GE, Disney Battle Time Warner, Comcast Over Digital TV

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The New York Sun

General Electric, Walt Disney, and other broadcasters find themselves in an unaccustomed role in Washington: underdogs.


They are locked in a lobbying battle with Philadelphia-based Comcast, the no. 1 cable company, New York-based Time Warner, the second largest, and the rest of the cable TV industry. At issue is whether the cable companies will be required to carry new digital channels the broadcasters are launching. The Federal Communications Commission ruled on February 10 in favor of the cable companies; now, the broadcasters face an uphill struggle to get Congress to overrule the commission.


The battle illustrates the shifting balance of power within the television industry. In the past, the broadcasters have largely gotten their way on Capitol Hill, defeating efforts to charge them for use of digital spectrum and blocking bills that would have required them to offer cut-rate or free time to political candidates.


“There’s always been the fear factor with the broadcasters,” said the director of the telecommunications project at Washington watchdog group the Center for Public Integrity, John Dunbar. “You can’t get elected without television. These guys really have tremendous control over whether you win this election and how much you’re going to spend to do it.”


Some independent cable channels, including Bloomberg Television, a part of Bloomberg News, are fighting the broadcasters because they compete for space on cable lineups. Cable companies own some of the channels they carry, and some broadcasters own both broadcast and cable channels. Burbank, Calif.-based Disney, for example, owns ESPN and the Disney Channel, but is lobbying to protect its broadcast business, ABC.


The fight over the digital channels may be the biggest challenge yet to the broadcast industry’s clout, said James Thurber, director of American University’s Center for Congressional and Presidential Studies in Washington.


“The marketplace is giving cable television much more power than it had in the past; it means the broadcast people have less power,” Mr. Thurber said. “It is always more difficult for Congress to act than to delay, and to affirmatively act in favor of this issue is going to be difficult” when there are other issues on the agenda like Social Security and taxes.


At issue is the industry’s transition to digital technology, which uses data bits, from analog, which uses magnetic waves. Converting to the new technology will allow broadcasters to offer high definition programs, or to air up to six digital channels in the same spectrum now used for one analog channel.


Broadcasters want the government to force cable companies to carry all of their digital channels. Cable operators argue that would violate their First Amendment rights.


“We’re not against carrying more than one signal if it’s compelling programming,” said Dan Brenner, senior vice president of the National Cable and Telecommunications Association in Washington. “What we oppose is a rule in which the government says a particular speaker, in this case the broadcaster, has an absolute right to put on a certain number of channels.”


The broadcast industry spent $12.8 million during the first half of 2004 to hire a team of Washington lobbyists, including Gregg Hartley, former chief of staff to House Majority Whip Roy Blunt, a Missouri Republican; Dan Mattoon, former executive director of the National Republican Congressional Committee, and Joshua Hastert, son of House Speaker Dennis Hastert, an Illinois Republican, according to Political MoneyLine, a Washington group that compiles lobbying reports.


About 40 lobbyists representing the four major networks – Fairfield, Conn.-based General Electric’s NBC, ABC, New York-based Viacom’s CBS, and New York-based News Corporation’s Fox – gathered in Fox’s Washington offices in the shadow of the American Capitol for a daylong meeting January 13 to map out their agenda.


The industry contributed $7.2 million to the 2004 campaigns of federal candidates, according to the Center for Responsive Politics, a Washington research group.


The cable industry has assembled its own lobbying team, including former Republican Representative Bill Paxon of New York and former Justice Department spokeswoman Barbara Comstock. New NCTA President Kyle McSlarrow was chief counsel to former Senate Majority Leader Trent Lott, a Mississippi Republican. The cable industry spent $8 million on lobbying during the first half of 2004 and made $5.6 million in donations to 2004 campaigns.


Congress is allowing analog service to continue until 85% of homes have the equipment to see digital TV, which is expected to occur well after the FCC’s December 31, 2006, timetable for converting all TV signals to digital. Of the 1,750 television stations in America, 1,373 are transmitting in digital in addition to analog, according to the Washington-based National Association of Broadcasters.


Broadcasters say the extra channels, some of which will carry news, weather, or children’s shows, won’t be profitable unless cable companies carry them. Two-thirds of the 109.6 million American television households, 73.6 million, subscribe to cable, according to Nielsen Media Research.


“You can’t operate a business when you only have over-the-air carriage,” said Jerald Fritz, senior vice president of Washington-based Allbritton Communications Company, which owns eight stations affiliated with Disney’s ABC.


The National Association of Broadcasters, the trade group for station owners such as Allbritton, Chicago-based Tribune Company, and Dallas-based Belo Corporation, is pressing Congress. “You don’t need a cable gatekeeper for competitive purposes to decide which channels can be seen and which can’t,” NAB President Edward Fritts said. To that end, 500 broadcasters met with lawmakers and their staffs March 2.


Senator Daniel Inouye of Hawaii, the senior Democrat on the Senate Commerce Committee, which oversees the broadcast and cable industries, said he expects Congress at least to look at the issue and that some committee members have been having informal discussions with outside experts.


“Congress can just look at the FCC and say, ‘They’ve spoken,'” he said. “I don’t think we’ll take that route.”


Senate Commerce Committee Chairman Ted Stevens, an Alaska Republican, said he would support legislation requiring cable companies to carry news, weather, and other public service channels. In the House, Energy and Commerce Chairman Joe Barton, a Texas Republican, said he opposes such a bill.


The cable association took out an advertisement in a Capitol Hill newspaper urging Congress not to require cable systems to carry every digital channel.


“We seek a fair opportunity to compete with broadcasters for cable and satellite distribution and viewership, nothing more and nothing less,” the ad said.


David Andersen, a spokesman for St. Louis-based Charter Communications, the fourth-largest American cable-TV provider, said there isn’t enough room in the cable pipeline to carry six channels for each broadcaster, in addition to cable channels such as HBO, TBS, and the Discovery Channel, all of which signed the ad. Bloomberg also signed the ad.


Consumer advocates aren’t taking sides.


“There’s a case to be made for broadcasters to get this federal welfare, but the broadcast industry doesn’t want to do anything for the public in exchange,” said Jeff Chester, president of the Washington-based Center for Digital Democracy. “On the other hand, cable is a powerful monopoly.”


Chester’s group wants broadcasters to provide more public service television and wants more competition for cable.


Enhancing cable’s clout is the fact that more Americans are now watching cable rather than the broadcast channels in prime time. In the 2003-04 season, 52% of prime-time viewers watched non-broadcast channels such as HBO and ESPN, while 48% watched over-the-air broadcast networks, according to an FCC report released February 4.


“It used to be the broadcasters absolutely controlled all broadcast media,” Mr. Dunbar said. “You’ve got to look at cable and say they have just as much potential power, and it’s getting greater.”


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