Is FCC chairman Julius Genachowski spicing up his resumé for a future career with one of the companies he used to regulate or does Rupert Murdoch deserve an extra special Christmas gift this year?

Mr. Genachowski has breathed new life into an industry-friendly plan that would allow a handful of companies to own or control even more media outlets  — the same kind of knuckle-headed thinking that brought us companies like Clear Channel that own more than 800 radio stations you can’t tell apart and an integrated media and telecom empire growing at the expense of competition.

Whether Genachowski considers “diversity” a dirty word or whether he is nostalgic for the days of William Randolph Hearst, his sudden interest in a twice-rejected harebrained scheme to allow one company to own even more is a stupendously bad idea. This is particularly true when the guy ready to benefit the most is running a company that looked the other way when its reporters hacked ordinary citizens’ phones and then used what was heard as the basis for scandalous tabloid reporting.

Would you be comfortable allowing Rupert Murdoch to own and control virtually all of your local news?

Phillip “Ask yourself if your interests or theirs are served by more media consolidation” Dampier

Regardless of Murdoch’s personal politics, the concept of a small handful of companies or media moguls reinforcing their media oligopoly with even more consolidation hardly has a track record of success for consumers. One need only look at what the 1996 Telecommunications Act and subsequent deregulation foolishness did for local radio and television stations. Do you even listen to local radio any longer? If not, why not?

• Is it the fact the people on your “local” radio station strangely mispronounce streets and local towns because, in fact, they pre-record those messages from a city several hundred miles away?
• Does your local radio station even bother with news any longer, or is it simply easier to rely on a national radio newscast picked off a satellite for three minutes an hour?
• Do you have a trigger finger on the dial when the station stops playing music and starts playing endless ads?
• Do you get the feeling any DJ that plays something not on the focus-group tested and pre-analyzed 50 song playlist will automatically be electrocuted in his chair?
• Does your local television station run six hours a day of infomercials and practically no local programming?
• Do you mind that some of your local stations have slashed local news budgets and may have even handed over their newscast to a competing TV station (or doesn’t bother with one any longer?)

What the FCC used to demand from local stations to demonstrate “local commitment” has been relegated to the rubbish bin. Today, local stations are mere pawns to be bought, sold or traded by well-consolidated media groups. It’s all about the money, not so much about the programming.

Radio created its problems adopting cookie-cutter, ad-infested formats that deliver no diversity and little to no local flavor. You might as well create your own ad-free playlist with an iPod or smartphone and be done with it. That is exactly what many former listeners do.

Local television lost viewers after programming budgets were slashed and local news operations were cut or contracted out. The quest for fatter profits for the corporate parent come at the expense of appealing programming. Remember when your local station ran movies or syndicated entertainment shows overnight, in the afternoon or on weekends? No more. Thanks to deregulation and capitulation to basic cable, your local station now runs program length commercials for the Skin Tag Remover, mineral makeup that involved putting ground up rocks on your face, or the Lint Lizard. Compelling viewing this isn’t.

Now the FCC wants to bring this same “success story” in spades by allowing consolidation to accelerate. Only instead of one company owning a bunch of local radio and television stations, it now wants to permit that same company to own your local newspaper, too.

Happy days these are for the likes of media baron Murdoch, who already owns local media in cities like Los Angeles and Chicago, but now wants the local newspaper in both cities as well. It represents an expansion of Murdoch’s media echo chamber the free flow of information required in a democracy cannot afford.

But Murdoch isn’t the only one prepping the champagne. Companies like Comcast-NBC could end up owning your newspaper, two major local television stations, eight local radio stations, and of course also provide your overpriced Internet access, phone and cable-TV service.

Chinese Central Radio & Television in Beijing doesn’t get this level of control, but under the latest FCC plan, Fox, Disney, Viacom, Comcast, Time Warner, and Clear Channel each would.

Murdoch and his supporters argue that allowing greater media consolidation will lead to a rescue of the ailing newspaper industry which is losing readers and subscribers in the Internet age.

I would argue the fate of newspapers, like local radio and television, is at the hands of their corporate owners who have slashed budgets to maximize profits at the expense of readers. Murdoch’s ownership would not change this, but would allow him to further influence the media landscape for his own personal and professional agenda. Great Britain learned this first hand with Murdoch’s tabloid newspapers. The pervasive illegal phone hacking and other abuses under Murdoch’s watch became so bad, an independent report regarding the tawdry affair now advocates the need for an independent body to review media excesses and start bringing abusers to account.

Real competition used to manage that pretty well. Those days are dwindling back home in the United States.

For at least 20 years, journalism advocates have complained local newsrooms have been gutted in cost-cutting maneuvers to allow media groups to buy and sell newspapers like they were baseball cards. After every sale, more cost-cutting. First to go were local consumer reporters and investigative journalists who antagonized local advertisers with their accounts of abusive car dealers or incompetent repair companies. Many took their ad business elsewhere.

Reporters remaining on the payroll were given more stories to cover and little time to investigate. With looming deadlines, the result all-too-often is superficial reporting that relies on “he said, she said” coverage. Many newspapers also reduced local coverage in favor of cheaper wire service reports, often outdated by the time readers saw them.

Some editors counted the days until a popular columnist decided to retire. That’s one more person off the payroll. The local movie reviewer is an endangered species, now replaced with a national columnist who covers the same movies for a lot less money. In some newspapers, some local reporting comes courtesy of local bloggers that work for free or for a pittance.

Copps

With reporting like this, many newspapers are at risk of becoming irrelevant and are already a poor value for money. Those that have a chance have learned investing in local reporting can make the difference, especially if those reading the newspaper online are asked to help contribute to the cost of gathering and disseminating the news.

One thing we have learned watching 20 years of deregulation: the larger media companies get, the less innovative they become. The proof is available on your radio dial today, if you still even listen.

That isn’t just me saying it. Former FCC Commissioner Michael Copps said much the same thing:

“[America’s news and information ecosystem] has suffered the same kind of collapse as so much of America’s physical infrastructure—witness the sorry state of our bridges, highways, streets, public transportation, airports and public utilities. So, too, in media. Private sector consolidation led to the closing of hundreds of newsrooms and the firing of thousands of investigative reporters who should be combing the beats to hold the powerful accountable. Instead journalism has been hollowed out as badly as those rust-belt steel mills. Investigative journalism hangs by a slender thread, replaced by vapid infotainment, bloviating talking heads, and a dry well of facts and real-world analysis.

The public sector is at least equally culpable because government—especially the FCC where I served for more than a decade—blessed just about every media merger and acquisition that came before it. Then it proceeded, over the better part of a generation, to eviscerate almost all of the specific public interest guidelines that had been put in place over many years to ensure that the people’s airwaves actually serve the people.

[…] Instead of hurrying in the wrong direction, wouldn’t the Commission’s time be better utilized by considering (and actually voting on) some of the dozens of recommendations that have been put before it by civil rights and public interest groups to establish programs and incentives to encourage minority and female ownership? It is time for the FCC to take a deep breath, change direction, and get on with the huge challenge of encouraging a diverse media environment that serves all of our citizens and that nourishes a thriving civic dialogue.”

Readers can take action by clicking on the infographic above and sign the petition from Free Press to send a clear message to the FCC more is less. Demand media diversity and a return to local accountability from those occupying the public airwaves.

AT&T’s Supreme Court: senior executives sitting together in judgment of landlines at Wednesday’s analyst conference.

Yesterday, at least a half-dozen AT&T senior executives sat lined up in a perfect row to present Wall Street with the company’s vision for the future.

There were no consumers in attendance, just a group of Wall Street investors and analysts that braved the latest nor’easter to attend.

At issue: what to do about AT&T’s landline network, particularly in rural areas. Earlier this year, AT&T CEO Randall Stephenson, still smarting from a regulatory slap-down of his plan to acquire T-Mobile USA, ranted his disapproval of federal regulators for nixing the deal and then reflected on AT&T’s rural customers who still cannot buy broadband service from AT&T.

One of Stephenson’s strongest arguments in favor of merging with T-Mobile was it would facilitate a rural broadband solution. With that off the table, Stephenson seemed at a loss:

“We have been apprehensive on moving, doing anything on rural access lines because the issue here is, do you have a broadband product for rural America?,” Stephenson said. “And we’ve all been trying to find a broadband solution that was economically viable to get out to rural America and we’re not finding one to be quite candid. That having been set aside, now we’re looking at rural America and asking, what’s the broadband solution? We don’t have one right now.”

Now AT&T claims they do, and miracle of miracles, it turns out they never needed the buyout deal with T-Mobile after all.

AT&T’s solution is good news for urban, suburban, and exurban customers who will benefit from billions in additional investments to beef up the company’s U-verse platform. Those with access to U-verse TV, broadband, and phone service will soon find maximum speeds available up to 75Mbps — important at a time when cable companies are moving to 50-100Mbps premium service tiers. Those without access to U-verse, bypassed by its recently completed initial buildout, now will have a chance to see the service in their communities.

For more exurban and near-rural areas, AT&T has a positive plan to rid customers of the scourge of painfully slow ADSL service, better known simply as “DSL,” which AT&T pitches at speeds typically 10Mbps or less. In more rural areas, it is often much less.

By using additional fiber and using D-SLAM technology to reduce the amount of copper wiring between the phone company and you, AT&T’s IPDSLAM service will dramatically improve speeds for customers languishing with 3Mbps service to upwards of 45Mbps. But for now, AT&T won’t roll this out as a full-scale U-verse service. Because maximum speeds are lower and network variability is expected to be greater, AT&T will instead pitch this as a broadband and landline phone service package. Customers will be marketed satellite dishes if they want television service bundled in.

Although not as robust of a platform as U-verse will soon be, it still represents a major improvement over DSL, which is now barely tolerable for today’s online multimedia experience.

But AT&T’s “good news” may not be so great for its most rural customers, who either have the slowest DSL service or more likely no broadband at all. Those customers have waited years for AT&T to invest in upgrades to finally connect them to the Internet, but AT&T’s plans have gone in a very different direction.

AT&T’s rural solution is to take down the existing landline network and move everyone to its wireless cell phone service. To implement this proposed solution, AT&T will aggressively invest in rural cell sites within the 22 states where it supplies landline service. The company claims 99% of its customers will be able to access a 4G LTE signal within a few years.

Phillip “Are you following this shell game” Dampier

But here is where things begin to get dicey.  AT&T told investors it has no current plans to differentiate rural wireless customers from their urban counterparts. In larger cities, a smartphone and data plan is not necessarily a necessity — customers can still access a landline to place urgent calls or find a home broadband plan that does not carry the kinds of restrictive data caps wireless plans deliver.

Rural landline customers often pay low rates for their home phones, primarily because their local calling areas are generally far more restricted than in larger communities. The base rate for rural phone customers can be around $10 (before taxes and fees) in some areas. The base rate for AT&T’s wireless service starts at around $40 for 450 talk minutes or $19.99 for anchored, wireless unlimited calling home phone service (with a $36 activation fee and a two-year contract) that works with your existing home phones. Both represent rate increases.

Wireless data plans are notoriously expensive and limited. Verizon’s plan for home broadband users is priced at $60 a month with a 10GB limit. Less expensive plans with limits 25 times greater (or unlimited) are available from wired broadband providers. If the customer wants a smartphone for their data and home voice calling, bundled plans start at $85 a month with a 1GB usage limit.

With these prices, it is no surprise AT&T is promoting this as great news for the company. But we’re not so sure the average rural American is going to be pleased treated like a second class citizen with high priced, usage-capped Internet access.

As victims of Hurricane Sandy also found out last week, the venerable landline also enjoys a reputation of working after disasters strike. Unlike a fallen tree knocking down a phone line in the backyard, should AT&T’s wireless network fail in a storm, it would potentially leave hundreds, if not thousands of customers without service. Repair crews could take days to reach damaged facilities. That actually happened to Frontier Communications in some parts of West Virginia where heavy snows and tree damage made travel nearly impossible.

But there are important clues to what AT&T is really up to in regulatory filings that accompanied the showy presentation AT&T put on in New York Wednesday.

AT&T Has a Plan — Move Customers Away from Low Profit, Low Growth Landlines to High Profit Wireless/Deregulated Broadband

After the two hour presentation ended, AT&T posted a copy of its proposal sent to the Federal Communications Commission.

Reviewing the 24-page document is a classic case of  déjà vu. Once again, after the rhetoric is set aside, AT&T is back, peddling the same case to retire landline service and the regulatory obligations that accompany it. Only now, it has a carrot to dangle in front of regulators — significant investments in broadband expansion.

Although the private sector has invested well over $1 trillion in broadband networks, much remains to be done. As of 2010, roughly 14 million Americans, residing in rural and other high cost areas where the broadband business case is tenuous at best, still lacked access….

[…] Carriers such as AT&T are stepping up to do their part. In fact, just today, AT&T announced a $6 billion investment plan to expand and upgrade its wireline network to bring robust IP broadband services to millions of additional locations in its legacy footprint.

[…] AT&T makes this announcement with full confidence that the Commission will continue to implement the National Broadband Plan’s vision of removing regulatory impediments to efficient, all-IP networks, including obligations that could require carriers to maintain legacy facilities and services even after they have deployed new, IP-based alternatives.

I guess they didn’t need T-Mobile after all.

Translation: We used to bypass 14 million Americans, leaving them behind because it was unprofitable to serve them. But now we’re going to invest some additional money. But before you get that investment, we need you to agree the landline is a relic and (largely unregulated) IP-based networks are the future. We are not going to run both, so if you want all of this investment, you have to let us abandon our regulatory responsibilities and commitments to rural customers.

AT&T even tried to calm investor fears about capital spending increases, arguing the potential payoff of discarding landline service opens up a new era of earnings, both from shifting customers to AT&T’s highly profitable wireless service at a cost of double, triple, or more what customers used to pay the phone company, and a platform to sell them even more services later.

A number of Wall Street analysts disagreed, panning AT&T’s wireline investments as unproven.

The Broadband Coalition, a group of competing telecom providers, called the entire affair a smokescreen:

AT&T’s announcement today that it needs regulatory intervention from the FCC in order to invest in IP technology is a re-run of a tired ploy to leverage the company’s dominance. AT&T only invests in order to respond to competition, and competition is made possible by the very pro-competitive policies that AT&T seeks to eliminate.  The Broadband Coalition members have invested billions of dollars to bring the benefits of IP to American consumers from coast to coast.  But if AT&T gets its way, competition will largely disappear, investments will dry up and consumers will suffer.

Former Congressman Chip Pickering, coalition spokesman, stated,  “AT&T is simply trying to use its belated roll out of IP technology as an excuse to rewrite the telecom rules to its advantage.  We already know that AT&T’s claim that IP will somehow alter the laws of economics and lessen its dominance is patently false.  Clearly, AT&T’s proposed changes are not necessary to achieve widespread IP deployment, but the retention of competition policy is.”

Consumer groups accused AT&T of lying to federal regulators when the company argued the T-Mobile acquisition was essential to accomplish their plan to expand wireless service to 96% of the U.S. population. A year later, the company now claims it can deliver 4G wireless service to 300 million Americans and 99% of its landline service area without breaking much of a sweat.

CNN:

AT&T insists that it wasn’t being disingenuous with the regulators. Things changed, the company says, pointing to the 40 new spectrum deals it signed over the past year. The FCC recently made available some spectrum that wasn’t on the table when AT&T was negotiating its T-Mobile takeover.

“We chartered a new path,” AT&T spokeswoman Roberta Thomson told CNNMoney on Wednesday.

That’s precisely what the FCC — and industry analysts — believed would happen.

Now What

For now, rural customers need not worry AT&T will put their entire rural landline operation up for sale, potentially selling off a large number of  customers to companies like CenturyLink, Frontier, Windstream or FairPoint.

Rural America’s new home phone?

But AT&T’s lobbying machine will soon descend on state legislatures to win regulatory approval of their “abandon landlines” agenda. AT&T has a carrot for those legislators as well — a promise that states that hurry to rubber stamp AT&T’s wish list will be first in line for “investments.”

“We are going to have to see 21st-century regulation for 21st-century investments like this,” said AT&T CEO Randall Stephenson. “I think what you’re going to see is that these investments will go first to those states where you have good line of sight to good regulatory authority to do some of the things we’re talking about here.”

The implications for rural customers are profound if AT&T wins permission to scrap the landline network. Despite assurances from AT&T this is a technology argument, in fact it is more of a campaign to rid themselves of regulatory and consumer protection rules that have been around for decades. The type of technology used makes all the difference. Landline providers are usually compelled to provide reasonable, affordable, universal service for all Americans. Broadband, IP-based, and wireless networks now exist largely in a deregulation free-for-all where AT&T can do as it pleases, serve who it likes, and charge whatever it wants.

Considering AT&T’s current business plans, that sets the stage to worsen the newest digital divide — one pitting urban areas with faster, advanced, and more competitively priced networks against rural America, consigned to expensive, usage capped wireless service that may or may not work when a natural disaster strikes.

The only way this plan works for consumers is if common-sense service obligations, consumer protection, open access for competitors, and mandated equivalence of service is part of the package. Without it, AT&T will get exactly what it wants: a regulation free lifestyle, an expensive wireless network that rural residents will be forced to use for basic telecommunications, and cost savings and revenue opportunities AT&T will use to bolster its own profits, while cementing its monopoly position in the rural communities of 22 states where it operates.

Phillip “I can see the duopoly from my house — why can’t the FCC?” Dampier

The New York Times is pondering whether Americans are paying too much for wireless broadband based on Long Term Evolution (LTE) technology. A new study now offers proof, noting U.S. customers pay three times as much, on average, for each gigabyte of data in contrast to European consumers.

The UK-based mobile industry group GSM Association offers evidence Americans are not getting the lower wireless broadband prices promised by the more advanced, cost-efficient LTE technology, although customers in other parts of the world are seeing savings.

According to the group’s findings, Verizon Wireless customers effectively pay $7.50 per gigabyte of data over the company’s 4G LTE network. That is three times more expensive than the European average of $2.50/GB, and more than 10 times higher than what Swedes pay: $0.63/GB, cheaper than many wired broadband providers’ overlimit fees.

Verizon Wireless’ Brenda Raney tried to defend the discrepancy, claiming that Verizon offers enhanced value bundles with unlimited voice, text, and mobile hotspot service. Having a data-only plan, Raney told the newspaper, would reduce the cost to $5.50/GB.

That is still more than twice as much as what Europeans pay.

So what is the real reason for the enormous price difference?

The wireless industry regularly claims that the vast expanse of the United States means a much larger investment in wireless technology and infrastructure, notably cell towers, to reach customers in suburban and rural areas. European countries, in contract, are much more compact and urban-focused, making infrastructure less costly.

But that has proven to be nonsense for Sweden’s Tele2, which not only operates a nationwide 4G cellular network in Sweden — a country with its own vast rural regions — but promises to deliver service to 99% of the country by the end of the year and already covers more than 100 Swedish municipalities. They deliver service at a fraction of the cost charged by Verizon. Tele2 remains undeterred by the “rural cost argument,” taking on the world’s largest country — the Russian Federation. It has already acquired 12 regional mobile operators in Russia, expanding service to more than 43 regions with over 22 million customers, and plans additional investments.

The real reason for the inflated price of service, unsurprisingly, is America’s lack of robust wireless competition, according to GSMA.

Europe has the largest number of competing providers — 38 of 88 operators with LTE technology are in Europe. Even the smallest countries have at least three major competitors. The U.S. has two major competitors, two smaller national carriers, and a dozen or more regional or prepaid operators totally dependent on the larger four to deliver national roaming service.

Until recently, Verizon Wireless had a veritable monopoly on LTE service as AT&T tries to catch up — one of the very rare moments Verizon directly challenged AT&T in advertising that distinguished the coverage differences between the two. These days, AT&T and Verizon mimic one another, often offering identically priced service plans. Customers who want to pay less have to reduce their expectations with smaller competitors that offer reduced coverage.

If you don’t want access to premium wireless broadband, American carriers will also gouge you for lesser 3G service.

U.S. consumers on two year contract plans spend an average of $115 a month for 3G service, according to a survey conducted by Ernst & Young. In the Netherlands, the average was $51; in Britain, $59 — about half the price.

The growing mobile phone bill has now reached the point where Ernst & Young’s Jonathan Dharmapalan suggests it is literally interfering with smartphone adoption and causing others to shut off the devices permanently after an experience with bill shock.

“The No. 1 reason for customers’ discontinuing their use of a smartphone service or not taking the option is the fear of overspending,” Dharmapalan said.

A former FCC senior Internet technology adviser attempted to explain away the vast discrepancies in pricing, offering this bit of analysis: Europeans talk and surf  less.

The Federal Communications Commission has granted cable operators permission to completely encrypt their television lineups, potentially requiring every subscriber to rent set top boxes or CableCARD technology to continue watching cable-TV.

The FCC voted last week 5-0 to allow total encryption, a reversal of an older rule that prohibited encryption of the basic tier, allowing cable customers to watch local stations and other community programming without the expense of extra equipment.

The cable industry said the decision is a victory against cable theft, claiming that nearly five percent of all cable television hookups are illegally stealing service, at a cost estimated at $5 billion in lost revenue annually.

But some third party companies offering alternatives to costly set top boxes with endless monthly rental fees claim the industry move towards encryption is more about protecting the cable monopoly than controlling signal theft.

Current licensing agreements do not allow third party set top manufacturers to support scrambled channels without an added-cost, cable company-supplied set top box or card. That means a would-be customer would have to invest in a third party set top box and a cable company-supplied set top box to manage scrambled channels. That may leave customers wondering why they need the third party box at all.

This presented a problem for Boxee, which manufactures third party set top boxes, some with DVR capability. If cable systems completely encrypt their lineups, Boxee customers will need to rent a cable box and work through a complicated procedure to get both to work together.

Boxee officials suggest both an interim and long term solution to the dilemma — both requiring the goodwill of the cable industry to work out the details.

For now, Boxee and Comcast have agreed to work together on an HD digital transport adapter (DTA) with built-in Ethernet (E-DTA). A Boxee user would then access basic tier channels directly through an Ethernet connection and change channels remotely using their enhanced set top via a DLNA protocol.

A longer term solution would be to create a licensing path for an integrated DTA solution included inside third party set top boxes. This would eliminate the need for an added cost E-DTA box.

Cable operators planning to encrypt their entire television lineup will soon begin notifying customers of their plans. Under an agreement with the FCC, those with broadcast basic service will get up to two boxes for two years without charge (five years if the customer is on public assistance). Those who already have a cable box or DVR will get one box for two years at no charge. The cable company can impose monthly rental fees on additional boxes and begin charging for every box after two years.

Former FCC chairman Michael Powell, who now presides over the nation’s largest cable lobbying group, called the FCC decision “pro-consumer” despite the added expense and inconvenient many customers will experience.

“By permitting cable operators to join their competitors in encrypting the basic service tier, the commission has adopted a sensible, pro-consumer approach that will reduce overall in- home service calls,” said Powell, president of the National Cable and Telecommunications Association. “Encryption of the basic tier also enhances security of the network which reduces service theft that harms honest customers.”

Comcast is a leading proponent of total encryption, because it would allow them to start and stop service remotely, without having to schedule a service call to disconnect service. Cablevision already encrypts its entire lineup in certain areas under a previously-obtained waiver from the FCC. The company said it saved money reducing labor costs associated with service calls to physically connect and disconnect service.

“We know where you live, where your office is and who you owe money to. We are having your house watched and we are going to use this information to destroy you. You made a big mistake messing with TCI. We are the largest cable company around. We are going to see that you are ruined professionally.” — Paul Alden, TCI’s vice president and national director of franchising to an independent consultant hired to review competing cable operators for Jefferson City, Mo., in a historical example of cable industry abuse

The Federal Communications Commission last week voted unanimously to expire rules that required cable operators to make their programming available on fair and reasonable terms to competitors. Big mistake.

We have been here before. Let us turn back the clock to the days before the FCC and Congress mildly reined in the cable television industry with the types of pro-consumer regulations Chairman Genachowski and others have now let expire. Why were these rules introduced in the first place? Because years of industry abuse heaped on consumers and local communities took their toll, with high prices for poor service, outrageous corporate bullying tactics, and endless litigation to hamper or stop consumer relief.

How long will it take for the industry to resume the same abusive practices that forced the FCC and Congress to finally act once before?

The Central Telecommunications. v. Tele-Communications, Inc. (TCI): The Poster Child for Cable Industry Abuse

Tele-Communications, Inc. (TCI) was the nation’s largest cable operator. Later known as AT&T Cable, the company was eventually sold to Comcast.

Back in the 1980s, before the days of direct broadcast satellite competition like DirecTV and Dish, and years before telco-TV was allowed by law, the cable industry totally dominated the video marketplace. The only challenges came from incredibly rare competing cable TV providers or three million home satellite dish owners or wireless cable subscribers.

The industry’s only check on unhampered monopoly growth came from local authority over cable operations through the cable franchising process. If a cable company got out of control or did not offer the programming or service a community found adequate, it could offer a franchise to another company, effectively kicking bad actors out of town.

In Jefferson City, Mo., the local cable operator during the 1980s was Tele-Communications, Inc. (TCI). It had acquired the franchise in the city by buying out the original provider in the late 1970s. TCI had been buying a lot of smaller cable operators around the country under the direction of then CEO John Malone. By 1981, it had grown to the largest cable operator in the country, and few dared confront the well-heeled operator, which had a legal budget greater than the operating budgets of some communities TCI served. TCI was later acquired by AT&T Cable, which in turn sold its cable systems to Comcast, which continues to operate them to this day.

In 1980, Jefferson City officials decided it would be prudent to make sure they were getting the best cable service possible, so as TCI’s franchise agreement reached expiration, the city issued a “request for proposals” offering other cable companies a chance to bid for the right to serve the community of around 38,000. For TCI, this was tantamount to a declaration of war, and the cable company meant business. Malone equated anything threatening a permanent cable franchise for TCI as something like an act of government theft. In books later written about the events in Jefferson City, even some TCI executives admitted they were “horrified by the sleaziness” of the kind of hardball tactics involved, comparing them to a “B-movie.”

TCI revealed it would stop at nothing to keep competitors away from their territories and drag out years of litigation. Central Telecommunications, Inc., v. TCI Cablevision, Inc., revealed exactly how far TCI was willing to go:

From: Cutthroat: High Stakes & Killer Moves on the Electronic Frontier, By Stephen Keating

Cajole the mayor into canceling competitive bidding. In early 1980, after Jefferson City made it known TCI might get some competition, the company quickly met with the mayor hoping to persuade him to renew TCI’s franchise without a competitive bid process, so as to avoid a “frontal attack” by competitors.

Threaten the independent consultant. In December, 1980 the city hired Elmer Smalling, an industry consultant, to independently evaluate various bids from cable operators willing to serve Jefferson City. TCI immediately began publicly attacking his qualifications in a way the court later found to be defamatory. The court case documents Paul Alden, TCI’s vice president and national director of franchising, making personal threats against Smalling.  A sample:

“We know where you live, where your office is and who you owe money to. We are having your house watched and we are going to use this information to destroy you. You made a big mistake messing with T.C.I. We are the largest cable company around[.] We are going to see that you are ruined professionally.”

It got worse for Smalling. At this same time, Warner-Amex (another large cable company now known as Time Warner Cable) was a client of Smalling’s. Alden contacted Warner-Amex about Smalling. Following the threats, Smalling lost Warner-Amex as a client.

City Attorney Thomas Utterback later wrote a memo to the City Council in which he described TCI as a “relentless corporate bully.”

Threaten would-be competitors. On several occasions, from January of 1981 to the summer of 1981, Alden repeatedly telephoned Robert Brooks, chief operating officer of Teltran, a company which submitted a bid for the city’s franchise, and threatened him that unless Teltran withdrew from the bidding process, TCI would make trouble for Teltran in Columbia, Missouri, where it operated a cable television franchise. Teltran subsequently dropped out of the bidding process on the ground there was a “distasteful environment” in Jefferson City.

Another competitor, Central Telecommunications, became a defendant in a TCI lawsuit challenging the city’s right to request proposals from other cable companies. TCI argued it now had a 1st Amendment right of free speech to serve Jefferson City residents regardless of the wishes of city officials. In a wide ranging series of subpoenas, TCI demanded the bank handling Central’s financing turn over a “very wide range of potentially confidential records,” which according to Central was an effort to destroy its financing agreement with the bank.

Malone

Threaten customers. TCI warned customers that unless it won the cable franchise for Jefferson City, it would immediately shut off its cable system and leave customers without service, potentially for years, until Central built its own system from scratch. TCI officials said “it would not sell ‘one bolt’ of its system to whoever received the new franchise and that it would ‘rather have [its system] rot on the pole’ than sell it to a competitor at any cost.”

TCI’s system manager in Jefferson City told elderly residents of a senior citizens’ home that TCI would cut off service if denied a franchise, and the residents would be without television for two years pending construction of a new system because the concrete walls of their residence would not allow reception of over-the-air stations.

Lie, Lie, and Lie Some More. In one City Council meeting, Alden wildly claimed that TCI was the nation’s largest distributor of satellite dish antennas, with “an exclusive” right to sell in the state of Missouri. TCI promised that if the city renewed its franchise agreement, it would keep satellite dishes out of Jefferson City. If the franchise was not renewed, Alden promised to “flood the city with satellite dishes,” denying the city franchise fees. Alden later admitted both statements were untrue.

Threaten the mayor’s office. Although the mayor has never disclosed exactly what TCI threatened him with, the public record shows in March 1981, Alden called the mayor and threatened to turn the system off unless TCI’s franchise was renewed. TCI also filed an expensive lawsuit against Jefferson City regarding the way it handled its request for proposals.

By the fall of that year, TCI was meeting with city attorney Utterback in secret negotiations to renew its cable franchise, in direct violation of the city’s request for proposals  which required all negotiations to be open, as well as Missouri’s “sunshine laws.” By next spring, the mayor had privately notified council members he would veto any franchise renewal awarded to anyone other than TCI, which he later admitted was a condition imposed by TCI during its secret negotiations.

On January 25, 1982, the City Council provisionally awarded the franchise to… Central Telecommunications. TCI immediately refused to pay the city the prior year’s franchise fees, in excess of $60,000. It also reminded the mayor of his obligations to TCI as part of the secret franchise renewal negotiations held the prior fall. On April 20, 1982, the City Council passed the ordinance awarding a franchise to Central. The vote was six in favor and four against. The mayor vetoed the ordinance. The council then deadlocked five-to-five on awarding a franchise to TCI and the mayor cast the deciding vote in favor of that company. The next day, TCI dismissed its lawsuit against the city and paid the withheld franchise fees.

In the end, several courts upheld tens of millions in damages for Central Telecommunications, TCI’s lawsuit was dismissed at the company’s request, Mr. Alden was summarily dismissed by TCI after Malone referred to him as a “loose cannon,” and Jefferson City was stuck with several additional years of lousy service from TCI.

But TCI’s “bad corporate citizen” practices would come back to haunt the cable juggernaut, eventually failing to win assignments for two $800 million orbital slots for a direct broadcast satellite service the company proposed. After the Jefferson City experience, even the FCC could not, in good conscience, reward TCI with satellite slots it wanted for a “competing satellite service” it would sell through its own cable companies.

The memories of FCC officials are evidently short. Giving cable operators an inch has historically bought them a mile, paid for by consumers. Mandating easy to understand rules requiring cable operators sell programming to competitors on fair and reasonable terms is sound policy whether there is competition or not. Removing those rules or watering them down only promotes the kind of mischief that, when unchecked, leads to these kinds of horror stories. History need not repeat itself.