Cable Firm's Plans Fuel Debate Over Ownership Limits

Times Staff Writer

Tele-Communications Inc.--already the nation's largest cable TV operator--gave its critics fresh ammunition last week in their fight to curb the growth and concentration of the cable TV industry.

TCI, in announcing plans to invest in Heritage Communications, the nation's 10th-largest cable operator, continued a buying spree that has enabled the Denver-based company to nearly double its market share since 1982.

If the Heritage deal goes through, TCI will serve 20% of the nation's cable subscribers either directly or indirectly through investments in smaller cable companies, increasing its market share from 17%, according to data compiled by Paul Kagan Associates, an industry analyst group in Carmel. American TV & Communications Corp., which is controlled by Time Inc., has an 8.5% market share.

'Hooks in Entire Industry'

In addition to its cable operations, TCI has begun investing in programming suppliers as well and recently acquired the nation's largest movie-theater chain with more than 1,400 screens.

TCI President and Chief Executive John Malone "has his hooks in the entire cable industry," said one shareholder admiringly, ticking off TCI investments as diverse as Turner Broadcasting System and Black Entertainment Television.

But TCI's buying power appalls some suppliers, including Hollywood's largest studios.

"If TCI turns you down, you're out of business," said Jack Valenti, president of the Motion Picture Association of America. As evidence, Valenti points to NBC's decision last year not to launch a cable news network, after TCI said it wouldn't use the service.

The Federal Communications Commission prohibits broadcasters from serving more than 25% of the nation's TV households, but cable TV operators are unfettered by such rules. Now critics are urging action by the FCC.

Spurred by a petition, the FCC sought public comments last summer about limiting cable TV ownership, but the agency is still debating whether to recommend a "full-blown inquiry" to the commission itself, said James C. McKinney, chief of the agency's mass media bureau. The Heritage deal "will certainly heat up the debate," McKinney said.

The cable TV industry contends that it is too fragmented to merit such curbs.

Brenda Fox, general counsel of the National Cable Television Association, insists that concentration of ownership is "still low" when judged by the Justice Department's antitrust division guidelines.

Indeed, Justice Department lawyers opposed the petition filed last year by Satcom Inc. asking the FCC to bar cable operators from serving more than 25% of subscribers nationwide, or more than 50% of the cable subscribers within a state.

In its comments, the Justice Department contended that anti-competitive acts ". . .can be better addressed under the antitrust laws and existing Commission rules."

Nor is the Justice Department scrutinizing TCI's plan to join Heritage's management in the $835-million buyout proposed last week. "We're not looking at that at this time," said Mark Sheehan, a spokesman for the antitrust division.

Debate over cable TV ownership could shift to Congress, but the Telecommunications and Finance subcommittee has a new chairman, Rep. Edward J. Markey (D-Mass.), and the agenda is unclear.

"We are tentatively planning to hold oversight hearings on cable issues, which would include the issue of cable ownership concentration," said David Moulton, the subcommittee's senior counsel.

Malone, in Australia for the America's Cup last week, could not be reached for comment. J. C. Sparkman, a TCI executive vice president, did not return a reporter's calls.

None of TCI's competitors or suppliers would speak publicly. But privately, some express concern over TCI's purchasing power.

Consortium Deal Collapsed

One executive recounted the fate of a consortium of supposedly powerful programmers which had planned to offer a programming package to backyard dish owners. The group included ESPN, Showtime/The Movie Channel, MTV Networks and Turner Broadcasting System. But the deal collapsed, the executive said, because TCI apparently opposed the deal and Turner pulled out.

At the time, he noted, Turner faced the prospect that its Cable News Network could be dropped by TCI in favor of a rival service then proposed by NBC.

"I wouldn't comment on that story," Turner spokesman Art Sando said Friday. "Ted (Turner) and John (Malone) are good friends."

Last month, TCI and other major cable TV operators were invited to invest up to $550 million in Turner Broadcasting, to help reduce the company's debt. Sando declined to specify any sums, but a source outside the company said that TCI and affiliated companies have agreed to invest nearly $200 million, in exchange for stock.

TCI has investments in more than a dozen companies, including a 24% stake in United Cable Television and about 65% of United Artists Communications. Both companies rank among the nation's largest cable TV operators.

The UA Communications deal, completed just two months ago, has stirred fresh concern in Hollywood because the San Francisco-based company owns not just cable systems, but the nation's largest movie-theater company.

Some entertainment executives suggest that if TCI controls Hollywood's biggest customer for films in theatrical release, then it may enjoy heightened bargaining power when buying movies or other shows for its cable systems.

"One could see a kind of pincers (movement) on Hollywood. (TCI) comes at the source of supply from two sides, and that's why I think it's so significant," said an executive at a major cable programming company.

With TCI's buying power, he said, it could license movies directly from the studios for its cable systems--or tacitly threaten to do so, to win pricing concessions from middlemen such as Home Box Office or Showtime/The Movie Channel, which supply movies on their pay-TV services.

"I think that's exactly what they have in mind," said one major studio president, who asked not to be identified.

But Fox, the cable trade group's lawyer, questioned Hollywood's complaints. "What is really at issue is not concentration of cable ownership," she said. "The Hollywood community is seeing that their total control is being eroded slightly, and they are looking to halt the process."

The debate won't slow the acquisition pace set by TCI's Malone, one analyst predicted. "John is like a Sherman tank," he said. "It doesn't have reverse. It just has forward."

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