by John M. Curtis
(310) 204-8700

Copyright May 5, 2000
All Rights Reserved.

ulling the plug on ABC’s television feed, Time Warner badly miscalculated the fallout from their decision to interrupt cable service to more than 3,500,000 subscribers from New York to Los Angeles. Denying ABC’s gung ho fans their weekly fix of "Who wants to Be a Millionaire," Time Warner’s capricious executives decided it was finally time to teach rival Disney a lesson for stringing them along. Suggesting that Time Warner had no other choice because "it was not authorized to carry the signals of ABC’s seven television stations, including KABC-Los Angeles," after the interim agreement expired at midnight, May 1, 2000, the cable behemoth stunned American TV viewers with their boundless chutzpah. "This kind of treatment of their subscribers is not a good sign," said Los Angeles City Councilman, Alex Padilla. With Time Warner planing its mega-merger with AOL this fall, "this certainly doesn’t bode well for Time Warner in the transfer process. We hope this is not a sign of things to come," Padilla remarked.

       Slapping Time Warner on the wrist, the FCC ruled that a cable company cannot remove a broadcast station from its systems during a key rating period knows as "the sweeps," during which time key advertising rates are determined. Agreeing with Disney, the FCC said Time Warner acted inappropriately—to put it mildly. Citing technicalities about whether the service was a 'must-carry' or 'retransmission,' Time Warner excused their actions, failing to acknowledge the most disturbing aspect of the controversy: Who really owns the airwaves? When radio and TV signals were broadcast in the atmosphere, the public owned the airwaves. Now that broadband and satellites are in vogue, can cable or satellite companies arbitrarily deny access to local network broadcasts because of contractual disputes or any other reason? According to the FCC, interruptions can’t take place during key ratings periods. But does that give broadband or satellite operators the right—at any time—to pull the rug out from underneath unsuspecting subscribers?

       Los Angeles City Attorney James Hahn notified Time Warner that they violated their contract with the City by not giving customers at least 30 days notice to implement a change in programming. Taking exception, Time Warner claimed it ran banner ads warning customers about the possible interruption in service. This hardly qualities as proper notice. Beyond their contractual right, Time Warner played fast and loose when they unplugged ABC’s cable feed. While ABC’s parent company Disney has its own ax to grind, executives at Time Warner flashed their true cards when they abruptly interrupted service. With anti-trust actions on everyone’s minds, claiming that Microsoft hurt consumers sounds like child’s play compared to blocking cable subscribers access to network programming. Sure subscribers had other options. But it’s almost un-American to deny access to Peter Jennings and Ted Koppel.

       With their mega-merger with AOL hanging in the balance, did they really think antagonizing 3.5 million consumers helped their cause? Pouncing on the chance to kick his rival and lobbying the FTC to block the proposed merger of Time Warner and AOL, Disney Chairman Michael D. Eisner swiped, "We have always had to contend with gatekeepers and have proven in the last two days that if you make a good product, even gatekeepers can’t block access." Disney claims they weren’t trying to squeeze Time Warner for more moola, they were only concerned about the issue of 'open access' to cable pipelines. Please. Seeking open access to broadband, Disney wants to advance its own dominance in interactive and web programming. You can’t blame them for that.

       Before Time Warner bought AOL, they too favored unfettered access to cable pipelines. Since their planned merger with AOL, they’re singing a different tune. Now that Disney’s lines were reconnected, Federal Communication Commission czar William Kennard remarked, "We are pleased that the parties have reached an agreement. The television sets of average consumers should never be held hostage in these disputes." If nothing else, Disney has to give Time Warner some credit for looking to the future. Owning parts of the information super-highway isn’t a bad idea. What’s so wrong with Disney leasing the highway and Time Warner renting creative property? Sounds like it’s a pretty good trade off.

       Whether heads are going to roll in upper management at Time Warner is anyone’s guess. Meting out hefty fines, the FCC would seriously clip the wings of Time Warner’s prodigious market capitalization. AOL knew that slugging it out with Microsoft over Netscape Navigator was a tough road to hoe. But few expected Disney to be biting and scratching with Time Warner. Time Warner’s recent blunder took about as much IQ as the LAPD’s recent Rampart’s scandal costing the City and taxpayers incalculable sums of money. Begging for the FCC’s mercy, Time Warner only prays that they view this recent lapse as an innocent onetime aberration. Time Warner’s Chairman Levin will no doubt be turning to the Prilosec until the FCC calculates his punishment. With Time Warner and AOL’s stock floundering, paying out astronomical fines wasn’t what the doctor ordered.

       Smelling the blood, satellite operator DirecTV jumped on the flesh. "We couldn’t buy this kind of awareness [publicity] for our product," said Bob Marsoocci, a company spokesman. Swirling around the high-tech media market are hungry predators looking to capitalize on competitors’ misfortune. Staffed with media savvy executives and brigades of attorneys, Time Warner’s move to unplug ABC is truly mind-blowing. What were they thinking when they threw that switch? No one knows for sure, but like other types of irrational behavior it’s usually attributable to egomania. In the heat of battle, corporate gladiators forget that there are real consequences to shooting off their mouths and acting impulsively. Time Warner and AOL’s share holders have every right to wonder who’s at the helm. Despite the politics seen in the 'magic kingdom,' it’s a good thing that Mickey Mouse is still their goodwill ambassador. With all of Time Warner’s recent shenanigans, it’s time wake up Tweety Bird.

About the Author

John M. Curtis is editor of OnlineColumnist.com and columnist for The Los Angeles Daily Journal. He’s director of a Los Angeles think tank specializing in human behavior, health care, political research and media consultation. He’s the author of Dodging The Bullet and Operation Charisma.

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