Don't Regulate ITV

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If a bear market doesn't destroy interactive-television startups, then a handful of corporations-led by The Walt Disney Co.-just might wipe them all out, should those giants prevail with the government.

Disney, accompanied by Viacom Inc., USA Networks Inc. and Univision Communications Inc., has filed comments with the Federal Communications Commission which state that cable MSOs have the market power to destroy competing ITV providers, and that cable should be prohibited from doing so.

In its FCC filing, the National Cable Television Association argued that regulatory intervention on the ITV front was premature because the market barely exists. The cable trade group ruled out the possibility of market failure that would warrant government intervention.

Back in the world of dwindling returns, the bears on Wall Street were again emerging from their caves, as witnessed by the pounding the market took last week.

Juxtapose that scene with the sparse attendance at last week's "2001 Television/Internet Conference" in New York, and you have to wonder why Disney and cohorts are so riled up about ITV.

That event, hosted last Thursday by the New York chapter of the National Academy of Television Arts & Sciences and the Cahners Television Group, drew a scant crowd of fewer than 200 attendees. By comparison, last year's event attracted some 800 players in the ITV space.

It was clear that many of the wannabes in the ITV arena were walloped in the NASDAQ massacre that has been unstinting since it began last April.

And the few attendees at the conference last week were visibly worried about the future of ITV, when the shakeout would end and who would survive.

We agree with the NCTA, which said in its filing that the "threat of regulation can only serve to exacerbate" the Wall Street "meltdown" that has already wiped out Internet stocks and other companies developing ITV services.

So why are Disney and its allies so worried about cable locking them out of a game in which one can argue that nobody has anything that resembles a competitive edge yet?

Oddly enough, it might be all about sports rights. In a March 19 filing, released last Thursday by the FCC, the National Football League actually backed the NCTA's position, urging the commission to let the ITV marketplace germinate before trying to harness it in.

"In the world of ITV, we anticipate that we would continue to use contracts to protect and exploit our intellectual property rights and to promote the development of program-related ITV services," the NFL said in its lengthy filing.

This is all so curious because the NFL's position doesn't sit with that of Viacom, which owns CBS, which has the rights to air NFL games. Clearly no one trusts anyone here. But you have to wonder about the real, potential upside of ITV because so many camps are at odds over a business that's peanuts right now.

Clearly a lot of people see some upside for ITV, and that's why a whole bunch of powerful media giants are making a stink over it-and taking the risk of inviting the government in, something most sound companies avoid at all costs.

It's becoming pretty clear that the companies seeking regulation might also be acknowledging that content may not be the big cheese here, and that cable's broadband pipe is a distribution force to be reckoned with.

"There is no sound basis for believing that vertically integrated broadband distribution providers with market power will voluntarily refrain from discriminatory practices and skew consumer choice," the Disney-led group whined in its filing.

Actually, we would be very surprised if this movement ever picks up any steam, given that the Republicans are in the driver's seat here, and they are as likely to intervene in market squabbles as I am to invite Sean "Puffy" Combs to my next cocktail party.

But this remains a brewing battle among content and pipe providers, and don't expect Disney and crew to disappear. The Mouse is again rearing its head in Washington, where it likes to go when it doesn't get its way.

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