TELCOS

Telephone companies (telcos) have always figured in the history of U.S. television. By the end of the 20th century they may attain the broadcast role they hoped for as long ago as the 1920s.

The earliest involvement of telephone companies in broadcasting dates to AT and T's interest in radio. Before World War I, AT and T was one among several companies actively experimenting with the hertzian waves with a view to controlling what seemed to be an imminent wireless communication era. AT and T's stake in the government-formed Radio Corporation of America (RCA) in the early 1920s seemed to guarantee the phone company a role in radio broadcasting, specifically with respect to developing the international market, selling transmitters, and providing anything that seemed to be telephony. Yet AT and T's definition of telephony broadened in that era: in 1922 it offered a special "toll broadcasting" service allowing people to use its "radio telephony" channels to send out their own programs--for a fee. At that time AT and T eschewed any interest in controlling content, although it did use its long distance lines to broadcast sports events, music, and certain other entertainment, avowing it desired only its rightful opportunity to transmit. Nevertheless, by 1924 the phone company had a regular radio programming schedule.

Its early control over broadcasting was broken up, however, by federal government (Federal Trade Commission) objections to the apparent growing monopoly power in radio. In 1926 a new structure was created to answer the monopoly charges, relegating the phone company to a role in transmission only while other companies involved in radio (General Electric, Westinghouse and RCA) would form the National Broadcasting Company and develop programming and an audience-oriented service.

AT and T, America's regulated, dominant national telephone carrier operated in that capacity for several decades, conveying first radio and later television signals across the country, enabling the formation of national networks through its long distance links. The carriage fees it accumulated were enormous, and as the sanctioned, monopoly inter-state common carrier, AT and T had the business to itself. a monopoly role that was at times contested. In 1948, for example, the FCC debated procedures concerning intercity video carriage. At that time the Commission espoused a rule reserving permanent microwave frequencies to common--not private--carriers. This rule thus sanctioned a de facto continued monopoly transmission role in television for AT and T. The company's first serious setbacks, however, did not occur until the mid-1970s.

In the 1970s regulatory liberalizations in two realms undermined AT and T's control of transmission services essential to television. First, communication satellites, an outgrowth of the U.S. space program, provided efficient and economical ways to transmit messages or signals over long distances. Although AT and T retained a major role for itself in international satellite communication through provisions in the 1962 Communication Satellite Act, the stage was set for other companies to enter into satellite services. Ultimately, this development would provide crucial alternatives to television's (and cable television's) continued reliance on AT and T for transmission. In particular, telephone companies were unable to control domestic satellite services, which became the preferred and cost-effective method for broadcast and cable television networks to deliver their signals, thus ending their dependence on AT and T for interconnection. The successful launch of HBO nationwide on RCA's Satcom satellite in 1975 bypassed AT and T and illustrated a future independent of the telcos. The Public Broadcasting Service moved to satellite distribution of its signal in 1978, followed by the major television networks' migration from AT and T to satellites in the mid-1980s.

Second, skirmishes between telcos and the young cable television industry prompted the FCC (Federal Communications Commission) and Congress to limit telcos' ability to own and operate cable television systems. The FCC ruled in 1970 that telcos could operate systems only in small, rural populations. In 1978, affirming that AT and T had abused its power in overcharging companies that wished to use its poles to establish cable television service, Congress enacted the The Pole Attachment Act authorizing the FCC to "regulate the rates and conditions for pole attachments," and effectively removing the telco's control over a key access and right-of-way issue and allowing cable television to expand under more favorable terms. Telephone company ability to enter into or otherwise control this new television medium clearly would be restrained. The cable television industry's insistence on this is in part reflected in a section of the 1984 Cable Communications Act that reiterated the 1970 telco-cable cross-ownership ban and explicitly forbade telephone companies from offering cable television services.

However, telephone companies' interest in video services never died. If the aforementioned two new communication technologies ultimately underscored telcos' limited hold on an expanding set of services, they can also be counted among the causes of a massive restructuring of the U.S. telephone system under the 1982 Modification of Final Judgment (MFJ), a federal court ruling that broke up AT and T's monopoly telephone service in the United States. The result of a long-standing inquiry into AT and T's vertical integration and possible abuse of power under antitrust laws, the MFJ separated competitive long distance (interexchange) service from monopoly-provided local service. AT and T restructured, spinning off the "Baby Bells," regional companies restricted to the provision of local telephone service (local exchange companies). Both sets of companies, AT and T and other long distance service providers (interexchange carriers) as well as the local service providers again eyed the provision of video services as one among other competitive possibilities.

 

The MFJ put several restrictions on AT and T. The most notable was a seven-year restriction from 1984 (effective date of the MFJ), on entering into "electronic publishing." But in the late 1980s and 1990s AT and T, as well as several other telcos, quickly constructed a number of strategic liaisons with cable television, computer, software and even movie companies in order to position themselves for new video and multimedia services. Such liaisons built on the telephone companies' long standing interest in new media and their abortive history of attempting to provide teletext or videotext services in conjunction with publishers.

In 1988, amid the deregulatory fever of the 1980s, the FCC recommended lifting the cable-telco cross-ownership ban, but the requisite Congressional action was not forthcoming. Nevertheless, continued restructuring proceeded, allowing the convergence of what had been conceived as quite separate video, voice and data industries. In 1992 the FCC issued its "Video Dialtone" order allowing telcos (such as the "Baby Bells" or other local exchange companies) to provide the technological platforms for video service to subscribers. Essentially this also allowed them to enter the video services business, albeit without permitting them to directly own programming. One year later, in response to separate suits brought by telcos, several district courts began lifting the cable-telco crossownership ban. The first such suit was brought in 1993 (Chesapeake & Potomac Telephone Co. of Virginia v. US, 830 F. Supp. 909) by Bell Atlantic, a telco which also announced that same year a proposed merger with the largest cable company in the United States, TCI, a deal which later collapsed. Additionally, in the mid-1990s several telcos announced plans to provide video services as cable companies (which would allow them to own programming) rather than as telephone companies operating a video dialtone platform.

With new emphasis on creating a national information infrastructure, the role of telephone companies in providing an array of new services, including television, seems certain. Deregulating telcos and allowing them to offer video services, alone or in conjunction with already-established providers, has set the stage for a new television service and an entirely new set of corporate powers.

-Sharon Strover

FURTHER READING

Barnouw, E. Tube of Plenty: The Evolution of American Television. London: Oxford University Press, 1975.

Berniker, Mark. "Telcos Going Their Own Way Into Video." Broadcasting & Cable (Washington, D.C.), 2 May 1994.

Horwitz, R. The Irony of Regulatory Reform: The Deregulation of American Telecommunications. London: Oxford University Press, 1989.

McAvoy, Kim. "Telco's Army Poised For Assault on TV Entry." Broadcasting (Washington, D.C.), 3 October 1988.

Oxley, Michael G. "The Cable-Telco Cross-Ownership Prohibition: First Amendment Infringement Through Obsolescence." Federal Communications Law Journal (Los Angeles, California), December 1993.

 

See also Cable Networks; Home Box Office; Radio Corporation of America; Satellite; United States: Cable Television