Disney Monopoly Defeats Time Warner


It's funny the way Washington works. The most ridiculous ideas can be taken seriously, if repeated often enough by brand-name lobbyists. Take the "open-access" argument, which states that the owners of high-speed data networks should be forced to share them with the companies that do not own high-speed data networks. What a concept! I wonder if we could apply this idea to other areas of life. Hey, that's a nice tie! Can I have open access to it? And by the way, I like your house, too you're not going to deny me open access to the jacuzzi, are you, just because you paid for it? But it's the only one in the neighborhood, you predatory monopolist!

"Openness" is a great word, and it's a cyber-word, which makes it even sexier. While you might appreciate all the wonderful products that have resulted from the commercialization of the Internet, think back to the days when the Internet was all about "openness" nobody owned anything, nobody did any business, nobody had customers or products or property rights. We just shared everything in a beautiful non-profit cyber-nirvana. And without any hope of a return on investment, people created many wonderful innovations. Why, don't you remember all those cool things to do online in 1980?

Amazing as it may seem, despite the unprecedented innovation and explosion of customer choices that have come from free markets in technology, telecom regulators are once again considering the "open access" idea. The argument is to opt out of the free market and instead allocate portions of the communications infrastructure through regulation.

The issue came back to life recently when "Who Wants to be a Millionaire?" and the rest of ABC's programs didn't appear for 39 hours on Time Warner cable systems serving 3.5 million homes in New York. ABC parent Disney and Time Warner were in the midst of a brutal negotiation over Time Warner's right to carry Disney programming on its cable systems.

Disney was trying to use the leverage of its popular ABC shows to force Time Warner to pay big bucks for the right to carry other Disney-owned cable channels. Time Warner, for its part, was trying to use the leverage of its cable distribution channel to force Disney to come down on the rights fees. Normally, this is called business.

Unfortunately, in the old world of telecom regulation, it's called a policy issue. And after New York Mayor Rudy Giuliani, the New York Times and FCC Chairman William Kennard decided Time Warner was the villain, the company blinked. Kennard wondered out loud if this meant that cable networks couldn't be trusted to provide fast Internet access without government regulation. Would Time Warner systems, due to be acquired by America Online, be "honest gatekeepers to the Internet?"

The beauty of the free marketplace is that we don't have to trust cable operators to be "honest gatekeepers." Consumers don't need the government to protect us, because we are the gatekeepers. If the cable guys deliver, we'll use them for our Internet access. If the phone guys do a better job with Digital Subscriber Lines, we'll use them. Or we'll use one of the many wireless and satellite services coming on line.

When you take the control away from us and give it to bureaucrats, history shows that's when innovation and customer choice disappear. Are the politicians really worried that Time Warner cable systems will prevent people from enjoying any content not owned by AOL? Get real. How long would you stick with an Internet service that only allowed you to visit one website, or a handful owned by one company?

"Open access" would be a disaster for customers of broadband services. But if some politicians want to allocate the resources of communications companies, then they should at least be consistent. In every American television market, ABC stations both those owned and operated by the network, and its affiliates exercise monopoly control over a particular section of the airwaves. It is a government-created monopoly, enforced by the Federal Communications Commission. ABC has a stranglehold over the programming broadcast on its Federally-designated portions of the radio spectrum.

Shouldn't Time Warner have "open access" to certain slots in the ABC prime-time schedule? This week, I think fairness dictates that, in return for carriage on cable systems, ABC should provide Time Warner with that Tuesday 9-10 slot between "Millionaire" and NYPD Blue. And why should only Time Warner get "open access" to the broadcasting system? At TechCentralStation, we'd like to stage our own awards show this Friday evening at 9 pm to replace the 27th Annual Daytime Emmy Awards. In fact, Michael Eisner has already been nominated for the "Why Don't You Just Invite the Government to Screw Up the Internet?" Award.

The irony here is that several years ago, Disney realized that it owned lots of valuable television programming, but didn't have a great distribution network. So it bought ABC. Later, the company thought it needed a bigger footprint online, so Disney bought Infoseek. I wonder if it ever occurred to Disney execs to just ask Washington to give them pieces of those companies. It would have been so much cheaper.