[Random-bits] Paul Allen's Vulcon Ventures and cable access issues

[James Love]

This is an interesting note from John Schwartz, regarding
Paul Allen's various investments in cable, as it relates
to the issue of control of content in cable based internet
services.    Jamie


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Subject:  Smoking Gun?
     Date: Fri, 14 Jan 2000 08:46:51 -0700
    From: John Schwartz <schwartz@usa.net>
      To: Multiple recipients of list <roundtable@cni.org>

Here's some info I ran across recently that I think is germane to the
cable modem open access debate. 

High Speed Access Corp. provides turnkey high speed internet service 
to mid-sized and small cable systems.  Paul Allen's Vulcon Ventures
recently invested in HSA.  At roughly the same time, HSA contracted
with two Allen-owned cable companies, Charter and Marcus, to service 
a number of their systems. 

In the master Network Services Agreement between Charter, Marcus, and
HSA, violation of a separate "content agreement" is listed as a cause
for termination.  Here, from an HSA SEC filing, is a desciption of the
content agreement. 

"Under our programming content agreement with Vulcan Ventures, Vulcan
has the right to require us to carry, on an exclusive basis in all cable
systems we serve, content it designates.  Vulcan content may include
start-up and related web pages, electronic programming guides, other
multimedia information and telephony services.  We will not share in any
revenues Vulcan may earn through the content or telephony services it
provides.  We must provide all equipment necessary for the delivery of
Vulcan content, although Vulcan will reimburse us for any costs we incur
in excess of $3,000 per cable headend.  Vulcan cannot charge us for any
Vulcan content through November 25, 2008; after that date we will be
obligated to pay Vulcan for this content at the lowest fee charged to
any Internet service provider who subscribes to Vulcan content.  Vulcan
has the right to prohibit us from providing content or telephony
services that compete with Vulcan content and can require us to remove
our competing content.  Moreover, many industry analysts believe that
Internet access will become increasingly reliant upon revenues from
content due to competitive pressures to provide low cost or even free
Internet access.  If Vulcan were to require us to remove our content or
substitute its telephony services for any we might provide, we could
lose a source of additional revenues and might not recover all related
costs of providing our content or telephony services.  Vulcan's ability
to prohibit us from providing content and telephony services means that
Vulcan's interests are not necessarily aligned with those of our other
stockholders"

There are quite a number of HSA SEC filings.  The document from which
the above quotation is taken can be found online at

   http://www.sec.gov/Archives/edgar/data/1075244/0000950123-99-002278.txt

The Network Services Agreement between the Allen cable operators and HSA
can be found at:

   http://www.sec.gov/Archives/edgar/data/1075244/0001035704-99-000273.txt


J.

___________________________________________________________________________

John B. Schwartz
P.O. Box 6060                                  Telephone  303-442-2707
Boulder, CO  80306                             FAX        303-442-6472

schwartz@usa.net
___________________________________________________________________________