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Second Source for Small Cable’s TV Rivals

Small telephone companies and local utilities, unable to join the National Cable Television Cooperative during its 10-month-old membership moratorium, will soon have another source for obtaining video programming at group rates.

The National Rural Telecommunications Cooperative, which represents independent rural electric utilities and phone companies, is preparing to offer its members a suite of cable networks delivered via Internet Protocol technology.

The NRTC has beta tests for its venture running at telephone cooperatives in Georgia, Kentucky and Texas. The group is also negotiating carriage deals with programmers for its IPTV service, according to Kelli Laski, its manager of external communications. She declined to comment on which networks the cooperative has struck deals with, if any.

Last November, the NRTC unveiled a deal to use a satellite service from SES Americom Inc. to offer IPTV to its members. It would be similar to Comcast Corp.’s “Headend in the Sky” digital service for small cable operators.

The IPTV package would give the NRTC’s telecom and utility members the third leg of a triple play of services — video, on top of voice and data — that would help them compete with cable-system operators, which already offer all three services.

The NRTC is an investor in WildBlue Communications Inc., which provides “satellite-speed” Internet services to homes and offices. The cooperative currently enables its members to offer wireless Internet service to their rural customers through that satellite-broadband provider.

The NRTC’s new MPEG-4, IP-based platform was supposed to be available to its members this summer. But that commercial launch has been delayed and no new date announced.

Through the NRTC venture, small local telcos will be able to use SES Americom’s “IP-Prime” platform to potentially distribute hundreds of programming services over the lines they use to bring subscribers telephone and high-speed data services.

With its new platform, the NRTC may now prove an option for local telcos and utilities that want to start offering subscription-TV services. These providers previously might have joined the NCTC to get such video content.

The NCTC is a buying cooperative that negotiates programming and hardware deals for its members — primarily small and medium-sized cable operators, but also some small independent phone companies and utilities. Even Verizon Communications Inc. is an NCTC member, by way of its purchase of GTE Corp., which offered television in the early 1990s.

Last November, without any fanfare, the NCTC instituted an indefinite membership moratorium “in order to undertake a review of its membership policies,” according to letters the co-op sent to some companies that sought to join this year.

Last week officials at the NCTC, whose members represent 10 million subscribers, declined to comment on their moratorium, why they instituted it or when it will end.

In late July, VDC Corp., an Internet video distributor, applied to join the NCTC, and received a form rejection letter. The rejection cited the moratorium, according to VDC chief operating officer Scott Wolf. VDC has a broadband video site, VDC.com, where it delivers such video channels as ShopNBC.

VDC earlier this month complained to federal regulators that it was being stymied in its efforts to secure carriage deals with networks. VDC said it was looking to join the NCTC so it could purchase programming for its Web site through the cooperative.

“After talking to some small cable operators that were interested in licensing our technology for their own private cable system, they had asked the question, 'Why are you having so much trouble getting programming?’” Wolf said.

Those operators suggested that he approach the NCTC, according to Wolf.

One longtime cable-industry executive was critical of the NCTC’s moratorium, since the whole basis for the cooperative’s being — its mission — is to amass the subscribers of its members to get volume discounts on license fees from programmers.

“How does this [moratorium] make sense for an organization whose reason for being was joint-programming clout?” the veteran executive said.

Added Wolf, “I guess Comcast and Time Warner will continue to grow, and they’ll [the NCTC] just stay the way they are.”

One programming executive said the NCTC is looking for ways to change its policy or rewrite its bylaws so it can bar companies that don’t use traditional hard wire, such as cable, to deliver programming, be it phone companies or an Internet company like VDC.

It’s not new for a cable-trade group to rewrite its bylaws so that phone companies can’t qualify for membership. The Cable & Telecommunications Association for Marketing did it last year.