Sinclair Bcst. pushed case to overturn FCC decision on ownership cap, in oral argument at U.S. Appeals Court, D.C., Mon. Under what Media Access Pres. Andrew Schwartzman called “unusually harsh questioning,” by Judges David Sentelle, Judith Rogers and Stephen Williams, Sinclair argued that FCC order that limits ownership to maximum of 2 stations, where there are 8 independently owned TV stations -- “8 voices rule” -- was unconstitutional. Determination on legality of common ownership of TV stations should be left to Dept. of Justice on market-to-market basis under antitrust laws, Sinclair argued.
Only question cable experts had when asked for their predictions for 2002 was which companies would merge next. In wake of proposed Comcast acquisition of AT&T Broadband, observers said other companies -- specifically Adelphia, Cablevision and Cox -- could be next takeover targets. Among possible buyers mentioned most often was AOL-Time Warner, which lost in bidding war for AT&T Broadband. Microsoft also may look to form one or more alliances with cable company this year, experts said, to fend off competition from arch- rival AOL-TW. Only analyst who contradicted prediction of more mergers was Thomas Eagan of UBS Warburg, who said he saw more system swapping rather than merging for sake of getting bigger. Experts on consumer end of business uniformly predicted higher prices for service. And all said federal govt. probably wouldn’t cry foul on cable mergers or price increases.
Showing little adverse impact from recession in most recent tax filings, big communications associations generally enjoyed sound surpluses -- and at least 3 paid their top executives $1 million or more -- according to their latest tax returns. New leader in communications groups salary sweepstakes was CTIA Pres. Tom Wheeler, at just under $1.3 million total compensation, supplanting last year’s leader, USTA’s Roy Neel, who left partway through 2000 tax year. MPAA Pres. Jack Valenti was close 2nd at $1.16 million, followed by NCTA Pres. Robert Sachs at $1.09 million and NAB Pres. Edward Fritts at $908,552.
FCC’s attribution rules are inexorably linked to questions about ownership limits and agency should take “a fresh look” at those rules and consider changing them, NCTA Pres. Robert Sachs told reporters Tues. Outlining NCTA’s regulatory strategy for coming year, Sachs said his group would ask Commission to reconsider whether company that held only 5% stake in another actually should be considered as having control of 2nd company. Sachs said attribution rules should be reconsidered across board for cable, broadcast, other media. He said it was unfair that FCC, when looking to limit ownership, didn’t take into account fact that small investments in other media companies didn’t amount to control. “What we want are attribution rules, bottom line, which establish that a company is credited with ownership where it actually controls an entity,” Sachs said. Rules say person or entity has attributable ownership if that person or entity have 5% of voting stock or 33% of combined debt and equity.
Consumer groups were weighing their options Mon. while hundreds of thousands of people were trying to cope with losing their high-speed Internet service. Consumers Union and Media Access Project bemoaned lack of regulation that they said might have prevented shutdown of service to 850,000 customers of AT&T @Home service. Consumer groups planned in coming days to seek action from govt. and to urge officials to take greater role in overseeing Internet-over-cable service. Shutdown hit AT&T cable modem customers Fri. night after San Francisco bankruptcy court judge decided that maintaining service was burden to struggling @Home (CD Dec 3 P4). While AT&T and Charter weren’t able to secure agreements with @Home to continue providing service, other major cable MSOs did. In addition to losing stored e-mails and other information, customers’ e-mail domain names were changing.
SAN FRANCISCO -- Judge’s order late Fri. permitting bankrupt @Home Corp. to cut cable modem service to 14 of its 15 cable partners set off 2 scrambles -- one by cable lawyers vowing to seek U.S. Dist. Court stay before weekend and other by @Home and cable operators to negotiate, under 12-hour deadline, sweeter revenue cut for @Home. At stake was: (1) whether more than 3 million residential customers would lose their high-speed access -- and with it access to e-mail and in some cases their own Web pages; (2) how much blame cable operators would catch; and (3)how much @Home might be worth coming out of bankruptcy sale or reorganization.
Whether Tues. Supreme Court decision dismissing appeal of 1995 Adarand case will have any impact on pending appeal of U.S. Appeals Court, D.C., rejection of FCC EEO rules depends on who you ask. Govt. official, who asked not to be named, said order would have no impact at all, while Andrew Schwartzman of Media Access Project believed it would. Had Supreme Court issued decision on new Adarand appeal (dealing with nonbroadcast matters but cited by Appeals Court in twice rejecting FCC rules as unconstitutional [CD Jan 17 p1]), he told us, ruling “would have had a dramatic impact” on pending appeal of rejection of FCC rules by lower court and would have made it much more likely that Supreme Court would accept that appeal. Govt. didn’t appeal FCC EEO ruling, but Minority Media Telecom Council (MMTC) did. After first accepting case, Supreme Court refused to issue opinion in latest Adarand appeal because, it said, new issues were brought up that never were considered by lower courts: “Petitioner [Adarand Constructors Inc.] urges us to take on this task ourselves and apply strict scrutiny to a complex web of statutes and regulations without benefit of any lower court review.” Justices haven’t announced whether they would accept MMTC appeal of FCC rules and U.S. Solicitor Gen. hasn’t filed govt.’s position with Supreme Court. Appeals Court rejected first set of FCC EEO rules in 1998, 2nd set of rules last Jan. In not joining MMTC appeal, FCC Chmn. Powell has said agency soon will come up with new set of EEO requirements that it expects will withstand court review.
Rather than rely on cable industry and public alone to provide data on FCC’s pending proceedings on cable access and horizontal ownership rules, Commission staff will do its own research and seek independent data to support any decisions by agency, Cable Bureau Chief Ken Ferree said Tues. at Schwab Capital Markets conference. When cable rulemakings were issued, Chmn. Powell and other commissioners stressed that they were depending on industry and public to provide data on which to develop record and base their decisions. However, public interest groups have complained that they lack resources to support such research and would be seriously outgunned by billion-dollar cable industry.
Public broadcasters will be allowed to accept ad money, as long as they limit those ads to programming on their excess DTV channel capacity that isn’t broadcast to general public, FCC ruled 3-1 Thurs. Commission said public broadcasters could solicit funding outside traditional sources -- donations from viewers, philanthropic organizations, corporate underwriters, govt. subsidies. It said ruling was intended to help public broadcasters make transition to DTV from analog, but it has no sunset provision, meaning alternative revenue streams still will be available after DTV transition is complete. Mass Media Bureau Chief Roy Stuart said money also could go into producing programming. Examples of kinds of services that may be offered as ancillary or supplementary in digital TV signal include subscription video, paging or voice messaging services, computer software distribution, data transmissions, interactive materials. FCC officials didn’t rule out subscription video offerings such as premium services much like HBO or Showtime delivered over cable systems. Commission did rule that noncommercial educational (NCE) TV licensees must pay fee to federal Treasury of 5% of gross revenue generated by those extra services, just like commercial broadcasters. Currently, public TV (PTV) doesn’t run commercials, but conversion to DTV would allow them to support several programming streams.
Media watchdogs say they're closely monitoring negotiations between Viacom’s UPN and advertisers for signs that product placements will become rampant in cable network’s fall shows. With increasingly bleak economy and tough ad environment for TV concerns, watchdogs expressed reservations about $30 million deal between UPN and advertisers represented by Omnicom Group, including Cingular Wireless, Gillette, McDonald’s, State Farm Insurance and others. Deal already is done, UPN official said, but details of “value-added” elements still were being worked out. Still on table are product placements in shows themselves, logo “bugs” in corner of TV screen and other corporate sponsorship ideas. “If commercial speech overwhelms artistic expression, that’s a source of concern,” critical observer said.