ABC Dispute Costs Time Warner $72K
By TED HEARN -- Multichannel News, 3/19/2001
Time Warner Cable agreed to pay the federal government $72,000 to atone for dropping ABC signals in 3.5 million cable homes last May during a high-stakes retransmission consent dispute with The Walt Disney Co.
That dispute turned into a public-relations disaster just as Time Warner Inc. was seeking approval for its merger with America Online Inc.
The Federal Communications Commission on March 9 said it and Time Warner had concluded a consent decree that said the dollar amount payable by the MSO was reasonable, considering its decision to compensate injured subscribers with free programming.
Officially, the FCC did not label the $72,000 payment as a fine, but as "a voluntary contribution to the U.S. Treasury." Time Warner violated FCC rules by dropping ABC owned-and-operated stations during a sweeps period, in which viewer ratings are measured to calculate advertising rates.
Time Warner agreed to pay the fine within 30 days and surrendered any right to appeal the FCC's action, which was rendered in a three-page ruling by Cable Services Bureau chief Deborah Lathen.
"We are pleased to put the matter from last May behind us," said MSO spokesman Mike Luftman. "Time Warner Cable made a voluntary payment to the U.S. Treasury as part of the resolution with the FCC."
Last May, Time Warner pulled the plug on eight ABC stations-including outlets in New York, Los Angeles and Houston-after the two media giants failed to conclude a long-term carriage deal for ABC and a stable of Disney-owned cable networks, including the pricey ESPN suite.
Disney gained the upper hand when the consumer press portrayed Time Warner as a sinister monopolist bent on denying consumers access to the ABC hit Who Wants to Be a Millionaire . In an editorial headlined "Time Warner's Power Play," The New York Times said Time Warner's "blunt use of monopoly power" was a "strategic blunder" that raised questions about the union between AOL and Time Warner.
In all, the dispute lasted a short but punishing 40 hours, prompting Time Warner and Disney to reach a short-term deal that was later finalized into a six-year carriage pact.
Speaking a few weeks later, then-Time Warner Inc. chairman Gerald M. Levin said Disney decided to target Time Warner with "messianic intensity" and leave it with only two options: dropping the ABC signals or continuing to carry them in violation of copyright law.
Levin later said that in a similar future dispute, he would rather deal with a copyright problem.
In the consent decree, the FCC noted that Time Warner had taken several steps to make amends, including its decision not to challenge the agency's ruling that the MSO had violated federal rules.
The commission said Time Warner gave subscribers two free days of basic service through bill credits that amounted to $2.7 million and offered some subscribers one free month of premium programming with a "potential value" of $15 million.
The FCC also noted that Time Warner had a "long history" of compliance with agency rules and had promised to build on that practice by complying with "the rules and regulations of the [FCC] and the provisions of the Communications Act in the future."
