FCC ruled that TWX broke the rules and will discipline:
The Wall Street Journal Interactive Edition -- May 3, 2000
FCC Says Time Warner Violated
Federal Rules in Dropping ABC
An INTERACTIVE JOURNAL News Roundup
NEW YORK -- Time Warner Inc. violated federal rules earlier this week when it pulled Walt Disney Co.'s ABC television network from cable systems in eight markets, the Federal Communications Commission ruled Wednesday.
The ruling comes a day after Time Warner and Disney temporarily resolved a dispute that resulted in about 3.5 million Time Warner cable customers losing access to ABC programs like "Who Wants to Be A Millionaire."
The FCC said its ruling "will protect consumers from experiencing a disruption in viewing a local television station during the sweeps period." The agency said it will consider separately what enforcement action is necessary.
FCC rules forbid cable companies from dropping a network during "sweeps," when critical ratings data is gathered. The rule is intended to take away one potentially extraordinary tool from cable operators that they could use in negotiating deals with the networks.
Time Warner early Monday pulled ABC from cable systems in New York, Philadelphia, Los Angeles and other markets, four days after a nearly monthlong ratings sweeps period had begun. ABC appealed to the FCC that same day, and Time Warner responded on Tuesday in opposition even as the companies negotiated a temporary truce and the network went back on Time Warner cable.
The two companies had been fighting over the terms under which Time Warner could carry ABC. ABC told the FCC that Time Warner used the May sweeps "as a sword" in the negotiations to push unacceptable conditions on ABC. Time Warner said ABC had made "unreasonable demands" that would cost the cable company millions of dollars.
Time Warner Cable, facing a backlash from angry customers and politicians, held out an olive branch to Disney, restoring ABC programming. The two companies have yet to hammer out a new long-term agreement allowing Time Warner to continue to carry ABC.
Time Warner proposed to restore the signals of seven ABC stations on its cable systems while the companies continue to negotiate -- but only if ABC agreed to an extension that ran through Oct. 15. ABC responded that it would accept an extension through July 15. Time Warner Cable Chairman Joseph Collins said he "reluctantly" acquiesced and hoped the network and consumers would remember his willingness to compromise in the likely event that talks heat up again this summer.
For Time Warner, the decision to put the signal back on means it may avoid some government scrutiny over its business practices as well as its pending acquisition by America Online Inc. Even before this week's battle, Disney was encouraging lawmakers to take a hard look at the Time Warner-AOL deal.
Viewers in the affected areas who tuned into the ABC channel on their cable system got a screen with a message saying "Disney has Taken ABC Away From You," with a continuous scroll running underneath pinning all the blame on Disney and ABC, and portraying Time Warner as having its hands tied. But the situation is more complicated than that. The two had arrived at an impasse after months of tense negotiations that boiled down to how Time Warner was willing to compensate Disney for carrying ABC TV stations on its cable systems.
At the core of the financial wrangling is Disney's request that Time Warner offer the Disney Channel as a basic cable service instead of a pay network, and also carry the new Disney channels Toon Disney and Soap Net. In return, Time Warner could continue to carry ABC-owned stations on its cable network at no charge. If Time Warner didn't want to carry the new channels, Disney was asking Tine Warner to pay 65 cents per subscriber to carry the stations.
While Time Warner said it was willing to carry the extra cable channels to keep the TV stations, it argued that the price was too high. Time Warner Cable executives have said the cost of ABC's deal was $300 million over several years and that its cable subscribers would have to pick up the tab. It didn't help matters when Disney told Time Warner last week it was also raising rates for its sports channel ESPN by 20%.
Time Warner stopped carrying the signal early Monday when the two sides failed to agree. In the end, though, Time Warner blinked, putting the signal back on Tuesday. That was good news for Disney; although the network's national ratings were very strong Monday night, its ABC-owned stations, such as WABC in New York and KABC Los Angeles, would likely have seen some erosion in its audience if the blackout had dragged on.http://interactive.wsj.com/archive/retrieve.cgi?id=SB957391900562812707.djm&template=bb-company-news^DIS
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