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ANDY GROSSMAN
Deregulatory policies cut both ways In his Farewell Address, George Washington warned to "beware of foreign entanglements."
They can be pretty tough here at home, too.
Our cover this week, with the "See no evil, hear no evil, speak no evil" chimps, is not an attack on anyone's intellectual capacity but merely a prediction that the incoming Bush administration is likely to look the other way as mega-media mergers and partnerships escalate.
AT&T wants to own more cable systems than a Democratic FCC would allow. Voila, ownership caps go away. TiVo's rivals want to have relationships with its strategic partners - to the possible detriment of TiVo stockholders - no problem. Rupert Murdoch wants to partner up on the UPN Network with his archrival Sumner Redstone? Sure, why not.
George W. Bush's record in this area as governor of Texas is mixed, leading many industry observers to take a wait-and-see attitude as to how lenient Bush appointees will be in anti-trust matters. But the appointment of the ultra-conservative John Ashcroft as attorney general is an early clue that the government will favor free market solutions over intervention.
Ashcroft has left few signs as to how active the Justice Department will be, but he did tell a television interviewer in October, "I've always stood on the side of innovation over litigation. And I think that some fundamental questions ought to be asked. `Are the consumers being harmed? And is innovation being stifled?'"
Bush's record on business matters in Texas has often seemed more political than ideological. For example, he has lined up against deeply unpopular industries, such as the utilities and insurance companies. But he has favored electric deregulation.
His Texas administration's dealings on telecommunications issues are similarly unclear. SBC recently won approval for long-distance, leading many to believe the Bell companies would have an easier road to long-distance under Bush than they did under Clinton. Still, SBC has long been unhappy with Bush's Public Utilities Commission appointees.
Bush seems to favor a competitive environment, and once he's satisfied that's the case, almost anything goes. New House Commerce Committee chairman Billy Tauzin, R-La., falls into that category as well.
The cable industry has generally liked a hands-off approach, especially since operators are insistent that they face real competition from DBS and overbuilders.
The FCC's Annual Report on Competition in Video Markets, which came out last week, always offers fodder for both sides. This year is no exception.
As of June 2000, cable's share of the video market had shrunk from 82% to 80%. While cable grew by only 1 million homes, DBS continues to make strong inroads by almost tripling cable's growth. DBS' market share stands at 15.4%.
Consumer advocates will argue with strong evidence that cable still dominates, but when most new customers sign on with DBS, I'd call that a pretty competitive marketplace and an excuse for a GOP Congress and administration to lie low.
But is a "see no evil" administration always good for cable? Should the industry beware of Big Media entanglements?
Yes and no. It depends on who you are. Cable has never been the big monolith that has spoken with one voice. TCI and Time Warner, for example, long had different agendas, as the latter is a more diversified content company. When some cable operators were in favor of compromising on rate regulation in 1990, TCI refused to back down, which led to the draconian Cable Act of 1992.
Now the pending AOL Time Warner merger has put the myth of a unified cable viewpoint to a final rest: AOL had been the biggest voice screaming for MSOs to open their networks to rival ISPs.
If the FCC lets Viacom own two national networks (CBS and UPN), its retransmission consent leverage with cable operators could increase as well. UPN last Friday began airing reruns of MTV's Celebrity Deathmatch. You can expect the crossover to intensify. If operators take any Viacom networks off the air, or fail to launch new ones, what's to stop the company from putting popular programs on UPN, which is badly in need of any good programming?
Meanwhile, Murdoch can use his second TV stations in markets such as New York and Los Angeles to sharpen his leverage with operators as well. Bill O'Reilly could start showing up on Murdoch's new stations. There's plenty of precedent: Cable networks have long put some of their shows on broadcast outlets.
If Murdoch buys DirecTV to fulfill his dream of a global satellite empire, he could use that national outlet to hound operators as well.
So, cable operators, after all, should beware of foreign entanglements.
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