COULD YOU SUMMARIZE FOR ME WHAT OPINIONS YOU
EXPECT TO GIVE IN THIS CASE AS OPPOSED TO TESTIMONY ABOUT
YOUR UNDERSTANDING OF FACTS OR HISTORICAL BACKGROUND?
A I THINK IN TERMS Of OPINIONS, THE OPINIONS THAT
I WILL GIVE WILL INCLUDE, FIRST, MY OPINION THAT FOR MOST
CASES IN THE CABLE INDUSTRY, OVERBUILDS ARE ECONOMICALLY
DISADVANTAGEOUS BOTH TO THE COMPANIES INVOLVED IN
25 OVERBUILDS, AND ALSO REPRESENT SOME DEGREE OF DISTURBANCE TO
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LUDWIG COURT REPORTERS INC
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THE PUBLIC-AT-LARGE AND TO THE COMMUNITY THAT IS GRANTED THE
CABLE FRANCHISES.
TO SUMMARIZE THAT, IT WOULD BE IN GENERAL I
THINK OVERBUILDS ARE PRESENT ECONOMIC PROBLEMS AND THERE ARE
VERY FEW CASES IN THE CABLE INDUSTRY WHEN OVERBUILDS HAVE
BEEN ECONOMICALLY SUCCESSFUL.
I THINK BECAUSE OF THE FACT THAT IN MY OPINION
IT IS VERY DIFFICULT FOR TWO OR MORE COMPANIES TO COMPETE
FOR THE SAME SUBSCRIBERS AND TO BE ECONOMICALLY SUCCESSFUL
OVER THE LONG RUN IN DOING THAT, I THINK THAT LEADS TO THE
OPINION THAT FALLS OUT OF THAT, AND THAT IS THAT IN MOST
AREAS CABLE I WOULD TERM AS A NATURAL MONOPOLY.
Q DOES THAT SUMMARIZE ALL OF THE OPINIONS THAT
YOU EXPECT TO GIVE?
A I THINK THOSE ARE THE GENERAL OPINIONS. I
THINK THERE WILL BE A LOT OF SUB-OPINIONS THAT SORT OF fORM
THE FRAMEWORK Of THAT.
FOR EXAMPLE, I MIGHT TESTIfY AS TO THE SPECIfIC
IMPACT ON PUBLIC RIGHTS-Of-WAY THAT OVERBUILDS HAVE AND THE
RELATIONSHIP WITH UTILITIES; WHAT ACTUALLY HAPPENS IN MOST
CASES WHEN MORE THAN ONE CABLE COMPANY ATTEMPTS TO SERVICE
THE SAME AREA.
BUT I THINK THOSE WOULD BE SUPPORTING OPINIONS,
AND THEY WOULD BASICALLY PROVIDE SOME EVIDENCE AS TO WHY I
BELIEVE THAT OVERBUILDS IN GENERAL ARE VERY DIFFICULT
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r--_______ Gs:..' T R E POR T E -'I=-'-N-'--'C"-'.=--__ _______,
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ECONOMICALLY.
Q
DO YOU EXPECT TO GIVE ANY TESTIMONY RELATED TO
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THE PARTICULAR PLAINTIFF IN THIS CASE, PREFERRED
COMMUNICATIONS?
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A I EXPECT TO GIVE OPINIONS AS TO THE AREA, THE
FRANCHISE AREA AND THE DEGREE TO WHICH THE CHARACTERISTICS
OF THE FRANCHISE AREA MAKE OVERBUILDS EITHER MORE DIFFICULT
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ECONOMICALLY THAN THE AVERAGE IN THE CABLE INDUSTRY OR
PRESENT SOME SPECIFIC UNIQUE PROBLEMS.
IN OTHER WORDS, I WILL BE TALKING GENERALLY
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ABOUT OVERBUILDS IN THE CABLE INDUSTRY, AND I EXPECT TO
SPEND SOME OF MY TESTIMONY ON THE SPECIFIC CHARACTERISTICS
OF THE AREA AS RELATED TO POSSIBLE OVERBUILDS.
Q BUT YOU DON'T EXPECT TO GIVE ANY TESTIMONY
ABOUT THIS PARTICULAR PLAINTIFF AS OPPOSED TO THIS
PARTICULAR AREA?
A YOU'RE TALKING ABOUT THE CHARACTERISTICS OR THE
CAPABILITIES OF THE PLAINTIFFS THEMSELVES?
Q YES.
A
I DON'T, UNLESS I'M ASKED THE SPECIFIC
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QUESTION. BUT THAT IS NOT ONE OF THE AREAS THAT 1 HAVE BEEN
RETAINED SPECIFICALLY FOR.
Q DO YOU KNOW ANYTHING ABOUT THE SPECIFIC
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PLAINTIFF IN THIS CASE?
A I HAVE SOME INFORMATION THAT I'VE GATHERED
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DURING THE COURSE OF THE RESEARCH I'VE BEEN DOING. I DON'T
THINK I KNOW AN AWFUL LOT ABOUT THE SPECIFIC INDIVIDUALS OR
THE COMPANY.
Q YOU DON'T THINK YOU KNOW ENOUGH TO EXPRESS AN
OPINION ABOUT THIS PARTICULAR P ~ A I N T I F F AS OPPOSED TO SOME
OTHER POTENTIAL CABLE TELEVISION APPLICANT?
A THAT'S CORRECT.
Q SO I TAKE IT THAT YOUR OPINIONS AS TO
OVERBUILDS IN THIS AREA AND THE PHYSICAL AND TECHNICAL
CHARACTERISTICS OF CABLE TELEVISION THAT YOU ARE GOING TO BE
TESTIFYING ABOUT RELATE TO CABLE TELEVISION COMPANIES
GENERALLY AND NOT TO ANYTHING SPECIFICALLY TAILORED TO THIS
PLAINTIFF?
A THAT'S CORRECT.
MS. HOLBROOKE: THE RECORD SHOULD REFLECT THAT
MR. PERRY PARKS, JR., OF THE PLAINTIFF HAS JUST ENTERED THE
ROOM.
(WHEREUPON, PERRY PARKS, JR., ENTERED
THE DEPOSITION ROOM.)
BY MR. BRAMSON:
Q MR. PILNICK, YOU'VE DESCRIBED -- I DON'T KNOW
WHETHER WE WANT TO CALL IT ONE OPINION WITH SUBPARTS OR
SEVERAL OPINIONS THAT ADD UP TO A SINGLE CONCLUSION. BUT
HOWEVER WE REFER TO IT, YOU'VE SUMMARIZED THAT FOR US. I
WOULD LIKE TO KNOW WHEN YOU ARRIVED AT THAT OPINION.
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,-______________ REPORTERS, ___________________,
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A I THINK I ARRIVED AT IT OVER A COURSE OF YEARS.
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I'VE EXPRESSED IT IN ESSENTIALLY THE SAME FORM IN PREVIOUS
3 EXPERT WITNESS TESTIMONY.
4 I WAS AN EXPERT WITNESS IN THE JEFFERSON CITY
CASE IN WHICH THE QUESTION OF OVERBUILDING AND NATURAL
6 MONOPOLY CAME UP THERE. THAT WAS SEVERAL YEARS AGO. AND I
7 THINK I EXPRESSED ESSENTIALLY THE SAME OPINION, THAT IN
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GENERAL OVERBUILDING LEADS TO VERY GRAVE ECONOMIC
9 DIFFICULTIES.
SO I DON'T THINK I CAN GIVE YOU A SPECIFIC
11 DATE. BUT AT LEAST THAT'S AT ONE POINT IN TIME IN WHICH ON
12 THE PUBLIC RECORD I THINK YOU'LL FIND MY TESTIMONY.
13 Q WAS IT THEN OR BEFORE?
14 A I'VE BEEN INTERESTED IN THE AREA AS PART OF MY
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CABLE CONSULTING PRACTICE FOR A NUMBER OF YEARS. SO THAT AS
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f 16 CASES OF OVERBUILDING CAME UP, I WAS INTERESTED ENOUGH TO DO
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17 A LITTLE BIT OF INVESTIGATION AND TRY TO FIND OUT WHAT WAS
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18 HAPPENING IN EACH OF THESE AREAS. AND I THINK THE
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19 PREPONDERANCE OF THE CASES I LOOKED AT LED ME TO THAT
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CONCLUSION SOME TIME AGO. BUT IT WAS EXPRESSED SPECIFICALLY
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21 FOR THE PUBLIC RECORD IN THE JEFFERSON CITY
22 Q THE OPINION THAT YOU'RE SPEAKING OF NOW IS THE
23 OPINION THAT GENERALLY SPEAKING OVERBUILDS HAVE THE RESULTS
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24 THAT YOU DESCRIBE?
A YES.
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Q
AND YOU CAME TO THAT OPINION SOME NUMBER OF
YEARS AGO?
A I THINK IF YOU LOOK AT THE BIBLIOGRAPHY THAT'S
INCLUDED IN THAT DOCUMENT, YOU"LL SEE STUDIES GOING BACK TO
THE LATE 1970'S. AND I'VE LOOKED AT MOST OF THOSE. NOT
JUST RECENTLY, BUT AT THE TIME THEY CAME ABOUT SO THAT MY
OPINION WAS FORMED AS A RESULT OF ALL THIS MATERIAL OVER
THESE YEARS.
Q
I UNDERSTAND. I'M JUST TRYING TO GET A TIME
FRAME ON IT.
IT'S FAIR TO SAY YOU HAVE HELD THAT OPINION
CONTINUOUSLY FOR THE LAST FIVE YEARS, IS IT NOT?
A I THINK SO.
Q
YOU ALSO MENTIONED THAT YOU EXPECTED TO GIVE AN
OPINION SPECIFICALLY TAILORED, AT LEAST TO SOME EXTENT, TO
THE SOUTH CENTRAL FRANCHISE AREA OF LOS ANGELES.
A YES.
Q WHAT IS THAT OPINION?
A WELL, THAT OPINION IS THAT THOSE
CHARACTERISTICS THAT MIGHT MAKE OVERBUILDS FINANCIALLY
VIABLE ARE EVEN LESS IN THE SOUTH CENTRAL AREA THAN THEY
WOULD BE IN THE PREPONDERANCE OF THE CASES WHERE OVERBUILDS
MIGHT BE A POSSIBILITY. THAT BECAUSE OF THE CHARACTERISTICS
OF THE AREA, OVERBUILDS WOULD PROBABLY BE EVEN MORE
DISASTROUS ECONOMICALLY IN THE SOUTH CENTRAL AREA THAN IN
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MOST OTHER AREAS.
Q WHEN DID YOU ARRIVE AT THAT OPINION?
A I THINK, AGAIN, OVER A PERIOD OF TIME. 1 THINK
IT WAS CRYSTALIZED WHEN I WAS ASKED TO PROVIDE EXPERT
WITNESS TESTIMONY FOR THIS CASE AND WHEN I LOOKED AT SOME OF
THE INFORMATION RELATED TO THE AREA.
BUT I THINK MY OPINION BEGAN TO BE FORMED ABOUT
THE TIME THAT FRANCHISES WERE BEING CONTESTED FOR THAT AREA.
SO IT'S PROBABLY SOME YEARS AGO. I WAS NOT INVOLVED IN THE
LOS ANGELES FRANCHISING PROCESS, BUT I HAVE BEEN AN OBSERVER
ON THE OUTSIDE, SINCE LIVE HERE.
Q WHEN YOU SAY THE TIME THE FRANCHISES WERE BEING
CONTESTED, ARE YOU SPEAKING OF THE 1981-1982 PERIOD?
A AT THE TIME THE CITY ISSUED ORIGINAL R.F.P.'S
FOR THE SOUTH CENTRAL FRANCHISE AREA. AND AT THE TIME IT
WAS AWARDED TO ACCESS AND SUBSEQUENT TO THAT.
Q NOW, YOU'VE CONFUSED ME. I'M FAMILIAR WITH THE
EVENTS THAT OCCURRED RELATING TO THE FRANCHISING PROCESS IN
SOUTH CENTRAL. BUT WHAT I THOUGHT YOU TOLD ME WAS THE TIME
WHEN YOU ARRIVED AT YOUR OPINION THAT THE CHARACTERISTICS OF
THE SOUTH CENTRAL AREA ARE LESS FAVORABLE FOR
THAN FOR MOST OTHER AREAS, THAT YOU HAD ARRIVED AT THAT
OPINION AT SOME TIME. WHEN WAS THAT TIME?
A I THINK WHAT I'M TRYING TO SAY IS THAT I HAVE
FOLLOWED BECAUSE I'M IN THAT BUSINESS AND I LIVE IN
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LOS ANGELES, I FOLLOWED THE HISTORY OF FRANCHISING IN
LOS ANGELES AS AN OBSERVER. AND I TRIED TO LEARN AS MUCH AS
I COULD ABOUT IT. I DID NOT RELATE THE QUESTION OF
OVERBUILDS TO THE SOUTH CENTRAL AREA AT THAT TIME BECAUSE
THAT WAS NOT AN ISSUE AT THAT TIME. I WAS SIMPLY OBSERVING
WHO FRANCHISES WERE AWARDED TO AND WHAT THE OUTCOME WAS AND
MAKING SOME JUDGMENTS IN MY OWN MIND AS TO THE ECONOMIC
VIABILITY OF CABLE IN MANY OF THOSE AREAS. AND FOLLOWING
FROM TIME TO TIME WHAT WAS HAPPENING IN EACH AREA IN
LOS ANGELES IN TERMS OF ACTUAL SUBSCRIBER PENETRATION AND
FINANCIAL SUCCESS.
SO THAT MY GENERAL FEELING WAS THAT SOUTH
CENTRAL WAS A DIFFICULT AREA TO BE SUCCESSFUL IN CABLE, AND
BECAUSE OF SOME OF THE CHARACTERISTICS OF IT, WHEN I LOOKED
LATER ON ON THE QUESTION OF OVERBUILDING, SINCE I FELT THAT
IT WOULD BE DIFFICULT FOR ONE COMPANY TO BE FINANCIALLY
SUCCESSFUL, THAT MADE IT EVEN MORE DIFFICULT, IN MY OPINION,
FOR MORE THAN ONE COMPANY TO BE SUCCESSFUL IN THAT AREA.
Q I GUESS I MISUNDERSTOOD YOU, THEN.
WHAT I'D LIKE TO FIND OUT IS AT WHAT TIME DID
YOU FINALIZE YOUR OPINION THAT AN OVERBUILD -- THAT THE
CHARACTERISTICS IN THE SOUTH CENTRAL AREA ARE LESS FAVORABLE
FOR OVERBUILDING THAN FOR OTHER AREAS?
A PROBABLY SINCE I TOOK THIS ASSIGNMENT FOR THE
CITY OF LOS ANGELES IN THE LAST FEW MONTHS. IN OTHER WORDS,
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SINCE I WAS RETAINED AS AN EXPERT WITNESS. BECAUSE THAT WAS
THE FIRST TIME THAT APPLYING THE GENERAL QUESTION OF
OVERBUILD WAS RELEVANT TO THE SOUTH CENTRAL AREA. FOR ME,
AT LEAST.
Q AT LEAST TODAY YOU DO HOLD THAT OPINION?
A YES, I DO.
Q IS THAT A TENTATIVE OPINION OF YOURS, OR IS IT
A FINAL CONCLUSION?
A IT'S PROBABLY AS FINAL AS I CAN MAKE IT UNLESS
I'M CONFRONTED WITH SOME EVIDENCE THAT I DON'T SEE OUT THERE
ON THE HORIZON AT ALL. UNLESS SOME CONVINCING EVIDENCE IS
SHOWN TO ME TO MAKE ME CHANGE MY MIND, I WOULD PROBABLY HOLD
TO THAT CONCLUSION.
Q YOU BROUGHT WITH YOU HERE TODAY, OR AT LEAST
WAITING FOR ME HERE TODAY WAS A LARGE BOX FULL OF DOCUMENTS.
I'D LIKE TO TAKE A MOMENT TO SEE IF WE CAN CATEGORIZE THOSE
DOCUMENTS.
HERE SITTING IN THE BOX IS APPROXIMATELY A
FOOT, PERHAPS A LITTLE LESS, OF DOCUMENTS. IS IT ACCURATE
TO SAY THAT THOSE DOCUMENTS REPRESENT DOCUMENTS FROM YOUR
FILES AS OPPOSED TO THE CITY'S FILES?
A I THINK ALL OF THE DOCUMENTS I BROUGHT FALL
INTO ROUGHLY TWO CATEGORIES: THE ONE CATEGORY IS MATERIAL
FROM MY OWN FILES OR MY COMPANY'S FILES, MOST OF WHICH
RELATES TO OVERBUILD STUDIES T ~ ~ T HAVE BEEN DONE IN THE PAST
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OR MATERIAL RELEVANT TO THE GENERAL QUESTION OF OVERBUILDING
AND SUCCESS OR LACK OF SUCCESS. SO THAT WOULD BE MATERIAL
THAT I WOULD BE USING OR HAVE ~ S E D TO COME TO THE
CONCLUSIONS THAT I TALKED ABOUT.
THERE'S A SECOND BATCH OF MATERIALS THAT WERE
FURNISHED TO ME BY THE CITY ATTORNEY'S OFFICE HERE AFTER I
WAS RETAINED. AND THAT MATERIAL IS ESSENTIALLY MATERIAL IN
THE CITY FILES THAT'S RELEVANT TO THE SOUTH CENTRAL CASE.
Q HERE WE HAVE A FOLDER MARKED 9254 CITY OF
LOS ANGELES.
A THAT'S A THIRD CATEGORY. BUT ITIS RELATIVELY
FEW DOCUMENTS. THAT'S SIMPLY OUR COMPANY CONTRACT FILE WITH
THE CITY OF LOS ANGELES. IT INCLUDES THE LETTER PROPOSAL
THAT I MADE TO THE CITY. IT INCLUDES THE CONSULTING
AGREEMENT THAT RESULTED FROM THAT. IT INCLUDES OUR BILLING.
ESSENTIALLY MATERIAL THAT WE WERE REQUESTED TO PROVIDE BY
THE SUBPOENA.
Q ARE THERE ANY DOCUMENTS THAT YOU HAVE IN YOUR
POSSESSION RELATING TO THE CABLE TELEVISION SITUATION IN THE
CITY OF LOS ANGELES THAT YOU DID NOT BRING WITH YOU TODAY?
A NOT TO MY KNOWLEDGE.
Q FOR ANY AREA OF LOS ANGELES?
A I MAY HAVE GENERAL MATERIALS SUCH AS THE
MATERIAL THAT THE DEPARTMENT Of TELECOMMUNICATIONS
PUBLISHES. THEY PUBLISH QUARTERLY REPORTS ON ALL THE CABLE
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L U DW I G CO UR T R EP ",--S.1-' N,-,-C",--,,-.___________
SYSTEMS IN THE CITY, WHICH INCLUDE SUBSCRIBER FIGURES AND SO
THAT'S GENERAL MATERIALS.
I INDICATED I DON'T CONSIDER THAT AS
SPECIFICALLY RELATED TO THIS CASE. BUT WE TRY TO GATHER AS
MUCH OF THAT MATERIAL AS WE HAVE ACCESS TO. SO I MIGHT HAVE
SOME PAPERS LIKE THAT. BUT NOTHING THAT I CAN THINK OF
THAT'S SPECIFICALLY RELEVANT.
Q DID YOU REFER TO ANY DOCUMENTS THAT ARE NOT
HERE WITH US TODAY IN PREPARING YOUR OPINIONS?
A THERE MAY HAVE BEEN DOCUMENTS IN THE PAST THAT
I DON'T HAVE IN MY COMPANY FILES THAT I'VE READ THAT HAVE
HELPED FORM SOME OF THE OPINIONS. BUT THEy'RE NOT IN MY
POSSESSION.
Q YOU DIDN'T REFER TO ANY OTHER DOCUMENTS
SPECIFICALLY FOR THE PURPOSE OF THIS CASE THAT YOU DIDN'T
BRING WITH YOU?
A THAT'S CORRECT.
Q AND THE ONLY DOCUMENTS YOU HAVE REFERRED TO
WHICH RELATE SPECIFICALLY TO THE SOUTH CENTRAL FRANCHISE ARE
THESF. DOCUMENTS HERE THAT WERE BROUGHT WITH YOU IN THE BOX
WHICH IS MAYBE HALF THE DOCUMENTS YOU BROUGHT?
A THE ONLY DOCUMENTS THAT ARE IN MY POSSESSION
THAT I FELT WERE RELEVANT, I BROUGHT WITH ME.
AS I INDICATED, I HAVE CONSIDERED THIS
PARTICULAR SUBJECT FOR PROBABLY ALL THE TIME THAT I 'VE BEEN
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IN THE CABLE CONSULTING BUSINESS, WHICH IS OVER 16 YEARS
WITH MY PRESENT FIRM. AND OVER THAT PERIOD OF TIME I'VE
LOOKED AT HUNDREDS OR MAYBE EVEN THOUSANDS OF DOCUMENTS.
BUT I HAVEN'T RETAINED ALL OF THEM.
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LET ME ASK THE QUESTION A DIFFERENT WAY.
LEAVING APART YOUR GENERAL OPINION ABOUT OVERBUILDS AND
FOCUSING ON YOUR OPINION RELATED PARTICULARLY TO THE SOUTH
CENTRAL FRANCHISE AREA, ARE THERE ANY DOCUMENTS WHICH YOU
HAVE REFERRED TO OR REVIEWED OR RELIED UPON IN FORMING THAT
SPECIFIC OPINION OTHER THAN THESE THAT ARE HERE IN THIS
PILE? AND I'LL REPRESENT THAT I'VE SEPARATED THEM OUT IN
THOSE STACKS. IF IT'S HERE IN THE BOX, THAT'S FINE.
A I THINK THE GENERAL ANSWER IS NO. AND I WANT
TO QUALIFY THAT A LITTLE BIT.
THERE MAY HAVE BEEN DOCUMENTS IN THE LAST FEW
MONTHS THAT I'VE LOOKED AT THAT I DON'T HAVE IN MY
POSSESSION. I DON'T RECALL ANY IN THAT CATEGORY. BUT I
WOULD NOT EXCLUDE THAT POSSIBILITY. BUT EVERYTHING THAT
HAVE IN OUR COMPANY'S POSSESSION THAT RELATES TO THE SOUTH
CENTRAL AREA, I BROUGHT WITH ME.
Q WHAT IS YOUR UNDERSTANDING ABOUT WHAT THESE
DOCUMENTS HERE RELATING TO THE SOUTH CENTRAL AREA AMOUNT TO?
IS IT YOUR UNDERSTANDING THAT THOSE ARE THE DOCUMENTS
RELATING TO THE SOUTH CENTRAL FRANCHISE?
A NO. AS A MATTER OF FACT, 11M PRETTY SURE
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L U Dhi I G CO U R T REP 0 R T E R S",-,-,-'I:...;.N.o...;C::....;.'---_________----.
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THEY'RE NOT. THOSE ARE THE DOCUMENTS THAT THE CITY
ATTORNEY'S OFFICE FURNISHED ME, WHICH THEY THOUGHT WERE
RELEVANT TO MY PARTICULAR AREA OF TESTIMONY THAT I'D BE
EXPECTED TO TESTIFY ABOUT. AND I THINK THEY GAVE ME WHAT
THEY THOUGHT WOULD BE HELPFUL TO ME IN BACKGROUND MATERIAL
THAT I SHOULD, IN THEIR OPINION, KNOW. BUT I'M SURE THERE
ARE MANY MORE DOCUMENTS ABOUT THE SOUTH CENTRAL FRANCHISING
PROCESS THAT I HAVE NOT SEEN.
Q
WHEN DID YOU RECEIVE THESE DOCUMENTS FROM THE
CITY?
A PROBABLY WITHIN THE FIRST TWO WEEKS AFTER THE
EFFECTIVE DATE OF THAT CONSULTING CONTRACT AGREEMENT. I'M
NOT SURE WHAT DATE THAT IS.
Q WHY DON'T WE GET THAT ON THE RECORD.
A THIS CARRIES THE DATE OF JANUARY 8TH, WHEN I
SIGNED IT, AND JANUARY 12TH WHEN MR. PEREZ SIGNED IT. IT
HAS JANUARY 26TH WHEN IT WAS SIGNED BY THE CITY ATTORNEY.
THEREFORE, IT BECAME EFFECTIVE SOMETIME AFTER JANUARY 20TH.
SO MY GUESS WOULD BE THAT I PROBABLY RECEIVED THAT MATERIAL
ABOUT THE FIRST WEEK IN FEBRUARY.
Q WAS THERE A COVER LETTER WITH THESE DOCUMENTS?
A NO. I THINK WHAT 11APPENED WAS THAT I MET WITH
MR. PEREZ AND TALKED IN GENERAL ABOUT THE AREAS THAT I WAS
EXPECTED TO TESTIFY ON, AND I THINK HE GAVE IT TO ME
PHYSICALLY AT ONE OF THOSE MEETINGS.
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Q DO YOU RECALL WHETHER HE TOLD YOU HOW HE
SELECTED THESE DOCUMENTS OUT OF WHATEVER OTHER DOCUMENTS
THERE WERE, IF THERE WERE ANY?
A I DON'T THINK THERE WAS ANY PARTICULAR
EXPLANATION. I THINK IT'S JUST WHAT HE THOUGHT WOULD BE
RELEVANT TO WHAT 1 SHOULD KNOW AND INSPECT IN REGARDS TO MY
TESTIMONY. I DIDN'T ASK HIM WHY HE PICKED THOSE OR WHY HE
DIDN'T PICK OTHERS.
Q AM I CORRECT THAT YOU HAVE NEVER DONE ANY OTHER
WORK FOR THE CITY OF LOS ANGELES PRIOR TO THIS ASSIGNMENT?
A THAT'S CORRECT.
Q HOW ABOUT THE COUNTY OF LOS ANGELES?
A I HAVE WORKED FOR THE COUNTY OF LOS ANGELES.
WE HAD A CONTRACT WITH THE COUNTY IN 1986. I THINK IT ENDED
THE BEGINNING OF 187.
IT WAS A TECHNICAL STUDY WITH RESPECT TO THE
USE OF CABLE SYSTEMS IN THE COUNTY FOR COUNTYWIDE
GOVERNMENTAL SERVICES. IT HAD NOTHING TO DO WITH
FRANCHISING AS SUCH.
Q WHAT YEAR DID YOU SAY THAT WAS?
A I THINK IT BEGAN IN 1986, AND I THINK IT
FINISHED SOMETIME EARLY IN '87.
Q WHAT WAS YOUR UNDERGRADUATE DEGREE IN,
MR. PILNICK?
A BACHELOR'S DEGREE IN ELECTRICAL ENGINEERING.
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HAVE YOU RECEIVED ANY POSTGRADUATE DEGREES?
A MASTER OF SCIENCE DEGREE, MAJOR IN ELECTRONICS
AND ELECTRICAL ENGINEERING.
Q WHAT YEARS DID YOU RECEIVE THOSE DEGREES?
A 1942 FOR THE BACHELOR'S DEGREE; 1949, MASTER'S
DEGREE.
Q ARE THOSE YOUR ONLY DEGREES?
A THAT'S CORRECT.
Q IN PREPARING FOR YOUR OPINIONS IN THIS CASE,
DID YOU MAKE ANY EXAMINATION, REVIEW ANY DOCUMENTS RELATING
TO ANY PART OF THE CITY OF LOS ANGELES OTHER THAN THE SOUTH
CENTRAL AREA?
A NOT SPECIFICALLY. I HAVE LOOKED, AS I
INDICATED, OVER THE YEARS liVE LOOKED AT THE FRANCHISING
PROCESS IN THE CITY. SO I SORT OF INCIDENTALLY PICKED UP A
LOT OF INFORMATION. BUT THE DIRECT ANSWER TO YOUR QUESTION
IS NO.
Q YOU AREN'T GOING TO EXPRESS ANY OPINION ABOUT
THE DEMOGRAPHICS OR UTILITY FACILITIES OR ANY OTHER SPECIFIC
CHARACTERISTICS OF AREAS OF THE CITY OF LOS ANGELES OTHER
THAN THE SOUTH CENTRAL AREA, ARE YOU?
A I MIGHT IF 1'M ASKED THE QUESTION ABOUT HOW YOU
WOULD COMPARE ONE AREA TO ANOTHER. I WOULD GIVE GENERAL
ANSWERS. I DO HAVE SOME INFORMATION WITH RESPECT TO THE
OTHER PARTS OF THE CITY, NOT BECAUSE I DID IT FOR THIS
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PROJECT, BUT ONE OF THE REQUIREMENTS OF THE LOS ANGELES
COUNTY JOB WAS THAT WE HAD TO LOOK AT EVERY CABLE SYSTEM IN
THE COUNTY. NOT PHYSICALLY LOOK AT IT, BUT LOOK AT SOME.
THE LAST COUPLE OF PAGES THAT YOU HAVE IN THAT
DOCUMENT HAVE STATISTICS ABOUT SOME OF THE CABLE SYSTEMS IN
THE CITY. WE WERE REQUIRED AS PART OF OUR LOS ANGELES
COUNTY CONTRACT TO DO THAT FOR 135 CABLE SYSTEMS IN
LOS ANGELES COUNTY. SO I HAVE ACQUIRED A FAIR AMOUNT OF
INFORMATION ABOUT THE OTHER SYSTEMS.
AND I HAVE LOOKED AT THE DEMOGRAPHICS IN SOME
OF THE OTHER AREAS. THAT IS NOT AN AREA THAT IS
SPECIFICALLY LISTED IN THE SCOPE OF MY TESTIMONY. BUT IF A
QUESTION CAME UP, HOW WOULD YOU RELATE THE CONDITION OF
UTILITY POLES IN SOUTH CENTRAL AS COMPARED TO SOME OTHER
AREA, MIGHT BE ABLE TO ANSWER THAT ON THE BASIS OF SOME
OTHER INFORMATION I HAVE.
Q
DO YOU HAVE A COpy OF THE STUDY -
A I HAVEN'T BROUGHT IT WITH ME. BUT ITIS PUBLIC
INFORMATION. 110 BE HAPPY TO MAKE A COpy FOR YOU. ITIS IN
SIX VOLUMES. BUT WE HAVE COPIES OF ALL OF THOSE. I'LL MAKE
THEM AVAILABLE TO THE CITY ATTORNEY'S OFFICE. THERE'S
NOTHING PROPRIETARY ABOUT THEM.
Q
IS THERE ONE PARTICULAR
A THERE IS ONE DOCUMENT IN THE BATCH THERE. THIS
PARTICULAR DOCUMENT WHICH HAS A GOOD DEAL OF THE SUMMARY
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MATERIAL ABOUT ALL OF THE CABLE SYSTEMS IN THE COUNTY.
Q IS THIS DOCUMENT SOMETHING YOUR OFFICE
PREPARED?
A THAT DOCUMENT IS AN EXTRACT FROM ONE OF THE
LOS ANGELES COUNTY REPORTS THAT WE MADE. AND THE REASON I
FELT IT WAS RELEVANT WAS THAT IT DOES CONTAIN INFORMATION
ABOUT NOT ONLY LOS ANGELES COUNTY CABLE SYSTEMS, BUT
LOS ANGELES CITY CABLE SYSTEMS, TOO. AND I HAVE REFERRED TO
IT IN PREPARING FOR TESTIMONY FOR THIS PARTICULAR CASE. SO
I DID BRING THAT ALONG.
Q IS THERE ANY DEMOGRAPHICS OR OTHER INFORMATION
CONTAINED IN THE LOS ANGELES COUNTY STUDY YOU DID WHICH
YOU'VE REFERRED TO OR RELIED UPON IN THIS CASE?
A I THINK IT'S ALL IN THAT MATERIAL. THERE IS
MATERIAL ABOUT CABLE SYSTEMS IN THE COUNTY SCATTERED
THROUGHOUT THE REPORT. BUT I THINK THE SUMMARY THAT'S HERE
IS WHAT I HAVE REFERRED TO SPECIFICALLY.
Q IN PREPARING YOUR OPINIONS IN THIS CASE, DID
YOU DO ANY PHYSICAL EXAMINATION OF A CABLE TELEVISION PLANT
OR UTILITY PLANT IN THE SOUTH CENTRAL AREA?
A YES. I HAD ONE RIDE-OUT WITH A REPRESENTATIVE
OF THE CITY ATTORNEY'S OFFICE, AND ALSO ACCOMPANIED BY A
REPRESENTATIVE OF THE LOS ANGELES DEPARTMENT OF WATER &
POWER. AND WE DROVE THROUGH THE AREA AND LOOKED
SPECIFICALLY AT THE UTILITY POLES AND THE CONDITIONS OF THE

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LUDW G COURT REPORTERS, INC.
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POLES AND THE LINES.
I ALSO HAD UNOFFICIAL DRIVE-OUTS OF MY OWN IN
PARTS OF THE AREA. BUT IN THAT ONE PARTICULAR CASE, I THINK
WE COVERED ALMOST ALL OF THE FRANCHISE AREA.
Q
WHEN YOU SAY YOU COVERED ALL OF THE FRANCHISE
AREA
A DROVE THROUGH.
Q DO YOU BELIEVE THAT YOU DROVE DOWN EVERY STREET
IN THE FRANCHISE AREA?
A NO. I DON'T THINK I'M TRYING TO SAY THAT. I
THINK WE DROVE DOWN A LARGE MAJORITY OF THE STREETS, AND WE
DROVE DOWN CERTAINLY ENOUGH TO GET A GOOD OVERALL IMPRESSION
OF THE CONDITION OF THE UTILITIES IN THE AREA. 11M NOT
MAKING A CLAIM THAT WE DROVE DOWN EVERY STREET.
Q HOW LONG DID THE TOTAL DRIVE TAKE?
A THE ENTIRE DAY.
Q EIGHT HOURS?
A PROBABLY CLOSER TO SIX. BUT SOMETHING LIKE
THAT.
Q AND DID YOU EVER STOP, OR WAS IT CONTINUOUS
DRIVING?
A WE STOPPED MOMENTARILY. IF WE FOUND A
PARTICULAR LOCATION WHERE THE UTILITY POLES HAD SOME SPECIAL
CHARACTERISTICS, EITHER OVERLOAD WITH A LOT OF CABLES OR
SOMETHING THAT WOULD BE RELATIVELY UNIQUE OR WOULD PERTAIN
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TO THE QUESTION OF COULD THAT POLE ACCEPT MORE CABLES,
WHATEVER, WE'D STOP AND LOOK AT IT A LITTLE BIT MORE
CLOSELY. WE DIDN'T STOP FOR ANY LONG PERIODS OF TIME.
Q OUT OF THE SIX HOURS, HOW MUCH TIME WOULD YOU
ESTIMATE YOU ACTUALLY SPENT DRIVING AS OPPOSED TO ANYTHING
ELSE?
A PROBABLY FOUR TO FIVE.
Q WHO WAS THE REPRESENTATIVE OF THE CITY
ATTORNEY'S OFFICE THAT WAS WITH YOU?
A MR. PEREZ.
Q AND WHO WAS THE REPRESENTATIVE OF THE
DEPARTMENT OF WATER & POWER?
A I DON'T RECALL HIS NAME. I HAVE IT IN MY FILES
SOMEWHERE. I CAN GET IT, BUT I DON'T RECALL IT.
Q IS THAT FILE HERE WITH YOU?
A NO, IT IS NOT.
I HAVE A CARD FILE OF CARDS OF INDIVIDUALS THAT
I'VE SPOKEN TO. AND I KNOW I HAVE HIS NAME. BUT I JUST
DON'T RECALL IT AT THIS POINT.
MR. BRAMSON: DO YOU KNOW WHO THAT WAS?
MS. HOLBROOKE: I DO NOT KNOW THE NAME, BUT WE CAN
SEE IF WE CAN GET IT FOR YOU.
BY MR. BRAMSON:
Q WHAT DID THE REPRESENTATIVE OF THE DEPARTMENT
OF WATER & POWER TELL YOU ABOUT HIS OPINION ABOUT THE STATE
LUDWIG COURT ___________________
26
OF THE FACILITIES?
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A WELL, HE WAS BASICALLY ACTING AS A GUIDE AND
TRYING TO ANSWER SPECIFIC QUESTIONS. HE WASN'T VOLUNTEERING
A LOT OF INFORMATION.
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BUT HE GAVE US, IF WE HAD ASKED QUESTIONS, 5
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INFORMATION ON WHAT THE PRACTICES WERE OF ATTACHMENTS TO
UTILITY POLES WITHIN THE CITY AND ALSO BASICALLY WHAT THE
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PROCEDURES OF THE DEPARTMENT OF WATER & POWER WERE IN
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MAINTAINING THE SYSTEM.
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HE ACTED, IN EFFECT, AS A TECHNICAL REFERENCE
11 FOR US. AND HE WAS MORE ANSWERING QUESTIONS THAN HE WAS IN
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EXPLAINING, BECAUSE IT WAS ESSENTIALLY OUR TOUR, AND HE WAS
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JUST A GUIDE.
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Q WHAT SPECIFICALLY DID HE TELL YOU ABOUT THE 14
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ATTACHMENT PRACTICES OR PROCEDURES?
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A WELL, WE WOULD ASK HIM QUESTIONS SUCH AS IF WE
CAME TO A PARTICULAR CROWDED UT[LITY POLE, WE WOULD ASK HIM 17
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NORMALLY DO IF IT HAD TO ATTACH OR IF A CABLE COMPANY WANTED
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TO ATTACH ANOTHER SET OF CABLES TO THE POLES. AND HE WOULD
21 RESPOND, IN EFFECT, WITH THE REQUIRED CLEARANCES THAT WOULD
22 HAVE TO BE BETWEEN ALL THE CABLES AND THE PROCEDURE FOR
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CHANGING OUT A POLE IF A POLE WAS SIMPLY TOO BURDENED DOWN
24 WITH CABLE TO ACCEPT ANY MORE.
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SO IT WAS MORE IN RESPONSE TO HYPOTHETICAL
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QUESTIONS SUCH AS WHAT IF, RATHER THAN HIM SIMPLY TELLING US
WHAT ALL THE PROCEDURES INCLUDED.
Q ARE YOU FAMILIAR WITH A PUBLIC UTILITIES CODE,
A GENERAL ORDER CALLED GENERAL ORDER 95?
A IN GENERAL, YES. 11M NOT FAMILIAR WITH EVERY
PARAGRAPH OF IT. I HAVE READ IT, YES.
Q ARE YOU GENERALLY FAMILIAR WITH THE CLEARANCE
REQUIREMENTS BETWEEN COMMUNICATIONS AND ELECTRICAL WIRES ON
UTILITY POLES?
A 11M GENERALLY FAMILIAR WITH IT, BUT I HAVE
LOOKED AT IT FOR A GREAT MANY STATES, AND THERE ARE SOME
SLIGHT VARIANCES FROM STATE TO STATE. SO 11M NOT COMPLETELY
SURE THAT I WOULD HAVE ALL THE NUMBERS ACCURATE FOR
CALIFORNIA.
BUT I KNOW THE CLEARANCE THAT MOST STATES
REQUIRE FROM THE GROUND UP TO THE LOWEST CABLE AND THEN THE
CLEARANCES BETWEEN COAXIAL CABLE AND TELEPHONE IN BETWEEN
TELEPHONE AND POWER CABLES
Q DID THE DEPARTMENT OF WATER & POWER INDIVIDUAL
TELL YOU OR EXPLAIN TO YOU ANY CLEARANCE REQUIREMENTS WITHIN
THE SOUTH CENTRAL AREA THAT WERE DIFFERENT THAN WHAT'S
CONTAINED IN GENERAL ORDER 95?
A I DON'T THINK SO.
MS. HOLBROOKE: COULD I HAVE THAT QUESTION BACK?
( R E COR DREAD. )
L U D WIG CO U R T REP O=R..:...T=ER,-,-",,-S..... ' .....;I::...;.N..;...;C:.....;.'---_________---,
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BY MR. BRAMSON:
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Q DO YOU KNOW OF ANY DIFFERENCES IN UTILITY 2
REQUIREMENTS WITHIN THE CITY OF LOS ANGELES THAT WOULD BE
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DIFFERENT THAN THOSE CONTAINED IN GENERAL ORDER 95?
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5 A NO. I WOULD THINK THE REQUIREMENTS WOULD BE
THE SAME THROUGHOUT THE ENTIRE CITY. AND I THINK THE ONLY 6
THING WE WERE TRYING TO FOCUS ON WAS HOW CROWDED WERE THE
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POLES AND WHAT WOULD HAPPEN IN THE EVENT THERE WAS A
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REQUIREMENT FOR MORE THAN ONE SET OF COAXIAL CABLES.
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Q TO THE BEST OF YOUR KNOWLEDGE, WHAT IS THE
CLEARANCE REQUIREMENT BETWEEN THE GROUND AND THE LOWEST 11
r COMMUNICATION CABLE IN THE CITY OF LOS ANGELES?
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A A NUMBER THAT STICIKS IN MY MIND IS 18 FEET.
14 BUT I WOULDN'T BE COMPLETELY SURE OF THAT. AS I RECALL, I
15 THINK THAT THAT'S THE MINIMUM DISTANCE. AND I THINK THAT
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YOU HAVE MORE THAN ONE, HAVE TO HAVE AT LEAST ONE FOOT OF 17
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CLEARANCE BETWEEN THEM.
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I THINK THAT THERE'S A REQUIREMENT OF SOMETHING
20 LIKE TWO FEET OF CLEARANCE UP TO THE TELEPHONE LINES AND
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FOUR FEET BETWEEN THE TELEPHONE AND POWER LINES. AGAIN, I
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MAY HAVE THOSE NUMBERS MIXED IN WITH THE NUMBERS OF OTHER
23 STATES.
Q 11M SORRY. WHAT W.lIS THE NUMBER YOU GAVE US
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BETWEEN CABLE AND POWER?
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A WELL, CABLE IS THE BOTTOM. THE TELEPHONE IS
BETWEEN, AND THE POWER IS USUALLY AT THE TOP. AND I THINK
WHAT I SAID WAS THAT AS A GENERAL REQUIREMENT FOR A MINIMUM
OF FOUR FEET BETWEEN THE HIGHEST COMMUNICATIONS LINE AND THE
ONE BELOW IT, WHICH IS TELEPHONE IN MOST CASES, AND THE
LOWEST POWER LINE. SOME STATES HAVE REQUIREMENTS FOR MORE
THAN FOUR FEET.
Q AND TO THE BEST OF YOUR KNOWLEDGE, AS YOU SIT
HERE, THOSE ARE THE ACCURATE CLEARANCES IN CALIFORNIA?
A TO THE BEST OF MY RECOLLECTION.
Q AND YOU DON'T HAVE ANY KNOWLEDGE THAT ANY OF
THOSE REQUIREMENTS DON'T APPLY IN THE SOUTH CENTRAL AREA OF
LOS ANGELES, DO YOU?
A I WOULD BE SURPRISED IF THERE WAS A DIFFERENT
CODE FOR THE SOUTH CENTRAL AREA THAN FOR ALL THE REST OF THE
STATE.
Q YOU SAID THAT THE CABLE IS TYPICALLY AT THE
BOTTOM OF THE POLE OR THE LOWEST POSITION ON THE POLE, THE
TELEPHONE COMPANY IS ABOVE THAT, AND THEN THE POWER IS ABOVE
THAT?
A THAT'S CORRECT.
Q DID YOU OBSERVE THAT IN THE SOUTH CENTRAL AREA
OF LOS ANGELES?
A THE AREA THAT I DROVE THROUGH, THERE WAS NOT
MUCH CABLE ON THE POLES. SO I CAN'T ANSWER THE QUESTION
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L U OW I G CO U R T REP O<-.!.R-'-'T'-.>E::.:.R"-"S'-','--"I'-'.-N:....:C;....:.'--_________---..,
FULLY. BUT EVERYTHING I'VE S E E ~ THROUGHOUT THE REST OF THE
CITY, THAT'S GENERALLY THE PRACTICE.
Q
SO YOU'VE OBSERVED IT IN OTHER PARTS OF THE
CITY?
A YES.
Q
DID YOU SEE ANY CABLE IN THE SOUTH CENTRAL AREA
DURING THE DRIVE?
A YES. I BELIEVE AT THE TIME WE DID THE
DRIVE-OUT THAT AMERICAN WAS CABLING IN CERTAIN PARTS OF THE
AREA. SO WE SAW SOME COAXIAL CABLE, BUT NOT VERY MUCH.
Q WHAT IS YOUR UNDERSTANDING ABOUT WHY THE CABLE
IS LOCATED AT THE LOWEST POSITION AND THE TELEPHONE COMPANY
IS LOCATED ABOVE IT?
A LET ME ANSWER THAT QUESTION IN REVERSE ORDER.
GENERALLY POWER LINES ARE LOCATED AT THE HIGHEST POINT ON
THE POLE BECAUSE THEY REPRESENT THE GREATEST DANGER, DANGER
TO PEOPLE AND TO PROPERTY. AND BECAUSE OF THAT, THEY
ATTEMPT TO ISOLATE THEM, MOVE THEM AS FAR AWAY FROM CONTACT
AS POSSIBLE.
SO GENERALLY YOU START WITH THE REQUIREMENTS
THAT POWER HAS TO BE AT THE TOP. THEN UP UNTIL THE TIME
THAT CABLE LINES BECAME PREVALENT, THE ONLY OTHER UTILITY WE
HAD ON MANY SHARE POLES WOULD BE TELEPHONE. SO THE NORMAL
PRACTICE WAS POWER ON TOP, TELEPHONE UNDERNEATH, AND THE
ORIGINAL CODES ONLY HAD SPACING REQUIREMENTS BETWEEN POWER
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AND TELEPHONE AND BETWEEN TELEPHONE AND THE GROUND.
THEN WHEN CABLE BEGAN TO BE ATTACHED TO POLES,
THE MOST LOGICAL POSITION FOR CABLE WAS UNDERNEATH TELEPHONE
SO YOU WOULD NOT HAVE TO REARRANGE THE TELEPHONE LINES THAT
WERE ALREADY THERE. SO THAT AS A RESULT OF THE FACT THAT
POWER AND TELEPHONE WERE FIRST ON THE POLES, GENERALLY CABLE
WAS THE LAST ENTRY, AND GENERALLY IT WAS LOWER THAN THE
TELEPHONE.
THEN YOU HAVE TO HAVE A MINIMUM REQUIREMENT
BETWEEN THE LOWEST CABLE AND THE GROUND TO AVOID THE PROBLEM
OF TRUCKS OR SOMETHING ON THE GROUND INTERFERING WITH THE
CABLE LINES. THAT'S MY UNDERSTANDING OF HOW THE ENTIRE
PATTERN GREW UP THROUGHOUT THE COUNTRY.
Q DO YOU KNOW WHETHER THERE'S ANY REQUIREMENT,
LEGAL REQUIREMENT THAT THE ORDER OF FACILITIES BE CABLE AT
THE LOWEST POINT, TELEPHONE COMPANY ABOVE THAT AND POWER AT
THE HIGHEST POINT?
A I THINK THERE ARE PUBLIC UTILITY, PUBLIC
SERVICE REQUIREMENTS FROM STATE TO STATE THAT ESTABLISH
THOSE. I DON'T KNOW IF YOU CALL THOSE LEGAL REQUIREMENTS OR
NOT.
Q I WOULD CALL THOSE LEGAL REQUIREMENTS.
MS. HOLBROOKE: I EXPECT YOU WOULD.
MR. BRAMSON: THEY MIGHT CALL THEM LEGAL
REQUIREMENTS.
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THE WITNESS: IT'S LIKE THE P.U.C. THEY CONSIDER
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2 THEIR REGULATIONS AND RULES AS LAW ALSO

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MS. HOLBROOKE: MOST ASSUREDLY THEY DO.
i 4 BY MR. BRAMSON:
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Q DO YOU KNOW WHETHER IN CALIFORNIA THERE'S ANY
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6 REQUIREMENT THAT THE CABLE GO A.T THE LOWEST POINT AND THE
TELEPHONE COMPANY GO ABOVE IT?
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A I'M NOT SURE I WOULD PUT IT THAT WAY. I THINK 8
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10 RESULTS FROM THE FACT, AS I SAY, THERE HAVE BEEN
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REQUIREMENTS FOR POWER AND TELEPHONE FOR MANY, MANY YEARS.
12 AND THE PRACTICE HAS GROWN UP OF CABLE BEING THE LOWEST ONE
13 ON THE POLES.
14 NOW, I'M NOT SURE WHETHER THAT PARTICULAR
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PRACTICE IS ENCODED IN THE P.U.C. REQUIREMENTS OR WHETHER
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IT'S SIMPLY UTILITY PRACTICES.
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IN MANY COUNTRIES THE UTILITIES THAT OWN THE
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19 INSTALLATION IN ADDITION TO P.U.C. THEY HAVE TO BE
20 CONSISTENT, OBVIOUSLY. THEY CAN'T BE CONFLICTING. BUT
,
THERE ARE MANY UTILITY POLE REQUIREMENTS THAT COME FROM THE
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OWNERS OF THE POLES RATHER THAN FROM THE P.U.C.
FOR EXAMPLE, THE OF SAFETY. IN MANY
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CASES THE POLE OWNERS ARE CONCERNED WITH SAFETY OF THEIR
25 PEOPLE CLIMBING THE POLES. AND THEY'LL ESTABLISH SOME
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LUDWIG COURT ________________
THERE ARE SEVERAL DIFFERENT OWNERS OF POLES. SOME POLES ARE
OWNED BY POWER COMPANIES. SOME ARE OWNED BY THE TELEPHONE
COMPANY. SOME ARE JOINT-USE POLES OR PERHAPS ONE OF THE TWO
MIGHT OWN THE POLES, BUT THEY'VE MADE AGREEMENTS BETWEEN
THEMSELVES AS TO HOW THEY'RE GOING TO SHARE THE USE OF THE
POLES.
SO MANY OF THESE REQUIREMENTS COME FROM THE
POLE OWNERS. AND THEY COME AS A RESULT OF THE PREVIOUS
SHARED-USE AGREEMENTS. SOME OF THE REQUIREMENTS ARE P.U.C.
REQUIREMENTS, BUT NOT ALL.
BY MR. BRAMSON:
Q DO YOU KNOW OF ANY PLACE IN CALIFORNIA WHERE
THE TELEPHONE COMPANY WAS PLACED LOWER THAN THE CABLE
COMPANY?
A I HAVEN'T SEEN THAT IN ANY AREA. IT COULD
POSSIBLY BE, BUT I DON'T RECOLLECT EVER SEEING IT IN THAT
ORDER.
Q I GUESS I SHOULD ASK THE BACKGROUND QUESTION
THAT I PROBABLY SHOULD HAVE ASKE:D BEFORE THAT QUESTION.
HAVE YOU HAD OCCASION, AS PART OF YOUR WORK, TO
EXAMINE POLES IN OTHER PARTS OF CALIFORNIA THAN LOS ANGELES?
A YES, MANY POLES.
Q CAN YOU GIVE US AN ESTIMATE OF THE NUMBER OF
REGIONS? I WON'T ASK YOU ABOUT THE NUMBER OF POLES.
MS. HOLBROOKE: YOU MEAN WHERE HE HAS WORKED? I'M
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NOT SURE I UNDERSTOOD WHAT THE QUESTION WAS. HE LIVES IN
CALIFORNIA. SO HE TRAVELS AROUND A LOT. WHETHER YOU'RE
INCLUDING AREAS WHERE HE'S HAD A PROFESSIONAL RESPONSIBILITY
WITH CLIENTS OR
BY MR. BRAMSON:
Q
I'M REALLY ASKING YOU THE NUMBER OF AREAS WHERE
YOU'VE REALLY TAKEN A LOOK AT THE POLES WITH YOUR
BACKGROUND.
A PROBABLY SEVERAL HUNDRED WITHIN CALIFORNIA
ALONE.
Q AND YOU DON'T HAVE ANY SPECIFIC RECOLLECTION IN
ANY OF THOSE PLACES OF EVER HAVING SEEN THE TELEPHONE
COMPANY PLANT BELOW THE CABLE PLANT ON THE POLE?
A THE ONLY RECOLLECTION I'VE HAD IS I'VE HAD A
NUMBER OF DISCUSSIONS WITH PROBABLY LESS THAN HALF A DOZEN
CABLE COMPANY REPRESENTATIVES IN VARIOUS AREAS . AND ALSO
WITH UTILITY REPRESENTATIVES IN VARIOUS AREAS. AND MY
RECOLLECTION OF THOSE DISCUSSIONS IS THAT THERE HAVE BEEN
SOME UNUSUAL CASES WHERE A TELEPHONE COMPANY CABLE MIGHT
HAVE BEEN BELOW THE COAXIAL. BUT IT WAS A RESULT OF UNIQUE
CIRCUMSTANCES SUCH AS A RECENT CHANGE FROM ONE POLE TO
ANOTHER, CHANGES IN OWNERSHIP OF THE POLES. AND SOME
PECULIAR CONDITIONS THAT DICTATED THAT IT WOULD BE A LOT
CHEAPER AND MORE CONVENIENT TO PUT THE TELEPHONE LINES IN
BELOW. BUT NOT AS A GENERAL PRACTICE.
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Q YOU HAVEN'T SEEN ANY, BUT YOU UNDERSTOOD SOME
MAY EXIST?
A IN THESE DISCUSSIONS, MY UNDERSTANDING IS THAT
IT PROBABLY HAS HAPPENED IN SOME CASES.
Q
YOU AREN'T SURE THAT IT HAS HAPPENED?
A I HAVEN'T SEEN ANY PARTICULAR POLES THAT I CAN
RECOLLECT WHERE THE TELEPHONE WIRE WAS BELOW THE COAXIAL
CABLE WIRE.
Q
NOW, WHEN YOU DROVE THROUGH THE SOUTH CENTRAL
AREA AND YOU LOOKED AT THE POLES, WAS THAT THE PURPOSE OF
THE TRIP?
A THE PURPOSE WAS TO TRY TO GET A GENERAL
OVERVIEW OF THE STATUS OF THE UTILITY POLES IN THE AREA.
ALSO TO GET SOME FEELING FOR THE DEMOGRAPHICS OF THE AREA,
TOO, IN TERMS OF THE TYPES OF THAT WAS THERE, THE
DENSITY OF THE HOUSING, THINGS THAT MIGHT BE RELATED TO
ESTIMATES OF CABLE COMPANY PERFORMANCE IN THAT PARTICULAR
AREA. BUT THE PRIMARY REASON WAS TO LOOK AT THE UTILITY
POLES.
Q WHEN YOU LOOK AT A UTILITY POLE, HOW DO YOU DO
IT? I GUESS YOU TOLD US YOU GENERALLY OBSERVE THEM FROM THE
CAR BECAUSE YOU DIDN'T STOP AT EVERY POLE.
A THE MAIN POINT OF LOOKING AT THEM IS TO LOOK AT
THE DEGREE OF CROWDING ON THE POLE; TO SEE HOW MANY CABLES
THE POLE SUPPORTS; WHETHER IT LOOKS AS THOUGH THERE MIGHT BE
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A SUBSTANTIAL CHANGE-OUT OR CONSTRUCTION PROCEDURE REQUIRED
IF YOU WERE GOING TO ADD MORE CABLES. AND ESSENTIALLY WE
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WERE LOOKING TO TRY TO GET S O ~ I E IDEA OF WHAT WOULD HAPPEN IF
THERE WAS ANOTHER SET OR MORE THAN ONE, TWO SETS, AT LEAST,
OF COAXIAL CABLES. AND WHETHER THE POLES COULD HANDLE THAT:
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WHETHER THE SPACING WOULD BECOME SO CLOSE THAT YOU MIGHT BE
VIOLATING P.U.C. REQUIREMENTS AND YOU'D HAVE TO CHANGE THE
POLE OUT. AND ALSO WHAT PERCENTAGE OF THE POLES WOULD FALL
INTO THAT CATEGORY, AND WHAT COSTS MIGHT BE INVOLVED IF THAT
HAD TO BE DONE.
Q CAN YOU TELL BY LOOKING FROM A CAR WHICH OF THE
WIRES IS TELEPHONE COMPANY AND WHICH IS CABLE?
A GENERALLY, YES. CABLE HAS THE AMPLIFIERS
SPACED PERIODICALLY ON THE POLE ALONG WITH THE CABLE. THE
SIZE OF THE CABLE, IN MANY CASES IS DIFFERENT. YOU'VE GOT
COAXIAL CABLES THAT MAY BE TRUNK AND FEEDER CABLES THAT MAY
BE THREE QUARTERS OF AN INCH OR HALF AN INCH IN DIAMETER.
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WIRES ARE
THERE ARE A FEW CASES WHERE A LOT OF TELEPHONE
BUNDLED UP IN ONE COAXIAL SHEATH, AND IT CAN LOOK
LIKE A COAXIAL CABLE. BUT GENERALLY IF YOU FOLLOW THAT
CABLE FOR A FEW BLOCKS AND LOOK AT THE AMPLIFIERS AND POWER
SUPPLIES THAT ARE NECESSARY TO GO WITH IT, YOU CAN TELL
WHICH IS THE COAXIAL CABLE.
COAXIAL CABLES ALSO, IF IT SERVES AN AREA,
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SPLITS OFF. IT HAS SPLITTERS AND TAPS AND DROPS TO VARIOUS
HOMES SO THAT ALL OF THESE CHARACTERISTICS HELP YOU IDENTIFY
IT. ITIS USUALLY PRETTY EASY.
Q
I THINK YOU ALREADY ANSWERED THIS QUESTION, BUT
I ASKED IT POORLY IN TERMS IF ONE CAN IDENTIFY IT.
CAN YOU PERSONALLY IDENTIFY CABLE VERSUS
TELEPHONE?
MS. HOLBROOKE: I THINK YOU GOT THE ANSWER TO THAT.
BY MR. BRAMSON;
Q
COULD YOU OR I TELL? THE ANSWER MIGHT BE
DIFFERENT.
A I THINK THE ANSWER TO YOUR QUESTION IS YES.
~ -
Q
YOU CAN TELL FROM VIEWING IT FROM THE GROUND?
A YES.
Q DID YOU CLIMB ANY POLES WHEN YOU WENT OUT?
A NO.
Q HAVE YOU EVER CLIMBED A POLE?
A ABOUT TWICE, AS FAR AS I CAN REMEMBER, YES.
Q DID YOU LOOK DOWN?
A IT'S NOT AN AREA I WANT TO BECOME EXPERT IN.
NOT AT MY AGE, ANYWAY.
Q AS FAR AS WHAT THE TELEPHONE COMPANY AND CABLE
TELEVISION CABLES LOOK LIKE FROM THE POLE OR LOOK LIKE AFTER
THEY'RE PUT ON THE POLE, ABOUT HOW BIG IS THE TELEPHONE
COMPANY CABLE, TYPICAL TELEPHONE COMPANY CABLE?
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A TYPICAL TELEPHONE COMPANY CABLE, IF YOU'RE
TALKING ABOUT BUNDLES OF CABLES, NOT JUST A LINE, A PAIR OF
WIRES TO ONE HOUSE. BUT IF YOU'RE TALKING ABOUT A BUNDLE OF
CABLES THAT MIGHT BE ON A POLE: MIGHT BE OVERALL DIAMETER A
QUARTER INCH TO A HALF INCH.
THERE ARE SOME GO-BETWEEN, VERY CROWDED AREAS
WHERE THERE ARE A LOT OF LINES BUNDLED INTO THE SAME CABLE
THAT CAN GET CONSIDERABLY LARGER THAN THAT IN DIAMETER. BUT
THAT'S TYPICAL.
Q WHAT DID YOU OBSERVE IN THE SOUTH CENTRAL AREA?
A A LOT OF TELEPHONE CABLE, AND AS I INDICATED,
NOT TOO MUCH COAXIAL CABLE. BUT ALSO NOT JUST THE CABLE IN
TERMS OF BUNDLES, BUT A LOT OF BRANCH-OFFS. A LOT OF IT
LOOKED AS THOUGH TELEPHONES HAD BEEN INSTALLED OVER A
CONSIDERABLE PERIOD OF TIME. SO YOU WOULD HAVE NOT ONLY ONE
BIG CABLE GOING DOWN A BLOCK, BUT BRANCH-OFFS TO ALMOST
EVERY HOUSE. AND BECAUSE OF THE HIGH DENSITY OF THE HOUSING
THERE, THAT MEANS A LOT OF WIRES.
Q AS FAR AS THE SIZE OF THE CABLE OR DIAMETER OF
THE TELEPHONE CABLES, WHAT DID YOU OBSERVE IN THE SOUTH
CENTRAL AREA?
A
A MIXTURE. ALMOST EVERYTHING. SOME VERY SMALL
CABLES. SOME WHICH WERE OBVIOUSLY BUNDLES OF CABLES AT A
HALF-INCH, THREE-QUARTER INCH, ONE-INCH DIAMETER.
THERE WAS A LARGE DEGREE OF VARIATION. IT
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LOOKED AS THOUGH THE CABLES, AS I SAID, HAD BEEN INSTALLED
IN MANY DIFFERENT PERIODS OF TIME OVER A LOT OF YEARS.
Q DO YOU RECALL WHAT THE SMALLEST DIAMETER
TELEPHONE CABLE WAS THAT YOU OBSERVED IN THE SOUTH CENTRAL
AREA?
A MY GUESS IS YOU'RE TALKING ABOUT A QUARTER
INCH. BUT AGAIN, IF YOU'RE TALKING FROM THE POLE TO A
PARTICULAR HOUSE, IT CAN BE AS SMALL AS SIMPLY ONE TWISTED
PAIR OF WIRES, WHICH IS JUST SIMPLY TWO VERY THIN DIAMETER
WIRES GOING TO THAT PARTICULAR HOUSE.
Q LET'S RESTRICT IT TO DOWN THE STREET. A
QUARTER INCH. WHAT ABOUT THE LARGEST?
A THE LARGEST PROBABLY IN THE AREA OF THREE
QUARTERS OF AN INCH TO ONE INCH. SOMETHING LIKE THAT.
THERE MIGHT HAVE BEEN SOME STREETS WHERE IT WAS LARGER. BUT
IN GENERAL, THAT WOULD BE THE CASE.
Q WHAT IS THE LARGEST DIAMETER TELEPHONE COMPANY
CABLE THAT YOU'VE EVER SEEN I ~ YOUR WORK?
A I'VE SEEN TWO-INCH DIAMETER CABLE. BUT NOT
GENERALLY
THAT KIND OF CABLE IS NOT GENERALLY ON POLES.
IT GENERALLY IS UNDERGROUND. IT GENERALLY GOES FROM A
CENTRAL OFFICE TO ONE OF THEIR MAIN STATIONS WHERE YOU'RE
TALKING ABOUT HUNDREDS OF INDIVIDUAL PAIRS OF WIRES THAT ARE
CONTAINED IN THE SAME CABLE.
Q WHAT WAS THE DIAMETER OF THE CABLE TELEVISION
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1 CABLE THAT YOU SAW IN THE SOUTH CENTRAL AREA?
A AGAIN, I SAW VERY LITTLE OF IT. I THINK I SAW 2
3 SOME TRUNK AND SOME FEEDER CABLE. MY IMPRESSION WAS THE
4 TRUNK CABLE WAS THREE QUARTERS OF AN INCH.
TRUNK CABLE GENERALLY VARIES BETWEEN HALF AN
6 INCH AND THREE QUARTERS OF AN INCH, EITHER ONE OF THOSE TWO
SIZES. I THINK THERE WERE SOME OF BOTH SIZES. AND FEEDER
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CABLE IS USUALLY BETWEEN FOUR TENTHS OF AN INCH AND HALF AN
9 INCH IN DIAMETER. SOME MAY BE A LITTLE SMALLER.
I THINK I SAW THOSE TYPICAL SIZES ON THE CABLE
11 I DID SEE. BUT IT REPRESENTED A RELATIVELY SMALL PART OF
12 THE FRANCHISE AREA.
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14 THE SOUTH CENTRAL AREA, WAS IT THE BLACK COVERED TYPE OR WAS
IT THE METAL METALLIC?
16 A I THINK SOME WAS SILVER COLORED AND SOME OF IT
17 WAS THE DARK COLOR. I COULDN1T BE ABSOLUTELY CERTAIN OF
t 18 THAT. BUT THATtS MY RECOLLECTION.
19 I'VE SEEN CONSTRUCTION OF AMERICAN CABLE
SYSTEMS IN OTHER AREAS OF THE CITY, AND IT LOOKED SIMILAR TO
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22 Q
SO THE CONSTRUCTION IN THE SOUTH CENTRAL AREA
23 WAS SIMILAR TO WHAT YOU'VE SEEN?
24 A
IT LOOKED LIKE NEW CABLE BEING PUT UP FOR THE
FIRST TIME
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Q WHAT OTHER AREAS HAVE YOU SEEN AMERICAN?
A WELL, I LIVE IN AN AREA OF THE CITY THAT WAS
SERVED ORIGINALLY BY BUT NOW THE SERVICE IS BY
AMERICAN. I HAVE CONSULTED FOR CULVER CITY, AND AMERICAN
HAS TAKEN OVER THE SYSTEM THERE. I HAVE CONSULTED FOR
CITIES LIKE DOWNEY AND LOS ANGELES COUNTY WHERE THE
FRANCHISES ORIGINALLY WERE GRANTED TO ROGERS CABLE SYSTEM.
BUT AMERICAN HAS BOUGHT THAT SYSTEM ALSO.
SO I THINK I'VE SEEN A MIX OF SOME COMMUNITIES
WHERE THEY HAVE BASICALLY TAKEN OVER CABLE THAT WAS BUILT BY
SOMEBODY ELSE AND SOME PLANTS THAT THEY HAVE BUILT
THEMSELVES OR UPGRADED THEMSELVES.
Q WHERE WAS THERE ACTUAL BUILDING BY AMERICAN?
A APART FROM THE SOUTH CENTRAL AREA, THEY
UPGRADED PART OF THE PLANT IN DOWNEY. MOST OF THE PLANT WAS
BUILT. BUT THEY REVISED SOME OF IT, AND I DON'T KNOW
WHETHER YOU'D CALL THAT NEW CONSTRUCTION OR UPGRADE
CONSTRUCTION.
BUT THEY DID IT ESSENTIALLY AFTER THEY BOUGHT
THE SYSTEM. MOST OF THE OTHERS THAT I'M FAMILIAR WITH, THEY
HAVE PURCHASED THOSE SYSTEMS, AND THE SYSTEMS WERE PUT UP BY
SOMEONE ELSE.
Q
DO YOU KNOW WHETHER OR NOT AMERICAN HAS
PURCHASED MOST OF THE SYSTEMS THEY CURRENTLY OWN AS OPPOSED
TO HAVING BUILT THEM?
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A IN CALIFORNIA, I THINK THAT'S THE CASE, YES.
THEY HAVE PURCHASED MOST OF THE ONES 11M FAMILIAR WITH.
Q WHAT ABOUT IN OTHER AREAS? DO YOU KNOW?
A WELL, THEY STARTED OUT AS AN EAST COAST COMPANY
WITH SOME SYSTEMS IN THE MASSACHUSETTS AREA. 11M NOT SURE
WHETHER THE SYSTEM THERE, WHETHER THEY BUILT THOSE SYSTEMS
OR BOUGHT THEM.
MY GENERAL IMPRESSION -- BECAUSE AMERICAN IS A
RELATIVELY NEW COMPANY -- WAS FORMED -- THEIR CHAIRMAN IS A
BANKER WHO BASICALLY FORMED THE COMPANY WITH INVESTMENT
CAPITAL ONLY A FEW YEARS AGO. SO MY GENERAL IMPRESSION IS
THAT MOST OF THEIR CABLE SYSTEMS THEY BOUGHT RATHER THAN
BUILT BECAUSE IT ALL OCCURRED RELATIVELY RECENTLY.
Q DO YOU PERSONALLY KNOW ANY OF THE EMPLOYEES OF
AMERICAN?
A YES.
Q WHICH ONES?
A liVE MET TERRY SOLEY A NUMBER OF TIMES SINCE I
CONSULTED FOR CITIES THAT WERE NEGOTIATING WITH AMERICAN AT
ONE POINT OR ANOTHER. liVE MET WITH PERRY PARKS III IN SOME
OF THOSE MEETINGS. liVE MET WITH DAVID KEITH, ESSENTIALLY
SOLEY'S BOSS, THE VICE PRESIDENT IN THIS AREA. AT LEAST HE
WAS UNTIL I THINK HE'S RUNNING THE Z CHANNEL OR SOMETHING
LIKE THAT.
I PROBABLY MET WITH HALF A DOZEN OF THE
,..----______--=L:.;:::Uc..::;...'DWIG COURT REPORTERS I INC.
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AMERICAN PEOPLE. MOSTLY AT THE: MANAGEMENT LEVEL AND MOSTLY
IN MEETINGS WHERE I WAS WORKING WITH A PARTICULAR CITY THAT
WAS BEING SERVED BY AMERICAN. I CONSULTED TO A NUMBER OF
THOSE CITIES AT THE TIME THAT AMERICAN PURCHASED THE SYSTEM
FROM THE PREVIOUS OWNERS ALSO.
Q DID YOU EVER MAKE RECOMMENDATIONS TO ANY OF
THOSE CITIES ABOUT WHETHER OR NOT THEY SHOULD APPROVE A
TRANSFER OF THE FRANCHISE TO AMERICAN?
A YES.
Q WHICH CITIES WERE THEY?
A WELL, THE CONSORTIUM, WHICH INCLUDED DOWNEY,
DOWNEY AND FIVE OTHER CITIES, SANTA FE SPRINGS AND PICO
RIVERA, A COUPLE OF OTHERS. BUT ROGERS SOLD THEIR SYSTEM TO
AMERICAN. CULVER CITY, AMERICAN PICKED UP THAT SYSTEM.
AND IN BOTH OF THOSE CASES, THE CITY
ESSENTIALLY ASKED US TO REVIEW THE APPLICATION FOR TRANSFER
AND SEE IF THERE WAS ANY REASON WHY THEY SHOULD NOT APPROVE
IT. AND WE FOUND NO REASON NOT TO APPROVE IT.
INCIDENTALLY, I MIGHT MENTION WE DID THE SAME
FUNCTION WHEN AMERICAN WAS PURCHASED BY CONTINENTAL ALSO.
Q
FOR THE SAME CITIES?
A
FOR SOME OF THE SAME CITIES. THE CONTINENTAL
PURCHASES WERE A LITTLE MORE ROUTINE, AND THERE WERE SOME
CITIES THAT DID NOT ASK FOR A SPECIFIC CONSULTING ASSISTANT.
THEY JUST ASKED US FOR A GENERAL OPINION. IF THERE WAS
LUDWIG COURT REFORTERS, INC.
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ANYTHING WE KNEW ABOUT CONTINENTAL THAT THERE MIGHT BE A
PROBLEM WITH, AND THE TRANSFER WAS PRETTY ROUTINE.
Q
WHAT KIND OF THINGS DID YOU LOOK AT WHEN YOU
WERE ASKED TO REVIEW THE AMERICAN PURCHASES?
A GENERALLY IF THE PURCHASER IS GOING TO PURCHASE
THE CABLE SYSTEM WITHOUT REQUESTING ANY CHANGES IN THE
FRANCHISE AGREEMENT, SIMPLY WANTS TO TAKE OVER THE EXISTING
AGREEMENT AND IS NOT ASKING FOR ANY MODIFICATIONS.
GENERALLY THE ONLY THINGS WE LOOK AT IN THAT CASE IS THE
FINANCIAL AND TECHNICAL QUALIFICATIONS AND THE TRACK RECORD
OF THAT COMPANY TO SEE WHETHER OR NOT IT LOOKS AS THOUGH
THEY HAVE THE MONEY TO OPERATE THE SYSTEM, WHETHER THEY HAVE
THE TECHNICAL ABILITY TO OPERATE IT AND WHETHER THERE HAVE
BEEN ANY PROBLEMS IN PAST OPERATIONS.
BY PROBLEMS, I MEAN DISPUTES WITH CITIES OR
ANYTHING THAT'S COME TO PUBLIC KNOWLEDGE. USUALLY IF
THERE'S NO PARTICULAR PROBLEM IN ANY OF THOSE AREAS, THE
TRANSFER IS PRETTY ROUTINE.
IF THE CABLE COMPANY THAT WANTS TO PURCHASE THE
SYSTEM ASKS FOR MODIFICATIONS, GENERALLY WE THEN GO INTO
NEGOTIATION. IN MANY CASES THE PURCHASER MAY A S ~ FOR AN
EXTENSION OF TIME ON THE FRANCHISE OR SOME OTHER
MODIFICATION OF THE FRANCHISE.
IN A NUMBER OF CASES THEY HAVE WANTED RELIEF
FROM COMMITMENTS THAT THE EXISTING FRANCHISE HAD IN IT, AND
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LUDwIG COURT REPORTERS, I N C ~ . __________________~
46
IN THOSE CASES, YOU GET INTO MORE OF NEGOTIATION SESSIONS
THAN SIMPLY JUST A REVIEW OF THE QUALIfICATIONS OF THE
PURCHASER.
Q ARE YOU FAMILIAR WITH ANY SITUATIONS WHERE
THERE WERE NEGOTIATIONS TO INCREASE THE FRANCHISE
OBLIGATIONS IN EXCHANGE FOR A CITY'S APPROVAL OF A TRANSFER?
A IF THE CABLE COMPANY IS ASKING FOR SOME
BENEFITS IN TERMS OF CHANGES, EITHER RELIEF FROM PREVIOUS
OBLIGATIONS OR SOMETHING NEW, THEN NORMALLY ONE FUNCTION
THAT I PROVIDE TO THE CITY THAT I WORK FOR IS TO ASSIST THEM
IN NEGOTIATING. THEN IN NEGOTIATING YOU USUALLY TRY TO GET
SOME BENEFIT FOR THE CITY OR FOR THE SUBSCRIBERS IN RETURN
FOR THE BENEFIT THAT THE CABLE COMPANY GETS.
SO I THINK THE ANSWER TO YOUR QUESTION WOULD BE
YES, THAT IF THE CABLE COMPANY WANTS SOME RELIEF, UNLESS
THERE'S A FINANCIAL HARDSHIP OR SOMETHING THAT WOULD
INDICATE THAT THEY SHOULD GET IT WITHOUT ANY QUID PRO QUO,
THE NORMAL PRACTICE IS TO TRY TO GET SOME COMPENSATION AS A
RESULT.
Q WHAT ABOUT IF THE CABLE COMPANY IS NOT ASKING
FOR ANYTHING EXCEPT APPROVAL OF THE TRANSFER OF THE
FRANCHISE? ARE YOU FAMILIAR WITH ANY SITUATIONS WHERE A
CITY HAS ATTEMPTED TO NEGOTIATE AN INCREASE IN OBLIGATION?
A I HAVE HAD A NUMBER OF SITUATIONS COME UP WHERE
THE CITY REPRESENTATIVE BROUGHT THAT QUESTION UP. THEY SAID
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LUD WIG CO U R T R EP _____ ____--,
IN EFFECT SINCE THE CABLE COMPANY WANTS A TRANSFER, CAN WE
USE THIS AS AN OPPORTUNITY TO NEGOTIATE. MY GENERAL ADVICE
IN THOSE CASES WHERE I WORKED fOR THE CITY IS THAT THATIS
NOT THE RIGHT TIME TO TRY TO NEGOTIATE.
IF ALL THE COMPANY WANTS 15 A STRAIGHT
TRANSFER, I FELT THAT THE CITY MIGHT GET ITSELF INTO
,DIFFICULTIES BY ATTEMPTING TO, IN EFFECT, HOLD UP THE
TRANSFER OR HOLD THE TRANSFER HOSTAGE UNTIL THEY GOT SOME
ADDITIONAL BENEFITS OUT OF IT.
SO MY ADVICE GENERALLY IN THOSE CASES HAS BEEN
IF YOU WANT TO NEGOTIATE FOR SOMETHING ELSE, KEEP THAT AS A
SEPARATE ITEM. BUT NOT TO SAY, IN EFFECT, TO THE COMPANY
THAT WEIRE NOT GOING TO APPROVE YOUR TRANSFER UNLESS YOU
GIVE US SOMETHING THAT WE DONIT HAVE RIGHT NOW.
SO THAT IN THOSE CASES WHERE THE CABLE COMPANY
WANTED NOTHING BUT THE PURCHASE, MY RECOMMENDATION IS -
THIS HAS INVARIABLY BEEN JUST LOOK AT THE QUALIFICATION AND
YOU CANIT OBJECT TO THE -- YOU HAVE NO GROUNDS TO OBJECT TO
THE TRANSFER. IN MOST OF THE CASES liVE BEEN INVOLVED IN,
THE REASON 11M CALLED IN IS BECAUSE USUALLY THE CABLE
COMPANY DOES WANT A CHANGE. THEN 11M CALLED IN TO ASSIST
NEGOTIATING THAT CHANGE.
Q DO YOU KNOW EVEN IN A SITUATION WHERE YOU MIGHT
NOT HAVE BEEN CALLED IN TO ASSIST, ARE YOU FAMILIAR WITH ANY
SITUATIONS WHERE THAT DID HAPPEN, THAT THE CITY HELD THE
I.
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TRANSFER HOSTAGE?
A I'M FAMILIAR WITH SITUATIONS WHERE PEOPLE HAVE
SAID THAT THAT'S HAPPENED. I THINK IT'S HEARSAY
INFORMATION. AND I WOULD NOT WANT TO TESTIFY SPECIFICALLY
ON FACTS I'M NOT AWARE OF.
I'VE HEARD CABLE COMPANIES COMPLAIN. I'VE
HEARD SOME CITY REPRESENTATIVES SAY, "LET'S USE THIS AS AN
OPPORTUNITY TO NEGOTIATE.- I'VE HEARD OF SOME SITUATIONS
WHERE PRESUMABLY THAT WAS SUPPOSED TO HAVE HAPPENED.
Q
IT WOULD BE PRETTY UNUSUAL; IS THAT TRUE?
A MY GUESS AND 1'M STRICTLY GUESSING NOW MY
GUESS IS THAT WOULD BE THAT IT MAY HAVE HAPPENED IN SOME
CASES. IF IT HAPPENED, IT HAPPENED WHERE THE CABLE COMPANY
WAS PRESSED FOR TIME AND WANTED TO GET THE TRANSACTION
APPROVED RELATIVELY QUICKLY. AND THEREFORE, GAVE IN ON
SOMETHING THAT THEY FELT THEY COULD FIGHT IF THEY WANTED TO
TAKE THE TIME TO FIGHT IT.
SO I WOULDN'T TAKE THE POSITION IT'S NEVER
HAPPENED. BUT I THINK NORMALLY THE RESPONSE OF MOST CABLE
COMPANIES IF THEY'RE NOT PRESSED FOR TIME AND THEY DON'T
HAVE TO HAVE A PURCHASE COMPLETED IN A SPECIFIC TIME,
NORMALLY MOST CABLE COMPANIES WOULD SAY, -THIS IS A STRAIGHT
TRANSFER. THE CITY IS BEING ARBITRARY IF IT HOLDS IT UP ON
THE GROUNDS OF TRYING TO BLACKMAIL US.- AND I DON'T THINK
THEY'D GIVE IN IN MOST CASES.
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LUDW G COURT _________
Q
WHY DO YOU RECOMMEND AGAINST DOING THIS?
A BECAUSE I THINK IT IS A FORM OF BLACKMAIL. I
THINK IF YOU HAVE AN AGREEMENT THAT YOU HAVE SIGNED
VOLUNTARILY -- AND BY YOU, I'M REFERRING BOTH TO THE CITY
AND THE CABLE COMPANIES -- I THINK BOTH SIDES SHOULD HONOR
THAT AGREEMENT. AND I THINK IF IT'S SIMPLY A PURCHASE AND
THE NEW PURCHASER IS WILLING TO ACCEPT ALL OF THE CONDITIONS
OF THE PRESENT FRANCHISE, THEN I DON'T LOOK AT THAT AS AN
OPPORTUNITY TO OPEN NEGOTIATIONS. I LOOK AT THAT AS JUST A
STRAIGHT TRANSFER.
MR. BRAMSON: WHY DON'T WE TAKE A BREAK.
(RECESS.)
MS. HOLBROOKE: WE CHECKED OVER THE BREAK,
MR. BRAMSON, AND THE REPRESENTATIVE FROM THE DEPARTMENT OF
WATER & POWER WHO ACCOMPANIED MR. PILNICK ON THE RIDE-OUT IN
SOUTH CENTRAL IS MITCHELL KOLACINSKI, K-O-L-A-C-I-N-S-K-I.
MR. BRAMSON: DO YOU KNOW MR. KOLACINSKI'S TITLE OR
POSITION?
MS. HOLBROOKE: C.A.T.V. COORDINATOR.
BY MR. BRAMSON:
Q DOES THAT MATCH YOUR RECOLLECTION, MR. PILNICK?
A YES, THAT'S THE GENTLEMAN.
Q HAD YOU EVER MET MR. KOLACINSKI BEFORE THEN?
A NO.
Q HAVE YOU SPOKEN WITH HIM SINCE?
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A NO.
Q
WHAT WERE YOUR CONCLUSIONS, IF ANY, THAT
RESULTED FROM YOUR RIDE-OUT AND EXAMINATION OF THE UTILITY
POLES?
MS. HOLBROOKE: WITH REGARD TO WHAT SUBJECT?
MR. BRAMSON: ANY SUBJECT.
THE WITNESS: GENERAL CONCLUSIONS ARE THAT THE
UTILITY POLES IN THE AREA WERE RELATIVELY OLD WITH A
CONSIDERABLE NUMBER OF CABLES. MY IMPRESSION WAS THAT ON
THE AVERAGE THERE WERE PROBABLY MORE CABLES PER POLE,
PRIMARILY TELEPHONE, IN THAT AREA THAN IN MOST OTHER AREAS
OF THE CITY THAT I WAS FAMILIAR: WITH.
SECOND IMPRESSION THAT RELATED TO THAT WAS THAT
BECAUSE OF THE DENSITY OF HOUSING AND THE PARTICULAR
LOCATION OF EASEMENTS IN GENERAL, ALLEYS BEHIND THE HOUSES,
THAT BOTH ANY UTILITY, POWER, TELEPHONE OR CABLE
INSTALLATION WOULD BE A FAIRLY EXPENSIVE JOB.
BY MR. BRAMSON:
Q IS THAT IT?
A I GUESS THE THIRD CONCLUSION WOULD BE THAT IF
THERE WERE A REQUIREMENT FOR MORE THAN ONE SET OF COAXIAL
CABLES, TWO OR MORE, THAT PROBABLY THERE WOULD BE A
REQUIREMENT TO CHANGE PHYSICALLY MORE POLES IN THAT AREA,
AGAIN, THAN IN ANOTHER COMPARABLE AREA OF THE CITY, WHICH
WOULD MAKE THE COST -- CERTAINLY TO THE SECOND COMPANY
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COMING IN -- WOULD MAKE THE COST EVEN HIGHER THAN NORMAL.
THAT BASICALLY CAME FROM THE FIRST CONCLUSION,
THAT THE POLES WERE ALREADY PRETTY CROWDED IN MOST CASES.
Q DID YOU DISCOVER ANYTHING ABOUT THE TYPICAL
HEIGHT OF THE POLES IN THE SOUTH CENTRAL AREA?
A MOST OF THEM, TO MY RECOLLECTION, WERE SHORTER
POLES RATHER THAN LONGER POLES. MORE IN THE 35-FOOT
CATEGORY, FOR EXAMPLE, THAN IN THE 45-, 50-FOOT CATEGORY
THAT YOU MIGHT HAVE IN OTHER LOCATIONS.
Q WHEN YOU SAY, OTHER LOCATIONS, WHAT OTHER
LOCATIONS ARE YOU TALKING ABOUT?
A OTHER PARTS OF THE CITY IN GENERAL. ALMOST ALL
OF THE POLES THAT I CAN RECOLLECT NEAR THE DRIVE-THROUGH
HERE WERE THE 35-FOOT VARIETY, WHICH WHEN YOU COMBINE WITH
THE LARGE NUMBER OF CABLES ALREADY HANGING ON THEM PLUS THE
OLDER CONSTRUCTION OF THE POLES, WHICH MEANS THAT PROBABLY
IN GENERAL THERE'S A NEED FOR REPLACING MANY OF THEM JUST IN
A NORMAL COURSE OF EVENTS.
YOU TAKE ALL THOSE CONDITIONS TOGETHER, THE
GENERAL CONCLUSION WOULD BE THAT ADDING MORE THAN ONE SET OF
COAXIAL CABLES WOULD RESULT IN A SIZABLE PERCENTAGE OF THOSE
POLES THAT WOULD SIMPLY HAVE TO BE PHYSICALLY REPLACED.
PART OF THE PROBLEM IS NOT JUST WILL THE WIRE
FIT, BUT WILL, WHEN YOU ADD THE EXTRA CABLES, WILL THE POLES
SUPPORT THE WEIGHT. NOT ONLY IN NORMAL CONDITIONS BUT UNDER
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HIGH WIND CONDITIONS, WHICH GENERALLY MEAN MORE GUY WIRES,
WHICH MEANS YOU HAVE TO HAVE MORE SPACE.
SO ALL OF THESE FACTORS TOGETHER ADD TO THE
CONCLUSION THAT THERE WOULD BE A SIGNIFICANT PERCENTAGE OF
POLES THAT WOULD HAVE TO BE CHANGED FOR LARGER POLES.
Q IS IT YOUR OPINION THAT THE COST OF REARRANGING
OR REPLACING UTILITY FACILITIES IS A SIGNIFICANT FACTOR IN
DECIDING WHETHER OR NOT AN OVERBUILD IS ECONOMICALLY
FEASIBLE?
A IT'S ONE FACTOR. IT'S OBVIOUSLY NOT THE ONLY
FACTOR. BUT IT'S ONE FACTOR. AND IN MANY CASES IT CAN
BECOME SIGNIFICANT.
IT DEPENDS, AGAIN, ON THE NUMBER OF POLES.
GENERALLY THE SECOND COMPANY, THE SECOND CABLE COMPANY ON A
POLE HAS TO PAY THE FULL COST OF REARRANGEMENTS, INCLUDING
MOVING OR REARRANGING THE FIRST COMPANY CABLES IF THAT'S
NECESSARY. SO THAT IT BECOMES AN INCREASING COST BURDEN FOR
EACH SUCCEEDING COMPANY THAT ATTEMPTS TO OVERBUILD. AND FOR
THE SECOND OR THIRD COMPANY, IT CAN BE A SIGNIFICANT COST.
FOR THE FIRST COMPANY, IT MAY NOT BE.
Q IS IT YOUR OPINION THAT IN THE SOUTH CENTRAL
AREA THE COST OF UTILITY REARRANGEMENTS FOR MAKE-READY
REARRANGEMENTS IS A SIGNIFICANT FACTOR IN YOUR OPINION ABOUT
THE ECONOMIC CAPABILITY OF THE COMPETITION THERE?
A I WOULD CONSIDER OVERBUILDING IN THAT AREA
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ECONOMICALLY UNFEASIBLE EVEN IF THE COST OF REARRANGING ON
THE POLES WERE EXCLUDED. SO I THINK THAT'S A PARTIAL ANSWER
TO YOUR QUESTION.
BUT I DO THINK IT CAN BE A SIGNIFICANT COST.
IN MANY CASES REPLACEMENT OF A POLE CAN COST UPWARDS OF
$1,000 OR MORE PER POLE. IF YOU'RE TALKING ABOUT SEVERAL
HUNDRED MILES OF CABLE, 30 TO 40 POLES PER MILE, AND A LARGE
PERCENTAGE OF THOSE THAT MIGHT HAVE TO BE CHANGED OUT, I
THINK WHEN YOU MULTIPLY THE NUMBERS OUT, YOU'LL FIND THAT IT
IS A SIGNIFICANT COST WELL INTO THE MILLIONS OF DOLLARS.
Q YOU MENTIONED THE WEIGHT OF THE CABLES. DO YOU
KNOW APPROXIMATELY HOW MUCH A CABLE, TELEVISION CABLE WEIGHS
PER FOOT OR PER MILE OR PER ANY AMOUNT?
A I CAN'T QUOTE THAT DIRECTLY. BUT I DO KNOW
THAT I'VE TALKED TO A NUMBER OF UTILITY POLE OWNER
REPRESENTATIVES, AND THEY STRESS THE FACT THAT THE WEIGHT IS
A SIGNIFICANT FACTOR, PRIMARILY IN TERMS OF WIND LOADS.
GENERALLY THE STATIC WEIGHT, WHEN THERE'S NO
WIND, IS NOT A HEAVY LOAD BURDEN FOR THE POLE. BUT IN CASE
OF HIGH WINDS, IT CAN BE A VERY SEVERE FACTOR. AND THEY
HAVE TO LOOK AT IT FROM A WORST-CASE BASIS.
Q YOU DON'T KNOW HOW MUCH COAXIAL CABLE WEIGHS?
A I CAN TAKE SOME GUESSES.
MS. HOLBROOKE: JILL CAUTION THE WITNESS NOT TO
GUESS.
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THE WITNESS: I WOULD SAY I WOULD RATHER NOT. I HAVE
SEEN THOSE FIGURES. I DON'T RECALL RIGHT NOW. OBVIOUSLY
YOU HAVE DIFFERENT SIZES.
YOU'VE GOT THE ONE-INCH, THE
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THREE-QUARTER-INCH, HALF-INCH, ONE-QUARTER-INCH. YOU'VE GOT
DIFFERENT CODINGS OR JACKETS ON THESE. SOME ARE METAL AND
SOME ARE PLASTIC. YOU'VE GOT DIFFERENT DIELECTRICS INSIDE
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THE CABLE, AND ALL THESE HAVE DIFFERENT WEIGHTS. SO I WOULD
HATE TO SIMPLY COME UP WITH A SINGLE ANSWER THAT MIGHT BE
MISLEADING.
BY MR. BRAMSON:
Q CAN YOU GIVE ME A WEIGHT FOR ANY OF THOSE SIZES
OR A RANGE THAT THEY MIGHT FALL INTO? IF YOU CAN'T, YOU
CAN'T.
A IF YOU'RE TALKING ABOUT THE LARGER CABLES,
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HALF- TO THREE-QUARTER-INCH, THEN YOU'RE PROBABLY TALKING
ABOUT SOMETHING IN THE NEIGHBORHOOD OF MAYBE A QUARTER POUND
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PER FOOT. SOMETHING IN THAT GENERAL RANGE.
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Q DOES THAT INCLUDE OR EXCLUDE THE METAL STRAND?
I
A NO, THAT EXCLUDES THE STRAND. THAT'S JUST IF
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YOU SLICED A FOOT OF THE CABLE OFF AND WEIGHED IT ON A
SCALE, THAT'S HOW MUCH IT WOULD WEIGH. THE METAL STRAND OF
STEEL, THAT HAS A SIGNIFICANT WEIGHT, TOO.
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Q CAN YOU GIVE US AN ESTIMATE OF A STRAND?
A NO.
,
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Q
HOW ABOUT A HALF-INCH TO THREE-QUARTERS-INCH
TELEPHONE CABLE?
A I DON'T KNOW THE ANSWER TO THAT. AGAIN, I
DON'T WANT TO USE THE WORD "GUESS, BECAUSE I DON'T THINK
SHE LIKES THAT. MY IMPRESSION IS THAT IT WEIGHS LESS THAN
EQUIVALENT LENGTHS OF COAXIAL CABLE, BECAUSE YOU DONrT HAVE
THE DIELECTRIC IN BETWEEN THEM.
Q SO THE TELEPHONE CABLE WEIGHS LESS THAN THE
COAXIAL?
A FOR EQUIVALENT DIAMETERS.
Q
HOW ABOUT THE POWER?
MS. HOLBROOKE: I'M SORRY. WHAT IS THE QUESTION?
MR. BRAMSON: RELATIVE WEIGHT.
MS. HOLBROOKE: WHAT IS THE WEIGHT OF POWER LINES?
BY MR. BRAMSON:
Q
WHAT IS THE RELATIVE WEIGHT OF POWER LINES?
A POWER LINES, THE WEIGHT DEPENDS SPECIFICALLY ON
THE VOLTAGE IT'S CARRYING. AND YOUrVE GOT ESSENTIALLY TWO
OR THREE CATEGORIES. YOU'VE GOT HIGH-VOLTAGE LINES WHERE
THE VOLTAGE IS TRANSFERRED AT THE END OF THE CABLE RUN, AND
THEN YOUrVE GOT THE LOW AND INTERMEDIATE VOLTAGE.
HIGH VOLTAGE CAN BE VERY HEAVY BECAUSE YOU HAVE
VERY SIZABLE CABLES THERE. MOST OF THE POWER THAT RUNS DOWN
THE STREETS OF THE CITY IS THE LOW TO INTERMEDIATE LEVEL.
AND YOU'RE TALKING IN MOST CASES ABOUT SOLID CONDUCTORS.
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YOU'RE NOT TALKING ABOUT COAXIAL OR CONDUCTORS THAT HAVE ANY
OTHER MATERIAL EXCEPT THE METAL ITSELF. SO THAT THE METAL
ITSELF, FOR THE HEAVY LINES, IS HEAVY. AND IT WOULD BE,
AGAIN, FOR A COMPARABLE DIAMETER, IT WOULD BE HEAVIER THAN
EITHER COAXIAL OR TELEPHONE WIRE.
Q WHAT ABOUT LOW VOLTAGE?
A
WHEN I SAY, -LOW VOLTAGE,- I'M NOT TALKING
ABOUT 110 VOLTAGE. GENERALLY IT'S TRANSFORMED BEFORE IT
GOES INTO THE HOUSE TO 110 VOLTS. SO WE'RE TALKING ABOUT
PERHAPS IN THE ONE TO TWO THOUSAND VOLT CATEGORY. AND THOSE
ARE THE KINDS I'M SAYING WILL BE HEAVIER.
IF YOU GET TO YOUR ORDINARY POWER LINES WITHIN
A HOUSE THAT HANDLE THE 110 VOLTS, THEN I THINK ALMOST
EVERYONE HAS SEEN YOUR ORDINARY EXTENSION CORD TYPE OF
THING. AND THAT'S THE KIND OF LINES WE'RE TALKING ABOUT.
BUT THE CABLE ON THE POLES ARE FAIRLY THICK.
Q SO GENERALLY SPEAKING, THE POWER CABLES THAT
ARE ON THE POLE WOULD BE HEAVIER THAN EITHER THE TELEPHONE
COMPANY OR COAXIAL CABLES?
A YES.
Q MR. PILNICK, WHAT IS YOUR ESTIMATE OF THE COST
PER MILE OF ALL THE MAKE-READY AND REARRANGEMENT COSTS THAT
IT WOULD TAKE TO PUT ONE CABLE TELEVISION CABLE ONTO THE
UTILITY POLES IN THE SOUTH CENTRAL AREA?
MS. HOLBROOKE: COULD I HAVE THAT AGAIN?
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(RECORD READ.)
MS. HOLBROOKE: IF YOU'VE MADE SUCH AN ESTIMATE.
THE WITNESS: I DON'T THINK I'VE MADE A SPECIFIC
ESTIMATE. IN GENERAL, IF THE POLE HAS TO BE CHANGED, THE
UTILITY CHARGES SOMEWHERE IN THE NEIGHBORHOOD OF 300 TO
$3,000. AND IT DEPENDS -- THAT'S A WIDE RANGE SIMPLY
BECAUSE IT DEPENDS ON DIGGING A NEW HOLE FOR THE NEW POLE,
PUTTING A LARGER POLE IN AND REARRANGING ALL THE PREVIOUS
CABLES IN ADDITION TO ADDING THE NEW CABLES.
THE AVERAGE COST THAT I'VE SEEN IN OTHER
COMMUNITIES AND I HAVE NOT SPECIFICALLY RELATED TO SOUTH
CENTRAL -- BUT OTHER COMMUNITIES' AVERAGE COSTS RUN AROUND
700 TO $1,000 A POLE IF THE POLE HAS TO BE CHANGED OUT.
IF THE POLE DOES NOT HAVE TO BE CHANGED AND ALL
YOU'RE TALKING ABOUT IS ADDING ONE SET OF STEEL STRAND AND
COAXIAL CABLE, GENERALLY YOU'RE TALKING ABOUT THE LOW
HUNDREDS OF DOLLARS PER MILE, ANYWHERE FROM ONE TO THREE
HUNDRED DOLLARS A MILE, WHICH INCLUDES THE ENGINEERING OF
IT, AND IT INCLUDES THE POLE ATTACHMENT COSTS AND
ESSENTIALLY ALL THE DOLLARS YOU SPENT TO GET THE CABLE
INSTALLED. BUT THAT WOULD BE A ROUTINE INSTALLATION THAT
REQUIRES NO MODIFICATIONS.
BY MR. BRAMSON:
Q I DIDN'T UNDERSTAND YOU. ONE TO THREE HUNDRED
DOLLARS, THAT'S THE COST THAT IS THE TYPICAL COST INCLUDING
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MAKE-READIES AND REARRANGEMENTS, ASSUMING NO POLES NEED TO
BE CHANGED?
A YES. THAT DOES NOT INCLUDE THE -- THAT'S THE
COST TO GET READY TO ATTACH IT TO THE POLES. IT DOESN'T
INCLUDE -- IT IS NOT INSTALLATION COST, AERIAL INSTALLATION
COST. IF YOU WERE ESTIMATING, PROBABLY IN THE SOUTH CENTRAL
AREA IT WOULD RUN SOMEWHERE BETWEEN 10 AND $20,000 A MILE
TOTAL. THIS IS ONE COMPONENT OF THAT COST.
Q THE TEN TO TWENTY THOUSAND INCLUDES THE ONE TO
THREE HUNDRED?
A YES. AND THE 1,000 OR SO MORE IF A POLE HAS TO
BE CHANGED OUT.
Q ONE POLE A MILE -
A NO.
Q THAT WOULD BE A LOT TO CHANGE THAT.
A NO. WHEN I SAID BEFORE IN A TYPICAL CITY
STREET YOU HAVE SOMEWHERE BETWEEN 35 AND 40 POLES PER MILE,
IF YOU ONLY HAD 1 POLE PER MILE OF THAT 40 TO CHANGE, THE
EFFECT WOULD BE RELATIVELY NEGLIGIBLE. IF YOU HAD TO CHANGE
20 POLES OUT OF THAT 40, THAT MIGHT ADD $20,000 A MILE TO
THE 10 TO 20,000 THAT I SAID WAS THE AVERAGE COST OF AERIAL
CONSTRUCTION. SO THAT IF YOU HAVE A LARGE NUMBER OF POLES
TO CHANGE, YOU CAN DOUBLE OR TRIPLE YOUR TOTAL COST OF
INSTALLATION.
NOW, USUALLY THAT'S NOT THE CASE. USUALLY YOU
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DON'T HAVE A HIGH PERCENT OF POLES TO CHANGE. SO THE IMPACT
ON THE POLE CONSTRUCTION COST IS VERY CLOSELY RELATED TO THE
NUMBER OF POLES THAT HAVE TO BE PHYSICALLY CHANGED OUT.
Q SO THE NUMBER OF CHANGE-OUTS IS THE KEY,
REALLY, TO KNOWING HOW EXPENSIVE YOUR AREA INSTALLATION IS
GOING TO BE?
A THAT'S CORRECT.
Q
WHAT IS YOUR ESTIMATE OF THE NUMBER OF POLES
PER MILE THAT NEED TO BE CHANGED OUT IN THE SOUTH CENTRAL
AREA?
MS. HOLBROOKE: IF YOU HAVE MADE SUCH AN ESTIMATE.
THE WITNESS: I'VE MADE AN INFORMAL ESTIMATE. I
HAVEN'T MADE AN ANALYSIS. BUT MY GENERAL ESTIMATE WAS FOR
ONE CABLE COMPANY, THAT YOU'RE NOT TALKING ABOUT A GREAT
PERCENTAGE OF THE POLES THAT WOULD HAVE TO BE CHANGED OUT.
THAT PROBABLY MY ESTIMATE WOULD BE THAT PERHAPS LESS THAN
10 PERCENT OF THE POLES MIGHT HAVE TO BE CHANGED. FOR TWO
CABLE COMPANIES, THAT ESTIMATE MIGHT GO AS HIGH AS
50 PERCENT OF THE POLES.
BY MR. BRAMSON:
Q THOSE ESTIMATES ARE BASED UPON THE VISUAL
EXAMINATION YOU MADE DURING YOUR RIDE-OUT?
A THE VISUAL EXAMINATION AND ALSO THE KNOWLEDGE,
AS I INDICATED BEFORE, THAT IT IS NOT ONLY A QUESTION OF
WHETHER THERE IS PHYSICALLY SPACE ENOUGH FOR TWO SETS OF
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COAXIAL CABLES AND STILL MEET THE UTILITY REQUIREMENTS.
IT'S SOME OF THE FACTORS THAT ARE NOT DIRECTLY EVIDENT,
LIKE DO YOU HAVE ENOUGH SPACE AROUND THE POLE TO PUT
ADDITIONAL GUY WIRES IN. THE MORE WEIGHT YOU HAVE, THE
STRONGER THE GUY WIRES YOU HAVE TO PUT IN. AND GENERALLY
THE LARGER THE DIAMETER FROM THE BASE OF THE POLE THOSE GUY
WIRES HAVE TO BE.
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SO THAT FACTOR IS ONE THAT WOULD BE INCLUDED.
THAT WAS A SUBJECTIVE OPINION ON MY PART LOOKING AT NOT ONLY
THE CROWDING ON THE POLES BUT THE SPACE AT THE BOTTOM OF THE
POLE. AND WHERE MANY OF THOSE POLES ARE LOCATED IN THE
SOUTH CENTRAL AREA ARE BACK ALLEY EASEMENTS WITH HOUSES VERY
CLOSE TO THE POLES AND VERY LITTLE SPACE AROUND THERE TO BE
ABLE TO WORK.
Q ANY OTHER FACTORS OTHER THAN SPACE ON THE POLE
ITSELF THAT YOU CONSIDERED IN COMING UP WITH YOUR FIRST
PERCENTAGE ESTIMATE?
A WELL, I THINK THE SPACE IN THE POLE -- WHEN YOU
SAY, -ANY FACTORS,- I THINK THE SPACE ON THE POLE IS A MINOR
FACTOR. IF YOU ADD UP, OBVIOUSLY, ALL OF THE DIAMETERS OF
ALL THE CABLES ON THE POLE AND COMPARE THAT AGAINST A
35-FOOT POLE, YOU THEORETICALLY HAVE A LOT OF SPACE LEFT
OVER. BUT WHEN I SAY IT'S A MINOR FACTOR, IT IS NOT WHETHER
YOU CAN PHYSICALLY FIT A SECOND CABLE IN THAT SPACE. IT IS
THE WEIGHT FACTOR THAT GOES WITH IT. IT'S THE UTILITY
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PROCEDURES THAT GO WITH IT. BECAUSE THEY HAVE SAFETY RULES,
FOR EXAMPLE, AND EACH SET OF CABLES PRESENTS AN ADDITIONAL
HAZARD TO THE UTILITY PEOPLE WHO HAVE TO CLIMB THOSE POLES.
PARTICULARLY TO THE PERSON THAT HAS TO CLIMB TO THE TOP OF
THE POLE AND HAS TO GO THROUGH THREE DIFFERENT SETS OF CABLE
THAT THEY HAVE TO REPAIR.
SO THE MORE YOU TALK TO UTILITIES, THE MORE
CONDITIONS AND MORE REQUIREMENTS THEY PUT IN, WHICH
GENERALLY RESULTS IN ADDITIONAL COSTS
IF YOU HAVE MORE THAN ONE CABLE, lIVE TALKED TO
MANY UTILITY REPRESENTATIVES, THAT IF YOU START TALKING
ABOUT THE POSSIBILITY OF THREE OR FOUR SETS OF CABLES WITHIN
THEM, THEY THROW UP THEIR HANDS AND SAY, -IT'S IMPOSSIBLE,R
FROM THEIR POINT OF VIEW. NOT BECAUSE THE POLE WON'T
ACCOMMODATE THEM, BUT BECAUSE OF ALL THE ANCILLARY
REQUIREMENTS THAT HAVE TO BE MET WHEN YOU ADD ADDITIONAL
CABLES.
Q
MY QUESTION TO YOU RIGHT NOW IS: YOU GAVE ME
YOUR ESTIMATES OF THE NUMBER OF POLES THAT NEEDED TO BE
CHANGED OUT. THAT WAS 10 PERCENT FOR ONE COMPANY AND UP TO
50 PERCENT FOR TWO COMPANIES.
A YES.
Q THEN I ASKED YOU IF THAT WAS BASED ON YOUR
RIDE-OUT VISUAL INSPECTION. YOU SAID YES, IT WAS. HOWEVER,
THERE WERE OTHER FACTORS BESIDES JUST THE SPACE ON THE
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POLES. I THOUGHT THAT'S WHAT YOU SAID.
A THAT'S CORRECT.
Q
YOU TOLD ME ANOTHER FACTOR WAS SPACE AROUND THE
BOTTOM OF THE POLE TO PUT A GUY IN.
A AND ALSO
MS. HOLBROOKE: WAIT. HE DOESN'T HAVE A QUESTION
YET.
BY MR. BRAMSON:
Q
THE QUESTION IS: ARE THERE ANY OTHER FACTORS
OTHER THAN SPACE ON THE POLES WHICH LED YOU TO MAKE YOUR
ESTIMATE OF THE NUMBER OF POLES THAT NEEDED TO BE CHANGED
OUT?
A I THINK YES. ONE FACTOR I HAVE MENTIONED, AND
THAT IS THE SAFETY REQUIREMENTS. THE SAFETY REQUIREMENTS
ARE ESTABLISHED GENERALLY BY THE UTILITIES THEMSELVES, NOT
BY THE P.U.C. AND THEY VARY FROM UTILITY TO UTILITY. 50
THAT THERE CAN BE CONFIGURATIONS WHICH MEET P.U.C. LEGAL
REQlIREMENTs IN TERMS OF THE SPACING. BUT WHERE THE UTILITY
COMPANY REPRESENTATIVES FEEL THAT VIOLATES THEIR OWN SAFETY
RULES OR SAFETY REQUIREMENTS, THEY WILL STILL NOT ALLOW A
CABLE COMPANY TO CONSTRUCT IN OTHER FASHIONS THAT THE CABLE
COMPANY MIGHT LIKE TO CONSTRUCT.
Q DO YOU HAVE ANY ABOUT WHAT THOSE
REQUIREMENTS ARE OR MIGHT BE IN THE SOUTH CENTRAL AREA
DIFFERENT FROM THE P.U.C. SAFETY REQUIREMENTS?
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A DON'T THINK THAT THEy'RE UNIQUE TO THE SOUTH
CENTRAL AREA. THE REQUIREMENTS I'M TALKING ABOUT ARE
GENERALLY COMPANY-WIDE WITH RESPECT TO THE UTILITIES.
SO THAT IF YOU TAKE THE POWER UTILITY HERE,
THEY DON'T HAVE ONE SET OF RULES FOR SOUTH CENTRAL THAT ARE
DIFFERENT FROM RULES IN OTHER PARTS OF THE CITY. BUT WHEN
YOU COMBINE THAT WITH THE FACT THAT THE PRESENT POLES IN
SOU1H CENTRAL ALREADY ARE CONGESTED AND YOU NOW TALK ABOUT
THE POSSIBILITY OF ADDITIONAL CABLE WIRES, MY OPINION IS, AS
I SAID BEFORE, THAT THE FIRST CABLE COMPANY WILL HAVE
RELATIVELY LITTLE DIFFICULTY IN MEETING THE UTILITY SAFETY
REQUIREMENTS COMPARED TO A POSSIBLE SECOND OR THIRD COMPANY
IN THERE.
THE KINDS OF REQUIREMENTS THEY IMPOSE ARE, FOR
EXAMPLE, WHERE THE WIRES ARE GOING TO BE ATTACHED TO THE
POLE. DOES THAT REPRESENT A HAZARD TO A POLE CLIMBER? IF A
CLIHBER HAS TO CLIMB UP TO GET ACCESS TO THE POWER POLES,
HOW CAN THEY GET AROUND THE VARIOUS CABLES BELOW THE POWER
POLES? THOSE REQUIREMENTS ARE GENERALLY SPELLED OUT IN
SAFETY MANUALS AND INSTALLATION PROCEDURES THAT EACH UTILITY
HAS. BUT IT GETS MORE COMPLICATED THE MORE CABLES YOU
ATTACH. THAT'S ALL I'M SAYING.
Q MY QUESTION TO YOU REALLY IS WHETHER YOU HAVE
ANY SPECIFIC KNOWLEDGE OF WHAT THOSE SAFETY FACTORS ARE.
A THE SAFETY FACTORS GENERALLY ARE UNRESTRICTED
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ACCESS TO THE SPECIFIC CABLES T:HAT THE UTILITY
REPRESENTATIVES HAVE TO CLIMB UP TO AND REPAIR.
Q LET ME ASK IT A DIFFERENT WAY. THE SAFETY
FACTORS, THE REQUIREMENTS YOU'RE TALKING ABOUT, THE UTILITY
REQUIREMENTS THAT ARE DIFFERENT THAN THE P.U.C.
REQUIREMENTS, ARE THEY IN WRITING SOMEWHERE?
A YES.
Q THEY'RE IN THE TELEPHONE COMPANY; THEy'RE THAT
BINDER, THE BLUE BOOK THEY CALL IT? THAT'S WHAT YOU'RE
TALKING ABOUT; RIGHT?
A YES.
Q AND DO YOU KNOW WHETHER THE DEPARTMENT OF WATER
& paWER HAS A SIMILAR MANUAL LIKE THAT?
A I HAVE NOT SEEN ONE, BUT I WOULD BE SURE THAT
THEY WOULD HAVE ONE.
Q OKAY.
WHEN YOU MADE YOUR ESTIMATE OF THE NUMBER OF
POLE.S THAT NEEDED TO BE CHANGED OUT, YOU WERE TAK I NG INTO
ACCOUNT YOUR UNDERSTANDING OF WHAT THE UTILITY REQUIREMENTS
ARE BEYOND THE P.U.C. REQUIREMENTS; CORRECT?
A YES.
Q AND SO WHEN I ASKED YOU ARE THERE ANY OTHER
REQUIREMENTS OTHER THAN SPACE ON THE POLES, YOu TOLD ME
THERE WAS SPACE AROUND THE POLES. THEN YOU WERE TELLING ME
ABOUT ANOTHER FACTOR. THE OTHER FACTOR YOU WERE TELLING ME
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LUDWIG COURT REPORTERS, INC. __________________~
65
ABOUT IS THE UTILITY'S OWN REQUIREMENTS APART FROM THE
P.U.C. REQUIREMENTS.
A GENERALLY SAFETY AND ACCESS-RELATED, YES.
Q NOW, WE HAVE THE SPACE AROUND THE BOTTOM OF THE
POLESi WE HAVE THE UTILITY SAFETY MANUAL REQUIREMENTS, AND
WE HAVE THE SPACE ON THE POLES INSOFAR AS IT RELATES TO THE
P.U.C. REQUIREMENTS.
A YES.
Q ANYTHING ELSE, ANY OTHER FACTORS THAT YOU
LOOKED AT IN MAKING YOUR ESTIMATE OF THE NUMBER OF POLES
THAT WOULD NEED TO BE CHANGED OUT?
A I THINK THOSE ARE THE MAJOR FACTORS.
Q DID YOU ACTUALLY MEASURE THE HEIGHT OF ANY OF
THE ATTACHMENTS ON A PARTICULAR POLE IN THE SOUTH CENTRAL
AREA?
A NO.
Q DO YOU KNOW HOW -
A I WAS GOING TO SAY WE ESTIMATED HElGHTS. WE
DID NOT MEASURE THEM.
Q DO YOU KNOW HOW ONE GOES ABOUT MEASURING THE
HEIGHTS OF ATTACHMENTS ON POLES TYPICALLY?
A I'VE SEEN CASES WHERE THEY SIMPLY USED TAPE
MEASURES AND CLIMBED POLES AND MEASURED FROM THE GROUND UP
BASICALLY. I'M NOT SURE THAT THOSE TECHNIQUES ARE USED IN
EVERY CASE. IT'S SIMPLY A QUESTION OF PHYSICAL MEASUREMENT
LUDWIG COURT ____,______________
66
IN HOST CASES.
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DO YOU HAVE TO CLIMB THE POLE TO MEASURE THE
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HEIGHTS?
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A IF YOU WANT THEM ACCURATE. BUT SOMETIMES
r
LOOKING AT THE POLE YOU CAN GET A REASONABLY ACCURATE
5
ESTIMATE AS TO WHETHER OR NOT THAT PARTICULAR CONFIGURATION
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ON THE POLE IS MEETING P.U.C. REQUIREMENTS.
7
FOR EXAMPLE, IN MOST CASES, THERE ARE
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SOMETIMES AND SEE THAT THERE'S CONSIDERABLY LESS THAN A 11
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THERE. THE FACTOR IS DOES IT MEET REQUIREMENTS OR DOES IT 13
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15 THERE ARE CASES OF CABLE SAGGING IN THE MIDDLE
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17 REQUIREMENTS, AND BECAUSE OF THE SAG OVER A PERIOD OF TIME,
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Q DID YOU SAY THAT THERE WERE SOME LOCATIONS IN 20
THE SOUTH CENTRAL AREA WHERE THERE WAS MORE THAN ONE
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TELEPHONE COMPANY CABLE ON THE SAME POLE?
A I DON'T HUNK I SAID THAT THERE WAS MORE THAN
,
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MANY POLES WITH A LOT OF TELEPHONE WIRES COMING OFF THE SAME
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LUD In' I G CO U R T R E POR TER ___________---,
POLE. THEY PROBABLY ALL BELONGED TO THE SAME PHONE COMPANY.
BUT THERE WERE SOME CABLES THAT WERE IN EFFECT LOCAL TRUNK
CABLES, CABLES GOING FROM DOWN THE LENGTH OF THE POLE AND
FROM ONE POLE TO ANOTHER.
THEN THERE WERE A LOT OF BRANCH-OFF CONNECTIONS
TO HOMES IN THAT AREA. AND BECAUSE OF THE HIGH HOUSING
DENSITY IN THAT AREA, IF YOU'D COME TO A PARTICULAR STREET
OR AN ALLEY BEHIND A GROUP OF HOMES, INSTEAD OF HAVING vUST
TWO TELEPHONE CABLE CONNECTIONS TO TWO HOUSES, YOU MIGHT
HAVE 50 TELEPHONE WIRE CONNECTIONS TO 50 HOMES ALL WITHIN
THE RADIUS OF THAT ONE POLE.
Q ARE THESE CABLES RUNNING DOWN THE POLES, ARE
THEY THE TELEPHONE CABLES BUNDLED TOGETHER, OR ARE THEY
SEPARATED BY SOME DISTANCE?
MS. HOLBROOKE: WAIT. I DON'T THINK I UNDERSTOOD
THAT QUESTION. COULD YOU TRY THAT AGAIN? I OBJECT ON THE
GROUNDS I THINK IT'S AMBIGUOUS. YOU'RE NOT TALKING ABOUT
ANY SPECIFIC LOCATION, AND 1'M NOT -- IT WAS COMPOUND.
BY BRAMSON:
Q I'M TALKING ABOUT TYPICALLY THE TELEPHONE
CABLES YOU SAW. YOU TOLD US THERE WERE PLACES WHERE THERE
WAS MORE THAN ONE TELEPHONE CABLE. I'M TRYING TO FIND OUT
WHETHER IN THOSE LOCATIONS WHERE THERE WAS MORE THAN ONE,
WERE THE TWO CABLES TOGETHER EITHER BUNDLED TOGETHER OR
RIGHT NEXT TO EACH OTHER OR WERE THEY SEPARATED EITHER -
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______ ____ REPORTERS, INC.
68
1
A GENERALLY YOU HAVE A BUNDLE GOING FROM POLE TO
2 POLE WHICH TRANSMITS THE MAIN WIRES THAT EVENTUALLY GO BACK
3
TO THE CENTRAL OFFICE. GENERALLY AT EACH POLE YOU HAVE
4 BRANCH-OFF CONNECTIONS WHICH WOULD BE EQUIVALENT TO THE DROP
CABL.E OF A CABLE SYSTEM. THE CONNECTIONS THAT CONNECT THE
6 WIRE GOING TO THE CENTRAL OFFICE TO THAT PARTICULAR HOUSE
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AND TO THE TELEPHONES
THE ONLY
WITHIN HOUSE.
POINT THAT I WAS MAKING WAS THAT THERE
9 WAS A VERY, VERY HI GH HOUS I NG CIENS I TY I N THAT AREA, WHI CH
MEANS A LOT OF DWELLING UNITS WITHIN A SMALL SPACE. THIS
11 MEANS A LOT OF INDIVIDUAL WIRE CONNECTIONS TO THE TELEPHONES
12 THERE. THAT, I THINK, IS HIGHER THAN THE AVERAGE FOR MANY
13 OTHER PARTS OF THE CITY. AND rHAT CONTRIBUTES TO THE
14 LOADING OF TELEPHONE CABLES ON THE POLES.
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RESTRICTING OUR ATTENTION TO THE TELEPHONE
CABLES GOING DOWN THE LINE OF POLES ALONG THE STREET, THOSE
CABLES ARE BUNDLED TOGETHER OR AT LEAST RIGHT NEXT TO EACH
OTHER, AREN'T THEY?
A IN GENERAL, YES.
Q
DID YOU OBSERVE ANY OTHER UTILITIES OR SUCH
WIRES ON ANY OF THE POLES OTHER THAN TELEPHONE CoMPANY,
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COAXIAL CABLES?
A THOSE WERE THE ONLY
THERE WERE OTHER WIRES OR CABLES
ONES I COULD
BELONGING TO
IDENTIFY. IF
SOMEONE ELSE,
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I DID NOT IDENTIFY THEM.
Q IS IT FAIR TO SAY IT WOULD BE UNUSUAL If THERE
WAS SOMEBODY ELSE'S WIRES ON ThERE?
A I WOULD BE SURPRISED. GENERALLY UTILITY POLES
ARE RESTRICTED TO UTILITIES, WHICH INCLUDES POWER AND
COMMUNICATIONS. AND CABLE, I GUESS YOU COULD SAY, IS A
UTILITY BASIS. THEY HAVE THE RIGHT TO USE THE POLES WHETHER
YOU CALL THEM A UTILITY OR NOT.
SO IN MOST CASES THOSE ARE THE ONLY THREE KINDS
OF CABLES THAT I'M fAMILIAR WITH. SOME CITIES HAVE THINGS
LIKE fIRE ALARM CABLES, SPECIAL-PURPOSE CITY-INSTALLED
CABLES. BUT I DID NOT RECOGNIZE ANY Of THOSE.
Q YOU SAID THAT THE INSTALLATION, THE TOTAL
INSTALLATION COSTS FOR CABLE TELEVISION IN THE AREA TENDS TO
FALL BETWEEN 10,000 AND $20,000 A MILE; RIGHT?
A THAT'S AVERAGE AERIAL CONSTRUCTION COST.
UNDERGROUND COSTS ARE CONSIDERABLY HIGHER.
Q DO YOU HAVE AN OPINION ABOUT WHAT THE AERIAL
INSTALLATION COSTS IN THE SOUTH CENTRAL AREA WOULD BE?
A MY OPINION IS THAT IT WOULD BE GENERALLY HIGHER
THAN THE AVERAGE FOR THE CITY, PRIMARILY AS I'VE INDICATED
BEFORE, BECAUSE OF THE NEED TO PROBABLY CHANGE OUT MORE
POLES ON THE AVERAGE PER MILE THAN WOULD BE NECESSARY IN
OTHER PORTIONS OF THE CITY.
Q
HAVE YOU EVER DONE A RIDE-OUT OR WALK-OUT IN
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ANY OTHER AREA IN THE CITY OF LOS ANGELES WHERE THE PURPOSE
WAS TO EXAMINE THE UTILITY POLES?
A lIVE DONE THAT, INCIDENTALLY, NOT ON A RIDE-OUT
OF A COMPLETE FRANCHISE AREA. BUT I HAVE LOOKED AT SPECIFIC
NEIGHBORHOODS WITH RESPECT TO THE CONSTRUCTION, TECHNIQUES
AND THE UTILITY POLE ARRANGEMENT.
FOR EXAMPLE, AS I INDICATED BEFORE, I LIVE IN
THE AREA THAT IS NOW SERVED BY AMERICAN THAT USED TO BE
SERVED BY COMMUNI COM. COMMUNI COM, AS I THINK EVERYONE WELL
KNOWS, DID NOT HAVE A REPUTATION FOR HAVING THE BEST CABLE
SYSTEM CONSTRUCTION IN THE WORLD. YOU COULD PROBABLY MAKE
AN ARGUMENT IT WAS THE WORST.
IN ANY EVENT, BECAUSE OF THAT AND BECAUSE I HAD
WORKED FOR OTHER CLIENT CITIES THAT HAD SIX STAR AND LATER
COMMUNICOM AS THEIR CABLE PROVIDERS, I WAS GENERALLY
INTERESTED IN THE CONSTRUCTION TECHNIQUES THEY HAD IN THESE
OTHER CITIES. AND SINCE I LIVE IN THAT AREA, I LOOKED AT
CONSTRUCTION TECHNIQUES IN THE AREA I LIVED IN, TOO.
SO ITIS THAT KIND OF INCIDENTAL REVIEW 11M
TALKING ABOUT. AND TO ANSWER YOUR QUESTION, DID I FORMALLY
DO IT AS PART OF AN ASSIGNMENT FOR A CITY? NO.
Q WHEN YOU SAY THAT IN YOUR OPINION THE UTILITY
POLES IN THE SOUTH CENTRAL AREA ARE MORE CONGESTED THAN THEY
ARE IN OTHER PARTS OF THE CITY OF LOS ANGELES, YOU ARE
REFERRING TO THE NUMBER OF TELEPHONE COMPANY DROPS TO HOUSES
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THAT ARE REQUIRED IN THE SOUTH CENTRAL AREA?
A TELEPHONE COMPANY AND POWER LINE DROPS. BUT
PRIMARILY TELEPHONE COMPANY, THAT'S CORRECT.
Q YOU AREN'T TALKING ABOUT THE NUMBER OF CABLES
ON A STRING OF POLES THAT GOES DOWN THE STREET, ARE YOU?
A GENERALLY, NO. BUT YOU HAVE TO -- THEY'RE NOT
INDEPENDENT OF EACH OTHER. IF A TELEPHONE COMPANY IS
REQUIRED TO SERVICE A THOUSAND HOMES DOWN AN AREA OF A FEW
BLOCKS, THEY HAVE TO SOMEWHERE START WITH A BUNDLE THAT HAS
ENOUGH INDIVIDUAL WIRE CAPACITY TO HANDLE THAT. SO AS THEY
GO ALONG THAT BUNDLE GETS RELATIVELY SMALLER AND SMALLER.
AND WHEN YOU GET TO THE END OF THAT PARTICULAR RUN, YOU MAY
HAVE A SMALLER CABLE. BUT THE DIAMETER AND THE WEIGHT AND
THE BULK OF THE CABLE GOING DOWN THE POLES HAS SOME RELATION
TO THE NUMBER OF BRANCH-OFF POINTS THAT YOU WILL HAVE.
Q THAT WOULD RELATE TO THE THICKNESS OF THE
TELEPHONE COMPANY BUNDLE OF CABLES?
A THAT'S CORRECT.
Q NOT THE NUMBER OF CABLES ON DIFFERENT SPOTS ON
THE POLE?
A THAT'S CORRECT.
Q YOU DON'T HAVE ANY SPECIFIC INFORMATION ABOUT
THE AMOUNT OF WEIGHT THAT A PARTICULAR UTILITY POLE CAN
SAFELY HOLD, DO YOU?
A NO. THAT VARIES FROM POLE TO POLE. IT VARIES
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WITH THE AGE AND CONDITION OF THE POLE. IT VARIES WITH THE
PARTICULAR STANDARD THAT EACH UTILITY ESTABLISHES.
SOMETIMES A UTILITY WILL NOT ONLY ESTABLISH
STANDARDS FOR WHAT IS HAPPENING NOW ON THE POLES, BUT ALSO
CAPACITY THAT THEY RESERVE FOR THE FUTURE. SO IT DEPENDS ON
WHETHER THE UTILITY ITSELF EXPECTS TO ADD MORE CABLES OF ITS
OWN IN THE FUTURE. PERHAPS GETTING INTO OTHER SERVICES THAT
THEY PROVIDE. SO I DON'T THINK THERE'S ANY ONE ANSWER THAT
WOULD BE ACCURATE FOR ALL CASES. BUT THEY ALL DO HAVE SOME
STANDARD.
Q
DID YOU MAKE AN ESTIMATE THAT SOME OF THE
UTILITY POLES IN THE SOUTH CENTRAL AREA COULD SUPPORT THE
WEIGHT OF ONE CABLE TELEVISION SYSTEM BUT NOT SUPPORT THE
WEIGHT OF TWO CABLE TELEVISION SYSTEMS ADDED TO THE EXISTING
FACILITIES?
A I THINK I MADE A SUBJECTIVE ESTIMATE WHICH CAME
TO THAT CONCLUSION. BUT IT WAS BASED NOT ON ANALYZING
SPECIFIC WEIGHT LOAD NUMBERS AND TAKING SPECIFIC POLES. IT
WAS BASED SIMPLY ON AN EXAMINATION OF THE CROWDING OF THE
POLES, THE NUMBER OF WIRE PAIRS THAT WERE ON THERE ALREADY
AND EXPERIENCE IN OTHER AREAS WHERE POLES HAVE BEEN CHANGED
OUT BECAUSE OF WEIGHT REQUIREMENTS. AND IN NONE OF THE
OTHER AREAS I'M FAMILIAR WITH THEY WERE CHANGED OUT WITH
E V E ~ I LESS OF A CABLE LOAD THAN WHAT I SAW IN THE SOUTH
CENTRAL AREA. SO I THINK MY ANSWER TO YOUR QUESTION WOULD
73
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BE IT'S NOT WHAT I WOULD CALL A RIGOROUS ANALYSIS, IT'S
BASED PRIMARILY ON EXPERIENCE.
Q YOU REALLY DIDN'T DO A RIGOROUS ANALYSIS ON A N Y ~
OF THESE ISSUES RELATING TO THE UTILITY POLES, DID YOU?
A IF THE QUESTION IS DID I DO A RIGOROUS ANALYSIS
/
DESIGNED TO FIND OUT EXACTLY HOW MANY POLES WOULD BE
REPLACED UNDER THE CONDITIONS OF ONE CABLE COMPANY OR TWO
CABLE COMPANIES OR THREE CABLE COMPANIES, NO. BUT I DON'T
THINK THAT WAS MY FUNCTION. MY FUNCTION WAS TO LOOK AT THE
AREA AND TRY TO GET A RELATIVE COMPARISON BETWEEN THE
COND][TION OF THE UTILITY POLES IN THAT AREA AS COMPARED TO
OTHER PARTS OF THE CITY AND OTHER PARTS OF THE COUNTRY THAT
I WAS FAMILIAR WITH. AND I THINK I ACCOMPLISHED THAT.
Q YOUR OPINIONS ABOUT THE APPROXIMATE NUMBER OF
POLES, THOUGH, THAT WOULD HAVE TO BE CHANGED OUT FOR A
SECOND COMPANY BECAUSE OF THE WEIGHT CONSIDERATIONS WAS
BASED UPON YOUR UNDERSTANDING THAT THE CABLE TELEVISION
CABLES WEIGH SOMEWHAT MORE THAN THE SAME DIAMETER TELEPHONE
CABLE; RIGHT?
A WELL, THERE'S NOT ONLY THE CABLE, THERE'S THE
STRAND THAT'S INVOLVED. THERE IS THE ELECTRONIC COMPONENTS
WHICH ARE CONSIDERABLY MORE BULKY FOR CABLE TELEVISION THAN
THEY ARE FOR TELEPHONE. THERE J ~ R E AMPLIFIERS THAT HAVE TO
BE MOUNTED ON THE POLES PERIODICALLY. THERE ARE TAPS COMING
OFF I=:ACH CORNER BASICALLY TO SERVE HOMES IN THAT PARTICULAR
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L U DW 1 G CO U R T REP OR T E R __________----..
74
AREA.
SO IT'S A COMBINATION OF A NUMBER OF DIFFERENT
ELEMENTS. IT'S NOT JUST WEIGHT THAT I WAS TALKING ABOUT. I
THINK I MENTIONED THAT WEIGHT AND WIND LOAD WAS ONE FACTOR.
CROWDING AND SPACING WAS ANOTHER FACTOR. SAFETY AND ACCESS
TO UTILITY CABLES WAS A THIRD FACTOR. MY OPINION, I THINK,
WAS BASED ON MY COMBINATION OF ALL THOSE FACTORS.
Q TURNING TO WIND LOAD FOR A MOMENT, THE WIND
LOAD IS ONLY IMPORTANT TO THE EXTERNAL -- IT RELATES TO
STRESS ON THE POLES; RIGHT?
A THAT'S CORRECT.
Q
YOU DON'T HAVE ANY SPECIFIC INFORMATION ABOUT
THE AMOUNT OF THAT SORT OF STRESS THAT A UTILITY POLE CAN
HANDLE, DO YOU?
A ONLY THE INFORMATlON THAT I'VE GOTTEN FROM
VARIOUS UTILITY REPRESENTATIVES AROUND THE COUNTRY.
WHEN I TALK ABOUT THE QUESTION OF ADDING MORE
CABLES TO POLES, ONE OF THE GENERAL RESPONSES THAT I GOT WAS
THAT WIND LOADING IS A VERY IMPORTANT CONSIDERATION FOR
THEl"1. AND THAT'S ONE FACTOR TIiAT THEY DO SET STANDARDS ON.
SO IF YOU'RE ASKING ME DO I HAVE INFORMATION AS
TO HOW MANY POUNDS A PARTICULAR POLE -- A PARTICULAR POLE IN
SOUTH CENTRAL MIGHT HANDLE, NO, THAT'S NOT IT.
Q WHAT I'M TRYING TO FIND OUT IS HOW YOU
ACCOMMODATED THIS INFORMATION THAT YOU RECEIVED THAT WIND
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LOAD I NG COULD BE A FACTOR TO '(OUR EST IMAT E OF THE NUMB ER OF
POLES THAT WOULD NEED TO BE CHANGED OUT.
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A I DONIT THINK I I:VER SAID THAT I ACCOMMODATED
ONLY WIND LOADING TO THE NUMBER OF POLES. I THINK IT WAS A
COMBINATION.
Q
I DIDNIT MEAN TO SAY IT WAS THE ONLY FACTOR. I
UNDERSTOOD YOU TO SAY IT WAS A FACTOR YOU CONSIDERED.
f
A IT WAS A FACTOR.
I WILL EVEN SAY IN SOUTH CENTRAL, IN THE

LOS ANGELES AREA, ITIS PROBABLY LESS OF A FACTOR THAN IN A
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TORNADO ZONE LIKE THE MIDWEST WHERE HIGH WINDS ARE MUCH MORE
COMMON EXPERIENCE. SO 11M NOT SAYING THAT I GAVE IT AN
ESPECIALLY HIGH WEIGHT. I 1M SIMPLY SAYING THOSE ARE THE
FACTORS THAT HAVE TO BE CONSIDERED.
PROBABLY THE MOST IMPORTANT FACTOR IN MY
CONCLUSION WAS SIMPLY THE CROWDING OF THE POLES RIGHT NOW.
I THINK IN LOS ANGELES, THAT MIGHT BE A MORE IMPORTANT
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I THINK ACCESS IS IMPORTANT. BUT THE UTILITIES
!
HAVE THEIR OWN RULES ON THAT. AND THEY USUALLY TAKE CARE OF
WHATEVER REQUIREMENTS THEY HAVE. THE QUESTION OF POLE
CHANGE-OUT CAN BE DIRECTLY REFLECTED INTO COST OF THE
SYSTEM, AS I INDICATED BEFORE. AND IF YOU HAVE A LOT OF
POLE CHANGE-OUTS, IT MAKES THE COST SIMPLY UNFEASIBLE FOR
t, COMPANY THAT HAS TO PAY THE COST.
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r 1 Q THE WIND LOADING FACTOR AND THE WEIGHT FACTOR
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2" AND THE ACCESS FACTOR ARE ALL ACCOUNTED FOR IN THE UTILITY
r 3 CO,.IPANY'S SAFETY MANUALS; RIGtiT?
4 A YES, GENERALLY. BUT ONE THING THAT'S NOT
ACCOUNTED FOR, FOR EXAMPLE, IS IF THE LOADING OF CABLES ON
6 THE POLES REQUIRES MORE GUYING JUST BECAUSE OF POTENTIAL
W I ~ D PROBLEMS. WHAT'S NOT ACCOUNTED FOR IS WHETHER THERE IS
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8 A PLACE TO ACCOMMODATE THAT GUYING. THAT VARIES FROM
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LOCATION TO LOCATION.
MY OPINION IN THE SOUTH CENTRAL AREA WAS VERY
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LITTLE SPACE AROUND THE BOTTOM OF THE POLE AND EASEMENT
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12 AREA. YOU'RE TALKING ABOUT NARROW ALLEYS. YOU'RE TALKING
13 ABOUT OTHER THINGS THOSE EASEMENTS ARE USED FOR. AND IN
14 GENERAL, I THINK YOU HAVE VERY DIFFICULT CONDITIONS IF YOU
t HAD TO INCREASE THE GUYING CAPABILITY OF THOSE POLES.
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Q
DURING YOUR DRIVE-OUT OF THE SOUTH CENTRAL
17 AREA, DID YOU NOTE ANY PLACES WHERE THE UTILITIES WERE
l 18 INSTALLED UNDERGROUND INSTEAD OF AERIAL?
l
19 A I DID NOT NOTE. I ASKED THE QUESTION OF
;
MR. KOLACINSKI, AND HE INDICATED THAT IN THAT AREA THERE WAS
A RELATIVELY SMALL PERCENTAGE OF UTILITIES UNDERGROUND. I
22
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THINK IT WAS SOMETHING LESS THAN FIVE PERCENT. SO WE DID
23 NOT LOOK AT ANY UNDERGROUND AREAS.
24 OBVIOUSLY, UNDERGROUND CONSTRUCTION IS
GENERALLY MORE EXPENSIVE. AND FOR A SECOND OR THIRD SET OF
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COAXIAL CABLES, IT WOULD BE AN EVEN HIGHER COST. SINCE THE
PERCENTAGE OF UNDERGROUND UTIL.ITIES WAS RELATIVELY LOW, WE
DID NOT CONSIDER THAT AS A M A ~ O R FACTOR.
Q
YOU DIDN'T EXAMINE ANY OTHER UNDERGROUND
CONSTRUCTION OR VIEW ANY BLUEPRINTS THAT WOULD SHOW ANYTHING
ABOUT FACILITIES UNDERGROUND OR ANYTHING LIKE THAT?
A NOT IN THE SOUTH CENTRAL AREA, NO.
I F WE WERE I NFORt-IED THAT THERE WAS A HI GHER
PERCENTAGE OF UNDERGROUND UTILITIES, I WOULD HAVE CONSIDERED
THAT A VERY IMPORTANT FACTOR, AND I WOULD HAVE INVESTIGATED
IT MORE. BUT BECAUSE OF THE SMALL PERCENTAGE, WE FELT THAT
THE TOTAL IMPACT ON THE COST OF CONSTRUCTION WOULD BE
RELATIVELY LOW.
Q YOU AREN'T PLANNING TO EXPRESS AN OPINION IN
THIS CASE THAT IT WOULD BE PHYSICALLY IMPOSSIBLE TO INSTALL
TWO CABLE TELEVISIONS IN THE SOUTH CENTRAL A R E A ~ ARE YOU?
A NO, I'M NOT PLANNING TO EXPRESS THAT OPINION.
Q IN FACT, IT IS YOUR OPINION THAT IT IS
PHYSICALLY POSSIBLY TO INSTALL MORE THAN ONE SYSTEM?
A IT IS PHYSICALLY POSSIBLE, YES.
Q AND THE RELEVANCE, AS YOU SEE IT, OF YOUR
TESTIMONY ABOUT UTILITY FACILITIES RELATES SOONER OR LATER
TO THE ISSUE OF COST; RIGHT?
A THAT'S CORRECT.
Q
IN THIS OUTLINE, ROMAN NUMBER IlION PAGE 2,
78
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HEADING A, IT IS ENTITLED -AERIAL CONSTRUCTION.
DO YOU SEE THAT?
A YES.
Q AND NO. 1 UNDER THAT IS -UTILITY POLE
ATTACHMENT.
WHAT DID YOU ANTICIPATE TESTIFYING ABOUT ON
THAT SUBJECT THAT WE HAVEN'T DISCUSSED YET, IF ANYTHING?
A I THINK YOU'VE COVERED MOST OF THE GROUNDS.
BUT WHAT I HAD ANTICIPATED WHEN I PREPARED THIS OUTLINE WAS
SIMPLY DESCRIBING IN GENERAL THE PROCEDURES THAT ARE
REQUIRED TO ATTACH TO UTILITY POLES, AND AGAIN, WHAT P.U.C.
MAY REQUIRE, WHAT THE UTILITIES MAY REQUIRE, AND TRY TO GIYE
THE COURT SOME UNDERSTANDING OF THE PROCESS ITSELF.
Q WOULD THAT BE TRUE OF BOTH 1 AND 2, OTHER THAN
WHAT WE'VE ALREADY TALKED ABOUT, MOSTLY BACKGROUND SORTS OF
INFORMATION?
A I THINK SO, YES.
Q WHAT ABOUT NO.3?
BEFORE YOU ANSWER THAT, DID YOU YOURSELF
PREPARE THIS OUTLINE?
A YES. I WAS ASKED TO PREPARE IT AS AN
INDICATION OF THE AREAS THAT I FELT WERE RELEVANT TO COYER,
YES.
Q IS IT YOUR UNDERSTANDING THAT YOU WILL TESTIFY
ON ALL THE AREAS COVERED IN THIS OUTLINE?
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A AS FAR AS I KNOW.
Q NO.3, -LIMITATION TO POLE ATTACHMENTS.
WHA T DOES THAT Mf:AN?
A IT MEANS SOME OF THE THINGS WE HAVE ALREADY
TALKED ABOUT. IT'S AN EXPLANATION OF WHAT PROBLEMS MAY
ARISE, BOTH TECHNICAL AND ECONOMIC PROBLEMS THAT MAY ARISE
AS MORE AND MORE CABLES BECOME ATTACHED TO THE POLES
IN OTHER WORDS, ONE ASPECT OF THAT WOULD BE:
DOES IT COST THE SAME FOR THE FIRST COMPANY TO ATTACH CABLE
TO POLES AS IT DOES FOR A SECOND COMPANY OR A THIRD COMPANY
OR A FOURTH OR A FIFTH OR A TENTH? WHAT ARE THE
LIMITATIONS? OBVIOUSLY, AS YOU'VE ALREADY ASKED, I'M NOT
TAKING THE POSITION THAT YOU COULDN'T HAVE MORE THAN ONE.
AM TAKING THE POSITION THAT THERE ARE SOME PHYSICAL LIMITS.
AND THAT PHYSICAL LIMIT MAY VARY FROM LOCATION TO LOCATION.
GENERALLY, IF SOMEONE IS WILLING TO PAY ENOUGH,
YOU CAN FIND WAYS AROUND THAT PHYSICAL LIMIT. BUT THERE ARE
SOME LIMITS. THINGS THAT WE MENTIONED LIKE WIND LOADING,
SAFETY CONSIDERATIONS ARE EXAMPLES OF THE KINDS OF LIMITS.
SO WHAT J ANTICIPATE TALKING ABOUT THERE IS WHAT HAPPENS AS
POLES AND UNDERGROUND EASEMENTS BECOME MORE AND MORE
CROWDED .
Q DO YOU HAVE AN OPINION ABOUT WHAT THE PHYSICAL
LIMIT IS IN THE SOUTH CENTRAL AREA AS FAR AS NUMBER OF CABLE
TELEVISION SYSTEMS?
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A I HAVE AN OPINION. AGAIN, IT IS NOT BASED ON A
POLE-BY-POLE EXAMINATION. BUT IT'S BASED ON GENERAL
EXPERIENCE AND EXPERIENCE IN OTHER AREAS.
MY GENERAL FEELING -- I GUESS I'M ANTICIPATING
YOU WANT TO KNOW WHAT THE OPINION IS.
Q
YES, I DO.
A MY OPINION IS THAT CONSTRUCTION COSTS FOR THE
FIRST COMPANY WOULD PROBABLY BE SOMEWHAT HIGHER, THAN THE
AVERAGE FOR THE CITY OF LOS ANGELES AS A WHOLE, BUT NOT
UNDULY MORE COSTLY. CERTAINLY NOT A FACTOR BY ITSELF THAT
WOULD PREVENT A COMPANY FROM CONSTRUCTING. MY OPINION, AS
liVE INDICATED, BY ESTIMATES OF THE NUMBER OF POLES THAT
WOULD HAVE TO BE CHANGED OUT, IS THAT FOR A SECOND COMPANY
THAT WISHED TO ATTACH TO THE POLES, THAT IT MIGHT BECOME
PROHIBITIVE IN TERMS OF COST. BUT NOT THAT THERE'S A
PHYSICAL OR TECHNICAL LIMITATION. PROHIBITIVE WITH RESPECT
TO COST.
MY OPINION IS THAT A THIRD OR ANYTHING MORE
THAN A THIRD COMPANY WOULD BECOME SO PROHIBITIVE IN TERMS OF
COST THAT FOR ALL PRACTICAL PURPOSES IT'S SIMPLY UNFEASIBLE.
Q LET'S LEAVE ASIDE THE ISSUE OF COST FOR A
MOMENT.
A ALL RIGHT.
Q LEAVING ASIDE THE ISSUE OF COST, DO YOU HAVE AN
OPINION ABOUT WHAT THE LIMIT TO THE NUMBER OF CABLE
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TELEVISION COMPANIES THAT WOULD BE INSTALLED IN THE SOUTH
CENTRAL AREA IS?
A YES.
Q WHAT IS YOUR OPINION ON THAT?
A MY OPINION IS THAT PROBABLY WHEN YOU START
GETTING THREE OR MORE, THAT YOU HAVE PHYSICAL PROBLEMS THAT
CANNOT ALWAYS BE OVERCOME SIMPLY BY SPENDING MORE DOLLARS.
ONE PHYSICAL PROBLEM, FOR EXAMPLE, IN THE AREA
OF CONSTRUCTION IS HOW HIGH YOU CAN MAKE THE POLES. YOU
CANNOT SIMPLY BUILD POLES UP TO THE SKY. SO THERE IS SOME
LIMIT. RELATED TO THAT IS WHEN DOES THE GROUP OF COAXIAL
CABLES THAT YOU NEED FOR CABLE SYSTEMS, WHEN DOES IT BECOME
A SAFETY HAZARD FOR OTHER UTILITY PERSONNEL THAT HAVE TO
CLIMB THEM? PARTICULARLY POWER PEOPLE WHO HAVE TO GET TO
THE TOP OF THE POLE. AND WHEN YOU START GETTING TO THREE IN
MANY OTHER COMMUNITIES AND EVEN MORE SO HERE IN SOUTH
CENTRAL, YOU FIND THAT THE UTILITY REPRESENTATIVES,
REPRESENTATIVES OF THE TELEPHONE COMPANY AND POWER COMPANY,
WHEN YOU ASK THEM THE QUESTION, WHAT PHYSICAL PROBLEMS WOULD
IT GIVE YOU TO HAVE THREE SETS OF COAXIAL CABLES OR FOUR?
IN MOST CASES WHEN YOU START GETTING TO THREE OR FOUR, THEY
LIST SO MANY PROBLEMS THAT THEIR ANSWER IS ITIS NOT
ACCEPTABLE FROM THE UTILITY POINT OF VIEW. MAYBE FROM THE
CABLE COMPANY'S POINT OF VIEW, BUT NOT FROM THEIRS.
Q
THAT'S COVERED IN THESE SAFETY MANUALS?
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A NOT ONLY IN THE SAFETY MANUALS, BUT IN THE
GENERAL PERCEPTION OF THE PEOPLE WHO HAVE TO CLIMB THE POLES
ON A DAILY BASIS.
THERE ARE SOME CASES WHEN THEY WILL TELL YOU,
WHETHER IT'S COVERED IN THE MANUAL OR NOT, THAT IT'S SIMPLY
TOO DANGEROUS FOR THEM AND THEY WON'T DO IT.
Q
IS IT YOUR OPINION THAT THAT WOULD HAPPEN AT
THREE COMPANIES OR SOMETHING HIGHER THAN THREE COMPANIES?
A I THINK THREE IS THE POINT AT WHICH THOSE
THINGS ARE BEGINNING TO HAPPEN. I CAN'T TELL YOU PRECISELY
THREE IS ACCEPTABLE AND FOUR 1S NOT ACCEPTABLE. MY OPINION
IS THAT WHEN YOU START GETTING TO THE THIRD, YOU FIRST WILL
HAVE EXCESSIVE COSTS, AND THEN YOU HAVE THESE OTHER PHYSICAL
PROBLEMS. AND THAT COMBINATION MAKES IT FROM A PRACTICAL
BASIS, SIMPLY IMPOSSIBLE FOR A THIRD COMPANY
Q
HAVE YOU DISCUSSED THOSE ISSUES WITH ANY
TELEPHONE COMPANY PERSONNEL RESPONSIBLE FOR THE SOUTH
CENTRAL AREA?
A NO, NOT FOR THE SOUTH CENTRAL AREA.
Q AND HAVE YOU DISCUSSED THOSE PROBLEMS WITH ANY
DEPARTMENT OF WATER & POWER PERSONNEL RESPONSIBLE FOR THE
SOUTH CENTRAL AREA?
A WE HAD A GENERAL DISCUSSION OF THOSE PROBLEMS
DURING THE RIDE-OUT. AND THE ONE REPRESENTATIVE OF THE
DEPARTMENT OF POWER WHO IS THE C.A.T.V. COORDINATOR AND
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THEORETICALLY RESPONSIBLE FOR C.A.T.V. CONNECTIONS TO THE
CITY'S UTILITY POLES, IN EFFECT TOOK THE SAME POSITIONS 11M
EXPRESSING TO YOU NOW. HE WAS AN INDIVIDUAL WHO WOULD BE
VERY UNHAPPY AT THE PROSPECT OF THREE SETS OF COAXIAL CABLES
ON THE DEPARTMENT POLES IN ADDITION TO THE CABLES THAT ARE
ALREADY THERE.
I'M NOT SAYING THAT THAT'S OFFICIAL DEPARTMENT
POLICY. I'M SIMPLY SAYING THAT THAT WAS HIS OPINION.
Q
WITHIN THE STATE OF CALIFORNIA, ARE YOU AWARE
OF ANY SUCH SITUATION WHERE A UTILITY REFUSED TO PERMIT A
CABLE TELEVISION COMPANY TO ATTACH ON THEIR POLES SO LONG AS
THE CABLE TELEVISION COMPANY MET ALL THE SAFETY MANUAL,
P.U.C. REQUIREMENTS AND PAID FOR THE COST OF ANY OF THESE
REARRANGEMENTS?
A I MIGHT HAVE TO GIVE YOU AN ANSWER THAT WILL
TAKE A MINUTE OR TWO ON THAT ONE.
I CAN CONFIRM, I THINK, THAT THE TELEPHONE
UTILITIES AND THE POWER UTILITIES TAKE THE OFFICIAL POSITION
THAT IF A CABLE COMPANY HAS A LEGITIMATE FRANCHISE AND IS
WILLING TO PAY THE COSTS, THAT THEY WILL ACCOMMODATE ALL
APPLICANTS. THAT IS THEIR OFFICIAL POSITION. IN MY
EXPERIENCE THAT VARIES WITH T ~ E I R UNOFFICIAL POSITION. AND
THEIR UNOFFICIAL POSITION, IN MANY, MANY CASES THAT I'M
AWARE OF, IS THAT IF THEY GET MORE THAN ONE CABLE COMPANY ON
THEIR POLES, THEY DRAG THEIR FEET. AND THEY WILL NOT SAY
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OUTRIGHT THAT THEY WILL NOT ACCOMMODATE A SECOND OR THIRD
COMPANY. BUT THEY WILL MAKE IT VERY, VERY DIFFICULT FOR
THAT SECOND OR THIRD COMPANY TO ACTUALLY ATTACH TO THEIR
POLES AND IT IS VERY EXPENSIVE. SO I DON'T KNOW IF THAT'S
THE ANSWER YOU WANT. BUT THAT'S MY EXPERIENCE.
Q
HAVE YOU HAD THAT EXPERIENCE IN THE LAST TWO
YEARS?
A I CAN'T CATEGORIZE IT AS THE LAST TWO YEARS.
THE ANSWER WOULD PROBABLY BE NO.
I'VE HEARD HEARSAY OPINIONS GIVEN TO ME BY
CABLE COMPANY REPRESENTATIVES, THAT WHEN FACED WITH A
POTENTIAL OVERBUILD PROBLEM OR THEY HAVE TALKED TO UTILITY
REPRESENTATIVES AND THEY'VE GOTTEN, AGAIN, THE OFFICIAL
ANSWER FROM THE OFFICIAL REPRESENTATIVE OF THE PHONE
COMPANY, IF YOU HAVE A FRANCHISE, WE'LL ACCOMMODATE YOU.
BUT UNOFFICIALLY THEY DELAY. AND THAT HAS BEEN- TERMED BY
THE CABLE COMPANIES TO BE FOOT-DRAGGING.
Q THERE IS A DIFFERENCE BETWEEN FOOT-DRAGGING AND
REFUSAL IN YOUR MIND, ISN'T THERE?
A THERE IS A LEGAL DIFFERENCE, AND THERE IS,
GUESS, A THEORETICAL DIFFERENCE. IN MY MIND IF THE COMPANY
THAT IS ATTEMPTING TO GET ENTRY IS CONVINCED THAT WHETHER
IT'S LEGAL OR UNOFFICIAL THAT IT'S GOING TO COST THEM A LOT
MORE MONEY THAN THEY WOULD LIKE TO SPEND, THAT'S AN
EFFECTIVE DETERRENT TO THE COMPANY ACTUALLY ATTEMPTING TO
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BUILD A SYSTEM.
Q DO YOU KNOW ANYTHING ABOUT THE RULES OF THE
TELEPHONE COMPANY RELATING TO WHO BEARS THE COST IF TWO
CABLE COMPANIES WANT TO ATTACH TO A POLE AT THE SAME TIME?
A THEY VARY FROM TO COMMUNITY AND FROM
UTILITY TO UTILITY. IN MOST CASES THE GENERAL RULE I CAN
GIVE YOU, FOR EXAMPLE, IF APPLICATIONS ARE RECEIVED FROM TWO
CABLE COMPANIES WITHIN A WINDOW, LET'S SAY 30 DAYS, 45 DAYS,
A WINDOW THAT'S NARROW ENOUGH, THEN MANY UTILITIES WILL HAVE
THOSE CABLE COMPANIES SHARE THE COST. AND THEY WILL ATTEMPT
TO DO THE INSTALLATION AT THE SAME TIME SO THAT IT'S ONE
INSTALLATION OF TWO SYSTEMS RATHER THAN TWO INDIVIDUAL
INSTALLATIONS.
IF THAT WINDOW IS NOT MET, IF THEY GET THE
SECOND APPLICATION PERHAPS 90 DAYS OR LATER THAN THE FIRST,
THEY WILL GO AHEAD WITH THE FIRST AND CHARGE THE FIRST
COMPANY THE COST OF REARRANGING. WHEN THE SECOND COMES
ALONG, THEY'LL START ALL OVER AGAIN AND MAKE THE SECOND
COMPANY PAY FOR ANY REARRANGEMENTS, EVEN OF THE FIRST
COMPANY'S CABLE.
Q WHEN THAT HAPPENS, WHEN THE SUBSEQUENT
REARRANGEMENT HAPPENS, IT ENDS UP BEING A MUCH HIGHER TOTAL
COST THAN IF THEY WERE REARRANGED TOGETHER, DOESN'T IT?
A THAT'S CORRECT. AND ALSO, OBVIOUSLY, A HIGHER
COST TO THE LAST COMPANY IN.
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IT ENDS UP BEING A MUCH HIGHER COST TO THE
SECOND COMPANY; RIGHT?
A YES.
Q MIGHT IT BE TRUE IN SOME SITUATIONS THAT THE
COSTS, EVEN TO THE FIRST COMPANY, WOULD BE LOWER IF THE TWO
COMPANIES HAD BEEN PUT ON TOGETHER AND SHARED THAT COST THAN
WHEN IT FIRST IS PUT ON BY ITSELF AND HAS TO BEAR THE WHOLE
COST OF THESE REARRANGEMENTS?
A THEORETICALLY, THAT'S TRUE. BUT THERE ARE
OTHER FACTORS THAT ARE INVOLVED THAT MAKE IT VERY DIFFICULT
TO PUT TWO COMPANIES ON AT THE SAME TIME.
Q
WHAT ARE THOSE FACTORS?
A WELL, FOR EXAMPLE, WHERE THE HEAD ENDS ARE
LOCATED, THE HEAD END IS THE CENTRAL DISTRIBUTION POINT OF
THE SYSTEM. AND GENERALLY A COMPANY WILL BUILD A HEAD END
EARLY IN THE CONSTRUCTION PROCESS AND THEN CONSTRUCT THEIR
CABLES RADIATING OUT FROM THE HEAD END IN ORDER TO SERVE
PEOPLE AS THEY GO. SO THAT YOU HAVE TO HAVE THE HEAD ENDS.
WHEN YOU BUILD A CABLE PLANT, YOU BEGIN TO
CONNECT SOME SUBSCRIBERS. THEN YOU EXTEND YOUR CABLE PLANT.
THAT'S THE MOST EFFICIENT WAY TO DO IT ECONOMICALLY. NOW,
IF THE TWO CABLE COMPANIES WERE TO SHARE THE SAME HEAD END
AND THEORETICALLY RUN THEIR CABLES OUT IN PARALLEL AND GO
AFTER THE SAME SUBSCRIBERS, THEN WHAT YOU'RE SAYING MAY BE
POSSIBLE
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BUT WHAT HAPPENS IN MOST CASES IS THE OPPOSITE.
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ONE COMPANY WILL HAVE A HEAD END IN ONE PART OF THE
FRANCHISE AREA, AND THE OTHER COMPANY MIGHT HAVE THEIR HEAD
END AT THE OPPOSITE SIDE OF THE FRANCHISE AREA. SO THEY
WILL ATTEMPT TO CABLE PORTIONS OF THE AREA IN ORDER TO SERVE
PEOPLE BEFORE THE COMPETITION GETS TO THEM. SO THEY WORK
FROM BOTH ENDS TOWARD THE MIDDLE. AND THAT MAKES IT ALMOST
IMPOSSIBLE TO INSTALL BOTH SETS OF CABLES AT THE SAME TIME.
Q WHAT YOU'VE JUST DESCRIBED IS A DIFFERENT
QUESTION FROM THE QUESTION ABOUT MAKE-READY ARRANGEMENT
COSTS, ISN'T IT?
A I DIDN'T UNDERSTAND IT TO BE A DIFFERENT
QUESTION. I THOUGHT YOUR QUESTION WAS WHETHER OR NOT IT IS
MORE EFFICIENT AND LESS COSTLY TO MAKE READY FOR TWO SETS OF
CABLES TO BE INSTALLED SIMULTANEOUSLY. MY ANSWER TO THAT
QUESTION IS YES, IT IS MORE EFFICIENT TO DO IT THAT WAY, BUT
IN MY EXPERIENCE, IT IS VERY, VERY RARELY THAT YOU CAN DO IT
THAT WAY.
Q IF YOU WERE ORGANIZED ENOUGH, YOU COULD SUBMIT
APPLICATIONS FOR THE MAKE-READY WORK FOR AN AREA EVEN THOUGH
YOU DIDN'T EXPECT TO BE ABLE TO ACTUALLY PLACE YOUR CABLE
THERE FOR A LONG TIME IN THE FUTURE, COULDN'T YOU?
A IT'S NOT VERY EASILY DONE. WHAT MOST UTILITIES
REQUIRE IS THAT YOU APPLY FOR A GROUP OF POLE ATTACHMENTS AT
ONE TIME, AND THEY LIMIT THE SIZE OF THAT GROUP. SOME
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UTILITIES MIGHT SAY YOU CAN APPLY FOR ATTACHMENT TO.RUN THE
POLES IN THIS QUARTER-MILE SECTOR. AND EACH UTILITY WILL
HAVE ITS OWN RULES. IT WILL NOT ACCEPT APPLICATION FOR ALL
THE POLES IN THE CITY OR IN THE FRANCHISE AREA AT ONCE.
THEY WANT TO DO THE MAKE-READY WORK IN AN ORDERLY MANNER.
SO THEY WILL ASK THE APPLICANTS TO APPLY FOR
SPECIFIC SECTIONS. SO WHAT HAPPENS IN MANY CASES IS WHAT
YOU CALL A RANGE WAR. THIS HAS HAPPENED IN PHOENIX. IT
HAPPENED IN OTHER COMMUNITIES I WAS INVOLVED INDIRECTLY
WHERE COMPANY A WILL ASK FOR THE RIGHT TO ATTACH CABLE TO A
CERTAIN GROUP OF POLES AND COMPANY B, IN ORDER TO MAKE LIFE
DIFFICULT FOR COMPANY A, THE NEXT WEEK WILL ASK FOR THE
RIGHT TO ATTACH THEIR CABLE TO A SET OF POLES THAT FENCE IN
THE POLES THAT ARE APPLIED FOR BY COMPANY A JUST TO HAKE IT
DIFFICULT FOR COMPANY A TO EXTEND THEIR CABLE THROUGH THAT
FENCE.
AND ALL I'M POINTING OUT IS THAT THE TENDENCIES
OF TWO COMPETING CABLE COMPANIES, PARTICULARLY IN A
POTENTIAL OVERBUILD SITUATION WHERE THEY'RE COMPETING FOR
THE SAME SUBSCRIBERS, THE TENDENCY IS NOT FOR THEM TO
COOPERATE AND DO THINGS IN AN ORGANIZED HANNER AND IN A
PLANNED MANNER. THE TENDENCY IS TO WORK IN EXACTLY THE
OPPOSITE FASHION, TO DO EVERYTHING THEY CAN TO MAKE LIFE
DIFFICULT FOR THE OPPOSITION.
MY EXPERIENCE IS THAT THAT HAS HAPPENED MORE
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OFTEN THAN PEOPLE INTELLIGENTLY SITTING DOWN AND PLANNING.
MS. HOLBROOKE: LET'S GO OFF THE RECORD.
(DISCUSSION HELD OFF THE RECORD.)
BY MR. BRAMSON:
Q MR. PILNICK, I'D LIKE YOU TO RUN DOWN FOR ME
THE CABLE-RELATED WORK THAT YOU'VE DONE IN THE LAST THREE
YEARS. YOU CAN DO THAT EITHER CHRONOLOGICALLY OR
GEOGRAPHICALLY OR ANY WAY ITIS EASIER FOR YOU TO DO IT.
A I CAN TELL YOU WHO MY CLIENT CITIES HAVE BEEN
FOR THE LAST THREE YEARS BY GOING DOWN THIS LIST. THAT MAY
BE AN ANSWER TO YOUR QUESTION.
IN THE LAST THREE YEARS -- IF YOU REFER TO THIS
SHEET, IT MIGHT HELP -- ALL OF THE WORK IN ARIZONA AND
ARKANSAS WAS PRIOR TO THREE YEARS AGO.
IN CALIFORNIA, WITHIN THE LAST THREE YEARS,
IT'S INCLUDED AGOURA HILLS, ALBANY, BALDWIN PARK", BELL, BELL
GARDENS, BENICIA, BEVERLY HILLS, CULVER CITY, CYPRESS,
DOWNEY, EL MONTE, EL SEGUNDO, FAIRFIELD, FOUNTAIN VALLEY,
GARDENA, GARDEN GROVE, HAWTHORNE, HUNTINGTON BEACH,
LAKEWOOD, LA PUENTE, LOS ALTOS HILLS.
INCLUDING THIS ASSIGNMENT IS LOS ANGELES CITY,
LOS ANGELES COUNTY, LYNWOOD, ORANGE COUNTY, PALM SPRINGS,
PARAMOUNT, PICO RIVERA.
THE NEXT ONE, INCIDENTALLY, SHOULD BE PINOLE,
P-I-N-O-L-E. RANCHO CUCAMONGA, ROHNERT PARK, SAN GABRIEL,
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SAN LEANDRO, SAN PABLO, SANTA CRUZ AND SANTA CRUZ COUNTY.
SANTA FE SPRINGS, SANTA MONICA, SONOMA, WESTLAKE VILLAGE.
THEN PROCEEDING ON THROUGH THE OTHER STATES, I
THINK THE DISTRICT OF COLUMBIA WAS WITHIN THE LAST THREE
YEARS. 1'M NOT QUITE SURE AS TO THE EXACT DATES.
HILLSBOROUGH, MARTIN COUNTY, FLORIDA;
CHARLESTON, ILLINOIS; PEORIA, ILLINOIS; SPRINGFIELD,
ILLINOIS; NEW ORLEANS, LOUISIANA; ANN ARUNDEL COUNTY,
MARYLAND; BLOOMFIELD TOWNSHIP IN MICHIGAN; LIVONIA,
MICHIGAN; WEST BLOOMFIELD TOWNSHIP.
SALEM, OREGON; AUSTIN, TEXAS. I THINK TO THE
BEST OF MY RECOLLECTION THOSE ARE THE ONES THAT ARE WITHIN
THE LAST THREE YEARS. MOST OF THE OTHERS ON THE LIST WERE
PRIOR TO THAT.
Q IN THE LAST 10 YEARS HAVE YOU OR YOUR FIRM EVER
BEEN REQUESTED TO DO WORK ON BEHALF OF A CABLE TELEVISION
COMPANY?
A NOT DIRECTLY. I DID SERVE AS AN EXPERT WITNESS
IN AN ARBITRATION PROCEEDING WHICH WAS BETWEEN TWO
TELEVISION COMPANIES. ACTUALLY ROGERS CABLEVISION AND THE
COMPANY THEY WERE IN PARTNERSHIP WITH, WITH RESPECT TO SOME
SYSTEMS IN ORANGE COUNTY. AND I WAS RETAINED BY THE LAW
FIRM THAT REPRESENTED ROGERS. AND MY TESTIMONY WAS
ESSENTIALLY THE EFFICIENCY OF THE CONSTRUCTION OF THE
SYSTEM.
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THAT WAS ONE POINT IN DISPUTE IN THE
ARBITRATION. SO THAT MIGHT BE INDIRECTLY CALLED RETAINED BY
A CABLE COMPANY. BUT APART FROM THAT, I HAVE NOT WORKED FOR
CABLE COMPANIES. AS A MATTER OF FACT, BECAUSE I'VE
REPRESENTED CITIES, lIVE ATTEMPTED NOT TO WORK FOR CABLE
COMPANIES.
Q OTHER THAN THAT ONE OCCASION YOU MENTIONED -
A THAT'S THE ONLY ONE I RECALL.
Q DO YOU RECALL HAVING BEEN ASKED AND TURNED DOWN
ANY CABLE COMPANIES?
A I RECALL HAVING BEEN ASKED IN A VERY
PRELIMINARY WAY. THERE ARE A COUPLE OF INSTANCES WHERE I
RECALL REPRESENTATIVES OF CABLE COMPANIES WANTED TO HAVE A
SO-CALLED UNBIASED CONSULTANT MAKE A PRESENTATION ON THEIR
BEHALF FOR A CITY. AND I'VE SrMPLY INDICATED THAT WE
GENERALLY WORK ONLY FOR LOCAL GOVERNMENTS, AND THAT'S BEEN
THE END OF IT. THERE HASN'T BEEN ANY FORMAL REQUEST THAT I
CAN RECALL.
Q HAVE YOU EVER RECOMMENDED TO A LOCAL GOVERNMENT
THAT IT PERMIT OR ENCOURAGE HEAD-TO-HEAD COMPETITION IN
CABLE TELEVISION?
A YES.
Q IN WHAT SITUATIONS?
A WITHIN THE LAST SIX MONTHS I HAVE WORKED FOR
HILLSBOROUGH COUNTY IN FLORIDA. AND AS YOU MAY BE AWARE,
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THERE IS A LARGE OVERBUILD CONTROVERSY IN THE STATE OF
FLORIDA WHICH WAS GENERATED PRIMARILY BY FLORIDA POWER &
LIGHT, WHICH IS A LARGE POWER UTILITY IN THE STATE OF
FLORIDA.
FLORIDA POWER & LIGHT WAS REQUESTING FRANCHISES
IN COMMUNITIES THAT ALREADY WERE SERVED BY OTHER CABLE
SYSTEMS. I WAS RETAINED BY THE COUNTY IN THIS CASE TO
REVIEW THE STATUS OF CABLE IN THE COUNTY AND THE POTENTIAL
IMPACT OF OVERBUILDS AND TO MAKE RECOMMENDATIONS AS TO WHAT
THE COUNTY SHOULD DO WITH RESPECT TO OVERBUILDS. AND I DID
DO THAT.
Q
DID YOU MAKE A WRITTEN REPORT?
A YES.
Q
DO YOU HAVE A COpy OF THAT REPORT?
A I DONIT HAVE IT WITH ME. IT'S AVAILABLE.
AGAIN, IT'S PUBLIC INFORMATION. liD BE HAPPY TO. GET YOU A
COpy OF IT.
MR. BRAMSON: liD LIKE TO MAKE A REQUEST FOR THAT.
BY MR. BRAMSON:
Q ON ANY OTHER OCCASION HAVE YOU MADE A
RECOMMENDATION TO ENCOURAGE OR PERMIT DIRECT COMPETITION?
A NOT THAT I RECALL IN TERMS OF OFFICIAL
RECOMMENDATIONS. THE QUESTION HAS COME UP IN A NUMBER OF
INSTANCES, AND I THINK MY RESPONSE -- IN MANY CASES, CITIES,
FOR EXAMPLE, WERE NOT HAPPY WITH THE QUALITY OF SERVICE THEY
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WERE GETTING FROM THEIR CABLE COMPANY. AND I WAS ASKED AS A
ROUTINE QUESTION WHY NOT OPEN THE DOORS AND LET OTHER
COMPETITION IN. AND I WOULD THEN GIVE THE CITY USUALLY A
VERBAL RESPONSE, WHICH WOULD INDICATE THE PROBLEMS THAT ARE
INVOLVED IN HEAD-TO-HEAD COMPETITION.
IN MOST CASES, I THINK MY RESPONSE WAS SIMILAR
THERE. SIMPLY TO POINT OUT THAT OVERBUILDING CONTAINS AN
AWFUL LOT OF PROBLEMS.
Q IS IT YOUR OPINION THAT IF CITIES PERMITTED
OVERBUILDING, LEGALLY PERMITTED IT, THAT IT WOULD NOT HAPPEN
ANYWAY OR THAT IT WOULD HAPPEN ANYWAY?
A IT IS MY OPINION THAT THE ECONOMIC FACTORS THAT
WEIGH AGAINST TWO OR THREE COMPANIES COMPETING IN THE SAME
AREA ARE SO HEAVY FOR MOST AREAS THAT THE CITY COULD GRANT A
HUNDRED FRANCHISES, AND IN MOST COMMUNITIES, THERE WOULD
STILL ONLY BE ONE CABLE COMPANY BUILDING A SYSTEM, OR IN THE
LONG RUN, OPERATING A SYSTEM. YES, THAT'S MY OPINION.
Q IN THE SOUTH CENTRAL AREA IS IT YOUR OPINION
THAT IF THE CITY PERMITTED -- OR TO PUT IT YOUR WAY -
ISSUED MULTIPLE FRANCHISES, THAT ONLY ONE COMPANY WOULD
BUILD ANYWAY?
A NO. IT'S MY OPINION THAT ONLY ONE COMPANY
WOULD SURVIVE, AND PERHAPS NOT EVEN ONE COMPANY. THERE ARE
MANY CASES WHERE COMPANIES WILL PERHAPS WISH TO GET INTO
COMPETITION, WILL WISH TO BE THE LAST SURVIVOR AND ARE
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PERHAPS READY TO UNDERGO SOME INITIAL LOSSES IN ORDER TO BE
THE LAST SURVIVOR.
BUT IT IS CERTAINLY MY OPINION THAT THE SOUTH
CENTRAL AREA AND MOST OTHER AREAS SIMPLY WILL NOT
ECONOMICALLY SUPPORT TWO CABLE COMPANIES WHO OVERBUILD EACH
OTHER. AND I WANT TO QUALIFY THAT. I'M TALKING ABOUT
GENERAL OVERBUILDING. I rM NOT TALKING ABOUT
ftCHERRY-PICKING- OVERBUILDING, SELECTIVE OVERBUILDING WHERE
A COMPANY CAN PICK AND CHOOSE AND MAYBE SERVE ONLY A PORTION
OF THE AREA AND SIMPLY NOT COMPETE IN THE REST OF THE AREA.
BUT IF THERE'S GENERAL COMPETITION FOR A SIZABLE FRANCHISE
AREA, IT IS MY OPINION IN THE LONG RUN IN MOST CASES ONE AND
ONLY ONE COMPANY WILL SURVIVE.
Q I UNDERSTAND THAT. MY SPECIFIC QUESTION TO YOU
IS: IF THE CITY OF LOS ANGELES WERE TO ISSUE MORE THAN ONE
FRANCHISE FOR THE SOUTH CENTRAL AREA, IS IT YOUR-OPINION
ONLY ONE WOULD BUILD ANYWAY OR MORE THAN ONE COMPANY WOULD
BUILD, AND WHATEVER HAPPENED EVENTUALLY DOWN THE ROAD WOULD
HAPPEN OR YOU JUST DON'T KNOW?
A I THINK THAT WOULD DEPEND ON THE TIMING. IF WE
WERE STARTING FRESH IN THAT AREA AND THE CITY WERE TO GRANT
MORE THAN ONE FRANCHISE AS OF NOW AND IF TWO COMPANIES
RELATIVELY EQUALLY FINANCED COULD GET STARTED ON
CONSTRUCTION AT ABOUT THE SAME TIME, IT'S POSSIBLE THAT TWO
COMPANIES MIGHT START IN DIFFERENT PARTS OF THAT FRANCHISE
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AREA AND COMPETE, AND BOTH WOULD HOPE TO BE FIRST AND GET
MOST OF THE TERRITORY AND BASICALLY OUTLAST THE OTHER ONE.
IF THE TIMING IS DIFFERENT, IF ONE COMPANY HAS
A HEAD START IN BUILDING A GOOD PORTION OF THAT AREA, I
THINK IT'S HIGHLY UNLIKELY THAT ANOTHER COMPANY WOULD COME
IN UNLESS THAT COMPANY IS WILLING TO LOSE A LOT OF MONEY FOR
A LONG PERIOD OF TIME.
Q WHAT KIND OF HEAD START IS A SIGNIFICANT HEAD
START AS FAR AS MONTHS?
A PERHAPS SIX MONTHS OR SO. GETTING A LARGE
BATCH OF APPLICATIONS INTO THE UTILITIES EARLY ENOUGH SO
THAT YOU GET THE RIGHT TO ATTACH FIRST TO THE POLES.
BECAUSE AS OF I'VE INDICATED, THE COMPANY THAT ATTACHES
SECOND GENERALLY HAS A BIG ECONOMIC DISADVANTAGE.
Q IS IT FAIR TO SAY THAT IF ONE ASSUMES THAT ONE
COMPANY HAS ALREADY BEEN GIVEN AT LEAST A SIX-MONTH HEAD
START IN CONSTRUCTION, THAT IT'S YOUR OPINION THAT THERE
WOULD BE NO ADVERSE CONSEQUENCES TO ISSUING A SECOND
FRANCHISE? ALTHOUGH I SUPPOSE IT'S ALSO YOUR OPINION THERE
WOULD BE NO POSITIVE BENEFITS FROM IT.
A I DIDN'T SAY THERE WOULD BE NO ADVERSE
CIRCUMSTANCES. IF ALL THE OTHER COMPANIES EXCEPT THE FIRST
SIMPLY DID NOT BUILD, CHOSE NOT TO BUILD BECAUSE THERE WAS A
BIG ECONOMIC PENALTY, THEN MY ANSWER WOULD BE YES, THE CITY
WOULD NOT EVER IN THAT CASE. IF TWO OR MORE COMPANIES
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ACTUALLY CHOSE TO OVERBUILD, I THINK THERE WOULD BE
CONSIDERABLE DISRUPTION AS A RESULT.
Q I UNDERSTAND THATDS YOUR OPINION, AND WE'LL GET
TO THAT THIS AFTERNOON.
DIDN'T YOU JUST TELL ME THAT IF ONE COMPANY HAS
AT LEAST A SIX-MONTH ADVANTAGE, YOU BELIEVE IT'S VERY
UNLIKELY THAT ANY OTHER COMPANY WILL BUILD?
A IT DEPENDS ON THE NATURE OF THE COMPETITION. I
THINK MY ANSWER GENERALLY IS YES. IF I GO BACK TO THE CASE
OF FLORIDA, FOR EXAMPLE, FLORIDA POWER & LIGHT IS A
$4 BILLION POWER UTILITY. VERY WELL FINANCED. MANY OF THE
CABLE COMPANIES WHOM FLORIDA POWER & LIGHT HAS INDICATED
THEY'D BE PREPARED TO OVERBUILD HAVE EXPRESSED THE OPINION
THAT IT WILL BE AN ECONOMIC DISASTER, THAT FLORIDA POWER &
LIGHT WILL LOSE A LOT OF MONEY. BUT THEY CAN AFFORD TO LOSE
A LOT OF MONEY. IF THEIR OBJECTIVE IS TO DRIVE COMPETITION
OUT AND IF THEY'RE WILLING TO LOSE ENOUGH MONEY TO DO THAT,
IT'S POSSIBLE THAT A VERY WELL FINANCED LONG-TERM COMPETITOR
LIKE THAT MIGHT BE ABLE TO BE THE LAST SURVIVOR IN AN
OVERBUILD SITUATION. BUT I'M TALKING ABOUT THE GENERAL CASE
WHERE THE COMPETITORS ARE RELATIVELY EVENLY MATCHED
FINANCIALLY.
Q OKAY.
YOU DO BELIEVE, THOUGH, THERE AREN'T ANY
ADVERSE CONSEQUENCES IF A SECOND FRANCHISE IS ISSUED IF IN
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FACT NOBODY USES THE FRANCHISE TO BUILD A CABLE SYSTEM?
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MR.
THAT'S
BRAMSON:
PROBABLY TRUE.
WHY DON'T WE BREAK FOR LUNCH AND COME
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BACK AT 1:30.
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(LUNCH RECESS: 12:30 P.M.)
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LOS ANGELES, CALIFORNIA; WEDNESDAY,
1:35 P.M.
JULY 13, 1988
98
BY MR. BRAMSON:
Q MR.
EXAMINATION (CONTINUED)
PILNICK, HAVE YOU IN ANY OF YOUR PAST
ACTIVITIES HAD ANY PERSONAL INVOLVEMENT IN ANY CABLE
TELEVISION OVERBUILDS?
A BY PERSONAL INVOLVEMENT, DO YOU MEAN HAVE I
ACTED AS A CABLE OPERATOR OR ON BEHALF OF AN OPERATOR?
Q WELL, WE CAN START WITH THAT, ALTHOUGH THAT'S
NOT QUITE WHAT I MEANT.
A NO.
Q HAVE YOU EVER YOURSELF BUILT A CABLE TELEVISION
SYSTEM?
A NO.
Q HAVE YOU EVER OWNED ONE?
A NO.
Q I THINK YOU TOLD US YOU NEVER ACTED AS A
CONSULTANT FOR CABLE TELEVISION COMPANIESr CORRECT?
A DIRECTLY, THAT'S CORRECT. YOU ASKED'THE
QUESTION BEFORE.
I'D LIKE TO AMEND ONE OF MY PREVIOUS ANSWERS.
THERE WAS A SECOND CASE THAT GOES BACK A NUMBER OF YEARS
WHERE AGAIN I WAS RETAINED BY THE ATTORNEY. THIS IS THE
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Q WHAT WAS THE SUBJECT MATTER OF YOUR TESTIMONY
IN THAT?
A BASICALLY THE QUESTION OF TELEPHONE COMPANY
PRACTICES WITH RESPECT TO ALLOWING CABLE COMPANIES ON THEIR
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BY THE ATTORNEY FOR THE PLAINTIFF WHO WAS NOT AN ESTABLISHED
CABLE OPERATOR. IT WAS ACTUALLY AN INDIVIDUAL WHO GOT A
FRANCHISE AND WAS NOT ALLOWED ACCESS TO THE TELEPHONE
COMPANY'S POLES. AND HE SUED THE TELEPHONE COMPANY.
HE NEVER GOT INTO BUSINESS, NEVER BUILT A CABLE
SYSTEM. BUT I WAS RETAINED BY HIS ATTORNEY. SO I GUESS YOU
COULD SAY THAT THAT WAS ACTING FOR A CABLE COMPANY IN THAT
RESPECT.
THOSE ARE THE ONLY TWO CASES I REMEMBER.
POLES; POTENTIAL COMPETITIVE AND ADVERSARIAL RELATIONSHIPS
BETWEEN PHONE COMPANIES AND CABLE COMPANIES. AND I THINK
THE TESTIMONY WAS IN SUPPORT Of THE PLAINTIFF'S CONTENTION
THAT NORTHWEST BELL HAD ACTED ILLEGALLY IN AN ANTITRUST
MATTER IN REFUSING TO GRANT ACCESS TO THE POLES.
Q DO YOU HAVE A COpy OF YOUR TESTIMONY OR YOUR
DECLARATION?
A I DON'T HAVE A COPY. IT OCCURRED ABOUT EIGHT
OR NINE YEARS AGO. AND AS FAR AS A COPY, I DON'T HAVE A
COPY IN MY FILES. A COpy WOUl[;' BE AVAILABLE. THE LAW FIRM
THAT REPRESENTED THE PLAINTIFF WAS COLE, RAYWID & BRAVERMAN.
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THEY DO REPRESENT A NUMBER OF CABLE COMPANIES. THE ATTORNEY
FOR THE CASE WAS ALAN RAYWID.
Q
GOING BACK TO MY INITIAL QUESTION, HAVE YOU, AS
PART OF YOUR WORK FOR LOCAL GOVERNMENTS, HAVE YOU EVER
CONSULTED IN A SITUATION WHERE THERE WAS AN EXISTING
OVERBUILD WITHIN THAT CITY?
A YES.
Q IN WHAT SITUATIONS?
A IN HILLSBOROUGH COUNTY AND IN ANN ARUNDEL
COUNTY. BOTH OF THOSE WERE RELATIVELY RECENTLY. BOTH OF
THOSE COUNTIES HAVE SITUATIONS WHERE MORE THAN ONE COMPANY
HAS A COUNTY-WIDE FRANCHISE, AND THERE HAVE BEEN SOME
SELECTIVE CASES OF OVERBUILD THAT HAVE OCCURRED UP TO THE
PRESENT. AND THERE ARE SOME POTENTIAL OVERBUILDS THAT MIGHT
OCCUR IN THE FUTURE.
Q NOW, THESE ARE SITUATIONS WHERE YOV WERE HIRED
BY THE COUNTIES AFTER THEY HAD ALREADY ISSUED THE FRANCHISES
TO THE COMPANIES?
A IN THE HILLSBOROUGH COUNTY CASE, TWO FRANCHISES
HAD ALREADY BEEN ISSUED. THERE WAS A THIRD APPLICATION FROM
FLORIDA POWER & LIGHT, THEIR SUBSIDIARY, TELESAT, AND I WAS
HIRED SPECIFICALLY IN THAT CASE TO REVIEW THE SITUATION AND
TO MAKE RECOMMENDATIONS AS TO WHETHER THE COUNTY SHOULD
GRANT A THIRD FRANCHISE AND UNDER WHAT CONDITIONS, IF THEY
DID GRANT A FRANCHISE, SHOULD IT BE GRANTED.
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101
IN THE ANN ARUNDEL COUNTY CASE I WAS NOT HIRED
AS TO OVERBUILDS AT ALL. I WAS HIRED TO HELP THE COUNTY
THROUGH A RENEWAL PROCESS. BUT THERE IS SOME OVERBUILDING
THAT HAS ALREADY OCCURRED IN THAT COUNTY.
Q DID YOUR WORK FOR ANN ARUNDEL COUNTY RELATE IN
ANY WAY TO THE EXISTENCE OF AN OVERBUILD THERE?
A ONLY WITH RESPECT TO ANALYZING THE IMPACT OF
THE OVERBUILD ON THE FINANCIAL OPERATIONS OF THE TWO
COMPANIES AND MAKING SOME PROJECTIONS IN TERMS OF WHAT MIGHT
HAPPEN IF THE EXTENT OF THE OVERBUILD GREW.
Q
DO YOU HAVE A COpy OF YOUR REPORT IN THAT CASE?
A YES.
MR. BRAMSON: I WOULD ALSO LIKE TO MAKE A REQUEST FOR
THAT. AND IF I COULD GET COPIES OF THOSE TOMORROW MORNING,
THEN I THINK THAT WOULD HELP.
THE WITNESS: IF I GET BACK TO MY OFFICE._
LET ME MAKE A NOTE SO I KNOW WHAT TO BRING IN.
MS. HOLBROOKE: I BELIEVE THE REQUEST IS NOW FOR
THREE REPORTS: LOS ANGELES COUNTY, HILLSBOROUGH COUNTY AND
ANN ARUNDEL COUNTY.
MR. BRAMSON: RIGHT.
THE WITNESS: THE ANN ARUNDEL COUNTY IS FOUR REPORTS.
THE LOS ANGELES COUNTY IS SIX VOLUMES, AND HILLSBOROUGH
COUNTY IS TWO. YOU'RE ASKING ME TO BRING IN A TRUCK.
III
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BY MR. BRAMSON:
Q BOTH OF THESE SITUATIONS IN FLORIDA ARE FAIRLY
RECENT; CORRECT?
MS. HOLBROOKE: WAIT. WHICH ARE BOTH SITUATIONS?
MR. BRAMSON: HILLSBOROUGH AND ANN ARUNDEL.
MS. HOLBROOKE: NO, NO. ANN ARUNDEL COUNTY IS IN
MARYLAND. I ILL REPRESENT TO YOU ITIS THE COUNTY SURROUNDING
ANNAPOLIS.
THE WITNESS: HILLSBOROUGH IS SURROUNDING THE COUNTY
OF TAMPA IN FLORIDA. AS LITTY INDICATES, ANN ARUNDEL COUNTY
IS IN MARYLAND AND SURROUNDS ANNAPOLIS.
AS I INDICATED, ONLY ONE OF THOSE WAS
SPECIFICALLY AN OVERBUILD ASSIGNMENT. IN THE ANN ARUNDEL
COUNTY
MS. HOLBROOKE: WAIT. HE STARTED A QUESTION ASSUMING
THEY WERE BOTH IN FLORIDA. WE HAVE THAT STRAIGHTENED OUT.
LET HIM POSE ANOTHER QUESTION.
BY MR. BRAMSON:
Q YOUR WORK IN BOTH THOSE SITUATIONS OCCURRED
WITHIN THE LAST YEAR, DIDNIT IT?
A YES.
Q AND THOSE ARE YOUR ONLY TWO DIRECT WORK-RELATED
EXPERIENCES WITH SITUATIONS WHERE AN OVERBUILD OCCURREDi
CORRECT?
A THAT
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Q
IT'S TRUE, IS IT NOT, THAT OVERBUILD SITUATIONS
ARE QUITE A BIT MORE FREQUENT TODAY THAN THEY WERE, SAY,
FIVE YEARS AGO?
A THAT'S GENERALLY TRUE. ALTHOUGH I WOULD JUST
MODIFY THAT A LITTLE BIT.
I THINK THE NUMBER OF ACTUAL OVERBUILDS THAT
HAVE OCCURRED ARE MORE FREQUENT BUT NOT THAT MUCH MORE
FREQUENT. THE NUMBER OF POTENTIAL OVERBUILDS WHERE ITIS
BEING TALKED ABOUT AND CONSIDERED IS VERY MUCH MORE F R E Q U E N ~
THAN IN THE PAST.
Q
WHY DO YOU THINK THAT IS?
MS. HOLBROOKE: WHY WHAT IS?
MR. BRAMSON: WHAT HE JUST SAID.
MS. HOLBROOKE: WHICH PART OF THAT?
MR. BRAMSON: EITHER OF IT AND ALL OF IT.
MS. HOLBROOKE: THERE WERE TWO QUESTIONS. OVERBUILDS
ARE NOT REALLY MORE FREQUENT NOW THAN FIVE YEARS AGO BUT THE.
DISCUSSION OF THEM OR THE POTENTIAL IS MORE.
MR. BRAMSON: I THINK IT'S ONE CONCEPT.
THE WITNESS: ONE REASON WHICH I INDICATED IN
HILLSBOROUGH COUNTY REPORT IS THE RAPIDLY INCREASING COST OR
PRICE OR ASSET VALUE OR ANY WAY YOU WANT TO PUT IT OF CABLE
SYSTEMS. SINCE THE EFFECTIVE DATE OF THE DEREGULATION OF
RATES BROUGHT ABOUT BY THE CABLE COMMUNICATIONS POLICY ACT
OF 1984, IF YOU RECALL, THAT DEREGULATED RATES WITH A
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TWO-YEAR GRANDFATHERING PERIOD SO THAT RATES THROUGHOUT THE
CABLE SYSTEMS IN THE COUNTRY WERE DEREGULATED EFFECTIVE AS
OF THE FIRST OF 1987.
WHAT HAS HAPPENED AS A RESULT OF THAT IS THAT
THE PRICES OF CABLE SYSTEMS IN TERMS OF DOLLARS PER
SUBSCRIBER HAVE RISEN VERY RAPIDLY. IF YOU GO BACK EVEN TO
1985 WHEN WESTINGHOUSE SOLD ITS GROUP W SYSTEMS, THE AVERAGE
PRICE PER SUBSCRIBER THAT THEY SOLD THEIR SYSTEMS FOR AT
THAT TIME WAS ABOUT $1,200. IN THE SPACE OF LESS THAN THREE
YEARS, PRICES OF CABLE SYSTEMS TODAY ARE SELLING FOR $2,500
A SUBSCRIBER AND EVEN HIGHER, UP TO 3,000 IN SOME CASES.
THE MAIN REASON FOR THIS RAPID INCREASE WAS THE
ASSUMPTION THAT WITH THE CABLE COMPANIES BEING ABLE TO
CHARGE WHATEVER THE TRAFFIC WILL BEAR, THAT RATES WILL
CONTINUE TO GO UP. AND THAT BECAUSE OF THE QUASI MONOPOLY
OF MOST CABLE COMPANIES, CABLE SUBSCRIBERS WILL HAVE NO
CHOICE BUT TO PAY THOSE RATES. SO THAT THE HIGH PRICES AS A
RESULT OF, SPECIFICALLY OF RATE DEREGULATION AND AN
ASSUMPTION THAT MORE DOLLARS CAN BE GATHERED FROM THE SAME
CABLE SUBSCRIBERS FOR THE SAME SERVICES WITHOUT ANY
REGULATION OR GOVERNMENT RESTRICTIONS.
ONE EFFECT OF THOSE HIGH VALUES IS THAT IN MANY
CASES IT BECOMES MORE ATTRACTIVE TO OVERBUILD THAN TO BUY.
AND THAT DOESN'T CHANGE THE POSITION THAT liVE TAKEN THAT
OVERBUILDS ARE NOT ECONOMICALLY COMPETITIVE IN MOST CASES.
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BUT THE FACT THAT THE PURCHASE PRICE IS CONSIDERED
OUTRAGEOUSLY HIGH BY MANY POTENTIAL BUYERS LEADS THEM TO
CONSIDER OVERBUILDS AS A POSSIBLE SOLUTION TO THEIR PROBLEM
OF GETTING MORE CABLE SUBSCRIBERS.
ANOTHER REASON THAT OVERBUILDS ARE GETTING MORE
CONSIDERATION IS THE REACTION BY THE CITIES AND COUNTIES
INVOLVED. AGAIN, THE CABLE ACT TOOK AWAY LOCAL CONTROL OF
RATES. IT RESTRICTED CABLE COMPANIES IN TERMS OF RENEWALS.
IT MADE IT VIRTUALLY IMPOSSIBLE FOR A CITY OR COUNTY NOT TO
VIEW AN EXPIRING FRANCHISE EVEN IF THEY WERE VERY UNHAPPY
WITH THE QUALITY OF SERVICE OF THE CABLE COMPANY. AS A
RESULT, MANY CITIES AND COUNTIES ARE LOOKING AROUND TO SEE
WHAT SOLUTIONS THEY MIGHT HAVE TO AN UNSATISFACTORY CABLE
SUPPLIER.
ONE SOLUTION THAT MANY CITIES AND COUNTIES ARE
LOOKING TO IS THE POSSIBILITY OF MUNICIPAL OWNERSHIP. AND
EVEN THOUGH THAT HASN'T OCCURRED VERY OFTEN, IT'S BEING
TALKED ABOUT MORE. BUT ANOTHER POSSIBILITY, IF WE CAN'T GET
THE COMPANY THAT IS ALREADY SERVING US OUT AND NOT RENEWING
THE FRANCHISE, PERHAPS WE CAN CONVINCE SOMEBODY ELSE TO COME
IN. SO THAT ONE PURPOSE OF CITIES AND COUNTIES IS
ESSENTIALLY TO TRY TO SOLVE THE PROBLEM OF A BAD CABLE
COMPANY SUPPLIER BY ATTRACTING SOME COMPETITION.
I THINK THOSE TWO REASONS ARE PRIMARILY THE
PRIMARY REASONS. THE OTHER REASON IS THERE ARE NEW PLAYERS
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IN THE GAME. AND A PARTICULAR OUTSTANDING EXAMPLE IS
FLORIDA POWER & LIGHT THAT I'VE TALKED ABOUT WHERE YOU HAVE
A VERY LARGE, VERY WELL FINANCED UTILITY THAT CAN AFFORD TO
TAKE SOME OF THE LOSSES THAT ARE INHERENT IN OVERBUILDING.
BY MR. BRAMSON:
Q
LET'S TALK ABOUT THE FIRST TIME THAT YOU
MENTIONED, WHICH IS, I GUESS, HIGHER RATES RESULTING IN
HIGHER PER SUBSCRIBER PRICES PER SYSTEM.
COULD YOU EXPLAIN TO ME WHY YOU THINK THAT HAS
RESULTED IN MORE OVERBUILDS OR MORE HARDER LOOKS AT
OVERBUILDS?
A IF YOU TAKE THE PARTICULAR CASE OF TELESAT IN
FLORIDA, liVE TALKED TO SOME OF THE TELESAT REPRESENTATIVES.
THEY INDICATE TO OVERBUILD IN THE HILLSBOROUGH COUNTY AREA,
NOT IN THE COUNTRY, BUT IN THE HILLSBOROUGH COUNTY AREA, TO
OVERBUILD, IT COSTS THEM ABOUT $18,000 A MILE. THE COUNTY
HAS A REQUIREMENT THAT ALL RESIDENTS WITH DENSITIES OF 45
HOMES PER MILE OR GREATER HAVE TO BE SERVED. SO THE WORST
CASE WOULD BE THAT YOU WOULD HAVE TO SERVICE DENSITIES AS
LOW AS 45 HOMES PER MILE.
IF YOU TAKE A COST OF $18,000 PER MILE AND 45
HOMES EXIST IN THAT MILE, YOUR COST PER HOME PASSED IS $400,
SIMPLY BY DIVIDING 45 INTO 18,000. TELESAT'S ARGUMENT IS
THAT EVEN IF YOU ONLY GOT 25 PERCENT PENETRATION AS A RESULT
OF THAT OVERBUILDING, YOUR $400 PER HOME PASSED WOULD
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TRANSLATE INTO $1,600 FOR EACH SUBSCRIBER.
WHAT THEY WERE SAYING IS THAT WHEN THEY OFFERED
TO BUY SOME SYSTEMS IN THAT AREA, THE POTENTIAL SELLERS WERE
ASKING PRICES OF $2,400 A SUBSCRIBER OR MORE, WHICH IS
50 PERCENT MORE THAN THE $1,600 FIGURE THAT I WAS TALKING
ABOUT. SO WHAT TELESATIS ARGUMENT WAS -- AND I THINK THEY
MADE THIS PUBLIC; IT'S NO SECRET -- IS THAT EVEN WITH THE
ECONOMIC DISADVANTAGE OF OVERBUILDING -- AND I STICK WITH
EVERYTHING I SAID -- BUT EVEN WITH THAT, BECAUSE OF THE HIGH
PRICES THAT CABLE SYSTEMS NOW CARRY IN MANY CASES, ITIS
CHEAPER FOR THEM TO OVERBUILD THAN TO BUY.
I DON'T EXPECT THAT THEY THINK THAT THE
OVERBUILD WILL LAST PERMANENTLY. BUT I THINK THAT THEY'RE
SAYING THAT TO GET IN THE GAME AND TO BE ABLE TO COMPETE AND
FORCE THE OPPOSITION OUT OR FORCE THE OPPOSITION TO SELL AT
A MORE REASONABLE PRICE, AND FOR ALL THOSE REASONS, ITIS NOW
CHEAPER FOR THEM TO DO IT BY AT LEAST CONSIDERING
OVERBUILDING.
AND AGAIN, I'LL MODIFY THAT. NOT GENERAL
OVERBUILDING THROUGHOUT AN ENTIRE COUNTY, BUT SELECTIVE
OVERBUILDING.
Q YOU MEAN OVERBUILDING DOWN TO 45 HOMES A MILE?
A I MEAN OVERBUILDING IN PROBABLY THE MOST DENSE
AREAS FIRST SO THAT YOU COMPETE OR YOU HAVE A BETTER CHANCE
OF ATTRACTING ENOUGH SUBSCRIBERS TO HOPEFULLY EXIST OR
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CONTINUE TO EXIST. AND ALSO WHERE YOU HURT THE COMPETITION
THE MOST BY TAKING AWAY SOME OF THEIR CUSTOMERS IN THE MOST
PROFITABLE AREAS.
Q DO YOU HAVE AN OPINION ABOUT THE CORRECTNESS OF
TELESATIS LOGIC AS YOU HAVE JUST DESCRIBED IT?
A IT DEPENDS ON WHAT THE OBJECTIVE IS. IF THE
OBJECTIVE IS LONG-TERM SURVIVAL AS A LAST PLAYER REMAINING
ON ITS FEET AFTER THE WAR IS CONCLUDED, THEN I THINK THAT
TELESATIS STRATEGY PROBABLY MAKES SENSE. THEY'RE ONE OF THE
FEW COMPANIES THAT COULD CARRY THAT STRATEGY OUT. I DONIT
THINK ITIS A STRATEGY THAT A NORMAL CABLE OPERATOR COULD
CARRY OUT.
I ALSO NOTICE IN THE LAST ISSUE OF ~ a Q A Q ~ A 2 I ~ ~
THAT TELESAT APPARENTLY IS MAKING DEALS NOW WITH THEIR
COMPETITORS IN FLORIDA BY WHICH THEY AGREED TO EITHER SHARE
THE TERRITORY, OR IN EFFECT, A NONAGGRESSION TYPE OF DEAL,
WHICH INDICATES TO ME THAT TELESAT'S LONG-RANGE PURPOSE
NEVER WAS TO MAKE OVERBUILDING A CHRONIC FACT OF LIFE. IT
WAS SIMPLY A TOOL TO GET THEM INTO A POSITION WHERE THEY
COULD CLAIM A GOOD SHARE OF THE MARKET. AND I THINK IT HAS
DONE THAT AND CONTINUES TO DO THAT. AND THE FACT THAT THEY
ARE NOW COMING TO AGREEMENTS WITH CABLE COMPANIES IN THAT
AREA TO ME INDICATES THAT, AGAIN, ANOTHER CONFIRMATION THAT
LONG-TERM OVERBUILDING IS SIMPLY NOT PROFITABLE.
Q LET ME ASK MY QUESTION A DIFFERENT WAY. YOU
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DESCRIBED THE DOLLARS AND CENTS KIND OF ARGUMENT WHERE
TELESAT WAS SAYING ~ E CAN BUILD IT. IT WILL COST US
X AMOUNT PER SUBSCRIBER TO BUILD THE SYSTEM. ONCE WE'VE
BUILT IT, IT'S WORTH MORE THAN WHAT IT COST TO BUILD IT.
AND THEREFORE, IT'S WORTH IT TO BUILD IT.
A THE LAST KNOWLEDGE, IT'S WORTH MORE THAN IT
COSTS US TO BUILD IT, ASSUMES THE MARKET STAYS UP. IT
ASSUMES YOU CAN GET TOP DOLLAR FOR A SITUATION, WHICH IS
UNUSUAL. YOU CAN GET TOP DOLLAR, OBVIOUSLY, WHERE THERE'S
NO COMPETITION. BUT I WOULD THINK THAT IF YOU HAD TWO
COMPANIES IN A MARKET YOU'RE NOT GOING TO GET $2,400 A
SUBSCRIBER BECAUSE ALL THOSE FIGURES ARE BASED ON SOLE
CONTROL OF THE SUBSCRIBERS. AND ADDING SUBSCRIBERS THROUGH
THE GROWTH OF THE SYSTEM AND INCREASING THE RATES TO EACH
SUBSCRIBER ON A PRETTY MUCH PERIODIC, CONTINUAL BASIS. AND
PROBABLY IT INVOLVES DOUBLING OR TRIPLING THE AMOUNT OF
DOLLARS FROM EACH HOME IN THE FRANCHISE AREA.
IF YOU INJECT COMPETITION AND YOU HAVE TWO OR
THREE COMPANIES -- AND I ILL STICK WITH TWO FOR THE MOMENT
IF YOU HAVE TWO COMPANIES IN THE AREA, IT SIMPLY DOES NOT
MAKE SENSE TO ASSUME THAT EITHER OF THOSE SYSTEMS 'IS WORTH
WHAT IT WOULD BE WORTH IF YOU HAD ONLY ONE COMPANY IN THE
AREA.
Q HOW MUCH OF A DISCOUNT DO YOU BELIEVE WOULD BE
APPROPRIATE TO GIVE ON A PER-SUBSCRIBER BASIS FOR A
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COMPETITIVE SITUATION?
A IF YOU'RE TALKING ABOUT PURCHASING, IT'S VERY
DIFFICULT TO ANSWER THAT, BECAUSE THERE HAVE NOT BEEN, AS
FAR AS I KNOW, PURCHASES OF SYSTEMS IN OVERBUILD AREAS. SO
I WOULD BE SPECULATING.
I WOULD THINK THAT IT WOULD DEPEND ON WHETHER
THE PURCHASER THINKS THAT PARTICULAR SYSTEM IS GOING TO BE
THE SURVIVOR OR NOT. IF THE PURCHASER DOES NOT BELIEVE THAT
THAT SYSTEM IS GOING TO SURVIVE, THE VALUE, I THINK, WOULD
BE VERY LOW. IF THE PURCHASER THINKS THAT THIS SYSTEM WILL
WIND UP WITH MOST OF THE SUBSCRIBERS OR DRIVE THE OTHER
SYSTEM OUT, THEN THE PRICE MIGHT BE BASED ON THAT
ASSUMPTION. BUT SINCE THERE HAS BEEN NO HISTORY OF THAT,
IT'S HARD TO GIVE AN ANSWER.
Q LET ME ASK IT THIS WAY: IF A POTENTIAL
PURCHASER CAME TO YOU AND ASKED YOU -- BEFORE WE GET TO
THAT, LET'S ASSUME IN A PARTICULAR MARKET THE GOING MARKET
RATE PER SUBSCRIBER WITH ONLY ONE COMPANY IS $3,000 A
SUBSCRIBER; OKAY? LET'S USE THAT AS OUR ASSUMPTION.
A OKAY.
Q NOW, THERE'S AN OVERBUILD IN THAT SliuATION. A
POTENTIAL PURCHASER COMES TO YOU AND SAYS, -I'M INTERESTING
IN BUYING ONE OF THESE OVERBUILDERS. I DON'T KNOW WHETHER
THIS IS GOING TO BE THE ONE THAT SURVIVES IN THE LONG RUN OR
WHETHER BOTH WILL SURVIVE OR WHAT WILL HAPPEN. I DONIT WANT
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TO PAY YOU A LOT OF MONEY TO GO FIND OUT WHAT YOUR OPINION
IS OF WHICH ONE WILL SURVIVE. I JUST WANT YOU TO TELL ME
HOW MUCH YOU THINK I SHOULD DISCOUNT THE $3,000 PER
SUBSCRIBER, BECAUSE IT'S IN A COMPETITIVE SITUATION INSTEAD
OF A ONE-COMPANY SITUATION.
A I DON'T THINK I CAN ANSWER THE QUESTION THE WAY
IT'S FRAMED. I THINK THAT I WOULD HAVE TO KNOW WHAT ARE THE
CAPABILITIES AND INTENTIONS OF THE PURCHASER AS WELL AS THE
SELLERS.
IF THE PURCHASER IS A VERY WELL-FINANCED,
LONG-TERM PLAYER LIKE A UTILITY COMPANY, THEN PART OF THE
ANSWER TO YOUR QUESTION WOULD BE AFTER YOU BUY THIS
PARTICULAR SYSTEM, HOW MUCH ARE YOU WILLING TO INVEST AND
POSSIBLY LOSE IN ORDER TO WIN THE COMPETITIVE WAR WITH THE
OTHER CABLE COMPANY? IF THE ANSWER IS, WE'RE WILLING TO
INVEST WHATEVER IT TAKES, AND WE CAN DO THAT, THEN MY
CORRESPONDING ANSWER MIGHT BE IN THAT CASE IT'S WORTH SO
MUCH TO BUY THE SYSTEM.
IF THE ANSWER IS, WE DON'T WANT TO GET INTO AN
ECONOMIC WAR, AND WE'RE NOT PREPARED TO LOSE MONEY FOR ANY
LENGTH OF TIME, MY RESPONSE WOULD PROBABLY BE DON'IT BUY THE
SYSTEM AT ANY PRICE.
Q LET'S TAKE YOUR FIRST ANSWER. LET'S SAY IN OUR
HYPOTHETICAL THE FIRST IS THE SITUATION. NOW, YOU'VE BEEN
ASKED WHAT AMOUNT TO DISCOUNT DOWN FROM THE $3,000 PER
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SUBSCRIBER.
A MY QUICK ANSWER -- AND I HAVE REALLY NOT
STUDIED THIS PARTICULAR PROBLEM -- MY QUICK ANSWER WOULD BE
THAT IF YOU HAD TWO SYSTEMS IN AN AREA AND IF YOU COULD FIX
THE GOING PRICE OF $3,000 PER SUBSCRIBER FOR ONLY ONE
SYSTEM, THAT EITHER ONE OF THE TWO COMPETITORS WOULD BE
WORSE, CONSIDERABLY LESS THAN HALF OF THAT, CONSIDERABLY
LESS BECAUSE OF THE RISK THAT WOULD BE INVOLVED THAT YOU
MIGHT BE PAYING FOR NOTHING IN THE LONG RUN. YOU MIGHT BE
PAYING FOR A SYSTEM THAT COULD NOT SURVIVE, AND THE ENTIRE
INVESTMENT WOULD GO DOWN THE DRAIN.
Q
LET ME EMPHASIZE. WE'RE TALKING ABOUT ON A
PER-SUBSCRIBER BASIS. I WANT TO MAKE SURE I UNDERSTAND YOUR
ANSWER.
A WELL, MY ANSWER IS THIS: IF I HAVE ONLY ONE
SYSTEM IN AN AREA, AND IF 1'M WILLING TO PAY $3,000 PER
SUBSCRIBER FOR THAT SYSTEM, THAT PRICE IS PREDICATED ON
ASSUMPTIONS. ONE ASSUMPTION IS THAT THERE WILL BE NO
COMPETITION FOR THAT SYSTEM, AND THAT IF THAT SYSTEM HAS
50,000 SUBSCRIBERS, IT WILL CONTINUE TO HAVE AT LEAST
50,000, POSSIBLY ADDING SOME EACH YEAR. AND THAT THOSE
50,000 WILL BE SUBJECT EVERY YEAR TO RATE INCREASES SO THAT
BOTTOM-LINE PROFITS WILL GROW. AND IT'S ONLY BY TAKING
THOSE THINGS INTO CONSIDERATION THAT I CAN COME UP WITH ANY
NUMBER CLOSE TO 3,000 TO JUSTIFY IT.
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BECAUSE IF YOU TAKE THE AMOUNT OF MONEY THAT
PRESENT REVENUE GENERATES IN A CABLE SYSTEM, THEN EVEN A
$2,000 PER SUBSCRIBER PRICE IS NOT JUSTIFIED. IT'S ONLY
JUSTIFIED ON THESE ASSUMPTIONS AS TO WHAT WILL HAPPEN IN THE
FUTURE.
ONE OF THOSE ASSUMPTIONS IS NO COMPETITION. SO
AS SOON AS YOU THROW IN THE FACTOR THERE WILL BE
COMPETITION, AND IF YOU THEN ADD TO THAT THAT COMPETITION
WILL EXIST FOREVER AS FAR AS WE'RE CONCERNED, IT MAKES IT A
TOSS OF THE DICE. IT MAKES IT SOMETHING I CAN'T PREDICT
ANYMORE. BEFORE I COULD PREDICT REASONABLY WELL. NOW IT
MIGHT BE AN ALL-OR-NOTHING PREDICTION. IT MIGHT BE A
PREDICTION THAT IF WE HAVE ENOUGH MONEY TO PUT IN AND IF WE
BEAT THE OTHER GUY OUT, WE EVENTUALLY WILL TAKE OVER THE
TERRITORY. OUR SYSTEM WILL BE THE SURVIVOR, AND WE CAN
CHARGE WHATEVER THE MARKET WILL BEAR.
THE OTHER SIDE IS MAYBE THE OTHER GUYS ARE
GOING TO BEAT US OUT AND MAYBE WE'RE NOT PREPARED TO PUT IN
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ALL THE LOSSES THAT ARE NECESSARY. THEN WE HAVE TO FOLD OUR
TENTS AND ALL THE INVESTMENT IS LOST. SO IT BECOMES THE
DIFFERENCE BETWEEN A PREDICTION THAT I CAN MAKE WITH
REASONABLE CONFIDENCE AGAINST A PREDICTION THAT IS SO WILD
THAT IT COULD GO EITHER WAY.
Q WHAT I WAS TRYING TO POINT OUT WAS THAT UNDER
MY ASSUMPTION IT WOULD BE ONLY BUYING HALF AS MANY
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SUBSCRIBERS. SO FIGURING IT ON A PER-SUBSCRIBER BASIS, I
WANT TO MAKE SURE I UNDERSTAND YOUR ANSWER.
YOU AT ONE POINT TOLD ME CONSIDERABLY LESS THAN
HALF OF THE ONE-COMPANY PRICE. WHAT I WAS NOT CLEAR ON WAS
WHETHER YOU MEANT ONE HALF LESS THAN ONE HALF ON A
PER-SUBSCRIBER BASIS OR AS A TOTAL PRICE.
A ON A PER-SUBSCRIBER BASIS.
MS. HOLBROOKE: I THINK HE UNDERSTOOD THAT.
BEFORE YOU GET ON TO ANOTHER QUESTION, YOU WERE
CLARIFYING YOUR LAST ANSWER, WHICH WAS ON A PER-SUBSCRIBER
BASIS.
THE WITNESS: WHEN I SAID LESS THAN HALF, I MEANT
LESS THAN HALF PROPORTIONATELY BASED ON A PER-SUBSCRIBER
BASIS. WHAT I MEAN IS WHAT THE: VALUE OF THE SYSTEM PER
SUBSCRIBER IS. IF YOU ASSUME YOU HAD TWO EQUAL SYSTEMS AND
EVERYTHING WAS EQUAL ON THEM, I STILL WOULD RECOMMEND PAYING
LESS THAN HALF PER SUBSCRIBER SIMPLY BECAUSE IF EVERYTHING
WERE EQUAL, I THINK YOU HAVE A HUNDRED PERCENT CHANCE OF
SUCCEEDING OR ZERO PERCENT CHANCE OF SUCCEEDING. I THINK IT
WILL BE A DRASTIC EXTREME SOLUTION RATHER THAN TWO COMPANIES
SIMPLY COEXISTING FOR SOME PERIOD OF TIME.
I CAN'T SEE SIMPLY SPLITTING COSTS IN HALF AND
SAYING THAT'S A GOOD DEAL. I DON'T THINK THAT'S WHAT WILL
HAPPEN. EVENTUALLY ONE SYSTEM OR THE OTHER WIll GO OUT.
III
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BY MR. BRAMSON:
Q DON'T YOU HAVE THE POTENTIAL OF GETTING THE
100 PERCENT TO COUNTERBALANCE THE POTENTIAL GETTING ZERO
PERCENT?
A IF YOU ARE A DEEP POCKETS COMPANY; IF YOU ARE
WILLING TO ABSORB LOSSES FOR A LONG PERIOD OF TIME. AND IF
YOU ARE DETERMINED THAT YOU HAVE MORE RESOURCES THAN THE
COMPETITION AND YOUIRE WILLING TO SPEND THEM UNDER THOSE
CIRCUMSTANCES, ITIS POSSIBLE THAT YOU WILL BE THE SURVIVOR.
YOU STILL HAVE TO BE WILLING TO TAKE A PRETTY DEEP ECONOMIC
BATH BEFORE YOU GET THERE.
Q THE VALUING OF A CABLE SYSTEM IN TERMS OF SOME
NUMBER OF DOLLARS PER SUBSCRIBER IS THE COMMON WAY TO VALUE
A CABLE TELEVISION SYSTEM IN THE INDUSTRY, ISNIT IT?
A IT'S ONE OF THE WAYS.
Q IT'S ONE OF THE COMMON WAYS?
A YES.
Q DO YOU HOLD YOURSELF OUT, MR. PILNICK, TO BE AN
EXPERT IN VALUING CABLE TELEVISION SYSTEMS?
A 11M NOT AN APPRAISER IN THAT SENSE. I DON'T
KNOW THAT A SIGNIFICANT PART OF MY BUSINESS IS INVOLVED IN
SPECIFICALLY APPRAISING THE VALUE OF SYSTEMS. THAT
IREQUIREMENT HAS COME UP IN A NUMBER OF CASES WHERE I HAD AN
,ASSIGNMENT -- THEY MAY HAVE HAD OTHER FACTORS INVOLVED -
aUT WHERE I WAS ASKED TO COME UP WITH AN ESTIMATED VALUE FOR
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THE SYSTEM. SO I HAVE DONE THAT AS PART OF A GROUP OF
TASKS. I THINK I HAVE SEEN ENOUGH PRO FORMAS AND FINANCIAL
STATEMENTS OF CABLE COMPANIES AND HAVE ENOUGH EXPERIENCE
WITH THAT TO BE ABLE TO KNOW WHAT THE COMMON TECHNIQUES FOR
VALUING SYSTEMS ARE. AND I THINK THAT I HAVE ENOUGH
EXPERIENCE TO DO A PROFESSIONAL JOB IN THAT AREA.
BUT TO ANSWER YOUR QUESTION, I WOULD NOT HOLD
MYSELF OUT AS A CABLE SYSTEM APPRAISER.
Q DO YOU ANTICIPATE GIVING ANY TESTIMONY IN THIS
CASE ON THE VALUE OF A CABLE TELEVISION SYSTEM?
A IF I'M ASKED THE QUESTION, I THINK I WOULD
RESPOND TO THE BEST OF MY ABILITY. I DON'T THINK THERE'S A
SECTION IN THE OUTLINE HERE ABOUT ECONOMIC ASPECTS OF CABLE
SYSTEM OPERATIONS. I WAS NOT INTENDING TO PRESENT THAT AS
SPECIFICALLY THE VALUE OF CABLE SYSTEMS AS THE KEY TOPIC.
BUT I THINK IT MIGHT COME IN AS AN INCIDENTAL PART OF THE
TOTAL.
Q I UNDERSTAND YOU DIDN'T KNOW WHAT QUESTIONS
MIGHT BE ASKED OF YOU ONCE YOU ACTUALLY GET ON THE STAND.
BUT WHAT I'M REALLY ASKING YOU: AS YOU SIT HERE WITH YOUR
PRESENT UNDERSTANDING OF WHAT OPINIONS YOU WERE GOING TO
GIVE AT TRIAL, IS IT YOUR UNDERSTANDING THAT INCLUDED IN
THOSE OPINIONS WILL BE QUESTIONS AS TO APPRAISALS OF SYSTEMS
OR POTENTIAL SYSTEMS?
A I WOULD NOT USE THE TERM -APPRAISAl.- I DON'T
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EXPECT THAT 11M GOING TO BE ASKED TO APPRAISE A SYSTEM. I
THINK WHAT I MIGHT BE ASKED WOULD BE THAT THE POTENTIAL FOR
ECONOMIC OR FINANCIAL SUCCESS FOR A CABLE SYSTEM IN THE
SOUTH CENTRAL AREA JUST IN GENERAL TERMS AND HOW THAT
POTENTIAL MIGHT BE IMPACTED IF THERE WERE MORE THAN ONE
COMPANY, FRANCHISE FOR THE AREA. I THINK THAT KIND OF
QUESTION MIGHT COME UP IN REGARDS TO MY TESTIMONY. BUT I
DON'T EXPECT AT THIS POINT TO BE ASKED A QUESTION AS TO
WHETHER I WOULD FORMALLY BE ABLE TO APPRAISE THE SYSTEM.
Q
IN YOUR DOCUMENT ENTITLED OVERVIEW OF CABLE
SYSTEM OVERBUILDS, YOU START OUT BY MAKING SOME REFERENCES
TO VARIOUS STUDIES, WHICH I GUESS ARE AMONG THE THINGS YOU
LIST IN YOUR BIBLIOGRAPHY ATTACHED TO IT.
A YES.
Q YOU YOURSELF HAVE NEVER DONE SUCH A STUDY, HAVE
YOU?
A AGAIN, NOT A FORMAL STUDY. I'VE BEEN REQUESTED
IN A NUMBER OF ASSIGNMENTS TO LOOK AT THE POTENTIAL IMPACT
OF A SECOND FRANCHISE. MOSTLY IN THOSE SITUATIONS, AS I
INDICATED BEFORE, WERE WHERE THE CITY WAS UNHAPPY WITH A
PRESENT FRANCHISEE AND WANTED TO KNOW WHAT THEIR OPTIONS
WERE.
I HAVE NOT DONE A STUDY IN THE SENSE OF THE
DEPTH OF ANALYSIS THAT MOST OF THESE STUDIES INCLUDE. I WAS
ASKED AS ONE EXAMPLE, MY ANSWERS IN HILLSBOROUGH COUNTY.

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ONE OF THE TASKS I HAD WAS TO TRY TO ASSESS WHAT THE IMPACT
WOULD BE OF A THIRD COMPANY COMING IN AND POSSIBLY
OVERBUILDING SOME OF THOSE AREAS. SO I DID HAVE TO RESPOND
TO THAT.
Q DO YOU THINK IT'S POSSIBLE THAT A THIRD COMPANY
WOULD OVERBUILD AN AREA WHICH WAS ALREADY OVERBUILT BY TWO
COMPANIES?
A NOT AS A GENERAL RULE. AS A GENERAL RULE, IF
IT'S ECONOMICALLY BAD FOR TWO -- AND THAT'S MY POSITION
IT'S ECONOMICALLY WORSE FOR THREE. BUT AS PART OF AN
OVERALL STRATEGY, SOME SELECTIVE OVERBUILDING MIGHT BE
POSSIBLE. I WOULD NOT EXPECT COMPANY 3 TO COME IN AND START
OVERBUILDING WILLFULLY THROUGHOUT A COUNTY OR A CITY. BUT
THEY MIGHT FOCUS ON AN AREA THAT'S NEWLY DEVELOPING WITH NEW
HOMES AND ESTABLISH A BASE OF SUBSCRIBERS THAT THEY SERVE
EXCLUSIVELY. THEN THEY MIGHT EXPAND OUT FROM THAT BASE.
AND OVERBUILDING IN AN AREA WHERE THERE POSSIBLY MIGHT BE
TWO OTHERS IF THEY FELT THEY COULD DRIVE ONE OR THE OTHER OF
THOSE TWO OUT.
Q WHAT YOU'VE SET FORTH HERE IN YOUR OVERVIEW IS
IN ESSENCE A REVIEW OF THE LITERATURE THAT YOU WERE AWARE OF
ON CABLE TELEVISION OVERBUILDS; CORRECT?
A TO A GREAT EXTENT, YES.
Q AND YOU AREN'T PURPORTING TO TESTIFY AS TO THE
ACCURACY OF THE CONTENTS OF ALL OF THOSE LITERATURE STUDIES
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THAT YOU REVIEWED, WERE YOU?
A IF YOU'RE TALKING ABOUT SPECIFIC DETAILS OF A
SPECIFIC STUDY THAT TALKS ABOUT ONE PARTICULAR LOCALE AND
WHAT HAPPENED THERE, THE ANSWER TO YOUR QUESTION IS NO. BUT
WHAT I AM PREPARED TO TESTIFY ABOUT IS THE FACT THAT ALMOST
ALL OF THE STUDIES, WHEN YOU REVIEW THEM, COME TO BASICALLY
THE SAME CONCLUSIONS. AND THEY COME TO THE SAME CONCLUSIONS
BECAUSE OF THE SAME REASONS. AND THOSE CONCLUSIONS CONFIRM
MY OWN EXPERIENCE IN THE FIELD.
SO WHETHER I HAVE DONE AN OVERBUILD STUDY
DIRECTLY OR NOT, I THINK IS NOT TOO RELEVANT WHEN YOU LOOK
AT THE NUMBER OF STUDIES THAT ARE THERE AND WHEN BASICALLY
THEY ALL SAY THE SAME THING. j ~ N D STUDIES ARE CONDUCTED, FOR
THE MOST PART, BY PEOPLE WHO ARE COMPETENT TO DO THOSE
STUDIES.
Q WELL, WHETHER THEY ARE COMPETENT OR NOT
COMPETENT IS SOMETHING WHICH PRESUMABLY APPEARS FROM THE
FACE OF THE STUDY, DOES IT NOT?
A I THINK THAT'S CORRECT. ALL I'M SAYING IS THAT
IF THE RESULTS OF THE STUDIES WERE 50-50, IF BASICALLY SOME
SAID OVERBUILDS ARE GREAT AND SOME SAID OVERBUILDS ARE
TERRIBLE, THERE WOULD BE MORE OF A BASIS FOR ARGUMENT.
BUT IF YOU LOOK AT THOSE -- AND I DON'T THINK
I'VE OMITTED ANY SIGNIFICANT ONES THAT I'M AWARE OF -- IF
YOU LOOK AT THOSE, THEY'LL ALL PRETTY MUCH SAY THE SAME
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THING.
Q
YOU SAY HERE IN THE THIRD PARAGRAPH OF YOUR
STUDY, -IT SHOULD BE NOTED THAT SOME OF THE STUDIES WERE
COMMISSIONED BY PARTIES WHO HAD A DIRECT STAKE IN THE
OVERBUILD, SUCH AS EXISTING CABLE OPERATORS, AND THEREFORE
COULD HARDLY CLAIM TO BE UNBIASED.
A YES.
MR. BRAMSON: DO WE HAVE AN EXTRA COPY?
THE WITNESS: I THINK I REMEMBER THAT ONE PRETTY
WELL.
BY MR. BRAMSON:
Q WELL, I 'M GOING TO ASK YOU SOME OTHER
QUESTIONS. THE IDEA IS NOT TO BE A MEMORY TEST.
COULD YOU EXPLAIN WHAT YOU MEANT WHEN YOU WROTE
THAT?
A WELL, AS A TYPICAL EXAMPLE OF THAT,. LET ME
REFER YOU TO FIGURE 1A THAT FOl.LOWS A LITTLE BIT LATER.
IT'S THE FIRST OF THESE HORIZONTAL FIGURES.
THIS IS THE DOW, l.OHNES & ALBERTSON REPORT ON
WILMETTE, ILLINOIS. IT WAS DONE IN 1979. DOW, LOHNES &
ALBERTSON, AS YOU MAY KNOW, IS A LAW FIRM. AND IF YOU
NOTICE ON THE SECOND PAGE, THE PAGE FOLLOWING THAT, THE LAST
COMMENT I MAKE IS, -IT SHOULD BE NOTED THAT DOW, LOHNES &
ALBERTSON IS A LAW FIRM WHICH HAS A NUMBER OF CABLE SYSTEM
CLIENTS, WHO MIGHT BE AFFECTED ADVERSELY BY AN OVERBUILD
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SITUATION, AND REPRESENTED THE FRANCHISEE IN WILMETTE.ft
SO OBVIOUSLY THAT WAS A CASE WHERE THE LAW FIRM
REPRESENTS AN EXISTING CABLE COMPANY. AS A THREAT OF
ANOTHER CABLE COMPANY COMING IN, THEY COMMISSIONED A STUDY,
AND THEIR EXPECTATION IS THAT THAT STUDY WILL SHOW
OVERBUILDING WILL BE TERRIBLE IN THAT SENSE, BECAUSE IF IT
WEREN'T, THAT STUDY WOULD NEVER BE PUBLISHED.
SO THAT'S WHAT I MEANT BY EXAMPLES OF STUDIES
THAT WERE COMMISSIONED BY ENTITIES THAT OBVIOUSLY HAD A
PREDETERMINED GOAL IN MIND. BUT THAT FACT DOESN'T
NECESSARILY MAKE THE STUDY INVALID.
Q WHY NOT?
A IT DEPENDS ON WHETHER IT AGREES WITH THEIR
STUDIES THAT ARE MORE UNBIASED. IF IT WERE A UNIQUE CASE
AND DIFFERED FROM THE OTHER STUDIES SIGNIFICANTLY, AND YOU
THEN HAD TO LOOK AT WHO WAS COMMISSIONING THE STUDY AND WHAT
THEIR REASONS FOR IT WERE, I THINK YOU MIGHT BE ABLE TO
LEGITIMATELY FIND FAULT WITH IT.
WHAT IF THAT STUDY IS ONE OF TWENTY AND ALL
TWENTY SAY THE SAME THING, AND MANY OF THE OTHERS ARE
CONDUCTED BY PEOPLE OR FIRMS THAT PRESUMABLY ARE LESS
BIASED. I WOULD SEE NO REASON TO SAY THAT THAT STUDY IS
INVALID.
Q WHAT YOU'RE REALLY SAYING IS IT DOESN'T ADD
ANYTHING ONE WAY OR THE OTHER, BECAUSE IF IT DIFFERS FROM
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THE OTHER STUDIES, YOU SUSPECT ITS RELIABILITY. AND IF IT
DOESN'T, IT DIDN'T.
A WHAT I'M POINTING OUT IS WHEN YOU LOOK AT A
STUDY, YOU HAVE TO LOOK AT WHAT STUDIES SAY AND WHO
COMMISSIONED THEM. IF YOU DO THAT AND STILL FEEL THE STUDY
IS VALID, FINE. INCLUDE IT. IF YOU FEEL THAT IT
INVALIDATES THE RESULTS, THEN AT LEAST BE AWARE OF THAT.
Q
THAT'S WHAT YOU DID?
A I MADE THE NOTE TO POINT OUT THAT THIS MAY NOT
BE AN UNBIASED SOURCE. THAT'S ALL.
Q
MR. PILNICK, HOW MANY OVERBUILDS WOULD YOU
ESTIMATE THERE HAVE BEEN SINCE THE CABLE TELEVISION INDUSTRY
BEGAN?
MS. HOLBROOKE: SINCE THE BEGINNING OF TIME?
THE WITNESS: CAN I ASK YOU TO JUST CLARIFY THE
QUESTION IN TERMS OF DO YOU MEAN HOW MANY HAVE STARTED THAT
MAY OR MAY NOT HAVE LASTED, OR DO YOU MEAN HOW MANY HAVE
LASTED FOR ANY SIGNIFICANT LENGTH OF TIME?
BY MR. BRAMSON:
Q I MEAN ALL-INCLUSIVE.
A THE STUDIES THAT ARE INCLUDED IN THIS OVERVIEW
INDICATE THAT PROBABLY SOMEWHERE IN THE NEIGHBORHOOD OF A
HUNDRED OVERBUILDS. AT LEAST THAT HAVE BEEN RECORDED. BY
THAT I DON'T MEAN TO SAY THOSE WERE THE ONLY ONES THAT
OCCURRED. BUT THE ONLY ONES THAT SOMEONE TOOK THE TIME TO
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CATALOG, LIST AND COMMENT ON.
OF THOSE 100, PROBABLY 90 OR SO, SOMEWHERE IN
THAT AREA BECAME NONOVERBUILDS THROUGH ONE REASON OR
ANOTHER. PERHAPS A LITTLE LESS THAN THAT. MAYBE 80. THERE
MIGHT BE ANYWHERE FROM 12 TO 20 OVERBUILDS EXISTING NOW.
Q CAN YOU NAME A SINGLE ONE OF THOSE 100 OR SO
THAT YOU KNOW FOR A FACT ARE EITHER NOT CONTINUING
OVERBUILDS OR RESULTED IN ONE COMPANY BUYING OUT THE OTHER
ONE OR ANOTHER COMPANY COMING IN AND BUYING BOTH? IS THERE
ANYTHING LEFT OTHER THAN THOSE POSSIBILITIES?
A I'M A LITTLE CONFUSED.
Q IT'S TRUE, ISN'T IT, THAT EVERY OVERBUILD THAT
YOU KNOW ABOUT HAS RESULTED IN ONE OF THREE SITUATIONS:
EITHER STILL AN OVERBUILD, OR ONE COMPANY BOUGHT THE OTHER
COMPANY OUT, OR ANOTHER COMPANY CAME IN AND BOUGHT BOTH
COMPANIES?
A NO. THERE'S A FOURTH POSSIBILITY, WHERE ONE
COMPANY SIMPLY ABANDONED THE FIELD WITHOUT BEING BOUGHT OUT
NECESSARILY.
Q HOW MANY INSTANCES OF THAT ARE YOU AWARE OF?
A MOST OF THE INSTANCES THAT I'M AWARE OF, ALMOST
ALL I CAN THINK OF NOW ARE WHERE ONE COMPANY BOUGHT THE
OTHER ONE OUT. I CAN'T RECALL OFFHAND ANY CASES WHERE
ANOTHER COMPANY CAME IN AND BOUGHT BOTH OF THEM. THAT MAY
HAVE HAPPENED AT SOME LATER TIME. BUT GENERALLY NOT DURING
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THE COMPETITIVE OVERBUILD PERIOD. I'M AWARE OF A NUMBER OF
CASES WHERE ONE COMPANY BOUGHT THE OTHER ONE OUT.
Q MY QUESTION TO YOU IS: ARE YOU AWARE OF ANY
CASES WHERE ONE COMPANY SIMPLY GAVE UP THE SHIP, ABANDONED
ITS STUFF AND LEFT?
A A FEW CASES LIKE THAT, YES.
Q WHERE?
A FRESNO, FOR EXAMPLE. A NUMBER OF YEARS AGO
THERE WAS AN OVERBUILD THAT WAS STARTED WITH BOTH COMPANIES
PROCEEDING FROM OPPOSITE ENDS OF THE CITY. AND ONE COMPANY,
IN A VERY SHORT TIME AFTER THE OVERBUILD STARTED, SIMPLY
STOPPED, RELINQUISHED THEIR FRANCHISE. THEY DECIDED IT
WOULD NOT BE TO THEIR ADVANTAGE TO CONTINUE. IT'S NOT A
VERY BIG COMMUNITY, BUT IT WAS AN EXAMPLE OF THE TYPE YOU
MENTIONED.
Q
ANY OTHERS?
A NOTHING COMES TO MIND RIGHT NOW. BUT I'M SURE
THAT THERE PROBABLY HAVE BEEN SEVERAL IN THAT CATEGORY
GENERALLY IN THE SMALLER COMMUNITIES WHERE THE
AMOUNT OF DOLLARS INVOLVED IS NOT SO GREAT THAT IT'S SIMPLY
IMPOSSIBLE FOR A COMPANY TO WALK AWAY FROM IT. IN THE
LARGER COMMUNITIES THAT I 'M FAMILIAR WITH IN ALMOST EVERY
CASE, IT'S BEEN A BUY-OUT.
Q
AT ANY RATE, WHETHER OR NOT IT EVER HAPPENED,
YOU COULDN'T IDENTIFY ANY OTHER SPECIFIC TIMES THAT A
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COMPANY ABANDONED THEIR SYSTEM OTHER THAN FRESNO?
A NOT AT THIS POINT. WHAT I WAS REFERRING TO, IF
YOU LOOK AT APPENDIX C IN THE TOUCHE ROSS REPORT, THERE'S A
LIST THAT THEY'VE COMPILED OF CATEGORIES OF OVERBUILDS OF
THOSE EXISTING MORE THAN THREE YEARS, EXISTING LESS THAN
THREE YEARS, AND THOSE PURCHASED OR MERGED SO THAT ONLY A
SINGLE OPERATOR REMAINS. AND IT LISTS JURISDICTIONS WHICH
OVERBUILDS WERE AUTHORIZED BUT DID NOT MATERIALIZE. SO
THINK THERE ARE A NUMBER OF CATEGORIES THERE. I CAN'T
VERIFY THE ACCURACY THAT IS IN FIGURE I(J), AND IT IS THE
APPENDIX TO THAT.
Q
YOU DON'T KNOW WHETHER ALL THOSE ARE ACCURATE
OR NOT?
A I PRESUME THAT SINCE TOUCHE ROSS CLAIMS TO HAVE
INVESTIGATED THEM, THEY'RE REASONABLY ACCURATE. BUT I CAN'T
TESTIFY DIRECTLY.
Q IN FACT, IF ONE LOOKS AT THE CATEGORIES IN
I(J), ONE FINDS THERE IS NO CATEGORY FOR A SYSTEM FOR
OVERBUILDS WHERE ONE COMPANY OR THE OTHER ABANDONED THE
SYSTEM, IS THERE?
A IT DOES HAPPEN RARELY, BUT I'M FAMILIAR WITH AT
LEAST THAT ONE CASE. AND I RECOLLECT KNOWING OF A FEW MORE.
BUT I DON'T REMEMBER THE EXA,CT NAMES RIGHT NOW. MY
IMPRESSION IS THAT THEY WERE Ve:RY SMALL COMMUNITIES.
Q WHAT YEAR OR YEARS WAS THE FRESNO SITUATION
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THAT YOU'RE AWARE OF?
A PROBABLY 10 YEARS AGO OR MORE. 10, 12 YEARS
AGO.
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Q NOW, DO YOU NOTICE THAT FRESNO IS NOT MENTIONED
IN FIGURE l(J)?
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A I NOTICE THAT IT'S NOT MENTIONED, YES.
Q DO YOU HAVE ANY EXPLANATION FOR THAT?
.{
A NO, I DON'T. IT IS NOT AN OVERBUILD SITUATION
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NOW. SO ANYONE WHO IS NOT FAMILIAR WITH WHAT HAPPENED 10 OR
12 YEARS AGO PROBABLY WOULD NOT BE ABLE TO INCLUDE IT.
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SO PRESUMABLY WHAir WE KNOW ABOUT AT LEAST ONE
OVERBUILD SITUATION WAS NOT INCLUDED IN THE TOUCHE ROSS
LIST?
A I'M SURE THERE ARE MORE.
Q
DO YOU KNOW OF ANY OTHERS SPECIFICALLY?
A IN READING THE REPORT, MY IMPRESSION WAS THAT
THEY HAD COVERED THE OVERBUILDS THAT I WAS FAMILIAR WITH.
BUT AGAIN, THERE ARE MANY SMALL COMMUNITIES WHERE THINGS DO
HAPPEN THAT DON'T GET REPORTED. I THINK THEY HAVE ANYTHING
OF ANY REASONABLE SIZE.
Q OUT OF THE 100 OR SO OVERBUILDS, ARE YOU AWARE
OF ANYWHERE THAT BOTH COMPANIES WENT OUT OF BUSINESS AND
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THEFtE WAS NO CABLE SERVICE AVAILABLE?
A NO.
2S Q IT IS YOUR OBSERVATION, IS IT NOT, THAT RATES
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TO SUBSCRIBERS TEND TO BE LOWER WHERE COMPETITION IS
OCCURRING IN THE CABLE TELEVISION INDUSTRY?
A FOR THE PERIOD THAT THE OVERBUILD EXISTS, YES.
Q
THERE ISN'T ANY EVIDENCE THAT IF THERE'S
COMPETITION FOR A WHILE AND THEN IT CEASES, THAT THE RATES
ARE HIGHER THAN THEY WOULD OTHERWISE HAVE BEEN IF THERE HAD
BEEN NO COMPETITION?
A THERE IS SOME EVIDENCE IN SOME OF THE STUDIES
THAr INDICATES THAT. HOWEVER, I THINK THAT THAT IS MADE
MOOT BY THE DEREGULATION OF RATES. THE RATES IN MOST CABLE
COMMUNITIES NOW ARE WHAT THE TRAFFIC WILL BEAR. AND I DON'T
THINK IT HAS ANYTHING DIRECTLY OR INDIRECTLY RELATED TO
WHATEVER THE PAST HISTORY HAS BEEN.
Q WELL, THERE WAS DEREGULATION IN CALIFORNIA FOR
SEVERAL YEARS BEFORE THE FEDERAL CABLE BILL PASSED.
A CERTAIN CONDITIONS WERE MET, YES.
Q AND VIRTUALLY ALL OF THE TELEVISION CABLE
OPERATORS OPERATING WITHIN THE CITY OF LOS ANGELES WERE
DEREGULATED WELL BEFORE 1987, WERE THEY NOT?
A YES.
Q IN FACT, ALL OF THEM WERE DEREGULATED BY 1983,
WEREN'T THEY?
A I'M NOT SURE OF THE EXACT DATE.
Q IS IT YOUR OPINION THAT A CABLE TELEVISION
SYSTEM WITH THE CAPACITY OF 52 CHANNELS IS CAPABLE OF
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CARRYING ALL OF THE PROGRAMMING WHICH IS OF SIGNIFICANT
INTEREST TO CONSUMERS?
A AT THE PRESENT DATE, YES.
Q WOULD YOU DESCRIBE FOR ME WHAT YOU PERCEIVE TO
BE THE NEGATIVE CONSIDERATIONS FLOWING FROM A MUNICIPALITY
ISSUING MORE THAN ONE FRANCHISE?
A NEGATIVE IMPLICATIONS TO SUBSCRIBERS, TO THE
CITY, TO THE fRANCHISE TERRITORY OR ANY COMBINATION Of ALL
Of THOSE; IS THAT THE
Q ANY COMBINATION BUT EXCLUDING THE IMPACTS UPON
ONE OR THE OTHER OR BOTH Of THE CABLE OPERATORS.
A I THINK ONE NEGATIVE IMPACT, OBVIOUSLY, IS IN
THE CONSTRUCTION AND RIGHT-Of-WAY AREA. If TWO COMPANIES
ACTUALLY DO BUILD, THEN YOU HAVE THE QUESTION THAT WE
DISCUSSED BEfORE Of WHETHER THEY ARE GOING TO ATTEMPT TO
BUILD SIMULTANEOUSLY OR WHETHER THEY WILL BUILD
SEQUENTIALLY. IN EITHER CASE, YOU HAVE A CONSIDERABLE
AMOUNT Of DISRUPTION TO THE COMMUNITY IN TERMS OF THE
RIGHTS-Of-WAY AND IN TERMS Of THE SUBSCRIBERS THAT MIGHT BE
AffECTED, AND CERTAINLY THE RESIDENTS IN THESE AREAS.
IF THE BUILD IS SEQUENTIAL RATHER THAN
SIMULTANEOUS AND I THINK IN MOST CASES IT WOULD BE
THEN YOU HAVE, IN EffECT, TWO BUILDS THAT WILL HAVE TO GO
ON. SO WHATEVER THE PERIOD Cf TIME MIGHT BE, ONE YEAR, TWO
YEARS, THREE YEARS THAT IT WOUL.D ORDINARILY TAKE TO BUILD
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ONE CABLE SYSTEM IS GOING TO BE INCREASED SUBSTANTIALLY BY
2 THE FACT YOU'RE GOING TO HAVE TO DO THE PROCESS TWICE.

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THERE MIGHT BE A LOT OF NONPRODUCTIVE 3
CONSTRUCTION. IF ONE CABLE COMPANY PUTS ITS CABLE ON THE
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POLES FIRST AND A CERTAIN NUMBER OF THOSE POLES HAVE TO BE
f CHANGED OUT, REARRANGED, WHEN A SECOND CABLE COMPANY COMES
ALONG, IT IS VERY DIFFICULT TO SAY THAT THAT SECOND
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RESPECT TO SUBSCRIBERS OR THE COMMUNITY. WHAT IT'S DONE IS
ADD MORE COST WITHOUT THE SUBSCRIBERS NECESSARILY GETTING
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12 THERE IS THE PROBABILITY, AS I INDICATE IN MY
13 POSITION, A PROBABILITY THAT REGARDLESS OF HOW MANY
14 FRANCHISES THE CITY ISSUES THERE EVENTUALLY WILL BE ONLY ONE
CABLE COMPANY. SO THAT IT SEEMS LIKE AN AWFUL DISRUPTIVE
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17 TIME IF THE END RESULT IS GOING TO BE ONE. I DON'T QUITE
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SEE WHOSE GAIN IT IS EXCEPT PERHAPS THE CABLE COMPANY, THE
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SURVIVING CABLE COMPANY.
Q
YOU'RE MOVING OFF MY QUESTION.
I
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A NEGATIVE IMPACT. CONSTRUCTION IS ONE AREA OF
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NEGATIVE IMPACT. REGULATION TO THE EXTENT THAT ITIS
23 PERMISSIBLE BY LAW GETS MUCH MORE DIFFICULT WITH TWO CABLE
24 COMPANIES.
ONE OF OUR TEMPORARY BENEFITS MIGHT COME IN
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TERMS Of PRICE REDUCTIONS OR RATE WARS. PROBABLY IT'S GOING
TO BE COUNTERBALANCED BY THE END Of A MARKET PRICE IN
THE LONG RUN. THE DIffICULTY IN COORDINATING SUCH THINGS AS
ACCESS AND LOCAL PROGRAMMING WITH TWO COMPANIES, THE
QUESTION OF HOW A CITY MIGHT WANT TO USE A PARTICULAR
CHANNEL, FOR EXAMPLE, OR THE SCHOOLS MIGHT WANT TO USE
EDUCATIONAL CHANNELS BECOMES MUCH MORE COMPLICATED.
IN ORDER TO GET ACCESS PROGRAM TO ALL
MEMBERS Of THE COMMUNITY, IT'S NOW NECESSARY TO CONSIDER
SUCH THINGS AS INTERCONNECTION Of THE CABLE SYSTEMS THAT DO
EXIST. THAT'S SOMETHING THAT LOS ANGELES IS STRUGGLING WITH
RIG ...'T NOW.
THERE'S A NEGATIVE IMPACT, I THINK, OBVIOUSLY,
TO THE CABLE COMPANIES THAT ARE INVOLVED, EVEN THOUGH THAT
MAY OR MAY NOT BE THE CITY'S CONCERN. I THINK THE IMPACT
WILL BE NEGATIVE fOR BOTH OF THE COMPANIES INVOLVED.
Q LEAVING ASIDE -
A POSSIBLE SATURATION Of THE RIGHTS-Of-WAY. WE
TALKED ABOUT THE POLES, fOR EXAMPLE, AND I THINK WE CAME TO
THE CONCLUSION THAT IT'S TECHNICALLY POSSIBLE TO ADD CABLES
TO POLES, AND MAYBE TECHNICALLY TO ADD CABLES UNDERGROUND.
BUT THE COST Of EACH SEQUENCE THAT YOU GO THROUGH GOES UP
AND GOES UP SUBSTANTIALLY. SO THAT IF A CITY, FOR EXAMPLE,
WERE TO NEED MORE SPACE IN ITS RIGHTS-OF-WAY FOR FUTURE CITY
UTILITIES OF ONE KIND OR ANOTHER, THEN IT WILL COST THE CITY
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IN THE FUTURE A LOT IF TWO OR THREE CABLE COMPANIES
HAVE ALREADY OCCUPIE) SOME OF THE RIGHTS-Of-WAY THAN IT
WOULD IF ONE CABLE COMPANY WERE OCCUPYING THE RIGHT-OF-WAY.
YOU'VE GOT A DEPLETION FACTOR IN THERE THAT'S
ALMOST LIKE AN OIL ALLOWANCE. YOU'RE USING UP
RESOURCES THAT SOME20DY'S GOING TO HAVE TO EXPAND IN THE
FUTURE, AND GENERALLY THE CITY WILL HAVE TO DO THAT AT A
VERY HIGH COST.
Q I TAKE IT YOU'RE NOT EXPRESSING A LEGAL OPINION
ABOUT WHO WOULD HAVE TO BEAR THE COST IF THAT HAPPENED?
A NO. BUT I'M EXPRESSING AN OPINION THAT HAS
BEEN PASSED ON TO ME BY MANY CITY AND COUNTY REPRESENTATIVES
WHEN THEY WERE FACED WITH THE QUESTION OF WHAT THEY WOULD
HAVE TO DO IN ORDER TO GET MORE EASEMENT SPACE IF THE
EASEMENT SPACE BECAME SATURATED. I DON'T THINK ANYONE CAME
UP WITH A DEFINITE ANSWER AS TO WHO WOULD BE RESPONSIBLE FOR
A SHARE OF THE COST.
I WILL SAY SOME COMMUNITIES ARE CONSIDERING
RIGHT NOW THE IMPOSITION OF A USAGE FEE, POTENTIAL USAGE
FEE. NONE OF THEM HAVE DONE IT TO MY KNOWLEDGE. BUT IT'S
LIKE PARKING SPACES. YOU'RE GOING TO NEED MORE, AND THE
QUESTION IS: WHO WILL PAY FOR THEM WHEN YOU NEED IT?
Q ALL I WAS SAYING IS WERE YOU EXPRESSING A LEGAL
OPINION ABOUT THE CITIES BEING RESPONSIBLE FOR PAYING THAT
COST?
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A IN ANYTHING I SAY IN THIS DEPOSITION, I AM NOT
EXPRESSING A LEGAL OPINION.
Q ALL RIGHT. LEAVING ASIDE WHAT YOU HAVE
TESTIFIED AS A POSSIBLE ADVERSE EFFECT UPON CABLE COMPANIES,
YOU NAMED FOUR THINGS: ONE, THE DISRUPTION TO
RIGHTS-OF-WAY; TWO, ADDED DIFfICULTY IN REGULATION; THREE,
DIfFICULTY IN COORDINATING USE OF ACCESS CHANNELS; AND FOUR,
THE FILLING UP OR LOSS OF SOME EXCESS SPACE IN THE
RIGHTS-Of-WAY.
IS THAT CORRECT?
A I THINK SO.
Q
EACH Of THOSE FOUR THINGS APPLIES EQUALLY
WHETHER OR NOT CABLE TELEVISION IS OR IS NOT A NATURAL
MONOPOLY OR WHETHER COMPETITION IS OR IS NOT ECONOMICALLY
FEASIBLE; RIGHT?
A I THINK ALL THAT I HAVE RESPONDED TO IS WHAT
MIGHT HAPPEN ADVERSELY IF MORE THAN ONE SET Of CABLES WERE
INSTALLED IN THE COMMUNITY. AND IT HAS NOTHING TO DO WITH
THE QUESTION Of IS IT A NATURAL MONOPOLY OR WHETHER ONE OR
MORE OF THE CABLE COMPANIES ARE GOING TO EVENTUALLY GO
BANKRUPT. NO DIRECT RELATION TO THAT.
Q
I UNDERSTAND THAT. WHAT 11M TRYING TO CLARIfY
IS: ISN'T IT TRUE THAT EACH OF THESE NEGATIVE IMPACTS THAT
YOU'VE IDENTIfIED YOU WOULD ALSO IDENTIfY EVEN IN AN AREA
WHERE YOU WERE ABSOLUTELY CONVINCED THAT COMPETITION BETWEEN
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CABLE TELEVISION WAS FEASIBLE AND WOULD AND COULD
CONTINUE INDEFINITELY?
A I THINK THE DIFFERENCE IS ONE OF DEGREE. I
THINK THAT IN ORDER TO HAVE AN OVERBUILD SITUATION OR A
COMPETITIVE SITUATION CONTINUE INDEFINITELY, CERTAIN FACTORS
HAVE TO BE PRESENT. SOME OF THESE STUDIES NOTE THAT.
ONE OF THE FACTORS IS OBVIOUSLY HIGH ENOUGH
TOT.AL PENETRATION SO THAT EACH ONE COULD EXIST. ALL I'M
POINTING OUT IS I THINK HAVING TWO CABLE COMPANIES IN THE
EXCEPTIONAL AREA WHERE AN OVERBUILD MIGHT CONTINUE
INDEFINITELY IN ONE OF THOSE DOZEN OR SO AREAS LISTED HERE
IS DIFFERENT IN DEGREE IN THE SENSE THAT SOME FACTORS ARE
PRESENT WHICH ALLOW THE COMPANIES TO ECONOMICALLY SURVIVE.
I THINK THE SAME PROBLEMS ARE THERE.
Q I THINK WE'RE GETTING AHEAD OF OURSELVES.
A MAYBE I DIDN'T UNDERSTAND THE QUESTION.
Q I'M NOT TRYING TO HAVE YOU SUMMARIZE YOUR WHOLE
TESTIMONY. I UNDERSTAND THOSE OTHER ISSUES. WHAT I'M
TR YI NG TO FOCUS ON NOW, I AS KEO YOU TO I DENT I FY WHAT IN YOUR
OPINION WERE THE NEGATIVE IMPACTS FROM ISSUING MORE THAN ONE
FRANCHISE. YOU GAVE ME A LIST OF FOUR.
A YES.
Q I'M TRYING TO CLARIFY THAT IT'S TRUE THAT EACH
OF THOSE FOUR IMPACTS EXISTS IN AND APPLIES EQUALLY WHETHER
OR NOT THE COMPETITIVE SITUATION, THE ECONOMIC SITUATION IS
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SUCH THAT COMPETITION WILL OCCUR, CONTINUE INDEFINITELY OR
IT WILL CEASE AFTER SOME PERIOD OF TIME.
A THAT'S TRUE.
Q YOU MENTIONED IN YOUR STUDY THAT THESE NEGATIVE
IMPACTS CAN BE OR THE EXTENT OF THE IMPACTS IS DEPENDENT
UPON THE ftDEGREE OF REGULATION AND COORDINATION EXERCISED BY
THE FRANCHISING AUTHORITY.
A YES.
Q WHA T DO YOU MEAN EI Y THA T1
A IF YOU TAKE ONE OF THE EXAMPLES OF THE FOUR
THAT I GAVE YOU, THE ABILITY TO HAVE LOCAL PROGRAMMING SUCH
AS CITY PROGRAMMING SEEN ON ALL CABLE SYSTEMS AT THE SAME
TIME, IF ONE OF THESE THINGS T t ~ T THE CITY DOES IN GRANTING
MORE THAN ONE FRANCHISE IS TO REQUIRE INTERCONNECTION OF THE
CABLE SYSTEMS, THEN THAT MIGHT ALLEVIATE THE PROBLEM OF
GETTING, LET'S SAY, A PROGRAM OF THE CITY COUNCIL OUT TO
EVERYONE AT THE SAME TIME. IF IT DOES NOT REQUIRE
INTERCONNECTION AND DOES NOT MAKE SURE IT HAPPENS, THEN IT'S
VERY LIKELY YOU'LL NEVER GET THE ABILITY TO HAVE CITY-WIDE
PROGRAMMING.
THAT'S A VERY SIMPLE EXAMPLE OF WHAT I MEANT BY
PROPER MANAGING AND COORDINATION, REGULATION. IT IS
POSSIBLE TO AMELIORATE SOME OF THOSE NEGATIVE IMPACTS THAT
WE TALKED ABOUT.
Q IN FACT, IT'S POSSIBLE TO AMELIORATE ALL OR
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VIRTUALLY ALL OF THEM BY CAREFUL REGULATION?
A NO, I DON'T AGREE WITH THAT. THE CONSTRUCTION
DISRUPTION IS ALMOST IMPOSSIBLE TO REGULATE AWAY. I THINK,
AS I INDICATED BEFORE, YOU COULD SET UP A THEORETICAL MODEL
THAT SAID IF EVERYONE GETS ON THE SAME POLES AT THE SAME
TIME, THEN IT WORKS OUT VERY SMOOTHLY. I JUST DON'T THINK
ON A PRACTICAL BASIS THAT CAN BE DONE
Q IF THE TWO COMPANIES COULD PUT UP THEIR CABLES
ON THE SAME POLE AT THE SAME TIME, THAT WOULD GREATLY REDUCE
ANY DISRUPTION TO THE FROM THE CONSTRUCTION,
WOULDN'T IT?
A YOU'RE POSING A HYPOTHETICAL WHICH I DON'T
THINK WILL HAPPEN. IT'S VERY SIMILAR, I THINK, TO SAYING
WHAT WOULD HAPPEN IF YOU ALLOW THE TELEPHONE COMPANY TO
BUILD A CABLE SYSTEM AND LEASE IT TO THE CABLE COMPANIES.
THEORETICALLY THAT WOULD SMOOTH THE CONSTRUCTION PROCESS.
BUT I THINK THERE ARE A LOT OF OBSTACLES IN THE WAY OF THAT.
I'M SAYING THE SAME THING WITH RESPECT TO YOUR
QUESTION. I HATE TO GIVE YOU AN ANSWER TO A QUESTION THAT I
THINK WOULD PRACTICALLY NEVER HAPPEN IN THE REAL WORLD.
Q THE REASON YOU THINK IT WOULD NEVER HAPPEN IS
YOU'VE NEVER SEEN IT HAPPEN?
A WELL, IT'S ALSO APART FROM THE FACT I'VE NEVER
SEEN IT HAPPEN. IT MAKES AN ASSUMPTION THAT I SIMPLY CAN'T
AGREE WITH. IT MAKES AN ASSUMPTION THAT COMPETITORS, LIKE
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TWO CABLE COMPANIES COMPETING FOR THE SAME SUBSCRIBERS ARE
GOING TO BE COOPERATIVE ENOUGH TO SIT DOWN AND WORK OUT A
PROGRAM THAT MAY HELP THE COMPETITION AS MUCH AS IT WILL
HELP THEM. I SIMPLY DON'T THINK THAT THAT'S A PRACTICAL
QUESTION.
Q THEY CERTAINLY AREN'T GOING TO DO IT UNLESS
THEY'RE REQUIRED TO DO IT?
A CERTAINLY. AND I'M NOT SURE THE LOAD WOULD BE
ABLE TO REQUIRE THEM TO DO IT.
AGAIN, IT'S NOT A LOCAL OPINION. BUT I DON'T
KNOW ANYTHING IN ANY REGULATORY POWER THAT A LOCAL
GOVERNMENT MIGHT HAVE THAT CAN KNOCK THE HEADS TOGETHER OF
TWO COMPETING CABLE COMPANIES BOTH IN ORDER TO GET ON THE
SAME POLE AND AT THE SAME TIME. YOU'D HAVE TO TAKE INTO
ACCOUNT THE WAY THEY BUILD THEIR HEAD ENDS, AND THAT TAKES
INTO ACQUISITION OF PRIVATE PROPERTY AND A LOT OF THINGS THE
REGULATING AGENCY CAN'T CONTROL.
Q
IN FACT, IN CALIFORNIA, ISN'T IT TRUE THAT
LOCAL GOVERNMENTS DO NOT CONTROL ANY ASPECT OF THE AERIAL
CONSTRUCTION OF A CABLE TELEVISION PLANT?
A IF YOU'RE SAYING IF THE P.U.C. AND UTILITIES
CONTROL IT, YES. THAT'S CORRECT. THE CITIES DO HAVE
SOMETHING TO SAY WITH RESPECT TO UNDERGROUND PLANTS. YOU
NEED PERMITS TO DIG UP THE GROUND, AND THOSE ARE LOCAL
PROCESSES. THERE IS A DIFFERENCE BETWEEN AERIAL AND
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UNDERGROUND CONSTRUCTION.
Q AS FAR AS THE NEGATIVE IMPACT ON THE CABLE
OPERATORS IS CONCERNED, WHICH YOU MENTIONED IN YOUR STUDY
AND YOU MENTIONED IN YOUR TESTIMONY, I THINK YOU ALSO
MENTIONED IN YOUR STUDY THAT -- WELL, YOU DON'T SPECIFICALLY
SAY IT. SO LET ME ASK YOU: ISN'T IT TRUE THAT COMPETITION
ALWAYS NEGATIVELY IMPACTS THE COMPETITORS AS COMPARED TO IF
NEITHER ONE OF THEM WERE IN A MONOPOLY SITUATION?
A SURELY.
Q
NOT JUST THE CABLE TELEVISION INDUSTRY?
A YES.
Q
TO PUT IT ANOTHER WAY, A BUTCHER WHO IS IN A
MONOPOLY SITUATION, IS THE ONLY BUTCHER IN TOWN IS GOING TO
BE NEGATIVELY IMPACTED IF ANOTHER BUTCHER COMES INTO TOWNi
RIGHT?
A RIGHT.
MS. HOLBROOKE: THAT'S NOT WHAT THEY SAY ABOUT
LAWYERS.
MR. BRAMSON: LAWYERS MAY BE THE EXCEPTION.
BY MR. BRAMSON:
Q THERE ISN'T ANYTHING DIFFERENT IN KIND OR
CHARACTER FROM THIS ASPECT OF THE CABLE TELEVISION INDUSTRY
AS OPPOSED TO MOST OTHER INDUSTRIES?
A I THINK THERE IS. I THINK THE COST OF ENTRY OF
THE SECOND COMPANY IS CONSIDERABLY DIFfERENT AND
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CONSIDERABLY GREATER IN MOST CASES
IN THE CASE YOU GAVE Of A SECOND BUTCHER COMING
INTO TOWN, I WOULD ASSUME THE COST Of OPENING A SECOND
BUTCHER SHOP WOULD NOT BE MUCH DIffERENT THAN OPENING THE
fIRST BUTCHER SHOP. If YOU WANT TO IMPOSE OTHER CONDITIONS
ON THAT SECOND BUTCHER AND SAY HE HAS TO BUILD HIS SECOND
BUTCHER SHOP ON TOP Of THE fIRST BUTCHER SHOP, I THINK
YOU'RE COMING CLOSER TO WHAT THE PARALLEL IS WITH CABLE.
HAVING TO USE THE SAME RIGHTS-Of-WAY, HAVING TO BE THE LAST
ENTRY ON THOSE RIGHTS-Of-WAY GENERALLY MAKES THE COST Of
ENTRY, THE COST Of CONSTRUCTION fOR THE SECOND COMPANY VERY
MUCH HIGHER.
AS A MATTER Of fACT, THAT'S THE MAIN REASON IN
MY OPINION YOU DON'T GET OVERBUILDING. IT'S NOT THE
TECHNICAL OR THE PHYSICAL PROBLEMS, IT'S SIMPLY THE COST TO
THE SECOND COMPANY COMING IN THAT MAKES IT AN UNATTRACTIVE
ECONOMIC VENTURE. AND THEY SIMPLY DON'T TRY.
Q THOSE COSTS, WHEN YOU SAY COSTS, YOU'RE
TALKING ABOUT MAKE-READY AND REARRANGEMENT COSTS?
A THE COST Of PHYSICALLY BUILDING THE PLANT AS
THE SECOND COMPANY COMING IN AND MARKETING AND OPERATIONAL
COSTS THAT COME IN If YOU HAVE TO PULL CUSTOMERS AWAY fROM A
COMPANY THAT'S ALREADY ESTABLISHED.
Q LET'S TALK ABOUT T t ~ T fOR A MINUTE. IT IS YOUR
OPINION, ISN'T IT, THAT WHEN IN THOSE SITUATIONS WHERE ONE
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139
COMPANY BUILDS ITS SYSTEM AND A SECOND COMPANY THEN BUILDS A
SYSTEM SUBSEQUENTLY AND ATTEMPTS TO COMPETE, THAT THAT
SECOND SYSTEM IS AT A SIGNIFICANT MARKETING AND OPERATIONAL
DISADVANTAGE COMPARED TO THE SITUATION THAT WOULD HAVE BEEN
IF BOTH COMPANIES HAD CONSTRUCTED SIMULTANEOUSLY; ISN'T THAT
TRUE?
A NORMALLY, YES. THERE MIGHT BE SOME EXCEPTIONS.
Q THOSE EXCEPTIONS WOULD BE IF THE FIRST COMPANY
HAD A NEGATIVE CONSUMER
A THAT'S ONE OF THE EXCEPTIONS. OR IF THE FIRST
CABLE PLANT WERE OBSOLETE, LIMITED IN CHANNEL
CAPACITY AND THE SECOND COMPANY COULD OFFER, LET'S SAY, MORE
OF A CHOICE OF SERVICES. THOSE WOULD BE THE EXCEPTIONS.
BUT ASSUME YOU'RE TALKING ABOUT ROUGHLY
EQUIVALENT CABLE PLANT AND SERVICES, THEN WHAT I SAID IS
TRUE.
Q HAVE YOU EVER HAD OCCASION TO ESTIMATE OR ARE
YOU INTENDING TO ESTIMATE IN THIS CASE THE AMOUNT OF
DISADVANTAGE THAT A SECOND COMPANY HAS COMING IN
SEQUENTIALLY AS OPPOSED TO SIMULTANEOUSLY?
A I HAVE NOT DONE THAT DIRECTLY. SOME OF THE
STUDIES, WHEN YOU LOOK THROUGH THOSE, ARE MORE DETAILED.
SOME OF THE STUDIES IN THAT LIS'r INDICATE THAT SOME
ECONOM I S TS WHO HAVE MADE THOSE I::STIMATES FEEL THERE IS
SOMEWHERE BETWEEN AN 18 TO 36 PERCENT -- THOSE ARE THE
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NUMBERS I REMEMBER -- ECONOMIC DISADVANTAGE TO THE SECOND
COMPANY IN MOST CASES. AND THAT'S IN THE CONSTRUCTION ONLY.
THIS DOES NOT GET INTO FURTHER ECONOMIC DISADVANTAGE WITH
RESPECT TO MARKETING AND HAVING TO WAIT A LONG PERIOD OF
TIME BEFORE YOU CAN ATTRACT A lOT OF CUSTOMERS.
BUT JUST THE COST OF CONSTRUCTING THE PLANT,
THOSE WERE THE NUMBERS AT LEAST ONE OF THOSE STUDIES
INDICATED.
Q LET ME ASK THE CORRELATIVE QUESTION: EXCLUDING
THE COST FACTOR AND JUST FOCUSING ON THE MARKETING FACTOR,
DO YOU HAVE AN OPINION ABOUT THE AMOUNT OF DISADVANTAGE FROM
SUBSEQUENT INSTALLATIONS AS OPPOSED TO SIMULTANEOUS?
A THAT'S DIFFICULT FOR ME TO ANSWER. I THINK IT
DEPENDS A GREAT DEAL ON CUSTOMER RELATIONS OF THE FIRST
COMPANY. IF THE FIRST COMPANY HAS BASICALLY PROVIDED VERY
POOR QUALITY SERVICE, HIGH RATES, AND HAVE IRRITATED THEIR
SUBSCRIBERS, ANOTHER COMPANY COMING IN MIGHT EXPECT TO GET A
REASONABLY HIGH PERCENTAGE OF THE TOTAL CUSTOMERS IN A
REASONABLY SHORT TIME. THERE HAVE BEEN A FEW CASES WHERE
THE FIRST COMPANY DID HAVE A POOR RECORD. AND THE THREAT OF
A SECOND COMPANY COMING IN FORCED THEM TO CUT THEIR PRICE OR
TO OFFER SOME INCENTIVES.
BUT AS I INDICATED, THAT'S GENERALLY TEMPORARY.
IF THE FIRST COMPANY IS DOING A FAIRLY GOOD JOB, WHAT
HAPPENS IN MOST CASES IS YOU NEVER EVEN GET A THREAT,
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BECAUSE A SECOND COMPANY THAT MIGHT BE INTERESTED KNOWS IT'S
FACING A VERY UPHILL BATTLE.
Q DO YOU HAVE AN O P I ~ I O N ABOUT THE AMOUNT OF
MARKETING, MARKETING DISADVANTAGE THERE IS IF IN FACT AN
OVERBUILD DOES OCCUR?
A I COULDN'T PUT A NUMBER ON IT.
Q DO YOU HAVE AN UNDERSTANDING OF WHAT THE TERM
"NATURAL MONOPOLY" MEANS?
A I HAVE AN UNDERSTANDING OF WHAT IT MEANS. I DO
NOT PRETEND TO BE A PROFESSIONAL ECONOMIST. I KNOW THAT
THERE ARE ECONOMISTS' DEFINITIONS OF -NATURAL MONOPOLY.
THERE PROBABLY ARE LEGAL DEFINITIONS OF IT, TOO. I HAVE A
DEFINITION THAT I MIGHT CALL MY OWN DEFINITION. AND I THINK
I CAN TELL YOU WHAT I MEAN BY THAT.
Q OKAY.
A TO ME A NATURAL MONOPOLY IS A BASE CATEGORY
WHERE THE ADVANTAGE OF THE FIRST ENTRY IN IS SO GREAT THAT
IT, ON A PRACTICAL BASIS, DISCOURAGES ADDITIONAL ENTRIES.
THERE ARE SOME OTHER CHARACTERISTICS SUCH AS IT
PRESUMABLY IS CHEAPER AND MORE EFFICIENT FOR ONE TO PROVIDE
THE SERVICES THAN FOR MORE THAN ONE TO PROVIDE A SERVICE.
BUT MY DEFINITION BASICALLY IS THAT ONCE ONE COMPANY HAS
BECOME REASONABLY WELL ESTABLISHED, THE PRACTICAL ODDS
AGAINST ANOTHER COMPANY COMPETING EFFECTIVELY ARE VERY, VERY
HIGHu HIGH ENOUGH SO IT DOESN'T HAPPEN VERY OfTEN. AND I
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THINK CABLE FITS THAT DEFINITION.
Q IN ALLENTOWN, PENNSYLVANIA, THERE'S AN
OVERBUILD THAT'S BEEN GOING ON FOR 20 YEARS, MORE THAN 20
YEARS. YOU ARE FAMILIAR WITH THAT SITUATION?
A YES.
Q IS IT YOUR OPINION THAT CABLE TELEVISION IN
ALLENTOWN, PENNSYLVANIA IS A NATURAL MONOPOLY, OR DO YOU
HAVE AN OPINION ON THAT?
A I THINK PARTS OF THAT SYSTEM ARE NATURAL
MONOPOLY AND PARTS ARE NOT. THE ONLY WAY I CAN EXPLAIN THAT
IS TO SAY THAT ALLENTOWN IS A SITUATION WHERE TWO COMPANIES
ARE COMPETING IN A CERTAIN AREA, BUT THEY ALSO HAVE A LARGE
BASE OF INDIVIDUAL SUBSCRIBERS IN AREAS THAT THEY SERVE
WITHOUT COMPETITION. AND I THINK THAT FACTOR IS POOR.
Q IS IT YOUR OPINION THAT THE TWO COMPANIES IN
ALLENTOWN, PENNSYLVANIA ARE LOSING MONEY IN THE PORTION OF
THEIR SYSTEMS THAT ARE OVERBUILT? ARE THEY LOSING MONEY OR
MAKING MONEY, OR DO YOU KNOW?
A I DON'T KNOW IF THEY ARE OR NOT. MY GUESS
MIGHT BE THAT THEY MAY NOT EVEN BE SURE, BECAUSE THEY MAY BE
MINGLING THE FINANCIAL RESULTS OF THE AREA THEY SERVE
WITHOUT COMPETITION WITH THE AREAS THEY SERVE WITH
COMPETITION. IT'S DIFFICULT IF YOU'RE TRYING TO ISOLATE THE
AREA WHERE THERE IS COMPETITION AGAINST THE OTHER AREAS.
THE QUESTION IS: HOW DO YOU ALLOCATE HEAD END
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143
EXPENSES? THE REAL QUESTION IS IF YOU TOOK THAT OVERBUILD
AREA AND SEGREGATED IT AND FORCED THE SAME TWO COMPANIES TO
OPERATE INDEPENDENT SYSTEMS ONLY WITHIN THAT AREA AND NOT IN
CONTIGUOUS AREAS WOULD THEY CONTINUE TO FIND IT ECONOMICAL
TO DO THAT? MY OPINION ON THAT IS THEY PROBABLY WOULD NOT.
Q
WHAT IS THE BASIS FOR THAT OPINION?
A I'VE TALKED -- I JUST ATTENDED A SEMINAR AT THE
END OF SEPTEMBER. THERE WAS A REPRESENTATIVE FROM ALLENTOWN
THERE, AND HE SPOKE ABOUT THE ALLENTOWN SITUATION. HE SAID
EVERYONE WAS HAPPY. BUT WHEN QUESTIONS WERE ASKED, THEN
WHAT CAME OUT AS A RESPONSE WAS THAT BOTH COMPANIES ARE
DOING VERY WELL IN THE AREAS THAT THEY SERVE INDEPENDENTLY.
SO TAKING THAT TOGETHER WITH SPECIFIC CHARACTERISTICS OF
ALLENTOWN, YOU HAVE A HIGH TOTAL PENETRATION. A HIGH TOTAL
PENETRATION FOR BOTH COMPANIES IS BETWEEN 80 AND 90 PERCENT.
SO IF YOU SPLIT THAT PERCENTAGE IN HALF, YOU HAVE REASONABLY
GOOD PERCENTAGES. COMBINING THAT WITH THE FACT THAT YOU
HAVE POOR OFF-THE-AIR RECEPTION SO THAT YOU HAVE VIRTUALLY
CAPTIVE REQUIREMENTS FOR WATCHING CABLE AND A REASONABLY
MID- TO HIGH-INCOME AREA LEVEL SO THAT PEOPLE CAN AFFORD
CABLE, ALL OF THE CHARACTERISTICS THAT ARE NECESSARY TO MAKE
OVERBUILDS EVEN MARGINALLY SUCCESSFUL ARE IN THAT AREA.
PLUS THE FACT THAT IT DID NOT START AS AN OVERBUILD. IT
STARTED AS TWO COMPANI ES WORKINI; FROM BOTH ENDS, AND THEY
CAME TO THE MIDDLE. THEY DECIDED THEY WANTED TO OVERBUILD
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IN THE MIDDLE, AND THEY'VE BEEN ABLE TO SURVIVE. THAT'S THE
EXCEPTION TO THE RULE, I THINK.
Q THE QUESTION IS: WHAT FACTS, IF ANY, DO YOU
HAVE TO SUPPORT THE OPINION THAT THE TWO CABLE TELEVISION
SYSTEMS COMPETING IN ALLENTOWN, IF ONE FOCUSES ONLY ON THE
OVERBUILD AREA, WOULD NOT BE PROFITABLE?
MS. HOLBROOKE: HE DIDN'T EXPRESS THAT OPINION.
THE WITNESS: WHAT I EXPRESSED WAS, A G A I N ~ AN OPINION
THAT IS GAINED FROM READING THE STUDIES THAT TALKED ABOUT
ALLENTOWN SPECIFICALLY, WHICH HAD SOME INFORMATION IN THEM.
AND FROM TALKING TO PEOPLE FROM THE ALLENTOWN AREA WHO WERE
FAMILIAR WITH THE CABLE SYSTEMS. AND MY CONCLUSIONS COME
FROM THAT
THEY ALSO COME FROM LOOKING AT OTHER OVERBUILD
SITUATIONS SIMILAR TO ALLENTOWN WHERE, AGAIN, THERE WAS A
LARGE BASE OF SUBSCRIBERS FOR EACH COMPANY WHERE THERE WAS
NO COMPETITION.
IF YOU LOOK AT THE STUDY SUCH AS THE SAM BOOK
STUDY, HE LOOKS AT THE LISTS OF CONDITIONS FOR SUCCESSFUL
OVERBUILDS. ONE OF THE DESIRABLE CONDITIONS IS THAT EACH
PARTY HAVE A SIGNIFICANT BASE OF NONCOMPETITIVE SUBSCRIBERS.
AND THAT FITS ALLENTOWN.
SO IF THE QUESTION IS DID I DO AN ECONOMIC
ANALYSIS OF ALLENTOWN, NO, I DID NOT.
BY MR. BRAMSON:
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Q YOU'VE NEVER DONE AN ECONOMIC ANALYSIS OF ANY
OVERBUILD, HAVE YOU?
A POTENTIAL OVERBUILDS FOR -- AGAIN, I'M NOT SURE
I WANT TO CALL IT AN ECONOMIC ANALYSIS. IT'S MORE OF AN
ECONOMIC IMPACT STUDY OF POTENTIAL OVERBUILDS. AND
PRIMARILY FOR HILLSBOROUGH COUNTY.
Q ARE YOU RELYING IN COMING TO YOUR CONCLUSIONS
ON MR. BOOK'S STUDY?
A NO. HIS STUDY IS ONE OF THE LISTS THERE. I
HAVE AN EXTRACT OF HIS STUDY ALONG WITH AN EXTRACT OF THE
OTHERS. ALL THAT I'M SAYING IS THAT THE STUDIES THAT ARE
LISTED THERE GENERALLY AGREE.
HE ADDED ONE SET OF FACTORS. WHAT HE DID WAS
LIST THOSE CONDITIONS THAT HE THOUGHT WOULD BE NECESSARY FOR
OVERBUILDS TO BE SUCCESSFUL. THAT, IN MY OPINION, IS NOT
PART OF THE STUDY. THOSE ARE CONCLUSIONS HE CAME TO IN
SETTING UP A HYPOTHETICAL MODEL AS A RESULT OF THIS ANALYIS
THAT SAID IF YOU REALLY WANT AN OVERBUILD TO BE SUCCESSFUL,
HERE ARE THE CONDITIONS THAT HAVE TO BE PRESENT. AND I'M
NOT RELYING ON THAT. I THINK ALL OF HIS CONDITIONS THAT HE
ESTABLISHED ARE REASONABLE. THEY'RE ALL COMMON-SENSE
CONDITIONS. THEY MIGHT HAVE BEEN THE SAME CONDITIONS THAT
OTHER PEOPLE WOULD LIST IF YOU LISTED WHAT YOU HAD TO HAVE
TO INVEST MONEY IN AN OVERBUILD SITUATION.
Q LET ME ASK IT THIS WAY: WHICH, IF ANY, OF THE
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STUDIES THAT YOU'VE LISTED OR STUDIES OR DOCUMENTS THAT YOU
LISTED IN YOUR BIBLIOGRAPHY ARE YOU RELYING ON IN COMING TO
YOUR CONCLUSIONS?
A THE BEST ANSWER I CAN GIVE YOU IS ALL OF THEM.
NO SINGLE ONE, TO ME, STANDS OUT ABOVE THE OTHERS.
WHAT WE'VE GOT HERE IS A LONG SERIES OF
OVERBUILD STUDIES STARTING IN THE LATE 1970'S. 50 IT'S AT
LEAST A PERIOD OF 10 YEARS. ALL OF THEM BASICALLY COME TO
THE SAME MAvOR CONCLUSION. SO I DON'T THINK I'M GIVING
GREATER WEIGHT TO ANY SINGLE ONE OF THEM THAN TO ALL OF
THEM. WHAT 1'M REALLY RELYING ON IS THE FACT THAT MOST OF
THEM SAY THE SAME THINGS.
Q LET ME ASK IT THIS WAY: SUPPOSE HYPOTHETICALLY
THAT EACH OF THESE STUDIES WERE FATALLY DEFECTIVE IN THEIR
METHODOLOGICAL SURVEY OR THEY WERE HOPELESSLY BIASED OR
SOMETHING ELSE, AND THEY ALL CAME TO CONCLUSION5WHICH
SOMEHOW WE KNOW WERE WRONG.
A YES.
Q
AND YOU'VE NOW BEEN INFORMED OF THAT FACT.
DOES THAT CHANGE YOUR OPINIONS IN THIS CASE?
A NO. BECAUSE THE STUDIES ARE NOT THE ONLY THING
I'M RELYING ON. I'M ALSO RELYING ON HUNDREDS OF
CONVERSATIONS WITH REPRESENTATIVES OF CABLE COMPANIES. AND
IN TALKING TO CABLE COMPANY PEOPLE ABOUT OVERBUILDS, THEIR
GENERAL ANSWER IS IT'S DISASTER. WE STAY AWAY FROM IT.
,-------------------
147
THEY'VE SAID IT PUBLICLY AND THEY'VE SAID IT PRIVATELY.
2
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SO IF THE PEOPLE THAT HAVE TO PUT UP THEIR
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3 MONEY ARE UNWILLING TO INVEST IN OVERBUILDS, IN GENERAL I
4 THINK IT'S TRUE. YOU HAVE A DOZEN OVERBUILDS OUT OF 8,000
5 CABLE SYSTEMS IN THE CABLE INDUSTRY. TO ME, THAT'S A VERY
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7 OVERBUILDS ARE NOT FINANCIALLY VIABLE. SO I THINK I WOULD
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9 ANY ONE OF THOSE STUDIES AT ALL.
10 Q REALLY, THE BEST EVIDENCE IS THE WILLINGNESS OR
11 THE LACK OF WILLINGNESS OF PARTICULAR CABLE OPERATORS TO
12 INVEST THEIR OWN MONEY IN AN OVERBUILD SITUATION; ISN'T THAT
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14 A IN GENERAL. IF YOU'RE TALKING ABOUT A PATTERN
15 THROUGHOUT THE INDUSTRY, YES. IF YOU'RE TALKING ABOUT
16 INDIVIDUAL CASES, I KNOW OF PEOPLE THAT INVEST THEIR MONEY
17 PRETTY STUPIDLY SOMETIMES, AND THAT CAN HAPPEN IN THE CABLE
18 COMPANY AS WELL AS ANY 8,000 CABLE SYSTEMS AND
19 YOU ASK THE QUESTION: WHY AREN'T THERE MORE OVERBUILDS?
20 THE ONLY ANSWER I CAN COME TO IS IF YOU DO A LOT OF
21 ANALYSES, IT DOES NOT REPRESENT A GOOD BUSINESS OPPORTUNITY.
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ONE WOULD EXPECT THAT THE DECISION MADE BY THE
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24 GOING TO BE A DECISION MADE UPON AS RELIABLE EVIDENCE AS
25 COULD BE FOUND BY THAT PERSON; TRUE? WOULDN'T YOU EXPECT
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THAT AS A GENERAL MATTER?
A I'M NOT SURE I GET THE FULL TENOR OF THAT
QUESTION.
Q LET
YOU
BELIEVE THAT THE
ME TRY IT A DIFFERENT WAY.
ARE AWARE, AREN'T YOU, THAT
MOST ACCURATE WAY TO ASSESS
ECON
WHAT
OMISTS
IS IN
SOMEBODY'S BEST INTERESTS IS TO LOOK AT WHAT THEY DO WHEN
THEY HAVE TO SPEND THEIR MONEY?
A YES.
Q AND YOU AGREE, DON'T YOU, THAT THAT IS A SOUND
APPROACH TO A PROBLEM IF YOU HAVE A PROBLEM OF TRYING TO
DECIDE WHAT IS IN SOMEBODY'S BEST INTERESTS? THE MOST
LIKELY WAY TO DETERMINE IS TO SEE WHAT THEY DO WHEN THEY'RE
PERMITTED TO DO WHAT THEY LIKE?
A IN GENERAL, I WOULD AGREE WITH THAT. I THINK
THERE ARE SOME EXCEPTIONS.
Q DO YOU THINK THAT'S TRUE WHEN LOOKING AT CABLE
TELEVISION OVERBUILDS?
A WELL, YOU'RE DEALING WITH WHAT 1 CALL A NATURAL
MONOPOLY SITUATION. AND I THINK THAT HAS OTHER IMPLICATIONS
TO IT. YOU'RE ALSO DEALING WITH THE USE OF PUBLIC
RIGHTS-OF-WAY. THAT HAS IMPLICATIONS TO IT.
IF I UNDERSTAND THE QUESTION, IF YOU ARE REALLY
ASKING ME SHOULDN'T A CABLE COMPANY HAVE THE OPPORTUNITY TO
SPEND ITS MONEY AS IT SEES FIT AND EVEN WASTE IT IF IT WANTS
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Q THAT'S NOT WHAT I'M ASKING YOU.
A OKAY.
Q OBSERVATION OF WHAT THE CABLE COMPANY WOULD DO
IF IT WERE PERMITTED TO SPEND ITS MONEY OR NOT SPEND IT;
OBSERVATION OF WHETHER IT DID OR DIDN'T SPEND IT WOULD BE
THE BEST EVIDENCE OF WHETHER OR NOT IT VIEWED IT AS A
MONEY-MAKING OPPORTUNITY, WOULD IT NOT?
A I WOULD AGREE WITH THAT.
Q AND YOU'D AGREE WITH THAT IN THE CABLE
TELEVISION OVERBUILD CONTEXT AS WELL AS OTHER CONTEXTS?
A I GUESS SO
(RECESS.)
BY MR. BRAMSON:
Q MR. PILNICK, IT'S TRUE, ISN'T IT, THAT THE
QUESTION OF THE ECONOMIC FEASIBILITY OF CABLE TELEVISION
COMPETITION REALLY POINTS US TO TWO FACTORS: ONE FACTOR IS
THE COST OF CONSTRUCTING AND OPERATING THE SYSTEM, AND THE
OTHER FACTOR IS THE AMOUNT OF REVENUE THAT IS MADE BY THE -
GENERATED BY THE COMPANIES IN THEIR OPERATIONS; TRUE?
A I WOULD AGREE TO THAT, YES.
Q THE FACTORS YOU LIST ON PAGES 3 THROUGH 5 OF
YOUR STUDY ARE SIMPLY FACTORS WHICH IN YOUR OPINION RELATE
TO THOSE TWO MAIN FACTORS; ISNIT THAT TRUE?
A THAT'S CORRECT.
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Q
SO AS FAR AS POOR OFF-THE-AIR RECEPTION, IT IS
ONLY POOR INSOFAR AS IT APPLIES -- SOMETHING ABOUT THE
NUMBER OF PERCENTAGE OF HOMES THAT ARE LIKELY TO TAKE CABLE
TELEVISION SERVICE; CORRECT?
A THAT'S AN ESSENTIALLY CAPTIYE AUDIENCE THAT
HAVE TO GET CABLE IF THEY WANT TELEYISION AT ALL.
Q IF IT TURNED OUT YOU WERE IN A TOWN WITH POOR
OVER-THE-AIR BROADCAST BUT IT WAS A TOWN FULL OF. THE AMISH,
YOL'D STILL EXPECT POOR PENETRATION EYEN THOUGH THERE WAS
POOR OYER-THE-AIR RECEPTION?
A THAT'S CORRECT.
Q
AND IT WOULDN'T DO THE CABLE TELEVISION COMPANY
THERE ANY GOOD WHETHER THERE WAS POOR OYER-THE-AIR BROADCAST
RECEPTION ANYWAY BECAUSE NOT VERY MANY PEOPLE WOULD CONSIDER
IT; IS THAT CORRECT?
A IF HE'S OFFERING A PRODUCT THAT NOBODY WANTS,
THAT'S CORRECT.
Q AND THE SAME THING IS TRUE OF THE FACTORS HERE
AS WELL: HIGH HOUSING DENSITY IS POOR BECAUSE IT IMPLIES
ABOUT THE COST PER HOME, COST PER SUBSCRIBER?
A YES.
Q
LOW CONSTRUCTION COST IS THE SAME; RIGHT?
A YES.
Q AND THE TIME FRAME IS THE SAME WHEN YOU
CONSIDER THE TIME VALUE OF MONEY?
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A YES.
Q AND ADEQUATE BASE OF NON-OVERBUILD REVENUE IS
ONLY IMPORTANT TO THE EXTENT ONE ASSUMES THAT LOSSES ARE
BEING SUBSIDIZED FROM SOME OTHER OPERATION?
A THAT'S RIGHT.
Q
AND YOU POINT OUT IT DOESN'T HAVE TO BE AN
OPERATION IMMEDIATELY NEXT DOOR TO THE OVERBUILD. IF YOU'RE
ASSUMING SUBSIDIES OCCUR, THOSE COULD OCCUR FROM ANY OTHER
OPERATION?
A RIGHT.
Q AND SUBSIDIES COULD OCCUR FROM NONCABLE
TELEVISION SYSTEMS?
A YES.
Q THAT'S ACTUALLY WHAT YOU'RE SUGGESTING AS A
FACTOR IN THE TELESAT OVERBUILD?
A YES.
Q
WHY DON'T YOU TELL ME ABOUT THE STATEMENTS ON
VULNERABILITY IN THE EXISTING CABLE OPERATIONS.
A IT GOES BACK TO WHAT I SAID BEFORE. IF THE
EXISTING CABLE OPERATOR EITHER HAS PROVIDED POOR QUALITY
SERVICE OR IS CHARGED WHAT ARE PERCEIVED TO BE ABNORMALLY
HIGH RATES AND HAS BUILT UP A RESERVOIR OF ILL WILL IN THE
COMMUNITY, THEN IT WOULD PRESUMABLY BE EASIER FOR A NEW
ENTRY TO ATTRACT SUBSCRIBERS AWAY FROM THAT CABLE COMPANY.
THAT, AGAIN, GETS BACK TO REVENUE. IT WOULD MEAN GETTING
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MORE REVENUE QUICKER.
Q AND THAT IMPROVES THE CHANCES OF AN OVERBUILD
OCCURRING?
A YES.
Q DOES IT IMPROVE THE CHANCES OF AN OVERBUILD
CONTINUING?
A ONLY, I THINK, IN THOSE EXCEPTIONAL CASES WHERE
A NUMBER OF THOSE FACTORS ALL FIT TOGETHER.
Q CONTINUING ON DOWN THE LIST, HIGH INCOME LEVEL,
WHAT DO YOU THINK THAT HAS TO DO WITH THE SITUATION?
A WELL, I THINK THAT THAT, PERHAPS -- I THINK
lIVE SAID ON THE NEXT PAGE THAT THAT FACTOR IS NOT AS
SUBSTANTIAL AS SOME OF THE OTHER FACTORS. BUT THE
IS THAT THE HIGHER INCOME LEVEL A HOUSE, THE MORE
DISCRETIONARY THE INCOME. AND IN THE EVENT OF, LET'S SAY, A
DEPRESSION OR IN THE EVENT OF SOME HARDER TIMES lN THE
COMMUNITY AS A WHOLE, THE PEOPLE WITH MORE INCOME TO SPEND
WOULD STILL BE ABLE TO CONTINUE SUBSCRIBING TO WHAT IS
CONSIDERED A NONESSENTIAL SERVICE LIKE CABLE.
Q I'D LIKE TO SUGGEST SOME OTHER FACTORS TO YOU
AND SEE WHETHER YOU AGREE OR DISAGREE THAT THOSE FACTORS MAY
BE IMPORTANT TO CONSIDER IN ASSESSING THE LIKELIHOOD THAT
COMPETITION WOULD OCCUR IN THE FIRST PLACE AND WOULD
CONTINUE.
A ALL RIGHT
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Q
WHAT IS THE AVERAGE NUMBER OF PERSONS PER
HOUSEHOLD IN THAT AREA?
A I GUESS I WOULD SORT OF LINK THAT WITH, TO SOME
EXTENT, WITH THE INCOME LEVEL. APART FROM THE FACT THAT
MORE WAGE EARNERS MIGHT MEAN MORE MONEY, GENERALLY THE
HIGhER THE INCOME LEVEL THE MORE YOU GET THE FRILL
SUBSCRIPTIONS, THE SUBSCRIPTIONS FOR THREE DIFFERENT
CONNECTIONS IN THE SAME HOME. THREE TELEVISION SETS RATHER
THAN ONE. I THINK THE TWO SORT OF GO TOGETHER.
I WOULD AGREE THAT IF YOU HAVE FOLIR OR FIVE
PEOPLE IN THE SAME HOUSEHOLD, THE ODDS ARE YOU'RE GOING TO
HAVE MORE THAN ONE TELEVISION SET. IF THE ODDS ARE YOU HAVE
MORE THAN ONE TELEVISION SET, IF SOME OF THE PEOPLE WANT TO
WATCH CABLE PERHAPS IN DIFFERENT ROOMS AT THE SAME TIME,
THEN IT MEANS YOU HAVE TO SUBSCRIBE TO ADDITIONAL OUTLETS.
SO IT'S WHAT I WOULD CALL AN INCREMENTAL INCREASE BECAUSE
USUALLY A SECOND AND THIRD SET RATES ARE CONSIDERABLY LOWER
THAN FIRST SET RATES. BUT IT DOES HELP GENERATE MORE
INCO'-1E, YES.
Q THE ADDITIONAL OUTLETS GENERATE ADDITIONAL
I N C O ~ 1 E FOR THE CABLE COMPANY?
A YES.
Q THAT WOULD BE ADDITIONAL INCOME PER HOUSEHOLD?
A THAT'S CORRECT.
Q
HOW ABOUT THE NUMBER OF CHILDREN PER HOUSEHOLD?
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A I WOULD THINK THAT'S A LITTLE LESS IMPORTANT.
I'M NOT SURE THAT IF YOU HAVE FIVE CHILDREN IN A HOUSE YOU
HAVE FIVE TELEVISION SETS. I THINK IT'S PROBABLY MORE
PREVALENT WITH MORE ADULTS IN THE HOUSEHOLD.
I THINK TO SOME EXTENT, AGAIN, IT GOES WITH
HIGH INCOME LEVEL. IF YOU HAVE A HOME WHERE THEY HAVE A
HIGH INCOME LEVEL AND THEY DO HAVE FIVE CHILDREN, PERHAPS
THEY CAN AFFORD TO HAVE FIVE TELEVISION SETS AND TAKE FIVE
DIFFERENT SUBSCRIPTIONS OF CABLE SERVICE. I DON'T THINK IT
HAPFENS VERY OFTEN, BUT I THINK IT REALLY IS PART AND PARCEL
OF THE INCOME LEVEL QUESTION.
Q LET ME SUGGEST SOMETHING ELSE. ISN'T IT TRUE
IN YOUR EXPERIENCE THAT A HOUSEHOLD WITH CHILDREN IS
SOMEWHAT MORE LIKELY TO SUBSCRIBE TO CABLE SERVICE AT ALL
THAN A HOUSEHOLD WITHOUT CHILDREN?
A I THINK SO, BUT I DON'T REALLY HAVE. THAT MUCH
DIRECT EVIDENCE ABOUT THAT. THERE'S SOME CHILDREN'S
PROGRAMS SPECIFICALLY ON CABLE. I'M NOT SURE THAT I'VE SEEN
CONVINCING EVIDENCE THAT THEY AFFECT THE RATE OF
SUBSCRIPTIONS.
Q HOW ABOUT AVERAGE AGE OF THE COMMUNITY?
MS. HOLBROOKE: OF THE COMMUNITY?
MR. BRAMSON: YES.
MS. HOLBROOKE: NOT OF THE HOUSEHOLD?
MR. BRAMSON: WELL, THE COMMUNITY IS MADE UP OF
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HOUSEHOLDS.
MS. HOLBROOKE: IT WOULD BE A DIFFERENT QUESTION.
MR. BRAMSON: I DON'T UNDERSTAND HOW IT'S DIFFERENT.
MS. HOLBROOKE: YOU CAN HAVE A COMMUNITY WITH A HIGH
AVERAGE, BUT YOUR PARTICULAR HOUSEHOLDS MAY BE MUCH YOUNGER
OR VICE VERSA.
THE QUESTION, I TAKE IT, WAS AVERAGE AGE OF THE
COMt<IUNI TY
MR. BRAMSON: YES.
THE WITNESS: THE WAY I WOULD INTERPRET THAT
QUESTION, I THINK IS
MS. HOLBROOKE: DON'T INTERPRET IT. MAKE SURE YOU
UNDERSTAND IT.
THE WITNESS: I'M ASKING THE QUESTION RATHER THAN
ANSWERING.
DOES YOUR QUESTION MEAN WOULD A PARTICULAR
COMMUNITY WITH A CERTAIN NUMBER OF HOUSEHOLDS, IF THAT
COMMUNITY HAPPENS TO HAVE A HIGHER AVERAGE AGE IN ANOTHER
COMMJNITY WOULD THERE BE ANY SIGNIFICANT DIFFERENCE IN THE
RATE OF SUBSCRIPTION PENETRATION OR INCOME THAT THE CABLE
COMPANY GETS? IS THAT THE QUESTION ESSENTIALLY':'
BY MR. BRAMSON:
Q BASICALLY, YEAH.
A I HAVE SEEN STUDIES. I DON'T HAVE ANY DIRECT
EVIDENCE MYSELF. I HAVE SEEN STUDIES THAT INDIC.ATE SENIOR
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CITIZENS, FOR EXAMPLE, WATCH TELEVISION LESS THAN THE
GENERAL PUBLIC. AND PARTICULARLY THE OLDER ARE. IF
THEY'VE GROWN UP IN THE PRE-TELEVISION DAYS WHERE THEY
PERHAPS LISTEN TO RADIO OR WENT TO THE MOVIES MORE, THEY
SEEM TO BE HARDER TO SELL ON CABLE SERVICE THAN THE YOUNGER
GROUPS. THAT'S THE ONLY AREA WHERE I HAVE READ THAT THERE
IS APPARENTLY SOME DIFFERENCE. I'M NOT SURE THAT THE
DIFFERENCE IS SIGNIFICANT.
Q I TAKE IT IT MIGHT BE A FACTOR TO LOOK AT,
ALTHOUGH MAYBE NOT AS SIGNIFICANT AS SOME OF THE OTHERS?
A EXCEPT FOR A FEW SENIOR DEVELOPMENTS, EXCEPT
FOR PLACES THAT ARE SPECIALIZED IN SENIOR CITIZEN HOUSING, I
WOULDN'T THINK IT WOULD BE A MAJOR FACTOR, BECAUSE I WOULD
ASSUME THE PERCENTAGE OF SENIORS IS ABOUT THE SAME FROM ONE
COMMUNITY TO ANOTHER.
BUT IF YOU'RE GOING TO BE SELLING CABLE ONLY TO
A RETIREMENT COMMUNITY, I THINK IT WOULD BE A FACTOR.
Q HOW ABOUT WEATHER PATTERNS? DO YOU THINK
THAT'S SOMETHING TO CONSIDER?
A THERE HAVE BEEN SOME THINGS I HAVE READ.
AGAIN, WITHOUT MY DOING A DIRECT ANALYSIS, SOME OF THE
THINGS I READ THAT INDICATE IN PLACES LIKE SOUTHERN
CALIIFORNIA WHERE THE WEATHER IS GOOD AND WHERE YOU HAVE MORE
FOR OUTDOOR RECREATION, THAT IT'S MORE LIKELY
THAT PEOPLE WILL GO OUT FISHING OR GOLFING THAN THEY WILL
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SIT HOME WATCHING TELEVISION. AND THEREFORE, PRESUMABLY
THAT SHOULD HAVE AN IMPACT ON CABLE. I'VE NEVER SEEN
ANYTHING THAT WAS PERSUASIVE IN THAT AREA.
SOUTHERN CALIFORNIA GENERALLY HAS A lOW
PENETRATION LEVEL THAN OTHER COMMUNITIES. BUT I THINK YOU
CAN ASCRIBE THAT TO THE FACT THAT YOU HAVE A LOT OF
OFF-THE-AIR TELEVISION STATIONS IN MOST OF THIS AREA AND
THAT MIGHT BE JUST AS IMPORTANT AS THE WEATHER. I DON'T
KNOW HOW YOU BREAK IT DOWN.
Q HOW ABOUT RACIAL BACKGROUND?
A WHAT I'VE SEEN IN THAT AREA IS MORE INDICATIVE
OF LANGUAGE CONSIDERATIONS THAN RACIAL BREAKDOWN. IF YOU
HAVE A HIGH HISPANIC COMMUNITY LIKE YOU DO IN LOS ANGELES,
BEFORE CABLE SYSTEMS OFFERED TWO OR THREE SPANISH LANGUAGE
PROGRAMS, THEY HAD A VERY POOR PENETRATION IN THE HISPANIC
AREAS. THEY STILL -- THE SYSTEM SUCH AS BUENAVISION SYSTEM
IN EAST LOS ANGELES, THEY HAVE HAD POOR PENETRATION, AND
THEY HAVE ASCRIBED PART OF THAT TO THE FACT THAT MANY OF
T H E I ~ RESIDENTS DON'T SPEAK ENGLISH. AND THEREFORE, THEY
WOUl!) NOT BE INTERESTED IN MOST OF THE PROGRAMMING THAT'S
AVAILABLE.
THERE'S A HIGH ASIAN POPULATION IN THIS AREA.
AND UNTIL SOME OF THE CABLE COMPANIES BEGAN TO PROVIDE
ASIAN-LANGUAGE PROGRAMMING, THEY HAD THE SAME PROBLEMS.
Q OKAY. DO ANY OTHER FACTORS COME TO MIND AS
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WE'VE GONE THROUGH THE LIST I'VE GIVEN YOU?
A NOTHING THAT I CAN RECALL RIGHT NOW.
Q DO YOU KNOW ANYTHING ABOUT THE AVERAGE REVENUE
PER SUBSCRIBER IN THE CITY OF LOS ANGELES AS OPPOSED TO THE
NATIONAL AVERAGE?
A I HAVE SOME SCATTERED INFORMATION. I KNOW WHAT
IT IS IN VARIOUS DIFFERENT INDIVIDUAL SYSTEMS BECAUSE I'VE
REVIEWED THOSE SYSTEMS AS PART OF MY TASKS OF THE CLIENTS.
I DON'T KNOW WHAT IT IS IF YOU WERE TO SAY JUST ISOLATE ALL
OF THE CABLE SYSTEMS IN THE CITY OF LOS ANGELES AS COMPARED
TO, LET'S SAY, OUTSIDE THE CITY OF LOS ANGELES.
Q DO YOU THINK THAT WOULD BE PARTICULARLY USEFUL
TO FOCUS WITHIN AND WITHOUT THE CITY LIMITS?
A I DON'T THINK SO. I'M NOT EVEN SURE IT WOULD
BE USEFUL TO FOCUS JUST WITHIN THE CITY ITSELF. BECAUSE
REVENUE IS COMPOSED OF A LOT OF DIFFERENT FACTORS.
ONE FACTOR IS HOW LONG THE SYSTEM HAS BEEN
OPERATING. A SYSTEM THAT'S BEEN STABLE FOR A NUMBER OF
YEARS PROBABLY HAS HAD AN OPPORTUNITY TO INCREASE RATES. A
SYSTEM THAT'S HAD SEVERAL OWNERS USUALLY HAS TO BE CAREFUL
ABOUT RAISING RATES BECAUSE OF THE OWNERSHIP. THEY MIGHT
LOSE SUBSCRIBERS. SO THERE ARE OTHER FACTORS APART FROM
JUST THE SERVICES THAT ARE BEIN(; OFFERED. I THINK THAT'S
WHAT I'M SAYING.
Q DO YOU KNOW WHAT TI,E NATIONAL AVERAGE REVENUE
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PER SUBSCRIBER IS?
A THE FIGURES lIVE SEEN, I THINK THE ANSWER IS
YES. AND I PRESUME THAT YOU MIGHT WANT TO KNOW WHAT I THINK
THEY ARE.
Q RIGHT.
A I DON'T WANT TO ANTICIPATE YOUR QUESTION, BUT I
HAVE AN UNFORTUNATE HABIT OF DOING THAT.
THE NATIONAL AVERAGE IS BETWEEN 13 AND $15 A
MONTH FOR BASIC SERVICE. AND PAY SERVICES RANGE GENERALLY
IN THE 8 TO $12 A MONTH CATEGORY.
Q HOW ABOUT A TOTAL REVENUE, ALL REVENUE FROM ALL
SOURCES?
A TOTAL REVENUE, SOMEWHERE IN THE 25 TO $30 A
MONTH RANGE PER HOUSEHOLD.
Q THOSE NUMBERS HAVE RISEN FAIRLY SIGNIFICANTLY
IN THE LAST 10 YEARS, HAVEN'T THEY?
A YES. BASIC SERVICE RATES HAVE RISEN
CONSIDERABLY MORE THAN PAY SERVICE RATES. IT HAS BEEN A
READJUSTMENT WHERE MANY OPERATORS RAISE BASIC RATES AND KEEP
PAY RATES CONSTANT OR EVEN REDUCE PAY RATES.
Q FOCUSING ONLY ON THE TOTAL REVENUE PER
SUBSCRIBER NUMBERS, IT'S TRUE, ISN'T IT, THAT HISTORICALLY
SPEAKING IT HAS BEEN A LONG EITHER SLOW OR FAST RISE IN
REVENUE PER SUBSCRIBER PER MONTH FOR CABLE SYSTEMS?
A YES.
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Q THAT'S THE HISTORY OF THE INDUSTRY?
A YES.
Q AND IT'S TRUE, ISN'T IT, THAT FOR A LONG TIME
THROUGH THE 1960'S AND MOST OF THE 1970'S, THE CABLE
INDUSTRY WAS THOUGHT OF AS A $S A MONTH INDUSTRY, YOU
RECEIVED APPROXIMATELY $5 A MONTH PER SUBSCRIBER?
A I THINK YOU'RE TALKING ABOUT THE TIME WHEN IT
WAS ALSO CALLED A 12-CHANNEL INDUSTRY. BUT THE ANSWER, I
GUESS, IS YES.
Q AND IN THE LAST 10 YEARS, THERE'S BEEN QUITE A
DRAHATIC INCREASE DUE TO A NUMEiER OF DIFFERENT FACTORS. AND
WHATEVER THE FACTORS ARE, THEY'RE NOW UP TO 25 TO $30 A
MONTH?
A YES.
Q AND MOST ANALYSTS THAT YOU'RE FAMILIAR WITH
PREDICT A CONTINUED RISE IN THAT FIGURE IN THE NEXT 10
YEARS?
A YES.
Q DO YOU KNOW WHAT THE NATIONAL AVERAGE
PENETRATION RATE IS?
A ABOUT 50 PERCENT. A LITTLE OVER, IN THE LAST
FIGURES I SAW.
Q WHAT IS YOUR UNDERSTANDING OF WHAT THAT
50 PERCENT REPRESENTS?
A 50 PERCENT OF THE HOUSEHOLDS PASSED BY CABLE
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SYSTEMS THAT HAVE THE CAPABILITY OF GETTING SERVICE HAVE
ACTUALLY SUBSCRIBED TO ONE OR MORE SERVICES OFFERED.
Q DO YOU KNOW WHAT THE FIGURE WOULD BE WHEN ONE
COMPARES A PERCENTAGE OF ALL TELEVISION HOUSEHOLDS TO THE
NUMBER OF HOMES TAKING CABLE?
MS. HOLBROOKE: I DON'T UNDER STAND THAT.
BY ' ~ R . BRAMSON:
Q YOU GAVE US, AS I UNDERSTAND, THE 50 PERCENT.
THAT'S THE RATE. THAT'S THE PERCENTAGE OF HOMES PASSED BY
CABLE TAKING CABLE.
A YES.
Q I'M ASKING YOU IF YOU KNOW OF AN APPROXIMATE
NATIONAL NUMBER FOR THE TOTAL NUMBER OF TV HOUSEHOLDS TAKING
CABLE.
MS. HOLBROOKE: YOU MEAN CABLE WILL PASS HOMES IN
WHICH THERE'S NO TELEVISION SET?
MR. BRAMSON: NO. THAT'S A MUCH LESS SIGNIFICANT
NUMBER. THERE'S A LOT OF HOMES WITH TELEVISION SETS THAT
AREN'T PASSED BY CABLE.
MS. HOLBROOKE: I'M NOT UNDERSTANDING THE QUESTION.
I UNDERSTOOD YOU TO BE ASKING -
THE WITNESS: I THINK I UNDERSTOOD IT THAT WAY.
WHAT YOU'RE TALKINI; ABOUT IS PRIMARILY lOW
DENSITY AND RURAL AREAS THAT DON'T HAVE CABLE. AND THE BEST
WAY I CAN THINK TO ANSWER THE QUESTION IS THE FIGURES I'VE
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SEEN INDICATE THERE ARE SOMEWHERE BETWEEN 80 AND 90 MILLION
HOMES THAT HAVE TELEVISION SETS. SO THAT HOMES CAN RECEIVE
SOMETHING OFF THE AIR PRESUMABLY. AND THE LATEST FIGURES
SHOW 40 MILLION CABLE SUBSCRIBERS. BETWEEN 35 AND
40 MILLION CABLE -- I THINK MY FIRST FIGURE IS LOW. I THINK
90 TO A HUNDRED MILLION TOTAL TELEVISION HOUSEHOLDS. SO IF
YOU TAKE SOMEWHERE BETWEEN 35 AND 40 MILLION CABLE
SUBSCRIBERS AND DIVIDE THAT BY THE HUNDRED MILLION OR SO
HOUSEHOLDS THAT HAVE A TV SET, IT'S SOMEWHERE AROUND
40 PERCENT.
THE OTHER WAY OF ANSWERING YOUR QUESTION IS
THERE IS SOMETHING LIKE 20 TO 30 MILLION HOMES THAT HAVE
TELEVISION SETS THAT DON'T HAVE THE CAPABILITY OF GETTING
CABLE.
BY MR. BRAMSON:
Q OKAY. BUT OF THOSE HOMES PASSED BY. CABLE,
50 PERCENT OR SLIGHTLY MORE -
A AS A NATIONAL AVERAGE. IT VARIES fROM
COMMjNITY TO COMMUNITY.
Q DO YOU KNOW WHETHER THE REVENUE PER SUBSCRIBER
AVERAGES FOR THE LOS ANGELES AREA ARE GREATER OR (ESSER THAN
THE 25 TO $30 PER SUBSCRIBER THAT IS THE NATIONAL AVERAGE?
A UNTIL THE LAST COUPLE OF YEARS, THEY WERE
GENERALLY CONSIDERED LOWER. PRIMARILY BECAUSE PENETRATION
IN SOUTHERN CALIFORNIA IS LOWER THAN THE NATIONAL AVERAGE.
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AND THERE WAS AN INCENTIVE FOR THE CABLE COMPANIES TO TRY TO
INCREASE PENETRATION BY NOT RAISING RATES TOO RAPIDLY.
IN THE LAST TWO OR THREE YEARS, MANY OF THE
CABLE COMPANIES IN THIS AREA HAVE RAISED RATES, PARTICULARLY
BAS2C SERVICE RATES. I THINK THAT AS OF NOW THE BASIC
SERVICE RATES ARE PROBABLY PRETTY CLOSE IN LINE WITH WHAT
THEY ARE OUTSIDE OF SOUTHERN CALIFORNIA. BASIC SERVICE
RATES ARE PROBABLY STILL A LITTLE BIT LOWER.
Q THE PENETRATION RATE, THE NATIONAL PENETRATION
RATE FOR CABLE HAS ALSO RISEN CONTINUOUSLY THROUGH THE
HISTORY OF THE CABLE TELEVISION INDUSTRY, HASN'T IT?
A YES.
Q IT'S ALSO TRUE THAT ANALYSTS WITH WHICH YOUIRE
FAMILIAR WITH PREDICT THAT TREND WILL CONTINUE FOR AT LEAST
THE NEXT 10 OR 15 YEARS; CORRECT?
A 11M NOT SURE ABOUT THAT. I THINK WEIRE
TALKING, AGAIN, ABOUT RATES AND DEGREES HERE. PART OF THE
REASON THAT THE NUMBER OF CABLE HOMES HAS RISEN IS THE
IN CABLE SYSTEM CONSTRUCTION BY OFFERING CABLE IN
NEW AREAS. THE ACTUAL PENETRATION OF 50 PERCENT ON A
NATIONAL AVERAGE IS NOT MUCH DIFFERENT. AS A MATTER OF
FACT, IT'S PROBABLY LOWER THAN IT WAS DURING THE DAYS WHEN
THERE WERE RELATIVELY FEW CABLE SYSTEMS OUT BECAUSE THE
FIRST CABLE SYSTEMS THAT WERE BLJILT WERE BUILT IN CAPTIVE
COMMUNITIES, COMMUNITIES THAT HAD EITHER VERY LITTLE OR NO
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CABLE SERVICE. AND IT WAS THE CUSTOM IN MOST OF THESE
COMMUNITIES TO HAVE 80 OR 90 PERCENT OF THE HOMES
SUBSCRIBING.
WHEN CABLE BEGAN TO COME INTO THE LARGER
METROPOLITAN AREAS WHERE THERE WAS COMPETITION FROM MY
OFF-THE-AIR STATIONS, THE NUMBER OF HOUSES PASSED INCREASED.
BUT CABLE PENETRATION, AS A PERCENTAGE OF THAT, ACTUALLY
DECREASED.
SO I THINK WE'RE STILL AT THE POINT WHERE THE
PENETRATION IS NOT AS HIGH AS IT WAS WHEN THE C.A.T.V.
INDUSTRY STARTED. BUT IT'S GROWING, AND AS NEW SERVICES
COME, WE PROBABLY WILL GROW FURTHER.
I THINK I DON'T AGREE WITH THE ASSUMPTION OF
THE QUESTION AS I UNDERSTAND IT THAT CABLE HAS BEEN
PROGRESSIVELY DOING BETTER AND BETTER. I THINK MORE HOMES
HAVE BEEN CABLED, AND OBVIOUSLY MORE CABLE SUBSCRIBERS ARE
PROVIDING MORE REVENUE. BUT AS A PERCENTAGE OF THE MARKET
THAT'S AVAILABLE, I DON'T THINK IT'S MUCH BETTER NOW THAN IT
WAS A NUMBER OF YEARS AGO.
Q SO IN YOUR OPINION THE 50 PERCENT HAS STAYED A
FAIRLY CONSTANT NUMBER ALTHOUGH IT'S MAYBE MORE ABSOLUTE
SUBSCRIBERS BECAUSE THERE ARE MORE HOMES PASSED BY CABLE?
A I THINK IT'S GROWN A LITTLE BIT IN RECENT
YEARS. BUT IF YOU COMPARE IT TO THE NUMBERS THAT WE HAD
15 YEARS AGO WHEN THE TOTAL NUMBER OF CABLE SUBSCRIBERS WAS
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SMALL, YOU'LL STILL FIND THAT THE CABLE COMPANIES FOCUSED ON
THOSE MARKETS WHERE THEY HAD VERY HIGH PENETRATION.
Q DO YOU HAVE AN OPINION ABOUT THE TOTAL
CONSTRUCTION COST THAT IT WOULD TAKE TO CONSTRUCT A CABLE
TELEVISION SYSTEM IN THE SOUTH CENTRAL AREA?
A NOT AS A RESULT OF ANY FORMAL ANALYSIS THAT
liVE DONE. JUST ON WHAT I WOULD CALL A RELATIVE BASIS
HAVING AN IDEA OF THE NUMBER OF HOUSEHOLDS, HAVING AN IDEA
OF THE COST PER MILE AND THE TYPE OF UTILITY POLE
ARRANGEMENTS THAT ARE INVOLVED.
I COULD PROBABLY GIVE YOU AN ESTIMATE. BUT I
WOULD NOT CLAIM THAT THE ESTIMATE IS AS PRECISE AS IT MIGHT
BE. I THINK IT WOULD BE AN INFORMED OPINION. BUT NOT MUCH
MORE THAN THAT.
Q COULD I HAVE THAT FORMED OPINION?
A THERE'S SOMETHING LIKE 180,000 HOUSEHOLDS, THAT
I UNDERSTAND, IN THE AREA. THE DENSITY IS RELATIVELY HIGH.
WE'RE TALKING ABOUT PROBABLY FOUR OR FIVE HUNDRED MILES OF
CABLE PLANT, AS I UNDERSTAND IT. I THINK IF YOU'RE TALKING
ABOUT 500 MILES OF CABLE PLANT AERIAL CONSTRUCTION, AND
ASSUMING THAT YOU DIDN'T HAVE A HIGH PERCENTAGE OF
REPU.CEMENT OF POLES, AS I I NO I CATED BEFORE, WE'RE TALK I NG
ABOUT ONE CABLE SYSTEM. THE COST OF AERIAL CONSTRUCTION
MIGHT BE, AS I INDICATED, IN THE 10 TO $20,000 PER MILE
CATEGORY.
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SO IF YOU TAKE -- LET'S ASSUME 400 CABLE MILES,
AND MY MILEAGE GUESSES COULD BE OFF BY A FACTOR. I'M JUST
ESTIMATING THESE. BUT IF YOU ASSUME 400 CABLE MILES AT 15
TO $20,000 A MILE, YOU'RE TALKING ABOUT 60 TO 880 MILLION AS
A COST. SO MY GENERAL ANSWER, I THINK, WOULD BE IF WE ARE
TO GIVE YOU A WIDE RANGE, PROBABLY SOMEWHERE IN THE 50 TO
S100 MILLION OR HIGHER CATEGORY.
Q LET ME SEE IF I CAN FIND ANY NUMBERS TO GIVE
YOUr A LITTLE MORE ACCURATE NUMBERS TO WORK WITH HERE.
A IF YOU'RE GOING TO GIVE ME PRO FORMAS, I WOULD
DISPUTE WHETHER THEY'RE ACCURATE OR NOT.
Q WHAT I'LL DO IS GIVE YOU NUMBERS ON A CITY OF
LOS ANGELES BOARD OF TELECOMMUNICATIONS DOCUMENT. IT SAYS
181,000 DWELLING UNITS.
A THAT'S WHAT I UNDERSTOOD.
Q POPULATION, 513,000.
A THAT'S NOT RELEVANT DIRECTLY.
Q AMERICAN ESTIMATED THAT THERE WILL BE 763 MILES
OF AERIAL PLANT AND 35 MILES OF UNDERGROUND PLANT.
A THEY'RE TALKING ABOUT 800 MILES. I WAS A
LITTLE LOW IN MY ESTIMATE.
Q 48-MONTH CONSTRUCTION TIME.
A WELL, IF YOU'RE TALKING ABOUT
MS. HOLBROOKE: THERE'S NO QUESTION.
III
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BY '''IR. BRAMSON:
Q THE QUESTION IS NOW: USING THOSE NUMBERS,
MAYBE YOU CAN GIVE ME A REVISED NUMBER FOR THE SAME THING.
A THE THING THAT'S CHANGED BY ANY SUBSTANTIAL
AMOUNT IS THE MILEAGE. FOR 800 MILES OF CABLE AT $10,000 A
MILE, YOU'RE TALKING ABOUT $80 MILLION. IF YOU TAKE THE
HIGH EXTREME AT 20,000, YOU'RE TALKING ABOUT 160 MILLION.
THOSE ARE WHAT I WOULD GIVE YOU AS A LOW AND HIGH RANGE.
IF YOU TOOK THE AVERAGE BETWEEN THAT, YOU'D
WINe UP WITH ROUGHLY 120 MILLION, I THINK.
Q SO WE'RE TALKING 80 MILLION TO 160 MILLION.
AND THAT REPRESENTS THE TOTAL CONSTRUCTION COST FOR THE
SYSTEM?
A YES.
Q NOW, YOU TOLD ME THAT THERE'S SOMETHING LIKE
40 POLES PER MILE.
A YES.
Q AND THAT YOU BELIEVED THAT AS MANY AS HALF OF
THOSE POLES MIGHT HAVE TO BE CHANGED OUT.
A I SAID THAT WOULD BE THE CASE IF THERE WERE TWO
CABLI: COMPANIES INVOLVED. I THINK I SAID PERHAPS 10 PERCENT
IF THERE WAS ONLY ONE CABLE COMPANY.
Q THAT'S MY RECOLLECTION, TOO.
SO HALF OF 40 POLES PER MILE IS 20 POLES PER
i MIL E : ~
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A YES.
Q AND I THINK YOU SAID $1,000 A POLE, AVERAGE,
FOR CHANGE-OUT COSTS?
A GENERALLY IF THERE'S A CONSIDERABLE NUMBER OF
ADDITIONAL CHANGES ALONG WITH CHANGING THE POLE, YES.
Q AND WE HAVE 760 MILES OF AERIAL PLANT. 760
TIMES 20, I GUESS 15,200 IS WHAT YOU GET.
A YES.
Q AND AT $1,000 A POLE, THAT WOULD BE ANOTHER
$15 MILLION; IS THAT RIGHT?
A YES.
Q SO IT WOULD BE YOUR ESTIMATE THAT THE
CONSTRUCTION COSTS FOR THE FIRST SYSTEM WOULD BE 80 MILLION
TO 160 MILLION, AND FOR THE SECOND SYSTEM, IT COULD BE AS
MUCH AS 95 MILLION TO 175 MILLION?
A NO, I DON'T THINK SO. WHAT I SAID WAS MY
ESTIMATED COST PER MILE FOR THE FIRST SYSTEM WAS 10 TO
$20,000 A MILE. THE REASON IT'S SUCH A WIDE RANGE BETWEEN
10 AND 20 IS BECAUSE THAT NORMALLY INCLUDES WHAT YOU
CONSIDER NORMAL POLE CHANGE-OUT COSTS. SO THAT WOULD
INCLUDE POSSIBLY THE $15 MILLION THAT WE'RE TALKING ABOUT,
THE SMALLER AMOUNT THAT WOULD BE NECESSARY IF ONLY
10 PERCENT OF THE POLES WERE CHANGED OUT.
IF YOU HAVE A SECOND COMPANY COMING IN, THEN
JUST THE POLE CHANGE-OUT COST ITSELF WOULD AMOUNT TO
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$15 MILLION EXTRA BURDEN OVER AND ABOVE THE COST OF
ATTACHING THE CABLE TO THE POLES.
NOW, THE COST OF INSTALLATION, APART FROM
CHANGING OUT POLES, IS ALSO HERE FOR THE SECOND COMPANY TO
BUILD. SO THAT IT'S NOT ACCURATE TO SIMPLY SAY TAKE THE
80 TO 160 MILLION NUMBER FOR THE FIRST COMPANY AND JUST ADD
15 MILLION TO IT. BECAUSE IN ADDITION TO PAYING FOR POLE
CHANGE-OUT COSTS, IT COSTS YOU MORE IN LABOR TO CONNECT THE
CABLES, TO MEET THE REQUIREMENTS OF SAFETY AND SO FORTH.
IT'S SIMPLY MORE EXPENSIVE TO BUILD AND CERTAINLY IN THE
UNDERGROUND AREA, IT'S CONSIDERABLY MORE EXPENSIVE BECAUSE
YOU HAVE TO DIG UP THE SAME AREA AGAIN.
SO THE COST PER MILE FOR THE SECOND COMPANY IS
PROBABLY CLOSER TO THE HIGH END OF THAT RANGE THAN JUST THE
AVEk.AGE OF THAT RANGE. NOW ALL. I'M SAYING IS THAT IT'S NOT
INSTEAD OF 80 TO 160 IT IS 95 TO 175. THERE'S AN ADDITIONAL
PENALTY THAT THE SECOND COMPAN'(, PAYS BECAUSE THE
CONSTRUCTION COSTS PER MILE ARE HIGHER.
Q HOW SIGNIFICANT IS THAT ADDITIONAL PENALTY?
A ALL I CAN DO IS REFER BACK TO THOSE STUDIES
THAT WE'RE TALKING ABOUT WHERE THEY CLAIM IT CAN BE
15 PERCENT UP TO 35 PERCENT. 35 PERCENT PENALTY ON A
$100 MILLION SYSTEM IS ANOTHER $35 MILLION. SO WE'RE
TALKING IF THOSE STUDIES ARE ACCURATE, IF THOSE RANGES ARE
REASONABLE, THEN WE'RE TALKING PERHAPS ANOTHER 20, 30,
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$40 MILLION ON TOP OF THE POLE CHANGE-OUT COST THAT THE
SECOND COMPANY WOULD HAVE TO PAY.
Q DO YOU KNOW WHETHER THOSE STUDIES INCLUDED
AREAS WITH SIGNIFICANT GNDERGROUND CONSTRUCTION?
A I THINK, AS I RECALL, THERE WERE COMPOSITES.
THEY WERE AVERAGED SYSTEMS IN THE SENSE THAT ThE PERCENTAGE
OF UNDERGROUNDING WAS OVER A LARGE NUMBER OF SYSTEMS THAT I
LOOKED AT. SO I DON'T THINK IT REFLECTED ANY SPECIFIC
SPECIAL CASE WHERE YOU MIGHT HAVE A LOT OF UNDERGROUNDING OR
A SMALL AMOUNT. I THINK IT WAS JUST AN AVERAGE.
Q LET'S START WITH AN EXAMPLE. I ASSUME THAT IF
YOU BELIEVED THAT TWO CABLE TELEVISION COMPANIES COMPETING
WITH EACH OTHER IN THE SOUTH CENTRAL AREA COULD EACH GET
HALF OF THE REVENUE THAT ONE COMPANY COULD GET, AND THAT IT
ONLY COST 50 CENTS TO BUILD A SYSTEM ALL THE WAY THROUGH THE
SOUTH CENTRAL AREA, THAT YOU BELIEVE IT WOULD BE CERTAINLY
ECONOMICALLY FEASIBLE FOR THAT COMPETITION TO OCCUR BECAUSE
IT WOULD COST HARDLY ANYTHING TO BUILD THE SYSTEM AND
ALREADY THERE'S MONEY POTENTIAL TO BE MADE. I CERTAINLY
AGREE THAT THAT COST IS AN ABSURD COST, AND 11M JUST TRYING
TO EXPLAIN TO YOU WHAT MY NEXT QUESTION IS GOING TO BE.
AND THE QUESTION IS: WHAT TOTAL SYSTEM COST DO
YOU BELIEVE IN YOUR OPINION WOULD BE THE BREAK-EVEN POINT,
THAl IS, WHERE THE CONSTRUCTION COST IS LOW ENOUGH SO THAT
TWO COMPANIES COULD BEAR THAT COST, RECEIVE THE REVENUE AND
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BOTH BE PROFITABLE INDEFINITELY?
A I PROBABLY CANIT GIVE YOU A SIMPLE ANSWER TO
THAT, BECAUSE FIRST OF ALL, THERE'S TWO TYPES OF COSTS.
THERE'S CONSTRUCTION COSTS, WH[CH I EMPHASIZE, AND OPERATING
COSTS. THE OPERATING COST IS A VERY SIGNIFICANT FACTOR
ALSO. AND YOU GET ECONOMIES, OF CABLE WITH ONE COMPANY
MONOPOLIZING THE AREA THAT YOU DON'T GET WITH TWO COMPANIES
IN THE AREA. SO THAT THE OPERATING COSTS GET TO BE
PROPORTIONATELY HIGHER FOR TWO COMPANIES IN THE AREA.
YOU HAVE SUCH IND1RECT COSTS SUCH AS COST OF
MONEY OR INTEREST COSTS. THE FACT OF THE MATTER IS THAT
BECAUSE OVERBUILDS ARE SO RARE, LENDERS ARE VERY LEERY OF
LENDING MONEY IN OVERBUILD SITUATIONS. MOST OF THE LENDER
REPRESENTATIVES I'VE TALKED TO HAVE INDICATED THAT IF A
COMFANY CAME TO THEM WITH AN OVERBUILD PROPOSITION, THEY
E I T ~ E R WOULDN'T LEND AT ALL OR THEY'D LEND AT VERY HIGH
INTEREST RATES. SO SUCH COSTS AS INTEREST COST COULD BE
CONSIDERABLY DIFFERENT FOR A SECOND COMPANY THAN FOR A FIRST
COMPANY.
ALL I'M POINTING OUT IS THERE ARE A LOT OF
FACTORS INVOLVED THAT CONTRIBUTE TO THE COSTS, AND' I THINK
IN MOST CASES THOSE FACTORS ARE WORSE FOR THE SECOND COMPANY
THAN FOR THE FIRST. I CAN'T GIVE YOU A CLEAR ANSWER THAT
SAYS IT'S OKAY TO PAY A $25 MILLION PENALTY AND YOU'LL MAKE
OUT ALWAYS. BUT IF YOU HAVE TO PAY A $30 MILLION PENALTY
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YOU WOULD NOT MAKE OUT AT ALL. IF YOU GO BACK TO THE
ORIGINAL QUESTION ON THE MARKETPLACE, WHY HAVEN'T OTHER
CABLE COMPANIES RUSHED INTO OVERBUILDING IF THERE IS AN
ECONOMIC OPPORTUNITY? I THINK THAT'S PROBABLY THE BEST
ANSWER.
Q WELL, THE QUESTION I'M ASKING YOU NOW IS:
WHAT, IN YOUR OPINION IS -- LET ME ASK IT A DIFFERENT WAY.
HOW LOW DOES THE SYSTEM CONSTRUCTION COST HAVE
TO BE BEFORE YOU BELIEVE COMPETITION WOULD BE ECONOMICALLY
VIABLE IN THE SOUTH CENTRAL AREA? IF YOU'RE TELLING ME YOU
DON'T KNOW, THAT'S FINE. IF YOU'RE TELLING ME IT WOULD HAVE
TO BE LESS THAN ZERO, THAT'S FINE. I'M NOT SURE I
UNDERSTOOD YOUR PREVIOUS ANSWER.
A WHAT I THINK I'M TELLING YOU IS THAT I CAN'T
CONC:EIVE IN ANY PRACTICAL CASE OF THE COST OF CONSTRUCTION
FOR THE SECOND COMPANY BEING LESS THAN THE COST OF
CONSTRUCTION FOR THE FIRST COMPANY. IN MOST CASES, IT WILL
BE HIGHER. GIVEN THAT ASSUMPT10N THAT I'M MAKING, THAT THE
COST OF THE CONSTRUCTION FOR THE SECOND COMPANY HAS GOT TO
BE tlIGHER THAN THE COST FOR THE FIRST COMPANY, I THINK THAT
LEADS ME -- THAT'S ONE OF THE THINGS THAT LEADS M ~ TO THE
CONCLUSION THAT SAYS THAT UNLESS YOU CAN GET YOUR OPERATING
COSTS DOWN TO PRACTICALLY ZERO -- I'LL TURN THE QUESTION
AROUND. UNLESS YOU GET YOUR OPERATING COSTS DOWN TO ZERO,
YOU'RE STARTING WITH A BIG HANDICAP. AND I DON'T SEE HOW
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YOU CAN EVER OVERCOME THAT HANDICAP.
Q IF YOU'RE FOCUSING ON THE DISADVANTAGES THAT A
SECOND COMPANY HAS COMING IN AND TRYING TO LURE AWAY
SUBSCRIBERS, I DIDN'T MEAN TO FOCUS ON THAT.
A OKAY.
Q LET'S CONSIDER A SITUATION WITH SIMULTANEOUS
CONSTRUCTION BY TWO SYSTEMS. NOT NECESSARILY ON THE SAME
POLE AT THE SAME TIME, BUT BOTH RECEIVE THEIR fRANCHISES AT
THE SAME TIME AND ARE PERMITTED TO CONSTRUCT.
A OKAY.
Q MY QUESTION TO YOU IS: IN YOUR OPINION, HOW
LOW DOES A CONSTRUCTION COST HtlVE TO GO BEFORE THAT WOULD BE
AN ECONOMICALLY VIABLE VENTURE FOR BOTH COMPANIES?
A I THINK MY ANSWER WOULD PROBABLY BE THE ONE I
SAID BEFORE, LESS THAN ZERO, BECAUSE WHAT WE ARE TALKING
ABOUT IS TAKING A PENETRATION RATE THAT IS, AT LEAST IN THIS
LOS ANGELES AREA, IS LOWER THAN THE NATIONAL AVERAGE TO
BEGIN WITH. IF YOU LOOK AT THE FIGURES I'VE GIVEN YOU AS OF
A COUPLE OF MONTHS AGO FOR THE CITY OF LOS ANGELES, YOU'LL
SEE THAT THE LOWER INCOME SECTIONS OF THE CITY HAVE
PENETRATION RATES IN THE 20 TO 30 PERCENT. IF YOU TAKE EVEN
40 PERCENT OR EVEN 50 PERCENT, WHICH IS HIGH FOR
LOS ANGELES, AND SPLIT IT UP WITH TWO COMPANIES GETTING HALF
OF THAT, I THINK THERE IS NO CONCEIVABLE WAY THAT EITHER
COMPANY CAN AVOID LOSING MONEY REGARDLESS OF HOW LONG THE
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CONSTRUCTION COST IS. THERE SIMPLY IS NOT ENOUGH REVENUE TO
2 COVER EVEN OPERATING COSTS.
f
Q I TAKE IT IN YOUR OPINION OPERATING COSTS FOR
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EACH COMPANY IN SUCH A SITUATION WOULD BE SOMETHING HIGHER
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T H A r ~ THE 25 TO $30 A MONTH THAT WOULD BE THE REVENUE PER
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SUBSCRIBER?
MS. HOLBROOKE: DO YOU UNDERSTAND THAT QUESTION?
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THE WITNESS: I THINK I DO.
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AGAIN, I WANT TO CLARIFY IT. WHAT I SAID
BEFORE, IN THE 25 TO $30 A MONTH PER SUBSCRIBER, THAT
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REVENUE COVERS BOTH OPERATING COSTS AND NONOPERATING COSTS
f 12 AND PRESUMABLY PROVIDES A PROFIT FOR THE CABLE OPERATOR.
13 WHAT I'M SAYING IS THAT THERE IS NOT ENOUGH REVENUE IF YOU
14 SPLIT THAT UP.
15 LET ME GIVE YOU AN EXTREME EXAMPLE. THATIS WHY
I DONIT -- CANIT ACCEPT YOUR QUESTION AS IT IS.
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IF A SECOND COMPANY COMES INTO AN AREA AND THE
l FIRST COMPANY HAS 10,000 SUBSCRIBERS AND THE SECOND 18
COMPANY -- JUST TO TAKE AN EXAGGERATED HYPOTHETICAL CASE -
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ONLY CAN PULL AWAY ONE SUBSCRIBER FROM THE COMPANY, IT WILL 20
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GET 25 OR $30 A MONTH FROM THAT SUBSCRIBER. BUT THAT WILL
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NOT BE ENOUGH TO COVER ANYTHING. SO YOUIVE GOT TWO THINGS.
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IT'S JUST NOT THE DOLLARS PER SUBSCRIBER, IT'S WHETHER YOU
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CAN COVER THE FIXED COST THAT YOU HAVE PLUS THE VARIABLE
25 COSTS THAT YOU HAVE.
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FIXED COSTS ARE COSTS THAT ARE INDEPENDENT OF
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2 SUBSCRIBERS, AND ONE OF THOSE IS CONSTRUCTION COSTS THAT
RELATES TO THE MILES THAT YOU BUILD, BUT DOESN'T
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IT RELATES TO SUBSCRIBERS, THE COST THAT GOES
INTO EACH HOME.
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BUT IF IT COST YOU $20,000 A MILE TO BUILD THAT 6
PLANT AND YOU ONLY GET ONE SUBSCRIBER, YOU STILL HAVE TO GET
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VARIABLE COSTS THAT ARE YOUR LABOR COSTS AND ThINGS LIKE 9
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12 NOW, YOU HAVE TO HAVE ENOUGH MONEY COMING IN TO
13 PAY BOTH YOUR FIXED COSTS AND TO PAY YOUR VARIABLE COSTS,
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14 AND GIVE YOU SOMETHING ON TOP OF THAT. SO TO TRY TO ANSWER
YOUR QUESTION, IT IS NOT SIMPLY SAYING HAVE THE SUBSCRIBERS
16 AT lHE SAME DOLLAR RATE. ITIS DETERMINING WHAT YOUR FIXED
17 COSTS ARE AND WHETHER AFTER THE SUBSCRIBER, WHETHER IT WILL
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PAY EVEN THE FIXED COSTS. IN MY OPINION, IT WON'T.
19 BY fJR. BRAMSON:
Q
DID YOU MEAN TO INCLUDE FIXED COSTS AS YOU'RE
21 DESCRIBING THEM NOW UNDER YOUR REFERENCE TO OPERATING COSTS
22 PREVIOUSLY?
23 A SOME OPERATING COSTS ARE FIXED. SOME ARE NOT.
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GENERALLY DEPRECIATION AND INTEREST. DEPRECIATION DEPENDS
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LANNED CONSTRUCTION COSTS, AND INTEREST IS RELATED TO
THAT VERY HEAVILY BECAUSE YOU'RE GENERALLY BORROWING A
CERTAIN PERCENTAGE OF THE MONEY. YOU HAVE TO PAY YOUR
I N T ~ R E S T WHETHER YOU HAVE ONE SUBSCRIBER OR A MILLION. YOU
HAVE THE SAME DEPRECIATION WHETHER YOU HAVE ONE SUBSCRIBER
OR A MILLION. SO THOSE ARE OBVIOUSLY FIXED.
BUT SOME OPERATING COSTS ARE FIXED ALSO. COST
OF MAINTENANCE, FOR EXAMPLE, MIGHT BE YOU MIGHT HAVE TO
HAVE 10 MAINTENANCE TECHNICIANS AND KEEP THEM MAINTAINING
THE SYSTEM REGARDLESS OF HOW MANY SUBSCRIBERS YOU HAVE.
THERE ARE OTHERS THAT VARY WITH THE NUMBER OF SUBSCRIBERS.
YOU HAVE TWO CATEGORIES. ONE CATEGORY YOU
CANNOT REDUCE NO MATTER HOW MANY SUBSCRIBERS YOU HAVE. AND
IF YOU DON'T HAVE ENOUGH REVENUE TO COVER THAT CATEGORY AT
LEAST, YOU'RE LOSING MONEY NO MATTER WHAT YOU DO.
Q IS IT YOUR OPINION THAT IF PENETRATION DIDN'T
CHANGE FROM ONE SCENARIO TO ANOTHER SCENARIO, THAT IS,
HOWEVER MANY SUBSCRIBERS YOU WOULD ESTIMATE AMERICAN IS
LIKELY TO GET IN THE SOUTH CENTRAL AREA, IF WE ASSUMED THAT
NUMEER OF SUBSCRIBERS STAYS THE SAME AND COMPETITION OCCURS
AND THE TWO COMPANIES SPLIT THOSE SUBSCRIBERS SO THEY EACH
HAVE HALF OF THAT TOTAL NUMBER, IS IT YOUR OPINION THAT THE
REVENUE RECEIVED BY EACH COMPANY IN THAT SITUATION WOULD BE
INSUFFICIENT TO COVER THEIR OPERATING COSTS?
A YES, THAT'S MY OPINION.
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(RECESS.)
BY f-IR. BRAMSON:
Q MR. PILNICK, WHEN I EARLIER ASKED YOU WHETHER
OR NOT IT WAS TRUE THAT THE FEASIBILITY OF COMPETITION IN
YOUR OPINION BOILED DOWN TO TWO LARGE ISSUES, ONE IS AMOUNT
OF COSTS, THE OTHER AMOUNT OF REVENUE, YOU AGREED WITH ME;
IS THAT CORRECT?
A YES.
Q THE BEST WAY TO ANALYZE THAT ISSUE IS TO ARRIVE
AT SOME TOTAL COST PER SUBSCRIBER TO COMPARE TO TOTAL
REVENUE PER SUBSCRIBER, ISNrT IT?
A I THINK THAT'S INCOMPLETE.
AS I INDICATED, TH,E COST INCLUDES SOME COSTS
RELATED TO SUBSCRIBERS AND SOME THAT ARE NOT. SOME THAT ARE
RELATED TO PLANT MILEAGE REGARDLESS OF HOW MANY SUBSCRIBERS
YOU HAVE. YOU HAVE TO HAVE A WAY OF TAKING BOTH OF THOSE
INTO CONSIDERATION.
Q WHAT YOU WOULD DO TO ASSESS THE FEASIBILITY OF
COMPETITION WOULD BE TO MAKE YOUR ESTIMATES ABOUT COSTS AND
ABOUT REVENUES AND PUT THEM ON SOME SORT OF PARALLEL PLANE.
SO IT'S EITHER TAKE THE TOTAL COSTS AND DIVIDE BY NUMBER OF
SUBSCRIBERS AND TOTAL REVENUES AND DIVIDE BY NUMBER OF
SUBSCRIBERS OR DIVIDE THEM BY NUMBER OF HOMES PASSED OR
SOMETHING THAT YOU CAN COMPARE THE COSTS TO REVENUES;
CORRE.CT?
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A I THINK THAT'S CORRECT. AND I DON'T WANT TO
QUI8BLE. I THINK IT'S SIMPLY EASIER TO SAY YOU ARE GOING TO
COMPARE COSTS AGAINST REVENUES PERIOD. THE QUESTION OF
PUTTING THEM IN SOME COMPATIBLE CONTEXT IS USUALLY FOR
PEOPLE WHO DON'T WANT TO GO THROUGH THE TROUBLE OF ANALYZING
THE COST AND REVENUES AND WANT A NICE SYSTEM THEY CAN USE
WITHOUT DOING THE ANALYSIS. THAT'S A CONVENIENCE.
WHAT IT BOILS DOWN TO ARE WHAT ARE THE TOTAL
OVER A PERIOD OF TIME1 ARE THE TOTAL. REVENUES
OVER A PERIOD OF TIME? AND THE QUESTION OF SUBSCRIBERS IS
REALLY IRRELEVANT TO THAT.
Q YOU HAVEN'T MADE PROJECTIONS OF THE TOTAL COSTS
FOR COMPETITIVE SYSTEMS IN THE SOUTH CENTRAL AREA, HAVE YOU?
A NO, NOT TO ANY GREATER EXTENT THAN WHAT I JUST
DID RIGHT HERE.
Q AND YOU HAVEN'T MADE ANY PROJECTIONS OF THE
TOT NUMBER OF REVENUES FOR A COM PET I T I VE SYSTEM?
A THAT'S CORRECT.
Q IT'S TRUE, IS IT NOT, THAT THE FACTORS WHICH
YOU'VE IDENTIFIED AS BEING RELEVANT TO THE FEASIBILITY OF
COMPETITION ARE RELEVANT BECAUSE THEY AFFECT THE
COSTS OR THE REVENUES; RIGHT?
A YES.
Q
AND THOSE FACTORS, SOME OF THEM ARE FAVORABLE
FOR COMPETITION AND SOME ARE UNFAVORABLE FOR COMPETITION;
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CORRECT? YOU HAVE TENDENCIES GOING IN BOTH DIRECTIONS;
RIGHT?
A WELL, I THINK ONE SECTION IN THAT DOCUMENT IS
TRY[NG TO ESTABLISH THOSE CONDITIONS THAT WOULD MAKE AN
OVERBUILD SUCCESSFUL. AND THOSE FACTORS ARE THE ONES THAT
WOULD GENERALLY BE FAVORABLE TO ECONOMIC SUCCESS IF THEY
EXISTED. SO THEY'RE INTENDED TO SIMPLY LIST CONDITIONS THAT
YOU'D NEED TO MAKE AN OVERBUILD SUCCESSFUL. THEY'RE NOT
INTENDED TO COVER ALL OF THE CONDITIONS THAT MIGHT INVOLVE A
PARTICULAR FRANCHISE IN SOUTH CENTRAL.
Q I UNDERSTAND.
LET ME GIVE YOU AN EXAMPLE. THE DENSER AN
AREJ" THE MORE FAVORABLE IT IS FOR COMPETITION, EVERYTHING
ELSE BEING EQUAL?
A EVERYTHING ELSE, INCLUDING CONSTRUCTION COSTS
PER HOME BEING EQUAL, YES.
Q AND THE DENSITY IN THE SOUTH CENTRAL AREA,
COMFARED TO MOST AREAS OF THE COUNTRY, IS QUITE GOOD?
A YES.
Q SO THAT THE ISSUE OF DENSITY IS FAVORABLE FOR
THE FEASIBILITY OF COMPETITION, CORRECT? I
YOU'VE IDENTIFIED SOME OTHER FACTORS THAT ARE UNFAVORABLE.
A WHAT I 'M GETTING AT IS DENSITY IS SOMETHING YOU
CANtT TALK ABOUT IN A VACUUM. THE DENSITY OF HOMES IN
NEW YORK CITY IS EVEN GREATER THAN IT IS IN SOUTH CENTRAL.
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1 IT'5 MUCH GREATER. SO THAT IF YOU ONLY LOOKED AT DENSITY AS
2 lONE ITEM, YOU WOULD SAY NEW YORK CITY IS A WONDERFUL MARKET
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FOR CABLE. BUT THE COSTS TO CONNECT THESE SUBSCRIBERS IN
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THAT HIGH-DENSITY AREA ARE SO MUCH HIGHER THAN THE COSTS IN
5 LOW-DENSITY AREAS THAT IT TURNS OUT THAT EVEN WITH GOOD
6 DENSITY, THATIS NOT A FAVORABLE MARKET.
Q THE REASON THOSE COSTS ARE SO HIGH IS THAT
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8 THERE IS UNDERGROUNDING WHICH HAS TO BE DONE UNDER CEMENTED
9 STREETS WITH A LOT OF STUFF UNDERNEATH THEM?
10 A THAT IS ONE OF THE REASONS, OBVIOUSLY, YES.
11 ANOTHER REASON IS ONE THATIS VERY SIMILAR TO
12 SOUTH CENTRAL. AND YOU HAVE A LOT OF BACK ALLEY
13 CONSTRUCTION EVEN IN THE AERIAL PORTIONS. YOU HAVE A LOT OF
14 CONGESTED POLES. AND YOU HAVE A LOT OF MULTIPLE-DWELLING
15 UNITS, APARTMENT HOUSES WHERE YOU NOT ONLY HAVE TO BRING THE
.
CABLE TO THE HOUSE, BUT YOU HAVE TO DO THE CABLING INSIDE OF
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THE HOUSE, TOO.
l SO ALL 11M TRYING TO DO IS NOT OVERSIMPLIFY. 18
AND I THINK YOU OVERSIMPLIFY IF YOU ONLY TAKE ONE OF THOSE
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FACTORS AND CONSIDER IT AS AN ITEM APART FROM EVERYTHING
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21 ELSE. MOST OF THESE ARE INTERRELATED TO EACH OTHER.
22 Q WHEN YOU SAY, -BACK ALLEY CONSTRUCTION,- WHAT
23 DO YOU MEAN BY THAT?
A THE EASEMENTS. IF YOU TAKE A SUBURBAN AREA,
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EASEMENTS TO THE TELEPHONE POLES, UTILITY POLES THAT SERVE
THAT IN MANY CASES GO DOWN THE FRONT SIDEWALK. AND IT'S
RELATIVELY EASY TO GET ACCESS TO THAT BECAUSE YOU CAN GET
ACCESS FROM THE PUBLIC STREET. SO THE ABILITY TO PUT YOUR
CABLE UP AND TO REPAIR IT, ADJUST IT IS SIMPLIFIED, AND THE
COST IS LOWER BECAUSE THE ACCESS IS EASIER.
SOME OF THE OLDER CONSTRUCTION, PARTICULARLY IN
THE HIGH-DENSITY INNER CITY AREAS, SOME OF THE OLDER
CONSTRUCTION HAS THE EASEMENTS IN THE BACK OF THE HOUSE. SO
THERE MAY BE A BLOCK OR ROW OF HOMES RUNNING DOWN ONE BLOCK
AND ANOTHER ROW OF HOMES RUNNING DOWN THE BLOCK BEHIND THEM,
AND IN BETWEEN YOU HAVE AN ALLEY. AND THAT ALLEY IS USED
BOTH FOR EASEMENTS, FOR UTILITY POLES, AND IT'S ALSO USED AS
A DRIVEWAY. IN MANY CASES CARS DRIVE BACK AND FORTH THROUGH
IT. IN SOME CASES IT'S USED AS A STORAGE AREA. WHATEVER.
BUT TO GET IN THERE, YOU'VE GOT TO GET INTO
THAT ALLEY FROM THE STREET. IT'S MORE DIFFICULT TO GET
CONSTRUCTION TRUCKS IN. IT'S MORE DIFFICULT TO BRING IN THE
CABLES AND TO GET THE CABLES ON THE POLES. AND IN GENERAL,
THE COSTS ARE HIGHER SIMPLY BECAUSE IT'S A MORE CRAMPED
SPACE AND LESS ACCESSIBLE.
Q YOU'RE NOT TALKING ABOUT WHAT ARE SOMETIMES
CALLED BACKYARD EASEMENTS?
A NO.
IF YOU HAVE, AGAIN, DETACHED HOMES, YOU MIGHT
--
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HAVE THE TELEPHONE POLES RUNNING IN THE BACKYARD OF THAT
HOME, AND THAT IS WHAT IS CALLED A BACKYARD EASEMENT.
THAT'S A LITTLE BIT MORE DIFFICULT TO GET AT T H A ~ THE FRONT
OF THE STREET EASEMENT, BUT ONLY BECAUSE YOU NEED THE
PROPERTY OWNER'S PERMISSION TO GET IN. AND IN ORDER TO GET
THAT, YOU HAVE TO MAKE AN APPOINTMENT WITH THE PROPERTY
OWNER. HE'S GOT TO BE THERE AND SO FORTH. THAT IS MORE
DIFFICULT. BUT IT'S NOT THE ORDER OF DIFFICULTY THAT I WAS
TALKING ABOUT. I WAS TALKING ABOUT A MUCH MORE CONGESTED
AREA TO WORK IN.
Q SO IT'S YOUR OPINION THAT BACK ALLEY
CONSTRUCTION IS THE MOST EXPENSIVE, DIFFICULT AERIAL
CONSTRUCTION TO DO; IS THAT TRUE?
A YES. IN GENERAL, YES. THAT'S ONE OF THE MOST
DIFFICULT. I DON'T KNOW IF I WOULD USE THE WORD "THE, BUT
IT'S UP THERE.
Q IT'S MORE EXPENSIVE THAN DOING AERIAL
CONSTRUCTION ON UTILITY POLES THAT RUN ALONG THE STREET?
A YES, GENERALLY.
Q AND IN YOUR OPINION, IT'S MORE EXPENSIVE THAN
DOING AERIAL CONSTRUCTION ON A LINE OF POLES THAT RUN WITHIN
PEOPLE'S BACKYARDS?
A YES.
THE PROBLEM IS NOT ONLY WITHIN PEOPLE'S
BACKYARDS, THE PROBLEM IS REALLY THE SPACE YOU HAVE TO WORK
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IN. IF YOU'RE TALKING ABOUT SUBURBAN-TYPE CONSTRUCTION WITH
DETACHED HOMES, YOU HAVE A POLE LOCATED IN PERHAPS ONE
BACKYARD EASEMENT AND ANOTHER POLE IN SOMEBODY ELSE'S
PROPERTY. BUT THERE IS A SIGNIFICANT SPACE BETWEEN THOSE
WHERE YOU DON'T HAVE TO DO TOO MUCH.
WHEN YOU'RE TALKING ABOUT THE TYPE OF BACK
ALLEY EASEMENTS THAT I'VE MENTIONED, THAT'S GENERALLY
ACCOMPANIED WITH VERY HIGH DENSITIES AS WE'VE MENTIONED.
VERY HIGH DENSITIES MEAN YOU HAVE NOT ONLY THE POLE-TO-POLE
CONSTRUCTION, BUT YOU HAVE TO DROP CABLES FROM THE POLES.
AND YOU HAVE MANY MORE OF THOSE WITHIN A RELATIVELY SHORT
SPACE.
YOU MIGHT HAVE ONE POLE IN A SUBURBAN AREA
WHERE YOU HAVE A FOUR-POSITION TAP SO THAT FOUR DROP CABLES
COME OFF THAT PARTICULAR TRUNK CABLE OR FEEDER CABLE ON THE
POLE. THAT'S TYPICAL. IN THIS KIND OF CONSTRUCTION WE'RE
TALKING ABOUT, YOU MIGHT HAVE 50 HOMES THAT YOU HAVE TO
SERVE FROM THAT ONE POLE. SO YOU HAVE A LOT MORE TAPS TO
GET UP THERE AND ALL THE CONNECTIONS TO MAKE, AND EVERYTHING
JUST GETS MORE CONGESTED.
Q BUT VIEWING IT ON A PER-HOME COST, THAT'S
WONDERFUL FOR A CABLE COMPANY, ISN'T IT? THEY ONLY HAVE ONE
LEAD, AND THEY CAN SERVE 50 HOMES FROM THAT ONE LEAD?
A THEY MAY HAVE ONE LEAD. THEY HAVE 50 DROP
CABLES AND TAPS AND CONNECTORS THAT GO OFF THAT,. SO ALL OF
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THOSE COSTS ON THE MATERIAL COSTS ARE OBVIOUSLY -- THERE'S
NO SAVINGS THERE. YOU MAY MAKE A SAVINGS IF YOU CAN GET ALL
THE WORK DONE AT ONE TIME. BUT IT'S VERY RARE YOU CAN GET
50 CONNECTIONS TO 50 APARTMENTS IN THE SAME APARTMENT
BUILDING ALL DONE AT THE SAME TIME.
Q WELL, IT'S VERY RARE TO HAVE SERVICE TO 50
HOMES FROM ONE POLE.
A RIGHT. ALL THAT I'M SAYING IS THAT THE HIGH
DENSITY IS GENERALLY AN ITEM T ~ ~ T YOU HAVE TO LOOK AT IN
CONJUNCTION WITH THE CONSTRUCTION COSTS. IF YOU CAN GET
HIGH DENSITY WITH AN AVERAGE CONSTRUCTION COST, YOU'RE DOING
VERY WELL. IF YOU GOT HIGH DENSITY WITH HIGHER CONSTRUCTION
COSTS, YOU HAVE TO LOOK AT THE COMBINATION OF BOTH OF THEM.
Q WHEN YOU SAY, CONSTRUCTION COSTS, YOUR MAIN
CONSTRUCTION COSTS PER HOME; RIGHT?
A THERE ARE TWO KINDS. THERE IS PER MILE AND PER
HOME.
NOW, AGAIN, WHAT I MAY BE REPEATING MYSELF ON
IS THAT SOME CONSTRUCTION COSTS HAVE NOTHING TO DO WITH THE
PER HOME. YOU HAVE TO PUT THE FEEDER CABLE UP AND TRUNK
CABLE UP ON THE POLES WHETHER YOU HAVE SUBSCRIBERS OR NOT.
THE EXPECTATION IS YOU'LL HAVE SOME. BUT YOU HAVE TO PUT
THOSE CABLES UP BEFORE YOU HAVE ANY SUBSCRIBERS, AND THE
COST OF PUTTING THEM UP DOES NOT DEPEND ON HOW MANY
SUBSCRIBERS YOU GET.
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DROP CABLES ARE RELATED TO SUBSCRIBERS. YOU
DON'T PUT A DROP CABLE UP; YOU DON'T PUT A CONVERTER IN A
HOUSE UNTIL YOU GET A SUBSCRIBER. 50 THOSE COSTS ARE
DIRECTLY RELATED TO NUMBER OF SUBSCRIBERS. BUT OTHER COSTS
LIKE THE TRUNK CABLE AND FEEDER CABLE PORTION OF THE SYSTEM,
THE HEAD END, T H ~ AMPLIFIERS, POWER SUPPLIES, ALL OF THOSE
ARE PER-MILE COSTS AND HAVE NOTHING TO DO WITH THE NUMBER OF
SUBSCRIBERS.
Q NONE OF THOSE COSTS WOULD BE ABOVE AVERAGE IN
THE SOUTH CENTRAL AREA, WOULD THEY?
A I SUSPECT THAT PUTTING UP TRUNK AND FEEDER
CABLE, BECAUSE OF THE LOCATION OF THE POLES, MIGHT BE A
LITTLE BIT HIGHER. BUT I WOULD NOT CONSIDER THAT A MAJOR
FACTOR.
Q MR. PILNICK, WITH REFERENCE TO THE LARGE STACK
OF I)OCUMENTS THAT YOU WER E SUP PL I ED BY THE CITY ATTORNEY I S
OFFICE TO REVIEW IN THIS CASE, HOW, IF AT ALL, DID YOUR
REVIEW OF THOSE DOCUMENTS AFFECT OR SUPPORT OR RELATE TO THE
TESTIMONY YOU ANTICIPATE GIVING?
A I DON'T THINK IT HAS ANY MAJOR EFFECT EITHER
WAY. I READ THE DOCUMENTS. I THINK IT WAS MORE A QUESTION
OF USING THEM TO FAMILIARIZE MYSELF WITH WHAT HAPPENED IN
THIS PARTICULAR PROCESS. I DON'T RECALL ANYTHING IN THE
DOCIUMENTS THAT WOULD SUPPORT SPECIFICALLY WHEn-fER THE SOUTH
CENTRAL AREA WAS A MORE EXPENSIVE OR LESS EXPENSIVE SYSTEM.
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ING THAT I CAN RECALL NOW IN THOSE DOCUMENTS I THINK IS
RELEVANT TO WHAT WE'RE TALKING ABOUT HERE. I THINK IT WAS
MORE A QUESTION OF LEARNING WH.A.T HAPPENED.
Q REALLY ALL OF YOUR OPINIONS ARE COMPLETELY
INDEPENDENT OF THE FRANCHISING HISTORY OF THIS PARTICULAR
PARl OF LOS ANGELES, AREN'T THEY?
A I THINK SO, YES.
Q SOME OF YOUR OPINIONS MAY RELATE TO THE
DEMOGRAPHICS OR THE POLE, UTILITY POLE SITUATION IN THE
SOUTH CENTRAL AREA, BUT IT DOESN'T DEPEND UPON WHAT THEY DID
IN THE PAST AS FAR AS REGULATING THE FRANCHISE?
A YES.
Q
AND THAT'S TRUE OF ALL OF YOUR ANTICIPATED
TESTIMONY; RIGHT?
A RIGHT.
MR. BRAMSON: I THINK THIS IS A GOOD STOPPING PLACE.
WE'LL CONTINUE TOMORROW MORNING.
(ENDING TIME: 4:40 P.M.)

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f1:'<

SPECIFICALLY AT THE UTILITY POLES AND THE CONDITIONS OF THE

I WILL EVEN SAY IN SOUTH CENTRAL, IN THE

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