Who Controls the Air Waves?
by David Morris
October 22, 1996
Who should control the air waves? That’s the kind of question I would have put to the presidential candidates if I were part of the audience in San Diego.
Some futurists insist the question will soon be irrelevant. Advanced communications technologies will offer us so much bandwidth that anyone will be able to transmit their programs to all willing recipients for pennies.
That may occur in the future. But right now channel scarcity exists. Only a handful of people decide who is seen or heard and who isn’t. More than 60 percent of American households subscribe to cable television and nearly all cable companies are monopolies within their cities.
This combination of vigorous demand and monopoly control gives cable operators enormous power. They can make or break a program, or a station. TCI, the nation’s largest cable operator, has demanded and received part ownership of t.v. programs in return for allowing them to be shown on its system.
Fearful that monopoly power could stifle local and community oriented stations, in 1992 Congress enacted the “must carry” rule. Cable operators must set aside a small portion of their channels for use by local commercial, educational and public broadcasts.
Cable operators were enraged. Time Warner, among others sued. So far the courts have ruled against the monopolists. This September an Appeals Court declared, “Without these provisions, vertically integrated cable operators could favor their affiliates to the disadvantage of other programmers.” Vertical integration occurs when the same company that produces the programs and owns the stations also owns the transmission capacity.
A few weeks after the Court wrote that opinion, the Federal Trade Commission(FTC) approved the biggest vertical integration of all time, the merger of Time Warner, TCI the nation’s largest cable operator, and Turner Broadcasting System(TBS). Time Warner is now the world’s largest entertainment and communications company.
TBS, of course, is Ted Turner’s baby. Another of Turner’s children is CNN, the world’s first global 24 hour news channel. Recently, two competitors have arisen. One is MSNBC, a joint venture of Microsoft and NBC. The other is the Fox News Corporation(FNC), owned by Rupert Murdoch.
Concerned that a merged Time Warner would refuse to carry any competing 24 hour news channel, the FTC made its approval of the merger contingent on the company’s carrying at least one additional news channel. Time Warner chose MSNBC.
A few weeks ago the mayor of New York, Rudolph Giuliani, asked Time Warner to use one of its 75 channels to carry the Fox News Network. The Fox News Corporation is headquartered in New York City. Giuliani argued that CNN, which is based in Atlanta, has had a very positive economic impact on that city and region and that FNC could create several thousand jobs in New York if it finds an audience. But three quarters of New York’s 1.5 million cable households subscribe to Time Warner and Time Warner won’t carry FNC.
Time Warner rejected the Mayor’s request. A few days later the Mayor took another tack. He used the non-commercial stations the city operates as part of its franchise agreement with Time Warner to carry the Blomberg News Service and FNC. The news programs carried no commercials.
Time Warner sued and District Court Judge Denise Cote issued a temporary restraining order on the city. She ruled that the city used its authority to “affect and control programming”.
The Mayor most definitely did use his authority to affect programming. Why is this illegal? In the information age, communities will thrive if they produce and sell information products. Selling those products depends on having access to transmission lines. Why is it illegal for a city to demand that one of its largest employers be able to sell its products to city residents?
Imagine that we were not talking about information highways but about asphalt highways. Imagine that Time Warner’s monopoly was not of cable lines running under the streets, but of the streets themselves. Imagine that Time Warner decided to prohibit a locally manufactured car from using the roads. Wouldn’t the city have the right to step in?
Some will say, “Let the marketplace decide”. But a competitive marketplace is not operating here. Cable is a monopoly. Ted Turner appears unwilling to lease Murdoch a channel even if Murdoch were willing to pay more than the present tenant. New Yorkers have no direct influence on Time Warner. They have much more influence over their democratically elected mayor.
The battle in New York illuminates many of the themes of this election campaign: the relationship of government and business, the nature of economic development in the information age, the rights of communities in the age of deregulation. I wish I could have heard where the candidates stand in the case of Time Warner vs. the City of New York.
David Morris is vice-president of the Institute for Local Self-Reliance