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FCC: Time Warner wrong
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May 3, 2000: 11:29 p.m. ET
Commission says company violated rules in removing ABC-TV from cable systems
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NEW YORK (CNNfn) - Federal regulators ruled Wednesday that Time Warner Inc. violated broadcasting regulations in removing ABC shows from its cable systems earlier this week, saying it was unlawful to pull the plug on a TV station during a ratings "sweeps" period.
The Federal Communication Commission said it would later consider appropriate enforcement action against Time Warner (TWX: Research, Estimates), the parent of CNNfn. The FCC's Cable Services Bureau issued the ruling, after an appeal from ABC.
"Time Warner Cable committed a clear violation of FCC rules," said FCC Chairman William Kennard in a statement Wednesday. "Today we are standing up for consumers. No company should use consumers as pawns in a private contract dispute."
"Our first priority was to clarify our rule so that this does not happen again during sweeps," he added. "Now we can consider the appropriate enforcement action."
The FCC did not provide details on the timing of such action but agency officials said fines could range from $7,500 per violation per day up to a maximum of $250,000.
Time Warner pulled ABC shows from its cable system for more than 36 hours earlier this week, leaving 3.5 million cable viewers around the country without such hit ABC shows as "Who Wants to be a Millionaire?" or the second installment of the miniseries "Arabian Nights." In New York, viewers were greeted instead with a blue screen featuring a scrolling message that read, "Disney has taken ABC away from you."
 The dispute involves how much Time Warner paid ABC's parent, Walt Disney Co. (DIS: Research, Estimates) to transmit ABC programs. The companies, which both blamed the other for the impasse, agreed Tuesday afternoon to continue talks until July 15.
The FCC stepped in after ABC asked federal regulators for help on Monday. Wednesday's ruling follows a tongue-lashing a day earlier from FCC head William Kennard, who said consumers should never be "held hostage" in a dispute such as this.
In the statement, the FCC said that its action is designed to "protect consumers from experiencing a disruption in viewing a local television station during sweeps period." The current sweeps period began April 26 and runs through May 24.
But ABC did not wait for the FCC ruling to go on the attack. The network ran newspaper ads in New York, Los Angeles and Houston offering a $198 rebate to Time Warner cable customers to switch over to satellite TV. The rebates were available to the first 1,000 telephone respondents to the ads in each city.
Time Warner took issue with the ruling, saying that the full FCC, rather than the cable bureau, should have reviewed the case.
"While we agree this ambiguous rule needs clarification, it is unfortunate that on an important issue affecting the entire cable industry, and where there was no emergency, that this was done without full commission being involved," said Mark Apfelbaum, senior vice president and general counsel of Time Warner Cable.
"We don't think Congress will pursue further review of this order," he said.
On a Wednesday conference call with analysts following the release of Disney's quarterly earnings report, Disney President Robert Iger acknowledged the FCC's ruling, and said Disney was prepared to resume negotiations with Time Warner as soon as possible.
"It would be our hope to immediately engage in negotiations with Time Warner," he said. "We are willing to get in a room immediately, we hope they will."
"We at least have an agreement to keep (ABC) on through mid-summer, and we would hope not to face the kind of situation we faced earlier this week," said Iger.
Time Warner shares slipped 13/16 to 85-5/16 in New York Stock Exchange composite trading Wednesday, while Disney stock lost 1-3/4 to 41-1/4. 
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