The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. The hostage story leads the news again this Friday. The White House said it had no new word on the possible release of an American and repeated it won't make deals with hostage takers. The abduction of another Westerner in Beirut was confirmed. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary we have a report and a debate about regulating cable television. Then Tom Bearden examines what the remains of Pan Am are doing to the rest of the airline industry, and we close with a Joanna Simon look at a homespun theater in Appalachia. NEWS SUMMARY

MR. MacNeil: White House Spokesman Marlin Fitzwater said today the administration is losing optimism that an American hostage will be freed in Lebanon. He said President Bush remains hopeful but there have been no specific indications that a release is imminent. Asked if a deal was being arranged, Fitzwater said, "We do not make deals with hostage takers. We do not negotiate with kidnappers." He called yesterday's kidnapping of a French aide worker "a reminder of the vicious and vengeful nature of terrorism." The governments of France and Lebanon confirmed that abduction today. We have a report by Brent Sadler of Independent Television News.

MR. SADLER: Friday prayers in Beirut's Shiite fundamentalist stronghold were led by a man whose voice is well known to captured foreign hostages. He is Sheikh Mohammed Hussein Padlala, Hezbollah's spiritual leader. It's known that his weekly prayers broadcast loudly from this mosque could be heard in underground hostage cells. Today's message was moderate, release the missing Frenchman and work towards ending the hostage issue involving all parties, he said. Beirut's newspapers were linking the kidnapping of Jerome Leyraud directly to yesterday's release of John McCarthy. A medic for Medson Demande, Doctors of the World, Mr. Leyraud was abducted in an area called Uzai on the outskirts of Beirut's Southern suburbs. It was close to where American journalist Charles Glass was kidnapped in 1987. A previously unknown group, the Organization for Defending the Rights of Prisoners, say they are holding him and they've threatened to kill him if more Western hostages are set free. The seizure of Mr. Leyraud, not far from a Syrian checkpoint, could be the result of a split in the extremist groups whose most hardline factions may want to remind the world that they can and will use force to achieve their demands. The Frenchman is almost certainly being held somewhere in the Southern suburbs of Moslem, West Beirut. Syria's prestige has taken a severe blow because the kidnapping took place in an area controlled by their troops. And it is now in the interest of Damascus to bring maximum pressure to bear on those who ordered and took partin this new abduction.

MR. MacNeil: The Associated Press reported later that Syrian forces have set up scores of checkpoints throughout Beirut. They frisked motorists and checked car trunks apparently to prevent the smuggling of the kidnapped Frenchman out of the city. United Nations Secretary General Perez DeCuellar today called Leyraud's abduction "totally counterproductive." He said it had delayed his efforts at winning more hostage releases. Perez DeCuellar will fly to London to meet released British hostage John McCarthy on Sunday. McCarthy has a letter for the Secretary General from his former captors, the Islamic Jihad. Jim.

MR. LEHRER: This afternoon the UN Secretary General said he had reports an Israeli-backed militia in Southern Lebanon might free some Lebanese prisoners. He said that would help efforts to free the Western hostages. He said, "I'm sure the Israelis will cooperate with us in solving this problem." Israel has set its own conditions for a prisoner release. We have a report by Michael Nicholson of Independent Television News.

MR. NICHOLSON: No surprise that McCarthy's release filled every Israeli headline. They too have their hostages. Prisoners of war are missing the action across the Lebanese border. It was the wife of a missing navigator, Tammy Arad, who said that McCarthy's release had given her new hope that her story will also finish soon. In return for the Israelis, the Islamic Jihad and other captives are demanding the release of Lebanese and Shiite prisoners held at the El Haram Camp in Southern Lebanon. Among them there is Sheikh Obeid, leader of Hezbollah. Israel says yes, given they have proof that their men are alive and that the Red Cross can confirm it.

MR. LEHRER: Israeli defense officials say they and the Israeli- backed militia hold about 370 Lebanese in Southern Lebanon. Gen. Norman Schwarzkopf retired today. The four star general was commander of allied forces in the Gulf War. He bid farewell to his U.S. Central Command troops during a ceremony at McDill Air Force Base in Tampa, Florida.

GEN. SCHWARZKOPF: You made it all worthwhile -- from my first day in the military service until my very last -- it was your grit when the going got tough -- it was your courage during the worst hours - - it was your resilience when we were down -- it was your love when we were up -- it was your great sense of humor that always when my morale was the lowest took my morale and shot it back up to the heights. You're what it's all about. We've never had finer troops in this country -- and the nation is well protected and well served for many years to come by you. I shall always love you. I will never, ever, ever forget you.

MR. LEHRER: Schwarzkopf spent 35 years in the U.S. Army. He has signed a $5 million deal to write a book now.

MR. MacNeil: Italy today began deporting some of the 10,000 Albanian refugees who forced their way into the country yesterday. Police fought battles with the refugees at a stadium in the Port City of Bari this morning. Some 200 managed to escape, but police said most were caught and returned to the stadium. Many collapsed from exhaustion from dehydration and had to be taken to hospitals. The refugees are fleeing desperate economic conditions in Albania.

MR. LEHRER: The government reported today a .2 percent drop in U.S. wholesale prices last month. The Labor Department said lower food and gasoline prices were the primary causes.

MR. MacNeil: Attorney Gen. Dick Thornburgh has submitted a letter of resignation to President Bush and a White House spokesman said he'll step down next week. Thornburgh is expected to be the Republican nominee for the Pennsylvania Senate seat of the late Senator John Heinz. He will run again Harris Waford, a Democrat who was appointed as interim Senator last April after Heinz died in an air crash. The White House said that Attorney General -- Deputy Attorney General William Barr will replace Thornburgh at the Justice Department.

MR. LEHRER: Anti-abortion demonstrators clashed with police again today in Wichita, Kansas. Nearly 100 people were arrested when they stormed the gates to a clinic which performs abortions. There have been more than 2,000 arrests since protests began there four weeks ago. In Washington, abortion rights supporters marched outside the Justice Department. They were protesting the Bush administration's decision to file a brief seeking to reverse a federal judge's order against the Wichita protesters. The Justice Department claims it is an issue for state rather than federal courts.

MR. MacNeil: President Bush announced a new policy on wetlands today. It proposes the government purchase up to a million acres annually. It also contains new criteria for identifying wetlands. Spokesman Marlin Fitzwater said the criteria were common sense in contrast to what he described as the school that says every mud puddle is a wetland. Some environmentalists criticized the new policy. J. Herr, President of the National Wildlife Federation, said it represents a death sentence for millions of acres of wetlands.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to regulating cable television, the remains of Pan Am, and a theater in Appalachia. FOCUS - STATIC

MR. MacNeil: Our lead focus tonight looks at America's love affair with cable television which is revolutionizing the television industry, but a love affair with as many gripes as gratifications. Judy Woodruff has our report.

MS. WOODRUFF: The controversy over cable television centers on what consumer groups contend are high prices and bad service. A recent study by Congress's General Accounting Office concluded that the cost of cable TV rose during the past four years at a rate 50 percent higher than inflation. The study said consumers were paying more for less because many cable companies cut back on services. In a moment we will debate that matter, but first this background report from Spencer Michels of public station KQED in San Francisco.

MR. MICHELS: More than 60 percent of all American homes with television sets are hooked up to cable TV, making the cable industry an $18.2 billion a year powerhouse. Viewers pay an average of $17.58 a month for basic service, a figure that rises every year. Cable began in 1948 simply as a means of improving reception. But today cable networks provide dozens of channels not broadcast over the air waves. In the early days of cable TV, local governments could regulate how much the cable company could charge subscribers. In exchange, the company got an exclusive right to provide that community with cable service. But the industry didn't like thousands of city councils deciding the rates. During the Reagan era, the administration and the industry pressured Congress into banning local governments from regulating cable fees. Within six years, the cost of basic service nearly doubled.

SYLVIA SIEGEL, Consumer Advocate: I think they're really shafting us and I for one won't take it anymore.

MR. MICHELS: Sylvia Siegel is a longtime consumer advocate from the San Francisco Bay area who has decided to take on the cable industry and push for lower rates through reregulation.

SYLVIA SIEGEL: This is a multi-billion dollar enterprise. I don't mind them making money, but I do mind them gouging, making it at our expense. They don't need all of the money they're getting or want to get in the near future.

MR. MICHELS: Cable officials say Siegel is wrong. Jerry Yanowitz is vice president of the California Cable Television Association. He says deregulation has been beneficial to subscribers.

JERRY YANOWITZ, California Cable TV Association: We've been able to invest significant dollars and resources into our programming, into our plant since the Cable Act was passed in 1984. These things were not possible under city regulation. CNN would not have been possible under the days of heavy city regulation.

MR. MICHELS: Why not?

MR. YANOWITZ: Simply put because the cable operators and the cable TV industry did not have access to the capital to invest in programming.

MR. MICHELS: By charging higher rates, cable systems then purchased premium channels like HBO, Showtime and Bravo, for which they also charge extra. And while millions of Americans enjoy basic and premium service enough to pay for it, many complain about it. Several years ago in Santa Cruz, California, where off air TV reception is poor, County Supervisor Gary Patton made an issue of poor cable service.

GARY PATTON, Santa Cruz Supervisor: Very few channels, not a good array therefore of services that are commonly available everywhere there are cable systems and excessively bad signal quality and poor customer service, the signals would go out for two or three days, you would call up the people and get a busy signal.

MR. MICHELS: Community activists press hard and finally forced much needed improvements. A new cable owner took over and rebuilt the system. In Freemont, California, former Mayor Gus Morrison says the cable system there was the biggest pain the city faced.

GUS MORRISON, Former Mayor, California: We signed a contract with one firm, it sold to somebody else, and it winds up being owned by the largest conglomerate who doesn't care about Freemont, they care about subscribers, and they don't provide public service or they don't answer their telephones.

MR. MICHELS: The Freemont cable system, which was trying to keep up with the growing community denies the mayor's charges, but Morrison insists that regulation of rates by the city is the only way to rein in the cable industry.

MR. MORRISON: We need to be able to regulate them. We need to be able to respond to our community who says my cable TV is no good, they don't answer their phone, I don't get service, the thing is down, I have to pay for it anyway. We need to have those kinds of controls.

SYLVIA SIEGEL: Cable's the only industry, monopoly industry, that is not regulated. All other industries either have competition or they have regulation. Cable has neither.

MR. MICHELS: Most communities grant cable franchises to only one company which wires the area. In that sense, cable is a monopoly. The industry says that since it competes with other forms of entertainment, it is not a monopoly.

JERRY YANOWITZ, California Cable TV Association: It's a discretionary purchase. They have other options on how to spend their entertainment dollars. They choose to subscribe to cable television.

MR. MICHELS: In Washington, the Federal Communications Commission has regulated the broadcasting industry since the days of Franklin Roosevelt. Recently, commissioners have been trying to decide if cable companies face enough competition to exempt them from government regulation. To deflect the congressional clamor for reregulating cable, the FCC hit upon a solution. In poor reception areas like this, local governments could resume control of cable rates if there are fewer than six over-the-air television channels that can be received. The industry hopes the decision will quiet the demands for regulation.

JERRY YANOWITZ, California Cable TV Association: Well, I think what it should do is send a signal to Congress that legislation is not necessary.

MR. MICHELS: But consumer advocates point out that about 2/3 of the nation's cable subscribers are not affected, including nearly all those in urban areas where there are lots of TV stations.

SYLVIA SIEGEL, Consumer Advocate: The FCC is carrying out the non-regulatory policy of the Bush administration. They thought that if they could get everyone to swallow the rules that they were putting out that nobody would press for congressional legislation. But the rules are weak. They don't mean anything and we require legislation now.

JERRY YANOWITZ: This is not an issue that is a front burner issue that needs action tomorrow. It's clearly a low priority in most congressional offices.

MR. MICHELS: Therefore it'll go away for a while?

MR. YANOWITZ: Well, therefore we believe that Congress probably will not take action on it this year.

MR. MICHELS: The upcoming hearings on cable TV should shed some light on the chances for reregulation. But it is already clear that the FCC decision which was designed to de-fuse the battle over reregulation has, instead, spurred on the debate.

MS. WOODRUFF: Here to explain the Bush administration's position in the cable debate is the man in charge of the federal agency that regulates television, Alfred Sikes, chairman of the Federal Communications Commission. Mr. Sikes, how many complaints was the FCC getting about cable, about the prices, about service, and so on, leading up to this decision that you all had to make?

MR. SIKES: Well, we're not a complaint receiving agency. So if we get a few hundred complaints a month, we think that's a big deal, and we were getting a few hundred complaints a month. But I think in the congressional sense that's not very many complaints.

MS. WOODRUFF: Are those complaints that you were getting and the kind of complaints that we saw reflected in that report, are they legitimate? I mean, do you believe what you're hearing, that there's a problem out there?

MR. SIKES: Well, the report points out the fact that if you've only got one person to buy something from, you're probably going to end up having some problems, some service problems, and some price problems. And, you know, what we've got to do is we've got to make sure that in time people can buy cable service or what we know as cable service from several different providers. And we've recommended a series of steps that we think will assure that will happen and I think only that will ultimately protect the consumer.

MS. WOODRUFF: In layman's terms, what did the FCC decide?

MR. SIKES: Well, the FCC in terms of what the piece you just ran showed decided that it would update the so-called effective competition standard. Basically, the Congress said in 1984, FCC, you tell us when there is or is not effective competition as to the basic television and so the FCC in 1985 said there is effective competition if there's three over-the-air signals. We said things have changed and, therefore, now the effective competition standard is six over-the-air signals.

MS. WOODRUFF: So if a cable system is in a city where there are fewer than six over-the-air stations, then you consider that no competition?

MR. SIKES: That's effective -- that is not effective competition --

MS. WOODRUFF: Right.

MR. SIKES: -- as the cable act of '84 defines effective competition.

MS. WOODRUFF: All right. And to bring this back again to what the report was saying, that really is only affecting what, a third of the cable subscribers in this country, is that right?

MR. SIKES: That's approximately correct, yes.

MS. WOODRUFF: So how do you think you've made a dent in this problem, which you acknowledge is widespread, by only -- with a solution that only affects a third of the people out there?

MR. SIKES: Well, first of all, we got a lot of our complaints from just the kinds of places that now can engage in some price regulation, that is, the fewer television signals people get, the more they tend to complain if their cable service is priced higher than they think it should be.

MS. WOODRUFF: People in poor reception areas.

MR. SIKES: Poor reception areas or rural areas where there are many -- fewer television signals. But again I want to come back to a basic premise, and that is that the Congress is going to have to change the law. And the law is going to have to say to municipalities, you can't unreasonably refuse to license second franchises, you can't --

MS. WOODRUFF: These are second companies that come in.

MR. SIKES: Second companies that would come in. You can't load them up with so-called universal service obligations which make it much more costly to do business. I mean, we have to look at the fact that they face a big hurdle.

MS. WOODRUFF: "They" meaning --

MR. SIKES: They meaning those who are trying to come in and compete. And the big hurdle is that the cable company that currently exists at 100 percent of the subscribers, and so what has to happen is we've got to be friendly to competition. We were friendly to MCI. We said, MCI, do whatever kind of business you want to do. They started with St. Louis to Chicago and now they - -

MS. WOODRUFF: MCI being a big --

MR. SIKES: And now they compete in long distance against AT&T.

MS. WOODRUFF: Oh, you're talking -- okay.

MR. SIKES: If we take that kind of approach in cable, we'll have cable competition.

MS. WOODRUFF: But that's -- again, that's the future. That's not a reference to what the FCC has done just now.

MR. SIKES: Well, I think it -- well, it is. I mean, we had a series of recommendations to the Congress last year that hit principally upon that point. And that's principally the point the Bush administration has hit upon is that we need to take action to open up these markets so there's true choice.

MS. WOODRUFF: But to those who say -- the critics who say -- and again, we heard it at the end of Spencer Michels' piece, for those who say this is not enough, it's not going to make enough of a difference, your response is --

MR. SIKES: Well, my response is that regulation and protection frequently coexist quite comfortably and so what we're suggesting is that rather than going down the protect route, let's go down the competition route. And you can also ask another question. That is: Should the government be in the business of making price decisions about sporting events and movies? And many believe that just because we do electricity and gas and water and handle the fundamentals of life, the wants, if you will, that we shouldn't get into the business of the needs.

MS. WOODRUFF: And what about the point raised by one of the consumer advocates also in that report who said cable is the only monopolyout there that isn't regulated?

MR. SIKES: Well, it's the only monopoly that I know about that's delivering movies and sporting events principally. In other words, the monopolies that they're referring to are delivering electricity and gas and water, which are essentials. And if that's what cable was delivering, I wouldn't hesitate to suggest that there should be much wider spread price regulation.

MS. WOODRUFF: All right. Let's open up this discussion now. We're joined by advocates -- and Mr. Sikes, stay with us, please -- we're joined by advocates on either side of the cable issue. Sen. Al Gore is co-sponsor of a bill that would give most local authorities the ability to regulate cable services. James Mooney is president of the National Cable Television Association, a trade association which represents 95 percent of the nation's cable companies and programming networks. Sen. Gore, let's go immediately to that point that Chairman Sikes made that cable isn't a monopoly in the classic sense, and, therefore, doesn't need to be regulated, I think is what he was saying, in the classic sense.

SEN. GORE: Well, it depends on whether or not we want to protect consumers or leave them at the mercy of an unregulated monopoly. For many people, it is not a necessity but takes on some of the trappings of it. If everybody in the community has it, if they live in areas where the only way to get a good, clear signal with the information that people in the community are talking about is to get cable, then they feel like they have to have it. In any event, when they enter into the marketplace and buy cable television, I think they've got a right to expect that we'll have the laws and rules in this country that protect them against a situation where a big nationwide corporation has no competition and no regulation and nothing stands between that company and the consumer's pocketbook. That's the situation today and it is totally unfair and unreasonable, and it's got to be changed.

MS. WOODRUFF: But what about the moves that the FCC made in the last month or so in changing the -- in beginning to reregulate or taking a step toward reregulation and saying that certain markets can be regulated by the local city council or city authority?

SEN. GORE: Well, I think Chairman Sikes' motives are good. I think he's a good person. But the regulation unfortunately is just completely inadequate. You used the figure of 1/3, which means 2/3 of the people who get cable television are not affected at all by this. Our figures are much higher than that. Our indications on the committee are that as many as 80 percent of all cable television customers are not affected or helped in any way by that regulation. So it's, obviously, inadequate and legislation is needed.

MS. WOODRUFF: And what do you think ought to be done?

SEN. GORE: Well, I think that we ought to give the local governments not the power they used to have to regulate every little aspect and dot every "i" and cross every "t," but give 'em the ability to protect their constituents and the citizens of their areas if there is no competition from distribution outlets like satellite TV or wireless cable. See, the cable industry is strangling all of the new potential sources of competition like satellite distribution. And if there is no competition for the kinds of services that cable TV offers, then the local governmental authorities which grant the monopoly franchise, ought to have the right at arm's length to regulate against abuses in the price for basic service.

MS. WOODRUFF: Well, Jim Mooney, is that what we need? Should the local authority, the city council, or whomever, have the right then to go in and say, if you don't have cable -- if you don't have competition, Mr. Cable Company, then we're going to tell you what your price ought to be and so forth?

MR. MOONEY: Well, you know when you talk about regulation, most people think of a dispassionate, quasi-judicial regulatory agency like Chairman Sikes's FCC, which considers matters on the basis of a coherent, intellectual policy in which fairness applies to all sides. This is not a description of city councils. And we hope whatever the government does in this area, it will not simply throw us back into the clutches of the city council, which is where we found ourselves until 1984. But I don't think you're going to have rational policy in this area so long as the debate in much of the Congress and for that matter in much of the traditional news media focuses only on the problems of rates and customer service and doesn't focus also on the overall good that has been accomplished in the television marketplace by the advent of cable. You know, to hear some of this talk, you'd think that cable is some kind of terrible plague that has been visited on the country by --

MS. WOODRUFF: And you're saying --

MR. MOONEY: -- a bunch of bad guys.

MS. WOODRUFF: -- it's not.

MR. MOONEY: No. I think cable in overall terms is a remarkable achievement. In 15 years, we have wired this entire country with no help from the government. In about the last seven years, we have invented a whole new television medium. In 1984, for example, we spent 300 million on basic cable programming. Today we spent 1.5 billion. And I think that shows up on the screen. And, you know, I don't say we haven't our problems on rates and customer service, but every time we get into these things in the Congress, it starts out a debate about rates and customer services. As the legislation progresses, they pile things onto it to the point where it becomes, you know, a boondoggle for our competitors.

MS. WOODRUFF: How far is your industry willing to concede that there ought to be, that there ought to be some mechanism on the part of local government, state government, whatever, to control, to have some say when prices are going -- are going up, up, up, and there's no competition?

MR. MOONEY: I think in places where there clearly is sufficient television available over the air to put a check on cable penetration of homes passed and cable prices, there should be no regulation, but that in the best of all worlds where there are not sufficient broadcast stations present in that market to impose that check, the regulating ought to be done by people like Mr. Sikes who are a position to do it thoughtfully or dispassionately.

MS. WOODRUFF: Senator Gore, what about that?

SEN. GORE: Well, Judy, this situation is out of hand. A lot of what Mr. Mooney's describing is far from reality. What's really happening is this opportunity to exploit and gouge the public is pulling entrepreneurs in who speculate on the prices of these cable systems and borrow enormous sums of money. And then they have to keep raising the rates in order to pay the debt service on their speculative purchases. It is a vicious cycle. And then the extra money, some of it is used to pull the programming away from the over-the-air broadcasters. They're talking now about the World Series, the Super Bowl, the Olympics, all of the programming that people are most interested in watching each year, that's being pulled toward the extra revenue stream that cable is getting from - -

MS. WOODRUFF: And what are you saying --

SEN. GORE: -- gouging them.

MS. WOODRUFF: -- is wrong with that? What are you saying is wrong with that?

SEN. GORE: Well, because they have neither competition nor regulation and the consumers are at their mercy, it's not fair, and they will exploit it in an unlimited fashion as long as they are allowed to exploit it. We need a new law that protects the consumers by saying either you have competition, which is the American way -- but if you don't have competition, and it's a monopoly, then your local government ought to have the ability to protect you, not the old situation -- arm's length.

MS. WOODRUFF: Is the consumer at the mercy of these cable companies, Jim Mooney?

MR. MOONEY: For the most part, no. I mean, there may be some places where the only way to get TV is on the cable. And in those places, I should think everybody would have to concede that the cable operator has some market power. But because of what Chairman Sikes's commission has done with the signal test, those places will go back under regulation. You know, Sen. Gore had a problem, as is well known, in Tennessee with a company called Multivision who were for the most part speculators and who came in and who quite frankly made a mess in 28 communities.

MS. WOODRUFF: This is a cable company.

MR. MOONEY: This is a cable company. But under the new rule that has been put out by the FCC, 21 out of those 28 communities are going back under rate regulation. So it's not as if nothing is being done here.

MS. WOODRUFF: Okay.

SEN. GORE: Can I respond to that?

MS. WOODRUFF: Just quickly, and then we want to turn to Chairman Sikes.

SEN. GORE: Well, we've got problems in Knoxville, in Chattanooga, in Nashville, in Memphis, and they're not going to be covered by this regulation. And the problem is basically exactly the same problem there.

MS. WOODRUFF: You're sitting here listening to all this, Chairman Sikes. You've hard many of these arguments before. How do you respond to the basic point that Sen. Gore is making over and over again that the consumer, he says, is at the mercy of these companies in many cases, and we need -- not only do we need more reregulation, we need competition, which you're advocating.

MR. SIKES: But the Congress has left the consumer, you know, at the mercy of the companies to the extent that that's true. The Congress has said that the telephone companies, for example, cannot offer cable service, that the broadcast companies cannot offer cable service.

MS. WOODRUFF: So you're saying they're limiting --

MR. SIKES: I can say that if you raise the entry barriers, if you eliminate the entry barriers, competition can literally develop overnight. And the threat of competition, just like competition, in fact, has a great disciplinary effect on price.

MS. WOODRUFF: Sen. Gore.

SEN. GORE: Well, I agree with a lot of what he says. In a way, that's a separate aspect of the issue. I favor legislation to allow the telephone industry with safeguards, very strict safeguards, to get into providing cable service. But you don't have to do that to fix this problem. Competitors like satellite dish broadcasters, for example, have been completely shut out by the cable industry because they use their extra money to buy up the people who make the programs and to control the programming and order them not to make it available to any of their competitors. It's a -- it's a classic monopoly exercising raw power in as brazen a way as I have seen ever in my time around this town.

MS. WOODRUFF: Doyou see it that way?

MR. SIKES: I'm saying that the Congress can take steps to the extent that is a correct characterization to eliminate that and I think they should and I think that resulting threat --

MS. WOODRUFF: Well, he's saying they're trying to, they're trying to make it easier for the telephone companies to --

MR. SIKES: Well, and I want to work with them and in the meantime, the FCC has taken steps recently to set technical standards to improve the quality of service. We've taken steps where there are the fewest TV signals to allow price regulation. I think the next step is up to the Congress.

MS. WOODRUFF: Sen. Gore.

SEN. GORE: Well, I agree. We're trying to pass this legislation and the cable industry is putting out extremely misleading information all over the country, just completely false information. They're using their power in the political system to try to stop --

MS. WOODRUFF: What misleading --

SEN. GORE: -- legislation.

MS. WOODRUFF: Specifically what do you mean misleading information?

SEN. GORE: Well, they -- here is a mailing from the National Cable Television Association that says Congress wants to tax you 20 percent when you watch cable. That is ridiculous, totally misleading. I'll show this -- I hear you say in the background there, Jim, complaining about this -- I'll give you a copy of this. This comes from the Clearview Cable Company and it has National Cable Television Association at the bottom of it, and these are going out all over. I'm assuming that it comes from your organization and is remailed out by the cable television companies.

MS. WOODRUFF: Are you all saying that, that Congress wants to tax --

MR. MOONEY: What we are saying -- and I'm very happy finally to be able to get onto this topic -- that they have loaded this bill up with provisions for the benefit of the traditional broadcasting industry.

MS. WOODRUFF: You mean the networks?

MR. MOONEY: Yeah. I'm talking about ABC, NBC, and CBS. And what Sen. Gore --

MS. WOODRUFF: Who you view as your major competitors, is that right?

MR. MOONEY: Yeah. And what they've done in this bill, amongst other things, is a provision which says for the first time cable companies and, therefore, cable subscribers will have to pay ABC, NBC, and CBS for the privilege of providing a local --

SEN. GORE: Absolutely wrong. Absolutely wrong.

MR. MOONEY: May I finish?

MS. WOODRUFF: Yes. Just a second, Sen. Gore, and then I'll let you --

MR. MOONEY: For the privilege of providing a local antenna service for those networks' programming. I mean, did you know that they've even got a thing in this bill --

MS. WOODRUFF: And you're saying --

MR. MOONEY: -- which gives a legal preference --

MS. WOODRUFF: -- that that's something you all don't want.

MR. MOONEY: -- to home shopping stations, a legal preference of those stations over cable channels like CNN --

MS. WOODRUFF: All right.

MR. MOONEY: -- and, for example, and C-Span?

MS. WOODRUFF: What about some of these items that Mr. Mooney keeps bringing up, Sen. Gore?

SEN. GORE: Will you ask him this question for me, Judy? Is there a tax in this, Jim? Is there a 20 percent tax, as you say?

MR. MOONEY: There is a provision in this bill which allows the broadcasters to charge cable systems for providing a local antenna service.

SEN. GORE: Is there a tax?

MR. MOONEY: And CBS says that it would propose that its stations charge 20 percent of basic revenues.

SEN. GORE: Well, first of all, Judy, there is nothing in the bill that gives the broadcast networks the right to charge for anything to cable services. There is a provision in the bill that eliminates a legal requirement now whereby the law says that the -- that local broadcasters have to give their signal for free. They can still do that, but cable -- they would have the right to say to cable, look, if you're going to retransmit --

MS. WOODRUFF: All right.

SEN. GORE: -- our signal, we want to talk to you about it. The networks have nothing. But let me make this point.

MS. WOODRUFF: And let's try to get back to the basic point about cable --

SEN. GORE: All right. They say in their nationwide mailing that Congress is proposing a 20 percent tax. That is a falsehood. It is a deliberate falsehood, a deliberate distortion. And it is an example of the kind of tactics that the cable industry has used to prevent -- [Mooney mumbling in the background] -- passage of the kind of legislation we're talking about here to protect consumers by saying either competition or arm's length local regulation.

MR. MOONEY: Look! This ad ran today on the op-ed page of the New York Times and it does not say what Sen. Gore just described.

MS. WOODRUFF: All right.

MR. MOONEY: It said the TV networks --

MS. WOODRUFF: We're getting --

MR. MOONEY: -- are going to Congress looking for this 20 percent surcharge.

MS. WOODRUFF: We're clearly getting off our main point, and I don't think we're going to be able to resolve that right at the minute.

MR. MOONEY: Just pick up the Times and read it.

MS. WOODRUFF: All right. Just in the few seconds we have remaining, Chairman Sikes, are you optimistic that in the coming months consumers are going to be able to get the kind of service that you think they ought to be getting and be able to get it at the price that is a fair price?

MR. SIKES: I'm optimistic that by 1992, probably third quarter, meaning the early summer of 1992, if we would open cable up to competition that the consumers would not be --

MS. WOODRUFF: With legislation from Congress.

MR. SIKES: That's right. That consumers would not be for the most part in an outrage.

MS. WOODRUFF: All right. Well, on that somewhat optimistic note, we'll leave it at that. Chairman Sikes, Jim Mooney, we want to thank you, Sen. Al Gore, thank you all for being with us.

MR. LEHRER: Still to come on the NewsHour tonight, the remains of Pan Am, and a different kind of theater. UPDATE - PAN AM - FINAL CLEARANCE

MR. LEHRER: Next, what's left of Pan Am Airways. The remaining parts of the financially troubled airline are at the center of a frantic bidding war among the big survivors of the airline wars. Today Delta Airlines upped the ante to $904 million just hours after United submitted a new offer of its own. Tom Bearden reports.

MR. BEARDEN: An airline terminal crowded with passengers smack dab in the middle of the most important international airport in the world's biggest airline market. By all outward indications, this would appear to be a highly profitable and desirable operation. Looks can be deceiving. This is the Pan Am terminal at John F. Kennedy Airport in New York. This airline has lost upwards of $2 billion since the industry was deregulated in 1978 and is now in bankruptcy. Once the Pan Am logo was synonymous with the American flag, itself, in foreign airports. Kevin Murphy, an analyst with Morgan Stanley, says it's now headed for the scrap heap.

KEVIN MURPHY, Airline Industry Analyst: Post Labor Day, I would suspect that Pan Am will no longer be with us. The name Pan Am, the emblem Pan Am is one of the best known industrial emblems ever known. I would suspect you'll find the name at least, find itself into the hands of something that's travel related, maybe a tour operation or charter service. But, no, there's no need for Pan Am's services. Our free market has spoken.

MR. BEARDEN: What has developed is a free market free for all over Pan Am's assets, the rights to fly to a host of European and South American cities. Those rights are valuable because they are agreements between governments. They are often difficult, if not impossible, to renegotiate and sometimes the only practical way for an airline to get landing rights is to buy them from a carrier that already has them. Four major airlines are now squabbling over Pan Am's routes -- Carl Icahn's TWA, with backing from American Airlines, Delta, and United.

KEVIN MURPHY: These are very intense negotiations that are going on, a lot of brinkmanship, a lot of posturing. These are very smart executives at Delta Airlines, American Airlines, United, and Carl Icahn's no pushover either. This is a convention of world class horse traders.

MR. BEARDEN: All the airlines declined to talk about their strategy for obvious reasons. United declined to talk to us at all. TWA's Jim Faulkner was willing to describe what Icahn is interested in.

JIM FAULKNER, TWA: The offer would allow TWA to acquire Pan Am's European routes and its Frankfurt hub, and with American's help, American would acquire some routes that Pan Am currently serves to Southern Europe as well as acquiring the Pan Am shuttle.

MR. BEARDEN: Delta wants those same routes and the Northeast shuttle to add to its extensive domestic route system. United already owns Pan Am's entire Pacific division and bought its most lucrative London routes earlier this year. United is now interested in the South American routes. It made an offer, withdrew it, then made another bid. The battle is being fought in two different arenas, first, the bankruptcy court. All the bidding airlines are courting Pan Am's creditors, hoping to get them to recommend the bankruptcy judge approve their offer.

KEVIN MURPHY: Getting a recommendation from the creditors' committee is crucial, not absolutely essential, but you'd like to have it. If not, then you go to the 11th hour and you have to bid just purely with the bankruptcy judge and if you don't pass the test with him, you have to kiss those routes goodbye forever. And that's the thing about these international routes, that they are once in a lifetime opportunities.

MR. BEARDEN: But the bankruptcy judge can't make the final decision. The Department of Transportation must also approve the deal. Transportation Sec. Samuel Skinner.

SAMUEL SKINNER, Secretary of Transportation: One of those issues that we'll look at will be is the transaction competitive or anti- competitive? If it's pro-competitive, we'll obviously be elated. If it's anti-competitive, or it conflicts with anti-trust law, we'll have to take that into consideration, and that would be a basis if the anti-competitive nature was strong enough to reject a transaction.

MR. BEARDEN: And Delta, a relative latecomer to the international market, claims the TWA-American offer is anti-competitive.

NEIL MONROE, Delta Airlines: American is already a very large European carrier and by concentrating even more European routes in the hands of one carrier, it really would lessen competition which we think the DOT's going to have some strong objections to.

MR. BEARDEN: A spokesman for American said Delta's remarks are foolish and without merit. The Transportation Department will also have to consider the implications of TWA's shaky financial position. Chairman Icahn is in the process of trying to restructure the company's heavy debt load.

MR. BEARDEN: TWA has already declared its intention to declare bankruptcy in January. How could a bankruptcy court and the Department of Transportation approve a deal for an airline that says it's going into Chapter 11 in six months?

SAMUEL SKINNER, Secretary of Transportation: Well, you're asking me to prejudge a transaction. I don't want to do that. I like to see the papers in front of me. I like to have the career people who've been doing this for years look at 'em, get the economic analysis, look at the transaction in a real form, rather than a speculative form. It's very dangerous to speculate on a transaction that's not before us.

MR. BEARDEN: Why are these routes so attractive? After all, Pan Am and TWA have been losing money flying them for years. Analysts say it's a matter of critical mass, that an airline has to be very large to be profitable in today's market and that overseas is the only place America's big carriers can expand. American Airlines executive vice president Don Carty says his company wants to build on its domestic network to prepare for the continuing globalization of the industry.

DON CARTY, American Airlines: It really is an extension of the philosophy that we developed during the, during the last decade where we were strengthening those hubs and strengthening those hubs. It happens to be coming to a head at a time when both of the traditional international airlines have been under some financial duress and have been looking to dispose of some of those international routes.

MR. BEARDEN: But foreign airlines aren't very happy with an expanding U.S. presence. They've gotten used to competing with financially troubled Pan Am and TWA. The last thing they want to see is a horde of jets from three U.S. mega carriers descending on their airports.

MR. CARTY: In fact, we already have a resurgence in protectionism. The U.S.'s relationship with a number of European countries is very restrictive and surprisingly restrictive in the context of many of our other trade agreements outside of aviation. The United States, Italy, Spain have all negotiated with the U.S. in the last year with the objective of restricting our aviation rights further. As they see these stronger U.S. carriers emerge to exploit these rights, they've suddenly done an about face and said, gee, we wish you didn't have so many rights, how do we negotiate our way out of this thing?

MR. BEARDEN: The main benefit of U.S. deregulation for consumers has been substantially lower air fares. But international air fares are set by government to government treaties. Some countries have refused to allow U.S. airlines to introduce discount fares in order to protect their own flag carriers, some of which are government- subsidized. So even though there will be increased competition internationally, fares aren't likely to decline very much. And domestic fares will probably go up. Most observers believe that by the middle of this decade the industry will be dominated by three super carriers, American, United, and Delta. They think the big three will divide the country among themselves, run the competition out of business, then sharply increase ticket prices. Kevin Murphy thinks fares will rise but not because the competition will have been eliminated.

KEVIN MURPHY, Airline Industry Analyst: There's a healthy purging going on because in the long run a financially sound airline industry is good for the consumer, not bad for the consumer. Will the consumer have to pay higher fares, compensatory fares? They probably will, but that's the way our system of free enterprise works.

MR. BEARDEN: How much higher?

MR. MURPHY: I would say fares keeping pace with inflation for a change instead of going up at less than the rate of inflation. What's wrong with that?

MR. BEARDEN: Consumers may find a lot wrong with that. Whatever the bankruptcy court and the government decide, an era is ending. The airline that pioneered international aviation is likely to cease to exist. So are the jobs of more than 20,000 Pan Am employees, only a fraction of whom are likely to find work in the surviving airlines. FINALLY - APPALACHIAN PRIDE

MR. MacNeil: Finally tonight we look at an unusual theater company that's thriving in the hills of Appalachia. Earlier this year, Correspondent Joanna Simon visited the Roadside Theater in Whitesburg, Kentucky.

MS. SIMON: Whitesburg, Kentucky, a coal mining town with all the disadvantages that brings. Unemployment hovers at 30 percent so does the high school dropout rate. And the standard of living never strays far from the poverty line. Most people here barely have enough for the necessities let alone the luxuries of life. So to an outsider this Saturday night line up for theaters seemed remarkable. In this remote corner of Appalachia, which in the minds of many is about as far off Broadway as you can get, an unlikely theater company is thriving. This performance sold out days in advance, with dozens buying tickets to see the play for their third or fourth time. [PERFORMANCE SEGMENT]

MS. SIMON: The reason for its popularity is that the Roadside Theater company performs plays by and about the people of Appalachia. Actors used their home grown musical and storytelling talents to stage the first local plays about their region. By celebrating local culture, the theater hopes its audience will take pride in its identity, no matter what the economic despair. Roadside Director Dudley Cocke.

DUDLEY COCKE, Director, Roadside Theater: For the audience here, it's clearly recognizable that this play has come out of the community right here. And I think it's been -- the audience delights in the fact that we have taken the trouble to the best we can artistically shape that experience, and then that we have returned that back to the audience in a generous way we hope, not in a pretentious way, but recognizing that it came from them.

MS. SIMON: For years, Carl says, Appalachia has suffered from a bad national image, uneducated coal miners, faces blackened with soot, barefoot, living in shacks, hillbillies and ragged children, a people without culture.

MR. COCKE: When you came up in this school system, a lot of the teaching was try to forget this culture, try to learn that culture outside of here that you will eventually have to make it in -- there is no future here -- the future here is coal mining and that's very dangerous -- so if you want to be a success, if you've got a little savvy, the idea is to leave these mountains and the ticket to leaving is to not think about this culture here, but to learn this other culture that if you're lucky you'll get to go to. [SONG FROM PLAY]

MS. SIMON: So when the theater company began, they decided to embrace local culture, rather than ignore it. Roadside started 15 years ago as a branch of a multimedia arts organization called Apple Shop. Apple Shop was set up by the federal government as a way to create new jobs. But when the money ran out two years later, Apple Shop found alternate funding and in a region where new businesses rarely succeed, Apple Shop flourished. Now after coal mining and government, it is the third largest employer in the area. Half of the theater company's income comes from grants and foundations. The rest is from performance fees. But no matter how successful Roadside has become, it continues to return to a basic goal, to dispel negative stereotypes. The play being performed this year, "South of the Mountain," was written by local resident, Ron Short, who's in the play as Thad, a character loosely based on his father. In this scene, Thad recounts a painful lesson learned in the schoolyard.

THAD: [SCENE FROM PLAY] Made fun of my clothes, you know, because they's patched, you know. And they'd ketch me a comin' out across the schoolyard there and where everybody could see who they was a hollerin' at and they know'd it was me. They'd say, hey, hey, lookie yonder, come here, lookie, yonder comes old raggy taggy -- well, I found out somethin' out there. Did you know that there's people in this world that believe they are better than other people? And it's even worse than that. There's people in this world that believe that they are better than other people because of the clothes that they wear. Now can you explain to me, how does a pair of britches make one feller better than another feller?

MS. SIMON: By examining the difficulties of the past, Roadside hopes to encourage audiences to strive for present day economic change.

RON SHORT, Playwright/Actor: If I just take 'em and beat 'em over the head with a Pollyanna story that things is wonderful because we are all singing and dancing hillbillies and having a great time, you know, and things have always been wonderful because -- nobody's going to believe that. And -- and I wouldn't expect them to. I can show them the full range of life's experiences and hope that by exploring the full range of it, they can come to some sense of hope rather than desperation.

MS. SIMON: Short's character gets a job as a coal miner. But the money he makes never seems to catch up to the money he needs to survive. The story is close to home. At Short's parents' home, pictures of that time grace the walls.

RON SHORT: This is one of, actually one of my favorite pictures of my dad. The memories are so vivid of him telling me about working in the coal mines that when it came time to start working on the play and the writing of it, it became the central theme, those images of him. And whenever II am on the stage recounting the story, this is -- this is the picture that I see -- my father getting ready to go off to work.

MRS. SHORT, Ron Short's Mother: He would go off to work like that, and I hated so bad for him to work in the coal mines because it was dangerous. And I seen him come home in winter time and he would have to ride in the back of the truck or maybe walk a long distance, and his clothes would be frozen to his arms. Maybe he'd work in water. And I would cry when he would come in -- the clothes, you know -- and I vowed if I could ever get him out of the coal mines, I was going to.

MS. SIMON: Nancy Jeffrey plays Ron's mother, Mabel, in "South of the Mountain."

MABEL: [SCENE FROM PLAY] I'd see him come in -- he'd look so pitiful I could cry -- he'd been better not havin' him a job at all -- and you had to make it one way or another, but I always vowed if there's any way I can get away from it, get him out -- I was going to do it.

MS. SIMON: Jeffrey, director of a local nutrition program for the elderly, had never acted when Ron Short approached her to perform.

NANCY JEFFREY, Actress, Roadside Theatre: He came and talked to me about it and said, I've been working on this and it has a lot to do with your people in this area and would you like to be in it, and, umm, at the time this happened, it was, it was just a completely strange notion to me because I really, I was working a full-time job and I had small children, and finally I let him convince me that I should give it a try, and I did.

MS. SIMON: Now Jeffrey has two jobs, nutritionist and actress. Using local actors is part of Roadside's formula for success. Tom Bledsoe, who plays Thad's brother in "South of the Mountain," never dreamed of becoming an actor. Now it's his full-time job. The theater company chose him because of his family ties to Appalachia and knowledge of the area's rich musical history. He's been taught by the likes of Uncle Charlie, who's been playing the fiddle for most of his 100 year long life. [CHARLIE PLAYING FIDDLE AND TOM PLAYING BANJO]

TOM BLEDSOE, Actor, Roadside Theater: Charlie is a real direct link I think to music as it was a couple of hundred years ago because he learned from his family. His father was a fiddle player and all his neighbors around here, a lot of 'em played music. If I know that there's -- that there's music like Charlie, musicians like Charlie, and just friends, not just his music, but just his friends too -- then I know that I've got something to come home to.

MS. SIMON: Above all else, Roadside's plays stress love of home. [SCENE FROM PLAY]

RON SHORT: We don't have economic power. We don't have political power. We don't even have control of our own image, so the only thing that we can control is our own sense of self-identity, our own image of ourselves, our sense of self worth.

DUDLEY COCKE, Director, Roadside Theater: We hope that it's not that sort of false pride, but rather that it gives people a sense that they are somebody, that they count, that they are visible in this, in this history, this unfolding history of our United States. [SCENE FROM PLAY]

MS. SIMON: Roadside now takes its plays to all parts of rural America and by continuing to tour nationally it also hopes to bring a more knowledgeable understanding of Appalachia to the rest of the country. [SCENE FROM PLAY] RECAP

MR. LEHRER: Again, the major story this Friday was the Lebanon hostages. White House spokesman Fitzwater said there was still no word on the hope for release of an American hostage. And officials confirmed that a French aid worker was abducted by terrorists in Beirut yesterday, raising fears that a major deal for the release of all Western hostages might be scuttled. A terrorist group said it would kill the Frenchman if any of the other hostages are released. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the NewsHour for tonight and we'll see you on Monday night. Have a nice weekend. I'm Robert MacNeil. Good night.