FCC Fines Time Warner $72K

Time Warner Cable on Friday agreed to pay the federal government $72,000 to
atone for dropping ABC signals in 3.5 million cable homes last May as the result
of a high-profile retransmission-consent dispute with The Walt Disney Co. that
turned into a public-relations soaking for Time Warner Inc. while it awaited
approval of its merger with America Online Inc.

The Federal Communications Commission reached a deal with Time Warner in a
consent decree that said the dollar amount payable by the MSO was reasonable
considering its decision to compensate injured subscribers with free

Officially, the FCC did not label the $72,000 payment a fine, but instead 'a
voluntary contribution to the U.S. Treasury.' Time Warner violated FCC rules by
dropping ABC stations during a 'sweeps' period, when viewer ratings are measured
to calculate advertising rates.

Time Warner agreed to pay the fine within 30 days and surrendered any right
to appeal the FCC's action, which was rendered in a three-page ruling by Cable
Services Bureau chief Deborah Lathen.

'We are pleased to put the matter from last May behind us. Time Warner Cable
made a voluntary payment to the U.S. Treasury as part of the resolution with the
FCC,' spokesman Mike Luftman said.

Last May, Time Warner pulled the plug on eight ABC stations -- including in
New York, Los Angeles and Houston -- after the two media giants failed to
conclude a long-term carriage deal for ABC and a stable of Disney-owned cable
networks, including the pricey ESPN suite.

Disney gained the upper hand when the consumer press portrayed Time Warner as
a sinister monopolist bent on denying consumers access to ABC hit Who Wants
to Be a Millionaire
. In an editorial headlined 'Time Warner's Power Play,'
The New York Times said Time Warner's 'blunt use of monopoly power' was a
'strategic blunder' that raised questions about the union between AOL and Time

In all, the dispute lasted a short but punishing 40 hours, causing Time
Warner and Disney to reach a short-term deal that was later finalized into a
six-year carriage deal.

Speaking a few weeks later, then-Time Warner Inc. chairman Gerald M. Levin
said Disney decided to target Time Warner with 'messianic intensity' and leave
Time Warner with the options of dropping the ABC signals or continuing to carry
them in violation of copyright law.

Levin said later said that in a similar future dispute, he would rather deal
with a copyright problem.

In the consent decree, the FCC noted that Time Warner had taken several steps
to make amends, including its decision not to challenge the agency's ruling that
the MSO had violated federal rules.

The commission said Time Warner gave subscribers two free days of basic
service through bill credits that amounted to $2.7 million and offered some
subscribers one free month of premium programming with a 'potential value' of
$15 million.

The FCC also noted that Time Warner had a 'long history' of compliance with
agency rules and had promised to build on that tradition by complying with 'the
rules and regulations of the [FCC] and the provisions of the Communications Act
in the future.'