If cable television lives up to its billing as the communications medium of the future, then history will show that one of the first major cable regulatory battles was fought here in Connecticut.
On one side is the powerful Times Mirror Co., the Los Angeles media conglomerate that almost overnight has become a tremendous influence in this small state.Pitched against Times Mirror are the state utility and consumer regulators, backed by a covey of small-town publishing companies that resent and fear the new California presence in their state.
So far, at least, the local team has won the most rounds. But Times Mirror Co., which in 1979 boasted sales of about $197 billion, seems willing to spend whatever it takes in legal fees to win in the end.
The issue is whether Times Mirror should be allowed to own both cable franchises and a newspaper that have a common market area with an overlapping audience. It's an issue that is sure to crop up increasingly in other parts of the country as larger and larger media conglomerates vie for fewer and fewer markets.
At stake here are two valuable cable television franchises that serve Hartford and 10 nearby towns. Times Mirror acquired the franchises last year when it completed acquisition of Communications Properties Inc. With the acquisition, Times Mirror Cable Television became the sixth-largest cable operator nationwide, serving more than 130 communities in 13 states.
The Federal Communications Commission, which oversees the companies that operate the cables, has since 1977 removed itself from regulating franchises. In most areas of the country, cable franchises are passed out by municipalities, cities or counties. But in Connecticut, a state agency called the Public Utility Control Authority decides who gets to operate cable television.
Times Mirror's problems begn on July 13, 1978, when PUCA approved the transfer of ownership of the two cable operations to the Times Mirror. The authority said: "Since Times Mirror does not own or control any newspaper, radio or television station in the franchise area . . . there is not at this time any cross control of the various media."
The authority added: "The Times Mirror Co., or any of its subsidiaries or affiliates, shall inform the PUCA of any and all contemplated acquisitions of Connecticut media."
Times Mirror president Robert Erburu met with the top executive at the Hartford Courant and expressed interest in buying the paper. The Courant is the only paper left in the city since the Hartford Times died in 1976.
PUCA first heard of the negotiations when they read about it in the paper.
Finally, on July 12, Times Mirror informed PUCA of its plans.
Times Mirror management explained its silence -- which appeared to violate the spirit if not the letter of its 1978 agreement with the PUCA -- by saying that premature disclosure would have spoiled negotiations for The Courant. Times Mirror ended up paying $106 million for The Courant, which, although it had after-tax profit in 1978 of only $4 million, was the only paper in this prosperous insurance city and the dominant one in the state.
All at once, Times Mirror was a major presence in the state. Not only did it own The Courant and the two cable franchises, it earlier had bought newspapers in two thriving southern Connecticut communities -- The Stamford Advocate and The Greenwich Times. Neither of these papers circulates in the area served by the cable franchises, however.
After the state Division of Consumer Counsel petitioned PUCA to reopen hearings on Times Mirror's cable franchises, hearings were scheduled for Oct. 31 through Nov. 2,1979.
Times Mirror is particularly vulnerable to challenges like the one here in Connecticut because of its size, diversity and concentration in major markets. cOn Long Island, for example, the company owns cable as well as the dominant newspaper, Newsday. It also has a number of cable francises in Orange County, Calif., which is in the circulation area of the company's flagship paper, The Los Angeles Times, as well as two weeklies it owns, The Daily Pilot and The Coast Life.
In Dallas, the company owns The Dallas Times Herald, along with television station KDFW, the CBS outlet serving Dallas-Fort Worth.
Times Mirror's other holdings include New American Library, Publishers Paper Co. and Sporting News Publishing Co. The Washington Post and The Los Angeles Times are partners in a news service that goes to more than 350 subscribing publications round the world.
A three-member PUCA panel presided over the Times Mirror hearings, with Marvin S. Loewith, a former insurance executive, acting as chairman. The other two members of the panel were attorneys Peter G. Boucher and john T. Downey, the former CIA agent from New Britain, Conn., who was shot down over China in the 1950s and spent more than 20 years in prison there.
Arguing that Times Mirror should be forced to sell off either The Courant or the cable outlets was State Consumer Counsel Barry S. Zitser, an intense and vigorous public advocate in the Nader manner. "I'm one of the people who think cable has the potential to be as important to our lives as telephones are now," Zitser says.
But Times Mirror executives, in their testimony, suggested the company saw only a limited future for cable. While Zitser asserted that cable and newspapers are natural competitors, the Times Mirror executives and attorneys maintained that cable systems are not editorial voices but merely conduits to carry ideas. They also claimed that cable is not suitable for advertising.
"Cable television companies are in the business of corraling entertainment for the most part in an effort to win subscribers," testified David Lewine, vice president for program development at Times Mirror. "They have no editorial voice of their own . . . . Their role is relatively passive, akin to a record player."
The question of transmitting newspapers by cable, which would make the cable franchises directly competitive with The Courant, was discussed. But Times Mirror executives said the idea is still blue sky.
Times Mirror President Erburu, while allowing that the Japanese "have a piece of equipment that can do darn near anything," concluded that cable is "complementary and not competitive" to newspapers.
"Legitimate newspapers play around with using cable television as a means of disseminating some information," Erburu said. "That is why we would be prepared to ensure that all newspapers, not just The Courant, have got access to our cable systems."
Ironically, even as Times Mirror executives were testifying about their limited vision for cable, at another hearing here eight other cable companies competing for a rich franchise in Fairfield County were promoting cable unlimited. One of them, Storer Broadcasting, put out a promotional brochure that crowed, "The only limit to the possibilities of cable television is the limit of human imagination."
Times Mirror argued that there was no statute in Connecticut laws that prohibited a firm from owning both a newspaper and cable outlets. But Milton Sorokin, a Hartford attorney representing small local newspapers who oppose Times Mirror's cross-media ownership, replied: "They can't have it both ways. They can't have total free enterprise and enjoy the use of a public franchise, too."
At the PUCA hearings, Times Mirror executives argued that it was corporate policy to allow subsidiaries to be totally independent. The hseadquarters in Los Angeles would not dictate policy to the management of The Courant or the cable franchises, both Times Mirror subsidiaries.
But one day during the hearings, recalls a gleeful Sorokin, "Erburu said he just came from a Courant board meeting the night before where they changed the board. Who would believe that the subsidiary is independent when this guy comes from Los Angeles and changes the board of directors?"
On March 7 of this year, PUCA decided that Times Mirror must sell either the cable franchises or The Courant. While allowing that cable broadcasting today is "largely restricted to sports and movies," the commissioners said that "the potential for other kinds of programming exists, such as news . . . ."
The commissioners worried that Times Mirror could deter the development of the cable franchises to benefit The Courant when all three are competing "for a limited number of local advertising dollars."
The authority said that "the First Amendment goal of achieving the widest dissemination of information from diverse and antagonistic sources is crucial to the determination of suitability of a CATV owner."
Times Mirror was ordered to advise the authority about its divestiture plans not later than April 1, 1981. Times Mirror apparently will keep The Courant, if it comes to that. Erburu said in testimony that Times Mirror probably would trade the cable outlets for outlets owned by another company in another part of the country.
But Times Mirror has appealed the PUCA'S decision to the Hartford superior court. Recently, that court suspended PUCA's order until one year after litigation growing out of the decision is settled.