April 26, 2004
Television broadcasters have their special-interest eyes on a political prize that will enrich the industry with tens of billions of dollars in new revenues. They are now political arm-twisting both the FCC and Congress to help achieve this goal. Once again, the public will be forced to bankroll a handful of big media companies, who will be guaranteed a secure economic future. And once again, the public--including children, families, and communities--will be left to pay the tab while getting nothing back in return.
Last week, the National Association of Broadcasters (NAB) held its annual convention in Las Vegas. Over the last decade, the NAB has used its political muscle to advance the interests of its handful of very powerful members, scoring victories worth hundreds of billions of dollars in federal legislation. It now has its sights on advancing a scheme that will turn every TV station into a “multi-channel” powerhouse, forcing cable (and ultimately satellite) operators to send these channels to every TV set in the U.S. It’s a classic flimflam operation, the digital-age equivalent of Willy Sutton robbing banks because “that’s where the money is.” The money today is in the digital spectrum, owned by the public, that broadcasters have been allowed to use freely. TV stations want to transform this public asset into a private, multi-channel, broadband bank account.
The con game is called “multicasting must-carry.” It’s the “endgame” of a ruse that the broadcast lobby and TV networks came up with twenty years ago. In the late 1980s, as a way of grabbing additional valuable spectrum (once called “public airwaves”) broadcasters launched a misinformation campaign claiming that the U.S. was falling behind Japan in rolling out high-definition TV (HDTV). They quickly had official Washington falling for that line. In the 1996 Telecommunications Act give-away to the media industry, broadcast TV stations scored a new chunk of valuable airwaves for free use in making the transition to digital broadcast. One of the key provisions of this act was to give broadcasters “flexibility” in how they used their new spectrum. Ultimately, that meant goodbye to the HDTV divide with Japan, and hello to finding ways to take this lobbying victory and make even more money with it
Broadcasters already knew, in fact, what they wanted to do (but hadn’t really told a clueless Congress). The broadcast TV industry has long understood that their future as an industry was in jeopardy. Cable is the dominant medium in television (reaching some 70 percent of all households). The key to TV’s future lies in the ability to send many channels to viewers, not just the single one that broadcasters can transmit today. TV’s business model will also require access to a set-top box for the delivery of video on demand and personalized advertising. Broadcasters recognize that unless they could use their political clout to gain greater control over cable, then the days of huge profit margins would eventually end.
So broadcasters now want the FCC to award them a new policy that would require cable systems to carry any channels they can transmit. Since the new digital spectrum each TV station has can be “sliced” into several channels, broadcasters want to “multicast.” Today’s single channel in one’s hometown will be able to send out six or more different signals. With multicast “carriage” on cable, each TV station owner will have ensured their financial viability in the broadband era.
Just how much is the multicasting of digital broadcast communications worth to stations? In her keynote speech to the NAB, Hewlett-Packard CEO Carly Fiorina reminded broadcasters that “…instead of one stream coming out of your station, there will be six. It means that instead of having to compete on one program schedule--during prime time, when cable is at its best by being at its worst --you'll have six streams which allow you to do what you can't do right now: target programming for families or local communities, creating a whole new level of value and new revenue opportunities.”
And NAB chief lobbyist Eddie Fritts was clear that gaining access to cable for broadcasting’s new multiple channels was at the top of their agenda. He called on the FCC to award so-called multicasting must-carry, complaining that “our DTV and high definition signals are all dressed up with no place to go.”
Why should the FCC award this give-away to broadcasters? Because, as Fritts said, broadcasting is the public’s “local town square.” He boasted of how the industry serves communities while he derided the role of the Internet, asking, “…What has the Internet done for community service? How many kidnapped kids have been saved by a Web site?”
Fritts claimed that the broadcasting industry’s provision of such things as public service announcements was proof of how broadcasters serve the public interest, and hence worthy of more special-interest give-aways. He claimed that broadcaster efforts contributed more to the public “…than the top 100 foundations combined!” In defense of such claims, the NAB has launched a new “Reclaiming the Public Interest” PR effort to convince policymakers that broadcasters are serving their communities. But the campaign fails to inform the public about the real issues regarding digital TV and the broadcast lobby. It doesn’t acknowledge the gifts broadcasters have received from the American public, and it says nothing about how digital TV could serve the interests of children and communities, if public interest standards were enforced.
Multicasting must-carry will not provide the public with any real benefit, unless policies are first put in place to ensure that broadcasters must effectively serve “the public interest, convenience, and necessity.” That promise, made back in 1934, must now be honored in the digital TV age. FCC Commissioners Adelstein and Copps have already vowed to do so. Will Commissioners Martin, Abernathy and Chairman Powell do the same, or will they once again promote broadcasters’ interests over the public’s?November 20, 2002
Washington, D.C.: On October 5, 1992, Congress passed the Cable Television Consumer Protection and Competition Act of 1992, also known as The Cable Act.
The Cable Act was famous for regulating a number of issues including: prohibiting cable operators from re-transmitting the signal of a commercial television or radio station without the station's consent; requiring that a cable operator get permission from a broadcast station before cable programming can be aired on the broadcast spectrum; and requiring that cable operators must set aside up to a maximum of one-third of its channel capacity for local commercial television stations.
Lesser known is that the Cable Act also contained the "tier buy-through" rule, a provision that prohibits a cable operator from conditioning a subscriber's access to per channel or per program video programming on the purchase of any other tier other than the basic tier. In simpler terms, this means that cable operators could no longer force cable subscribers to purchase expanded or digital packages just to get access to premium channels such as HBO or Showtime. The provision applies to all cable systems, including those that are not subject to rate regulation. Cable systems that were technically incapable of letting subscribers buy only the basic tier and still have access to all pay services were given ten years to bring their systems into compliance.
October of 2002 was the ten-year deadline for cable systems to comply with the Cable Act. Now that the rule has taken effect, cable customers now have much more flexibility in choosing which channel or pricing packages they'd like to purchase. However, the rule allows customers to choose only premium stations such as HBO on an a la carte basis, not other satellite stations such as CNN or MTV.
But cable customers are still not getting a square deal. According to David Butler of the D.C.-based Consumers Union, cable operators should be able to offer a la carte for all channels and notes that cable rates have increased 45% since the Telecommunications Act of 1996 deregulated the industry. Consumer advocates will continue to fight for such a provision.
In the course of announcing his company's merger with Time Warner last January, AOL's Steve Case proclaimed the dawn of the Internet Century. And now, less than a year later, that promising era of high-speed online communications is about to give way to a pale facsimile--call it the "Set-Top Century"--in which a handful of cable system magnates will be allowed to define the online experience for millions of American households. In what amounts to a bait-and-switch operation of colossal proportions, the cable industry is poised to offer (with the impending blessings of federal regulators, it appears), a streamlined subset of the Internet, with absolutely no guarantee that its tradition of competition and openness will be preserved. We will be asked to trade the depth and diversity of the Internet, in short, for the speed and simplicity of new interactive television (ITV) implementations, and that's a deal that none of us should be forced to make.
If there's a silver lining to this dark cloud of ever-growing media concentration, it's that the technology itself remains a tremendously powerful tool. And even as millions of broadband cable subscribers are led down the walled-garden path of the new Internet Lite, the old Internet that has nourished more than 7,000 Internet service providers (ISPs) and generated some 2 billion web pages will endure. It may be harder to reach, and many of its sites will be overshadowed by the media conglomerates' online estates, but it will persist nevertheless. Thus it becomes our job--those of us committed to a diverse, democratic online media system--to continue the campaign for open, nondiscriminatory access to all broadband networks--cable and telephone, wired and wireless. In the process, we'll make sure that the Internet, "… the most participatory form of mass speech yet developed," in the words of the U.S. Supreme Court, will continue to serve the public interest.
We made great strides in bringing the open-access issue to the forefront during the debates that surrounded the AOL-Time Warner merger. The principle of open access, at least, has been widely acknowledged. We need only to ensure now that it is administered in a meaningful fashion--not in back-room agreements among the fortunate few, but in the form of open interconnection and nondiscriminatory transport for all ISPs and content providers. And it must apply to all forms of Internet traffic, whether through PC modems, set-top boxes, or devices still to be invented.
David Isenberg, the former Bell Labs researcher who was present at the creation of the Internet, often refers to it as the ultimate "stupid" network, in that all of the intelligence and power reside at the end points, rather than in the middle. In this manner network users, rather than owners and operators, are able to decide what services they need and what content they want. Today, in contrast, cable giants like AT&T and AOL-TW are introducing broadband networks encumbered with "artificial intelligence"--namely, the power to discriminate between affiliated and competitive programming, to trap users in branded environments that offer only the illusion of choice, and to maximize profits through tiered levels of service. Rather than the open-ended network that has so effectively fostered competition, innovation, and diversity, many Americans will be treated instead to a proprietary, closed system, one that reduces Internet traffic to the same commodity status that prevented cable television from ever realizing its full potential.
Ironically, now that bandwidth constraints have been lifted, facilitating the online exchange of a wide variety of multimedia content, artificial constraints imposed by network operators raise the specter of new bottlenecks. Those organizations lacking sufficient commercial clout--and the noncommercial, public-interest sector in particular--will be especially affected by the new broadband environment, which is why an organized movement is needed now to maintain the openness and diversity of the Internet. At the same time that we are concerned with these architectural issues of control and closed access as the chief threats to the Internet, we are equally committed to formulating a vision for what the Internet can become in the broadband era. Making room for effective commercial competition is one key goal. Another is helping to foster the dot-commons, the electronic civic sector that is unlikely to be created--or to be sustained if it is established--through the play of market forces alone. We must ensure, in other words, that our travels through cyberspace remain unfettered, that they do not, in fact, become mere guided tours of cable operators' online holdings.
2 July 2004
As a new national debate emerges over the failure of U. S. television journalism to effectively report on key issues of concern--from the Iraq war to media ownership--it is time to turn our attention to the narrow programming landscape of cable television. Programmers who want to offer Americans with serious news channels, for example, or with services that provide for independent points of view, have no chance of emerging on the multi-channel dial (or the electronic program guide). Two recent cable industry trade magazine articles illustrate why it's time for Congress to "bust-up" the cable cabal that controls much of U.S. Television.
Cable conglomerate Comcast now controls the future of almost all potential new programmers. As CableWorld magazine recently reported, "Comcast has become the …kingmaker, with the power to make or break a digital network. Without a carriage commitment from Comcast, it is difficult for start-ups to raise the investment capital they need." And as the article also makes clear, Comcast is "not looking" to place any new channels on its systems.
According to the article, programmers that may pass Comcast's narrow programming interests have to accept a place on the cable's company new video-on-demand (VOD) system. Comcast has made a strategic decision to expand its VOD offerings, in part as a way to differentiate itself from direct broadcast satellite. So it wants to add VOD content instead of adding what it calls "linear" or full-time channels. That's why it's not surprising that in the article Comcast's Amy Banse, executive VP for programming investments, is quoted as saying that it is "next to impossible, if not impossible" to launch a linear channel these days.
It's also clear from the article that Comcast and the cable industry have made a political and economic decision that more network-like programming isn't necessary. According to Banse: "…with all of us offering 200-plus channels, there's plenty of content out there, and the subscriber simply doesn't want anything else to warrant charging them for that. So between those two facts, it makes it very difficult to launch anything, because it's tough to get eyeballs." Only by agreeing to a VOD distribution agreement with Comcast can an independent programmer hope to reach a significant number of cable households, and only then on terms that are advantageous to the cable operator.
How does Comcast evaluate whether a new service deserves any distribution? One programming executive says they "look at the size and type of the target audience and its attractiveness to advertisers.… Even if it's something that's of interest to a large target audience, that doesn't mean that it will make good television programming. You also look at the other content that's out there that's also serving this niche or audience." For Banse, four "specific criteria" must be met before Comcast will "invest" in and carry a programming service: "It needs to be unique to the channel lineup; it needs to be inexpensive to program; it needs to appeal to a specific demographic; and preferably that's a younger demographic, because it needs to make its money on advertising revenue as opposed to relying heavily on affiliate revenue."
Presumably, since Americans receive such "diverse" news as CNN, Fox, MSNBC, Comcast would claim that the "market" for journalistic content is already covered. Or that because there are two African-American channels (controlled by conglomerates Viacom and Comcast itself), there is no need to ensure independently run services.
It's not Comcast alone that has a "No New Nets" sign. Cox Cable isn't interested in new channels either. That's because "…consumer appetites already have been sated for that kind of programming," according to its senior vice president of programming.
For a country founded on diversity of expression, the opening for new content is an ever-decreasing "eye of the needle," revealed one of cable's leading consultants for new channels in a recent Broadcasting & Cable article.
Given the hold that the gang of six media giants has over broadcast, cable, and satellite programming, and the lack of opportunity for real content diversity, it's time to address breaking up the TV oligopoly. If the country is to have a serious independent press and in order to foster a robust culture of ideas, breaking up big cable must be high on the policy agenda.
Lorine D. Card: consultant (sister-in-law of White House chief of staff Andrew Card)
Victoria Clarke: former Ass’t Secretary of Defense for Public Affairs under Donald Rumsfeld
Alfred Mottur: consultant (former senior telecommunications advisor to Sen. Ernest Hollings)
David Cohen: former aide to (now) Pennsylvania Governor Ed Rendell
Kerry Knott: former chief of staff to former House Majority Dick Armey and a Microsoft lobbyist
Melissa Maxfield: former head of Sen. Tom Daschle’s political action committee
Jessica Wallace: former senior advisor to Rep. Billy Tauzin (while he was chair of House Energy and Commerce Committee)
According to Comcast’s lead political operative, David Cohen, this lobbying team gives the company " … a lot of balance. Republican and Democrat, House and Senate, people who have relationships throughout Washington….”
Sources: “Rising Profile in D.C.: Comcast Bolsters Its Lobby Operation With Top Talent,” Multichannel News, Sept. 29, 2003; “Comcast’s Emergence as Titan Is Backed By a Powerful Lobby,” Wall Street Journal, Feb. 13, 2004.
$10,000-Senate Minority Leader Tom Daschle (D-SD)
$5,000-Sen. (and Commerce Chair) John McCain (R-AZ)
$5,000-House Majority Leader Tom DeLay (R-TX)
$5,000-House Telecommunications Subcommittee Chair Fred Upton (R-MI)
$5,000-House Energy and Commerce Committee Chair Joe Barton (R-TX)
$5,000-House Energy and Commerce Committee Ranking Member John Dingell (D-MI)
$200,000-plus to Bush-Cheney re-election campaign from Stephen Burke, president, Comcast Cable.
Comcast's PAC gave $599,372 to candidates in 2002 and $424,159 in 2003.
sources: "Watchdogs Target Comcast," TV Week, Feb. 16, 2004; Wall Street Journal , Feb. 13, 2004
Morgan Stanley (Paul Taubman. The company helped Time Warner Acquire Turner Broadcasting, Viacom take over CBS)
Quadrangle Group (Steven Rattner. Former journalist turned media dealmaker, represents the Sulzbergers, owner of the New York Times ).
J. P. Morgan Chase & Co. (Rob Kindler. He helped Viacom buy CBS and worked on the merger of AOL and Time Warner)
Felix Rohatyn (former Ambassador to France under Pres. Clinton)
Davis Polk & Wardwell (legal advisor. Helped Comcast Swallow AT&T Broadband)
DC Lobbying Firm: Brownstein, Hyatt and Farber (Washington power-brokers with high-level connections to Democrats and the GOP (including Gale Norton, the Secretary of the Interior)
Sources: The Deal , Feb. 16, 2004; AFX News Service; New York Magazine
It now controls (as of Feb. 2004):
21.5 million cable TV subscribers
5.3 broadband subscribers
7.2 million digital video customers
Comcast is the "Market Leader" in 8 of the top 10 U.S. markets, with 70 percent of subscribers in the top 20 U.S. markets, and operates in 22 of the top 25 markets.
Its programming interests include "E," Comcast Sports Net, G4, Golf Channel, Style, Outdoor Life, TV One, and Comcast-Spectacor.
Source: Comcast
The institutional watchdog group Corporate Library has given Comcast Holdings Corporation an "F" rating for the effectiveness of its board of directors. It also informed investors that as a result of the "F" rating, "...the weaknesses of the board contribute to a VERY HIGH degree of investment risk to this stock."
Corporate Library's company profile on Comcast notes the absence of "fully independent outside directors," and the lack of a "formal governance policy" and "effective CEO compensation practices." Its outside directors--who are supposed to be independent of the company--have strong links to Comcast and the cable industry. For example, Comcast president Brian Roberts' father--Ralph J. Roberts (a co-founder of the company)--is listed as an "outside" director. So too is Decker Anstrom, the former chief lobbyist for the cable industry (and now CEO of the company that runs cable's Weather Channel). Anstrom chairs the "compensation" committee of the board; Ralph Roberts is chair of the "executive" committee. CEO Brian Roberts, who received almost $10 million in compensation in salary and stock options, heads both the nominating and governance committees.
One Comcast board member, Julian A. Brodsky, also serves on the board of Rupert Murdoch's NDS corporation. The twelve-director board has a lone woman director. (The Walt Disney Co., which Comcast is trying to acquire, also received an "F" rating from the Corporate Library.)
Source: Corporate Profile: Comcast Holdings Corp. 2004 by The Corporate Library