Oct
01
1995

The Power of the Cable Trust

One can hardly find a better illustration of the dangers of media monopoly than the relationship between Time Warner, TCI and CNN.

CNN is generally thought of as the property of Ted Turner. In fact, to raise money in the 1980s, Turner sold a large stake in Turner Broadcasting--which owns CNN and other cable channels--to the cable system operators that carry the channels.

The largest of these outside owners are Time Warner and Tele-Communications Inc. (TCI), the two largest cable system operators, which jointly control cable access to almost half of the U.S. homes that have cable. TCI President John Malone reportedly once boasted that he had Turner under his thumb (Newsweek, 10/25/93).

Having gained a financial interest in the CNN all-news channel, the cable giants jealously guarded their investment. Lawrence Grossman, former president of NBC News, describes in his new book The Electronic Republic what happened when NBC tried to launch a competing 24-hour cable news service.

"To protect their financial interest in CNN," Grossman writes, "the major cable operators--that control programming to tens of millions of cable subscribers--refused to let NBC compete with CNN by offering another cable news channel. They were determined to keep CNN as a 24-hour cable news monopoly."

Since you can't have a cable channel if cable systems refuse to carry it, NBC agreed to turn the fledgling CNBC network into a business news outlet. Time Warner and TCI had demonstrated that they have more power to determine what news the American people get than General Electric, NBC's parent company, one of the country's biggest corporations. (Showing that it too understands the value of a monopoly, GE soon bought out CNBC's main rival, the Financial News Network, and shut it down.)

NBC is not the only network that would like to air news around the clock. (It's thought to be a good way to help recoup the cost of producing a daily half-hour newscast.) CBS tried to get the cable companies to agree to run a CBS news channel in 1993, according to Grossman, but "ran into a stone wall."

Even Rupert Murdoch, one of the world's most powerful media moguls, could not overcome the Time Warner/TCI alliance. Murdoch "would have liked to start a news channel," he told Broadcasting & Cable (1/17/94), "but Tele-Communications Inc. President John Malone and Time Warner Chairman Gerald Levin would not give me the time of day."

"There are at least four companies, perhaps five, that would like to start a 24-hour news channel," Murdoch claimed (Broadcasting & Cable, 1/24/94). "But so long as they can't be sure of distribution, they're never going to get the chief executives or the chairmen of those companies to take the risk and make that investment."

This anti-competitive entente threatens to become more entangled with the proposed merger of Time Warner and Turner Broadcasting, which was announced as Extra! Update went to press. Since Turner stockholders would receive shares of Time Warner, TCI would end up being a major stockholder in its supposed rival--effectively turning the cable industry into a trust, like the railroads and oil companies used to be.

There's talk of making some of TCI's Time Warner stock non-voting, in a move aimed at avoiding regulatory enforcement. But that misses the point: With TCI receiving a significant share of its profits from Time Warner, it has every incentive to divide the country between the two companies for their mutual profit.

Whether or not the Time Warner/Turner merger goes through, the collusion between Time Warner and TCI is exactly what anti-trust laws were designed to prevent, and it's time they were invoked. In the '40s, the movie studios were forced to sell their theater chains because it was recognized that putting media production and distribution in the same corporate hands is too great a concentration of power, leading to anti-competitive practices.

Today, through their control of cable systems, Time Warner and TCIhave power that the old studios never dreamed of. They too should be forced to choose--between being producers of TV programming or distributors of TV channels, so they no longer have a financial incentive to deny choices to the American public.