Internet Provider Channels Efforts Into Leasing Cable TV Space

Don Janke, president of Los Angeles-based Internet Ventures, got what he wanted in 1997, when he joined with Ventura’s Avenue TV Cable to provide high-speed Internet service to the cable company’s 10,000 subscribers.

But it hasn’t been as easy negotiating an agreement with the other Ventura cable operator, 15,000-household Century Communications. So Internet Ventures, through its affiliate VenturaLink, is taking an alternate approach. Rather than try to arrange a partnership, the Internet firm has applied to lease a cable channel.

Under a Federal Communications Commission rule, cable companies are required to set aside channel space for unaffiliated companies to provide video programming. Whether Internet access qualifies as video programming has been cause for debate, but Janke is ready to argue his case.

“What we do is enriched Internet service, which is video programming,” Janke said. “We’re not writing new regulations, we’re just making sure they’re complied with.”

Interpretation of the FCC regulations is a primary point of contention for cable companies that aren’t clamoring to hook up independent Internet service. And an FCC decision last week not to force cable firms to sell space to Internet providers supported their fight.

“We’re studying their request and looking for guidance from Congress and the FCC,” said Bill Rosendahl, senior vice president of operations for Century Communications of Southern California. “We have limited capacity on our cable--the Ventura [cable] plant is old and decrepit and we’re going to tear up the plant and build a system that is going to have a broader band. When that infrastructure is complete I’ll have a better idea of what we can do.”

Aside from structural capability, Rosendahl said, providing cable access to an Internet provider doesn’t make good business sense.

“We’re the ones who spend the money on the infrastructure, we’re the ones who take the risk in capital, we’re the ones building the telecommunications systems,” he said. “We would feel more comfortable if access can be worked out in the marketplace.”

Rather than lease space, VenturaLink has a revenue-sharing agreement with Ventura’s Avenue TV Cable, which serves customers on the west side of the city. The companies share income from Internet service subscriptions, with VenturaLink receiving about 70%.

In a leased-space situation, the Internet provider would pay $8,000 monthly and receive 100% of the revenues, Janke said.

Internet Ventures is pursuing leased-access arrangements in 18 other markets in the western United States. The company’s Internet On Ramp provider invoked the leased-access provision early this month with the TCI cable company in Spokane, Wash. Last week the company applied with Century Communications in east Ventura and with MediaOne in Stockton.

“We’ve been trying [shared revenue] agreements first--Avenue Cable was the first in the country,” Janke said. “Then our business sense starts to come up. . . . Leased access gives us more in-pocket revenue than revenue share does.”

Janke worked eight years in the cable industry before spending the past 11 years involved with the Internet industry. He said he can see two sides of the argument for cable Internet access.

“It’s easy for me to put my old cable operator’s hat on and from a chest-beating, monopoly standpoint, this would not be what I want, somebody telling me what to do,” Janke said.

“But on the other side--we may be the leader right now--but this is good for the local [Internet service provider] industry--if we win the Century argument with leased access, I see no reason others [providers] won’t follow,” he said. “If Century in Ventura were to say, ‘no problem,’ we’d draw up a contract, finalize it and we’re ready to go. If they say we don’t believe [the FCC rule] applies, we would request an audience with the City Council, and if that wasn’t sufficient, file in federal district court.”

To date, Janke said, cable company response to working with Internet Ventures affiliates has run the gamut.

“I have heard everything from cable companies,” he said. “From ‘don’t darken our door,’ to Spokane TCI responding in a shorter time period than the FCC required.”

Century Communication’s Rosendahl said he expects it will take six to 18 months to iron out the relationship between cable firms and Internet providers on a national basis.

“This is going to be a major federal issue, a policy issue,” he said. “When it’s all said, the [providers] will get on these platforms, but we have to work things out.”