Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age (46 page)

41.
Helmetag, “Railroad Mergers,” 1495; Transportation Act, ch. 722, 54 Stat. 898 (1940);
http://www.bnsf.com/about-bnsf/our-railroad/company-history/pdf/hist_overview.pdf
.

42.
Morris,
Theodore Rex
, 316.

43.
Ernest Hamlin Abbott, “Introduction,” in Theodore Roosevelt,
The New Nationalism
(New York: Outlook Company, 1910),vii–xxi.

44.
Theodore Roosevelt, “Fourth Annual Message” (speech to Congress, December 6, 1904), available at
http://www.presidency.ucsb.edu/ws/?pid=29545
.

45.
Modern Business: A Series of Texts Prepared as Part of the Modern Business Course and Service of the Alexander Hamilton Institute
, vol. 14 (New York: Alexander Hamilton Institute, 1917), 237–43.

46.
Samuel Huntington, “The Marasmus of the ICC: The Commission, the Railroads, and the Public Interest,”
Yale Law Journal
61, no. 5 (1952), 467–509.

47.
Interstate Commerce Commission Termination Act, 49 U.S.C. §§ 101–6, 201–5 (1995). Railroad mergers and acquisitions are exempt from antitrust law and are reviewed by the Surface Transportation Board. The National Rural Electrical Cooperative Association claims that “the railroads’ antitrust exemptions are antiquated, have no public policy justification and allow anticompetitive conduct. The resulting lack of competition, together with the Surface Transportation Board's past ineffectiveness, has allowed freight railroads to reap huge profits from electric cooperatives and other industries with no marketplace consequences or legal
accountability for their unreliable service and exorbitant rates and fees” (NRECA Fast Facts, May 2012,
http://www.nreca.coop/press/fastfacts/Documents/FastFactsRailCompetition.pdf
).

48.
Kimberly A. Zarkin and Michael J. Zarkin,
The Federal Communications Commission: Front Line in the Culture and Regulation Wars
(Westport, Conn.: Greenwood, 2006), 5.

49.
Interstate Commerce Act of 1887, ch. 104, 24 Stat. 379 (1887) (current version at 49 U.S.C. §§ 501–7, 522, 523, 525, 526, 20102, 20502–5, 20902, 21302, 21304, 31501–4 [1994]). In
Munn v. Illinois
, 94 U.S. 113 (1876), the Supreme Court upheld Illinois state laws establishing minimum railroad rates and preventing rate discrimination, stating that private property “affected with the public interest … must submit to being controlled by the public for the common good.”

50.
Phil Nichols, “Redefining ‘Common Carrier’: The FCC's Attempt at Deregulation by Redefinition,”
Duke Law Journal
1987, no. 3 (June, 1987), 508–11.

51.
Alfred Dupont Chandler and James W. Cortada,
A Nation Transformed by Information: How Information Has Shaped the United States from Colonial Times to the Present
(Oxford: Oxford University Press, 2003), 94.

52.
Leonard Reich, “Industrial Research and the Pursuit of Corporate Security: The Early Years of Bell Labs,”
Business History Review
54, no. 4 (Winter 1980), 511; David Gabel, “Competition in a Network Industry: The Telephone Industry, 1854–1910,”
Journal of Economic History
54, no. 3 (September 1994): 543, 558; John Brooks,
Telephone: The First Hundred Years
(New York: Harper and Row, 1976), 122, 134.

53.
Tomas Nonnenmacher, “History of the U.S. Telegraph Industry,”
EH.net
, February 1, 2010,
http://eh.net/encyclopedia/article/nonnenmacher.industry.telegraphic.us
; John Brooks,
Telephone: The First Hundred Years
(New York: Harper and Row, 1976), 134.

54.
Nonnenmacher, “Telegraph Industry,” 248; “Loses on Its Messages: The Postal Accuses the Western Union of Discriminatory Methods,”
New York Times,
February 7, 1911. As reported in the
Times:
“For messages thus transferred the Postal is obliged to pay the Western Union full rates and a further charge is exacted for additional words which indicate the transfer point and the date. By this arrangement the Postal loses about 10 cents on each message transferred.”

On November 14, 1911, the New York Public Service Commission prohibited Western Union from imposing these additional charges (“Postal Telegraph Co.,”
Wall Street Journal
, November 14, 1911). On February 9, 1912, Postal again complained that Western Union was charging for additional words (“Postal Again Complains,”
New York Times
, February 10, 1912; “Postal Versus Western Union,”
Wall Street Journal
, February 12, 1912). On January 16, 1914, the New York Supreme Court affirmed the New York Public Service Commission's decision to forbid Western Union from charging for additional words for telegraphs forwarded for Postal (“Western Union-Postal Telegraph,”
Wall Street Journal
, January 16, 1914).

55.
“Theft of Messages Charged by Postal,”
New York Times
, April 1, 1912.

56.
Gerald W. Brock,
The Telecommunications Industry: The Dynamics of Market Structure
(Cambridge: Harvard University Press, 1981), 155; Brooks,
Telephone
, 136.

Chapter 2. Regulatory Pendulum

Epigraph. Paul Starr,
The Creation of the Media: Political Origins of Modern Communications
(New York: Basic Books, 2004), 193.

1.
Patrick R. Parsons,
Blue Skies: A History of Cable Television
(Philadelphia: Temple University Press, 2008), 121.

2.
Ibid., 122.

3.
Ibid., 122–25.

4.
Ibid., 104. In a 1986 oral history, Smith noted that in 1949, when he first learned about cable, he thought it might be a common-carriage service. “It occurred to me that it might be considered to be a wire communications service for hire and, therefore, possibly a common carrier service subject to the jurisdiction of the FCC.” After all, as he put it, “the subscriber paid the system owner to receive signals intended for reception and use by the public and to communicate the signals to the subscriber's television receiver. There were certainly other theories which could be argued but at the time I was a common carrier lawyer.” He then drafted a report for the FCC noting that the Commission could classify cable this way. But after he left the FCC, Smith changed his mind: “Later, after I had left the FCC and was in private practice the existence of that report came to light while I was representing the National Community Antenna Association in hearings before the Senate Interstate and Foreign Commerce Committee where I was arguing that community antenna services were not common carriers or any form of public utility. When teased about this apparent turn around by Kenneth Cox, who was special counsel to the Senate Committee, I told him that when I wrote the report I thought I was right, but that this time I knew I was right” (Ed Parsons, interview with E. Stratford Smith, March 31, 1986, the Cable Center, Barco Library, Hauser Oral and Video History Collection, available at
http://www.cablecenter.org/content.cfm?id=667
).

5.
Parsons,
Blue Skies
, 195.

6.
Ibid., 171, 173–90, 196–206.

7.
United States v. Southwestern Cable Co.
, 392 U.S. 157 (1968); Parsons,
Blue Skies
, 247–48.

8.
Teleprompter Corp. v. Columbia Broadcasting System, Inc.
, 415 U.S. 394 (1974); Parsons,
Blue Skies
, 238–46, 350–51.

9.
Cabinet Committee on Cable Communications, “Cable: Report to the President” (1974), 20. Two other studies at about the same time argued that cable should be treated as a common carrier of some kind. See Committee for Economic Development,
Broadcasting and Cable Television: Policies for Diversity and Change
(New York: CED, 1975), and Sloan Commission of Cable Communications,
On the Cable: The Television of Abundance
(New York: McGraw-Hill, 1971).

10.
Parsons,
Blue Skies
, 344–46.

11.
Monroe E. Price, “Requiem for the Wired Nation: Cable Rulemaking at the FCC,”
Virginia Law Review
61, no. 3 (April 1975): 572.

12.
Walt Mossberg, “Show Me the Money,”
Wall Street Journal
, June 2, 2009.

13.
Parsons,
Blue Skies
, 227, 260.

14.
Representative Ed Markey, interview with the author, January 2011.

15.
Parsons,
Blue Skies
, 90, 92–96.

16.
In the Matter of the Associated Bell Sys. Co.’s Tariffs for Channel Serv. for Use by Cmty. Antenna Television Sys.
, 6 F.C.C.2d 433 (1967);
In the Matter of California Water & Tel. Co. Tariff F.C.C. No.
1
&
Tariff F.C.C. No.
2
Applicable to Channel Serv. for Use by Cmty. Antenna Television Sys.; In the Matter of the Associated Bell Sys. Co.’s Tariffs for Channel Serv. for Use by Cmty. Antenna Television Sys.; In the Matter of the Gen. Tel. Sys. & United Utilities, Inc., Co.’s Tariffs for Channel Serv. for Use by Cmty. Antenna Television Sys.
, 22 F.C.C.2d 10 (1970).

17.
Memorandum Opinion and Order in Docket 16928, 37 Rad. Reg. 2d (P & F) 1166 (July 28, 1976); Parsons,
Blue Skies
, 360.

18.
Parsons,
Blue Skies
, 360; Communications Act Amendment of 1978, Pub. L. No. 95–234, Sect. 6 Stat 33–35 (1978) (codified as amended at 47 U.S.C. § 224).

19.
Parsons,
Blue Skies
, 298–320, 365–69.

20.
Paul Baran, “Convergence: Past, Present, and Future,” lecture presented at CableLabs Winter Conference, February 9–11, 1999.

21.
Parsons,
Blue Skies
, 404–15.

22.
Ibid., 473–79. Cable Communications Act of 1984, Pub. Law 98-549, 1984 98 Stat. 2779, codified at 47 U.S.C. sec. 521 et seq.

23.
Parsons,
Blue Skies
, 498–501, 544–46.

24.
Ronald Goldfarb,
TV or Not TV: Television, Justice, and the Courts
(New York: New York University Press, 2000), 137.

25.
Ken Auletta, “Annals of Communications: John Malone, Flying Solo,”
New Yorker
, February 7, 1994.

26.
Parsons,
Blue Skies
, 469–71; “Cable Rate Hikes Anger Residents of Oregon City,”
Multichannel News
, October 24, 1988 (citing “indifferent service, unanswered telephone calls, arbitrary programming changes and rate increases” by TCI). In 1988, Congress held hearings into citizen complaints about cable customer service. Problems included “poor signal quality, inadequate service, decrepit system infrastructures, escalating subscriber rates, with monopolistic cable operators behind the whole scam,” as reported in K. Van Lewen and R. Stoddard, “What's Wrong with the Cable Act,”
Cable Television Business
(March 1, 1989): 58–61.

27.
Mark Robichaux,
Cable Cowboy: John Malone and the Rise of the Modern Cable Business
(Hoboken, N.J.: Wiley, 2002), 95.

28.
Parsons,
Blue Skies
, 544, 569–75; Andrew Kupfer, “The No. 1 in Cable Has Big Plans,”
Fortune
, June 28, 1993, available at
CNN Money
,
http://money.cnn.com/magazines/fortune/fortune_archive/1993/06/28/78011/index.htm
.

29.
Robichaux,
Cable Cowboy
, 104–8; Parsons,
Blue Skies
, 581–83, 540–41. John Malone today is the largest private landowner in America, with more than two million acres of land. See “2011 Land Report 100,”
Land Report
, available at
http://www.landreport.com/americas-100-largest-landowners/
.

30.
General Accounting Office,
Report to the Chairman, Subcommittee on Telecommunications and Finance, Committee on Energy and Commerce, House of Representatives
,
1991
Survey of Cable Television Rates and Services
, GAO/RCED-91-195 (July 17, 1991), 4–5.

31.
Parsons,
Blue Skies
, 577–78.

32.
Ibid., 554–62, 567–68, 570–72.

33.
Robichaux,
Cable Cowboy
, 117–18, 570–72.

34.
“Company News: House Gets Cable TV Bill,”
Reuters
, March 26, 1992.

35.
William M. Kunz,
Culture Conglomerates: Consolidation in the Motion Picture and Television Industries
(Lanham, Md.: Rowman and Littlefield, 2007), 174.

36.
Broadcasting and Cable
(September 14, 1992): 6.