By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
WHEN CORALIE WILSON received the fax announcing the $11.6 billion merger between US West and Continental Cablevision, the nation's third-largest cable provider, she could barely contain her anger. Wilson, executive director of a 10-city cable commission that includes St. Paul, had just asked the feds to put the merger on hold because local officials had been denied a say in the final deal. Worse, in the days before the merger was announced, US West's lawyers assured her it was on hold. The episode, she now says, set the tone for what has become a bitter relationship between the telecommunications conglomerate and the commission set up to protect a quarter of a million cable-TV viewers throughout the Twin Cities.
Because cable-TV franchises are monopolies, local commissions like Wilson's are supposed to determine what kind of cable service best suits each community, and make sure cable companies live up to their agreements. In this case, the commission's role was all the more important. Under federal law, US West can't own both cable and telephone franchises in the same city. So when US West announced its intention to merge with Continental a year ago, it knew it would have to sell its local cable franchises. Normally, to buy some time, the phone companies behind such mergers can apply for a federal government waiver allowing them to operate a cable company in their home area until they can sell it. Local commissions must approve the waivers.
When US West's form letter rolled over Wilson's fax, she learned that the Federal Communications Commission had given US West permission to go ahead with the consolidation without a waiver. Instead, the feds gave US West something called "special relief" that is similar to a waiver, but ends up cutting the commission out of the loop. US West insists the deal was perfectly legal. But Wilson says the phone company and the FCC thwarted the law that was set up to deal with this kind of corporate merger. Not only is it unclear that the "special relief" loophole legally exists, she says, if it's allowed to stand it could set a dangerous precedent for public oversight of the cable industry.
The reasons why local participation in such deals is vital aren't readily apparent to most cable viewers: Locally, there's no guarantee the St. Paul system will be sold to the best suitor--especially since any buyer will become US West's competitor in several years when cable and phone companies are allowed to do business in one another's arenas. Nor does US West have reason to maintain or improve a system it's selling. Plus, the merger could allow the phone giant to acquire high-speed data transmission lines, further hampering any future competitors in both the phone and cable arenas.
Thomas Creighton, legal council
for the North Suburban Cable Commission (NSCC), claims US West didn't want the hassle of appealing to local commissions, possibly because its shareholders wanted the deal cemented by the end of 1996. Other critics note that the decision is one more piece of evidence that phone companies have learned to expect better treatment at the federal level, where their largesse in terms of political donations is more evident. "The FCC seems to be much more amenable to the industries that they regulate than to local franchising authorities," says Wilson. "We can't afford to keep a permanent presence at the FCC, and US West can."
The FCC admits it hasn't done anything in the four months since the commission complained. For its part, US West denies trying to cut the commission out of the loop. "There's been a disagreement about whether what we got from the FCC was sufficient," says spokesman Steve Lang. "But it's our position that it is."
Media watchers note that if a community believes its cable contract has been breached, it can revoke the company's franchise. "What the commission should be doing right now is putting the franchise out for a bid and trying to get a new owner who is going to commit to vastly improving the quality of cable in the Twin Cities," insists Jeff Chester, executive director of the nonprofit, Washington-based Center for Media Education.
Which is exactly what the commission intends to do if it doesn't hear from the FCC by May 1, when the affected municipalities are scheduled to meet. "A lot of people are just mad as hell that some bureaucrat would say, 'I know the law says you have a right to have a local hearing, but it couldn't have possibly meant that,'" says Creighton. "My clients believe that if they are supposed to have a hearing, [the FCC] ought not be able to take that right away from them, and they're willing to fight about it."