L.A. POLS TAKE CABLE MONEY TO SLOW COMPETITION
by Joe Shea
American Reporter Correspondent
HOLLYWOOD, Decvember 22, 2000 -- The high-stakes world of cable televisi= on is in a constant state of flux, adapting to new markets, new technologie= s and new competition with an arsenal of weapons.
For the markets, cable providers search out new programming that can s= ell at premium prices; for technologies, they build on or fractional advanc= es like Internet telephony, interactive video, and fiber optic lines. But = for competition they reserve the most powerful weapon of all: money.
In the past two years, Los Angeles politicans have been swimming in a se= a of cable money that has totally eclipsed any lobbyist largesse of the pas= t. At the rate of millions of dollars a year, companies like Adelphia, AT&T= , Buenavision, Cox, Falcon Communications and Time Warner have poured their= wallets into campaigns, advertising, law firms, sponsorships and other ave= nues with one single-minded intent: to slow down or stop those two forms of= competition that might weaken their hold on millions of cable television v= iewers in the richest market for cable in the world.
Although they rarely break the law, the players in this gameoften skir= t it, and too often present the spectre of a city governmentthat has been b= ought and paid for.
One of the competitive avenues that worry the cable giants is so-called = "open access," which is not a disability or personal rights issue, but a ma= gically-named way of taking the technology and infrastructure of the giant = cable companies and providing it to a new wave of Internet-based competitio= n like AOL and Earthlink, the two giants that have survived in the frenzied= , suicidal mosh pit that is the world of Internet Service Providers (ISPs),= so that they can offer high-speed cable modem Internet access to their cus= tomers in direct competition with their hosts.
The $100-million merger of AOL and Time Warner approved Dec. 14 by the= FCC after a year of study was held up, in fact, until the two firms agreed= to allow other ISP's access to their technology, including cable systems a= nd instant messaging services.
The other way upstarts have found they can compete with cable giants is = as "overbuilders" -- firms that come into a monopoly franchiseand attach th= eir lines and other gear to a cable or telephone systemalready in place. Co= mpanies like RCN and Western Integrated Networks, twooverbuilders that are = mounting competion to monopolies all across thecountry, are now on the verg= e of entering the L.A. market.
Prepared to spend as much as $3 billion on construction to bring their "= bundle" of services -- high-speed Internet access, cheap long distance Inte= rnet telephony, basic and premium cable tv and whatever else fiber optic te= chnology can eventually deliver -- they dream of booming markets here for c= heap access to the vast worlds of information becoming available to ordinar= y folks via cell and standard telephones, PDAs, laptop and desktop PCs and = wizardry yet to be invented.
At least $3,100,000 has filled campaign coffers and law firm treasuries = since the open access debate began, and how that money makes itself felt is= an important lesson in how things get done in our city.
It was spent almost entirely by the cable giants, who first wanted to de= fend themselves against AOL and other ISPs, and then, when a Portland, Ore.= , federal court ruled that cities could not require open access, anyway, to= stop or slow down competition in their coveted monopoly franchise areas. =
So pervasive is the influence of cable giants that when open access came= up for a vote in the City Council on Nov. 21, four members of the Los Ange= les City Council had to recuse themselves due to conflicts of interest.
In the race to deliver the new services are operators of satellite,= wireless, and cable systems, telephone companies with copper and fiber opt= ic lines and digital switches, ISPs, traditional radio and television broad= casters, and even pager services that can beam stock data via satellite to = a matchbox-sized beeper on your belt or a digital watch/camera/phone on you= r wrist.
The new players in L.A. are RCN and WINfirst, as Western Integrated= Networks is known.
They are two of the most hardy and well-heeled of the new technology e= ntrepreneurs called overbuilders. Their business grows like moss right on = top of existing cable systems, which are composed of lines strung on teleph= one and utility poles and buried in undergrund concrete vaults, and buried = in the $100-million-dollar digital switches at the telephone company's "cen= tral offices" serving various neighborhoods.
RCN, funded principally by Microsoft co-founder Paul Allen, one of = the world's richest men, came through the door first when the city let itbe= known that cable franchise monopolies might be up for grabs.
Successful in Boston, Chicago, San Francisco and other cities -- where i= t has sometimes had to pay a heavy price to enter the markets -- it sought = overbuilding rights in five franchise areas now controlled by Adelphia, Tim= e Warner and At&T/MediaOne/TCI that cover a vast swath of West Los Angeles,= the West Valley and South Central and some 333,000 cable subscribers.
WINfirst, which is not quite as well known, has asked the city for = rights in all 14 franchise areas but its proposal is still in a preliminary= stage. RCN's franchise agreement, in the meantime, is being held up by ne= gotiations that can enable other competitors and slow down competition. It = is now expected to come before the council in mid-February, an influential = councilman says.
Proving that the people holding it up are responding to the large s= ums of money they've got from RCN's competition is probably impossible, but= both the money and the delays are a matter of public record.
How do these folks get their money's worth? As one judge in Florid= a said recently, it's like getting "nibbled to death by ducks." At every h= earing, in every negotiation, in every stage of the City Council committee = hearings, there are opportunities for new questions, new objections, new re= ports, new studies, new surveys, new language and new laws that can bog the= progress of the competitor down.
Although RCN by the end of October 2000 had spent some $43,000 on lawyer= s from Latham &Watkins and the well-connect Rose & Kindel lobbying firm, it= s spending was dwarfed by the companies that had monopolies to lose.
According to reports filed with or by the Los Angeles Ethics Commis= sion, cable operators spent their millions on lawyer-lobbyists and influenc= e peddlers that represent a very large number of the city's "inside" player= s. The so-called "Open Access Coalition" headed by AOL and the cable giant= s led by Adelphia, AT&T/MediaOne/TCI and Time Warner have spent the bulk of= the money.
Here is how it seems to have played out:
* Between Jan. 1, 2000 and July 30, 2000, City Attorney Jame Hahn= 's mayoral campaign got $14,000 of the $106,000 spent by AT&T/MediaOne/TCI,= Time Warner, Adelphia and other cable operators in the mayoral race.
Hahn's campaign is being guided by legendary political strategist Joe Ce= rrell, who has gotten some $70,000 from AT&T and Adelphia.
Hahn's deputy, Ed Perez, sat in on a meeting of the Information Technolo= gy Commission in September where he suggested several ideas that would keep= the contract from proceeeding.
Perez, who provided a copy marked "final" of the franchise agreement to = the Weekly, told us the document was ready to go to the City Council when w= hen the Board of Information Technology Commissioners passed it unanimously= on Oct. 16 and would heard by the City Council on Nov. 21. Perez said tha= t unbeknownst to him, plans had changed weeks before.
* Also joining the chorus for delays was commissioner RohitShukla= , who heads the Regional Technology Alliance and wanted arcane construction= protocols that will govern part of RCN's build-out to be put in a draft pu= blic works ordinance before the RCN contract was concluded. The issue for S= hukla was telephone poles, and one of their owners, Pacific Telesis and its= subsidiaries, treated him to two tickets to a Clippers game, the Ethics Co= mmission noted.
* Councilman Alex Padilla, chair of the Information Technology wh= owith his staff was taken to lunch by lobbyists for WINfirst, and who recei= ved at least $10,000 in contributions from cable operators over the past tw= o years, announced at its first hearing on Nov. 1 that he'd taken the RCN c= ontract off the agenda for Nov. 16, even while making a speech about the "h= istoric day" that had come -- the arrival of competition for cable monopoli= es for the first time in more than 15 years. Padilla has gotten so much mon= ey funneled to him from lobbyist Mario Solis -- some $78,000 -- that it tak= es three pages in the Ethics Comission report to list it all.
* If and when RCN's contract gets to the City Council, at least f= our members will have to recuse themselves again because they have cable-re= lated conflicts of interest. One of those is West Side Councilman Michael = Feuer, whose district is dominated by Adelphia and sought by RCN. Feuer is= running for City Attorney in the Spring is in a terrific position to call = shots on the contract. Adelphia spent some $18,000 in the second quarter o= f 2000 on lobbyists.
* Finally, if a draft ordinance now in the works to formalizesome= of the once-informal agreements covering construction (with political appo= intees on the ITC board would have final say on disputes) is finally approv= ed with some of those issues in it, the former chairwoman of the Public Wor= ks Commission, lobbyist Maureen Kindel, is likely to be well-situated to ar= gue the case for two clients, AT&T and Cabletron, whogave her firm a total = of $160,000 between April and October 2000.
Who's the big loser? The public.
Back at the same near-secret meeting of the Board of Informational Rec= hnology Commissioners on Sept. 25 where oppponents first tried to sidetrack= the RCN agreement, the Information Technology Agency (ITA) - which is over= seen by the Mayor's appointed board - reported that more than half of surve= y respondents said they'd like to get cable service from someone else, and = many said they wished the city would provide it instead.
With the various issues already resolved by the civil service profe= ssionals at ITA yet to be resolved -- for the second time, like a Florida r= ecount -- by Padilla's negotiators, the prospects for competition anytime s= oon still look like slim or none.
When you take into account the pressing financial needs of a city t= hat pays out $15 million to as single claimant shot in the back bypolice, t= he vast revenues the city could earn by running a larger version of its cur= rent cable operation is damnably attractive. It would not only end most of = the lobbying, but probably deliver the public a slate of programming that i= s all things to all people -- what every politician wants to be.
One can only imagine how much the cable industry would pay to stop = that.