Interviewer: Stewart Schley
Interview Date: June 27, 2018
Abstract
Stuart Brotman describes his introduction to cable television as a student at the University of Wisconsin-Madison. He recalls “The Wired Nation,” an influential book that examined the future of cable. He discusses writing an important article in law school about the groundbreaking case involving HBO and the ruling that the FCC could not regulate pay television. He goes on to talk about other seminal communications cases that had implications for cable content. He recounts his work with Henry Geller, general counsel of the FCC, and later director of NTIA, and describes the development of policies around cable, and the history of FCC rulemaking. Brotman explains the Cable Acts of 1984 and 1992 as well as the Telecommunications Act of 1996, and the political issues that ensued. He details the opening of the pay television market, engendered by HBO, and how that changed the economics of the business. He clarifies the question as to whether cable should be seen as a transmission medium or a content medium, and how policy and regulation should apply. He notes the ongoing tension with both the broadcast industry and the movie studios. He discusses the issue of “must-carry,” and its effect on channel capacity. Brotman observes the more recent competition between telephony and cable regarding triple-play, and remembers Ted Turner, Amos Hostetter and Newton Minow. He concludes with remarks about the growth of ESPN and net neutrality.
Interview Transcript
STEWART SCHLEY: Greetings. Welcome to another edition of the Cable Center’s Hauser Oral History Collection in which we speak with interesting people, luminaries, folks of influence who have had an impact on the cable industry, one of which is with me here today. I’m Stewart Schley. My namesake, Stuart Brotman. I’m struggling to introduce Stuart because his resume is about a ream of paper deep. He is a communications attorney, an academic, a policy advisor. He has been a consultant to business participants in this category for a long time. And we’ll let the conversation kind of reveal who you are and what you’ve done. But the main focus is to thank you for being here and sharing some of your reflections about the industry.
STUART BROTMAN: It’s a pleasure to be here. Thank you.
SCHLEY: Let’s start this way. Tell me where you grew up, and when you were an eleven-year old kid, I’m doubting you dreamed of becoming a communications attorney. So what happened?
BROTMAN: I was watching television all my childhood and loved television, and watched every genre of television from sports, obviously, primetime and daytime. And as soon as I got home in the afternoon, I would run down and turn on the television set. So I was really absorbed by the medium and I just loved the medium. And tried to figure out is there a way for me to be involved in this medium when I grow up. So, no, I didn’t have this notion that I would go into law necessarily, but I was certainly very interested in the medium. Then I was also very interested in related media like film and went to the movies quite a lot at a time when you had double features and triple features, and you could sit in the theater all afternoon and do that. And then I was also very heavily involved in listening to music. Because progressive rock was starting and FM. So the combination of music and film and video was just an intense and fascinating combination.
SCHLEY: And a big influence. This was where and when? Just put me in a time and place.
BROTMAN: This was in suburban New Jersey. I grew up in a little town called Fairlawn, which is twelve miles from New York City. And what was interesting is at the time, because New Jersey did not have its own television station, it did not have its own professional sports teams—we really were not an adjunct of New York, we had our own little world that we dealt in. And then New York was this other world, which was twelve miles but also it was many miles away in our heads.
SCHLEY: But this is interesting because that era was so different from today’s world of plenty, where you had a few TV stations over-the-air. You said FM, that was probably the most diverse of the new media creations at the time. And things have changed obviously a great deal since then. So talk about your segue into academia and your decision to study law and where that happened.
BROTMAN: Well, when I was leaving high school—I left high school, graduated when I was 17 years old. I wanted to see the United States and go far away. I wanted to go to California. But when you’re a 17-year old kid growing up in suburban New Jersey, California is equivalent to thinking about going to a place like China. It’s too far psychologically to go when you’re 17.
SCHLEY: It’s a big leap.
BROTMAN: So I began to take out maps and look at where might be the furthest distance I could go psychologically. That turned out to be Chicago. So Chicago turned out to be my California with the idea, like Lewis and Clark, that I would ultimately make my way to California, but I needed to have some way stations. I wound up at Northwestern University and the principal reason I wound up there was not geographic, but was that it had one of the world’s greatest communications programs. And I got to do communications from the first day I stepped on campus. In many other types of programs, you have to study for a couple of years and then you transfer in or you take upper-level classes. But I was able, right from the time I came to Northwestern as a freshman, to immerse myself in communications.
SCHLEY: So that was undergrad, deep exposure to the communications world, which was changing still at that time. Then you decided to pursue a law degree?
BROTMAN: I decided that I wanted to have eight years of post-secondary education. And I tried to figure out what is the best combination of those eight years. So one combination obviously would be four years of undergraduate, and four years to get a PhD. That was a traditional way to do it. So that was one way to break in an eight-year cycle. But then I had this idea: maybe if I took those eight years and took three years for a law degree, four years for undergraduate, and maybe if I could be really ambitious, could I squeeze in a Master’s degree between them? So I decided that’s what I was going to do. I was going to take the best opportunity to have a great post-secondary eight years of education.
SCHLEY: And Stuart, while this was going on, you, I’m sure, began to know of this thing, this creation called cable television, which was beginning to grow and beginning to have a presence in American life. Can you just talk about your first sort of brush-up against cable?
BROTMAN: It was actually Madison, Wisconsin, when I was in graduate school. I had a professor
named Don LeDuc, who was one of the early scholars of cable television, and Don was also very unique in that he at the time was the only professor at the time who had both a JD and a PhD. He was a very seminal figure for me. He was one of the reasons I went to graduate school at Wisconsin, to work with him, and he ultimately became my thesis adviser. And he had a classroom which was a class called “Cable Communications.” So literally it was an overview of the industry as it was developing. Madison was also an early cable city, and the city became very involved. There was a cable commission. Many of the academics at the University of Wisconsin at Madison were involved in advising the city. So I also had cable television while I was a graduate student. I was studying it. It was really a wonderful little laboratory to learn about it.
SCHLEY: Exactly. This was when—point me back in terms of years.
BROTMAN: This would have been in the mid-70s. This is really, as Ted Turner would say, before cable was cool.
SCHLEY: Exactly. But as a media kid, someone who did, as you said, sort of absorb television at a young age, did you like what you saw in cable? Did you see promise? Did you see interest in what was going on?
BROTMAN: I did. I thought it was very, very interesting. And I also began to read some of the new literature that was coming out in the field, such as “The Wired Nation,” which was a very important, first an article, then a book by someone named Ralph Lee Smith. That really had the whole promise of what cable might become, and the fact of it being a wired nation ultimately. And I thought that was just a great glimpse into the future.
SCHLEY: Some of the precepts that are talked about in that book, they took a while longer to develop than maybe we thought they would. But it’s still kind of an interesting pertinent exposure of what’s going on in today’s world. You know, with interactivity, and with some of the multichannel creations…
BROTMAN: It is. And about five years ago, I went on Amazon and bought a very old copy of it, but I actually have a copy of “The Wired Nation” on my bookshelf. Every now and then I take it out and see the things that you’re talking about.
SCHLEY: So professionally, what was your first engagement or involvement that had anything to do with the cable industry or the regulatory policies around cable?
BROTMAN: It was probably when I was in law school. Because when I was in law school, the HBO case came down. This was the case essentially that broke open the pay television market and said that the FCC could not regulate pay television. And I became very intrigued when that case came out. That was the U.S. Court of Appeals for the DC Circuit, which essentially reversed what the FCC had done. [Home Box Office v. FCC 567 F.2d 9 (D.C. Cir. 1977)] And ultimately the United States Supreme Court decided it wasn’t going to take the case. So that became the law of the land. That was a really interesting case to me, and I was fortunate enough to be on the Law Review at the University of California, Berkeley, and I decided to write my Law Review piece on the HBO case.
SCHLEY: Just bring us—sort of elucidate the agency regulation that prevailed at the time. Was there rate regulation around pay TV?
BROTMAN: No, there were actually restrictions on the type of content that could be on pay TV.
SCHLEY: That borrowed from the old broadcast motif.
BROTMAN: Well, it basically restricted the windows for movies, theatrical movies, and also restricted the types of professional sports that you could have on pay television. That’s why HBO at the beginning started out with boxing because obviously they couldn’t get any of the major sports. So it was a very interesting case. But in writing about it, obviously I had to look at the larger cable industry developments, and try to put pay television in that context. And then, even though I wrote the piece, I had no assurance that it would be published. Then my colleagues on the Law Review decided this would be an important piece to publish. I was fortunate enough to actually have a publication on the HBO case relatively soon after it came out, and I was one of the first people who had written about that case.
SCHLEY: From what your research showed you, I’m curious about this. What were the political pressures or the reasons that were used originally to justify restrictions on pay cable?
BROTMAN: It was the old siphoning when we had the freeze; in 1968, the FCC froze cable television development in the U.S. for four years.
SCHLEY: Why?
BROTMAN: Well, because the broadcast industry obviously feared that the cable industry was an intruder, it might grow up to be a big, bad competitor. So rather than wait for that to happen, I think the broadcast industry put a lot of resources into making sure the cable industry would not develop as quickly as it could have.
SCHLEY: I ask because I think maybe it is or isn’t properly appreciated that the cable industry had to battle a lot of entrenched interests in its early development.
BROTMAN: It did. It did. And there were some extraordinary entrepreneurs and business people and thinkers who I think really are getting credit now, but to some extent over the years were the unsung heroes of the industry.
SCHLEY: Right. Persevered and rolled the dice and risked a lot on building this industry.
Let’s talk about other seminal cases or moments legislatively or in a regulatory domain that as your career as a communications law attorney developed, you saw firsthand that impact of the development of this industry. What would you name as a couple?
BROTMAN: When I was in law school, I had the opportunity to do a summer clerkship at a law firm in Washington, DC. That was Arent, Fox, Kintner, Plotkin & Kahn. And Arent Fox represented Pacifica Radio.
SCHLEY: Pacifica Radio.
BROTMAN: Pacifica Radio obviously had been fined by the FCC for airing what we know as the “seven dirty words.”
SCHLEY: Oh, of course.
BROTMAN: The George Carlin monologue. And they were fined by the FCC and that case was appealed to the DC Circuit. The DC Circuit actually overruled the FCC, and said the FCC couldn’t do that under the First Amendment. But then that was appealed to the Supreme Court, the U.S. Supreme Court. And I was working at the firm during the summer, so I was drafted to work on the brief for the Supreme Court on the Pacifica case. And obviously that’s a seminal
case broadly for the communications industry, but I think had great importance for cable as well because it then really distinguished cable as a medium that could air things that you could not air on broadcast. I think cable began to take advantage of that over time.
SCHLEY: It’s funny because we sort of take this for granted today, I think, but it was not always the case that cable had a particular liberation that hadn’t been imposed on the preceding broadcast television industry.
What else? Talk about kind of how your career as an attorney developed from there and what sort of brush-ups against as you said, seminal decisions, were part of that?
BROTMAN: After I graduated—when I was in law school, I also had the privilege and opportunity to take the semester off for credit and go to Washington to work at the Aspen Institute. And I worked for Henry Geller, who had been the general counsel of the FCC, and would become the head of NTIA [National Telecommunications and Information Administration], the first head of NTIA. I basically became Henry’s research, writing, staff, everything, at the Aspen Institute and we began to work on projects together. And then literally I sat next to Henry every day at two little desks. We would just spend hours and hours talking. So I literally learned the history of the communications business. Henry was the lawyer who argued the Southwestern case in 1966, which was the case where the U.S. Supreme Court said that the FCC could assert jurisdiction over cable television. [United States v. Southwestern Cable Co., 392 U.S. 157 (1968)] It was the first time ever. And Henry was the person who came up with the theory of why the FCC could get involved with cable television. So through Henry I was able to learn all about the history and also the conflicts between the broadcast and the cable industry. I think an interesting anecdote is Henry had told me that there was great debate within the FCC at the time whether or not to argue that cable was more like a broadcaster or more like a telephone company. Because cable had wires and under Title II of the Communications Act—which is the provision for telephone companies—so originally he thought it would be easier to survive an appeal at the Supreme Court by saying, “Cable is a wired medium. The FCC already has authority already to regulate a wired medium. Therefore, it’s pretty much the same.”
And then, later on, before the FCC came up with its final rules, Henry had this moment of inspiration.
SCHLEY: Really? He changed—?
BROTMAN: He changed the viewpoint. And he said, “No, this is actually more like television. And broadcasting.” And to some extent I think that really changed everything. At that point, a lot of his lawyers at the FCC said, “It’s going to be much more difficult to convince the Appellate Court and the Supreme Court about that.” But ultimately Henry prevailed on that and did it through the force of his intellect and argumentation.
SCHLEY: When you were working for Geller and learning about the industry, were you becoming a fan, did you like what you saw in terms of cable, in terms of its promise or its potential contribution, or were you neutral?
BROTMAN: Oh, no. I was quite a fan. And part of that is because at the time that we were at NTIA, we were facing the future of cable and hadn’t developed policies around cable.
SCHLEY: You were sort of trying to figure this beast out, right? Because as you said, it’s a hybrid of preceding communications platforms.
BROTMAN: Right. And once I got to NTIA, because I had this pre-existing relationship with Henry, Henry basically said, “I want you to be my eyes and ears to the private sector and tell me what’s happening out there in the world.” And so, I would be able to go to NCTA and various regional cable associations and the conferences. Obviously read all the trade magazines. Typically, when people from the cable industry came to Washington on their rounds, and came to NTIA, they would be directed to me as the person to talk to. So I got to meet an extraordinary range of people who were in the cable industry or starting in the cable industry. People like Ted Turner and Jerry Levin and Bob Pittman. And all of the people we know who wound up creating these enormous enterprises.
SCHLEY: This is why I think it’s interesting to talk to you because you were sort of part journalist or researcher in addition to being a specialist in law and policy. So you absorbed a lot of this input that was going on.
BROTMAN: Yes, I think the academic training helped because I was always interested in looking at what is the literature saying, what are trade magazines, what are newspaper articles. So I was very absorbed in that as well as being in an active policy-making role. So I knew that it was important to do that. And I think that was very helpful, not just personally, but for the agency as well.
SCHLEY: I just wanted to as a sidelight explain to our viewers and readers: NTIA was created during the Carter Administration.
BROTMAN: It was created when Jimmy Carter came to office. In fact, it was the first Executive Order that he signed, which was Executive Order No. 1 to create the National Telecommunications and Information Administration.
SCHLEY: And it lives on today.
BROTMAN: It lives on today. It is doing great things and has had a very interesting history. In fact, it’s now in its 40th year, and has had a variety of different leaders, including some who had substantial influence at the FCC. One of its former heads is Al Sykes, who became the head of the FCC. And another person who had worked there as the acting head was Meredith Baker, who became an FCC Commissioner and is now head of the Wireless Association. So we’ve had a pretty good run in terms of being able to not only influence broad policy, but also regulation.
SCHLEY: What were, kind of just traveling forward, some of the other seminal cases that changed either the economics or the direction? You know them far better than I, but I think for instance that was largely seen as a rate deregulation act of 1984, is that correct?
BROTMAN: Well, I think both the Cable Acts of ’84 and ’92 were seminal and certainly the Telecommunications Act of 1996. Which is commonly known as the “Rewrite.” And that perhaps is the most important because that, for the first time, broke open the market between telephone companies and cable companies.
SCHLEY: Let me ask you to back up. ’84, I remember—was the name of the act “The Cable Communications Act of 1984?”
BROTMAN: It was, yes.
SCHLEY: What did it do?
BROTMAN: Well, for the first time, it created a law around cable because between 1966 and 1984, all of cable was really overseen by the FCC. Congress had not really told the FCC anything in terms of what it might want Congress—
SCHLEY: So the agency is sort of making it up as it goes along.
BROTMAN: The agency was making it up and coming up. And that’s why you had things like the freeze, which went for four years. Because Congress didn’t say either do it or not do it. I think it was very, very important to have Congress finally focus on this medium and certainly by 1984, cable was at the point of maturity where, I think, as a national issue, cable would be a very important one.
SCHLEY: I know that cable in the United States reached that tipping point of 50% penetration in ’87. It was driving toward that in ’84. But economically, if I read this correctly, the basic deregulation of rates brought in floods of investment, right? And tipped off a really epochal growth point for the cable industry.
BROTMAN: It did. But there was an earlier flood of investment. The real flood of investment started in the early 1980s, and I think much of it was when the pay television market broke open, HBO obviously took off. HBO was the fuel for the cable industry, and Showtime and movie channels, and some of the other pay channels. Because it meant all of a sudden you had money coming in through basic subscriptions, you had money coming in through pay, and you couldn’t get pay without buying the basic. So there’s all sorts of money. Cable really became a cash flow business. And once you have a cash flow business, loads of people want to invest in the cash flow business—
SCHLEY: It’s predictable, it’s attractive from an economic return on investments.
BROTMAN: Exactly.
SCHLEY: You saw new companies come in, I think, around that era. Some of them from outside the industry, right? I’m just trying to think back to Westinghouse’s involvement. It seemed to me that cable around that time became embraced or legitimized as a big media player.
BROTMAN: It did. It did. I think part of it was the business of it, and I think part of it was the policy community began to accept and embrace cable as a major aspect of communications. So I think you really needed both. It wasn’t just having the business. I think you needed the policy community and the legal community to begin to do that. And so going back to the 1984 Cable Act, I think symbolically to have a national piece of legislation—
SCHLEY: To have the U.S. Congress—
BROTMAN: The U.S. Congress deal with that. That probably was seminal in itself. And the actual details of it might have been important, but the real importance was having a piece of legislation called the Cable Act.
SCHLEY: And this oral history collection is very rich, but there is not a lot of material until now about these legislative moments that we’re talking about. I want to tell you to tell me what then happened over the next eight years. What happened in 1992?
BROTMAN: I wanted to just wind the tape back a little bit because I think there’s an important missing piece that took place when I was at NTIA. So when I was at NTIA, there was a major policy controversy about the future of cable. In 1974, there was a cabinet commission on cable television, which had been assembled under Richard Nixon, and directed by Clay Whitehead, who had been the head of the Office of Telecommunications Policy. And literally some of the major cabinet secretaries sat on this commission, including the head of the what was called the HEW, Health, Education and Welfare, and a variety of other cabinet secretaries. And the idea was for the U.S. government to begin to think about the future of cable. So that had been done in ’74. One of the key recommendations of that was that cable should be a transmission medium and should not be a content medium. That cable should be separated between what was called content and conduit.
SCHLEY: OK.
BROTMAN: But it also said that cable should not be treated as a common carrier. So it created real ambiguity in terms of what to do about cable television. Henry Geller had been one of the advisers on that commission. Obviously, when we inherited OTP for NTIA, we had all of the materials from that commission. So one of the key things we sort of re-opened the book on is how should cable be regulated. Should it be like a telephone company, a common carrier? Should cable companies be allowed to have content ownership as well? And during this period obviously with companies like ATC and Westinghouse, they were also very interested in being in the content business. So at that time Westinghouse owned Showtime and HBO was affiliated with ATC. So there were these combinations of content and conduit that were being constructed and so we were asking the question, even though that’s the way things were developing, is that the right policy choice, or should we at least consider some other policy options?
SCHLEY: And where did you end up with a recommendation or a conclusion?
BROTMAN: Henry basically put me in charge of that policy decision, so that became a—really consumed a good deal of my time at NTIA. So going back to my academic background, I said, “This is a major policy decision.” And in order to be able to deal with it, we really need to understand the full complexity of where the industry is technologically, content-wise, business-wise. So I oversaw a large study called the “Emergence of Pay Cable Television.”
SCHLEY: Circa 1978?
BROTMAN: This would have been about 1980 is when it was published, and we had some research funding within the agency and just like a grantmaking organization, we went out with an RFP—a Request for Proposals—we had a variety of consulting firms and other research firms. And then there was this very interesting proposal that landed on my desk to do the study, and the proposal was written by Ralph Lee Smith.
SCHLEY: Of course.
BROTMAN: So Ralph Lee Smith became our adviser and he worked with a firm called Technology Economics, and NTIA contracted with that firm to produce what became a four-volume study called “The Future of Pay Cable Television.” Which was really the first study to look at all of the growth and potential of the industry, and the relationship between pay television and basic.
SCHLEY: There’s so much there because when you’re talking about these fundamental questions of content and conduit, as you just described. We’re sitting here, only last week, AT&T purchased or completed the purchase of Time Warner. So we sort of know where the policy went in hindsight, but those had to be intellectually tough questions to grapple with at the time.
BROTMAN: And there were political pressures because HBO obviously was dominating pay television, and the movie studios were very unhappy because they had executed some long-term early licenses with HBO. And they realized they made a big mistake because HBO was going to be very successful and they did not have the licenses that they wanted. And Jack Valenti, who was head of the MPAA at the time, and the other members of the MPAA, had strong influence in Washington. So they were lobbying very heavily for HBO to be divested or HBO to be separate from ATC. The logic there obviously would be Showtime would be to be separated from Group W Cable. And all other ones would need to be separated. So they were very much in favor of separating content and conduit because they thought it would be in the interest of the content producers. Because they felt that once you had that combination—
SCHLEY: It would be powerful.
BROTMAN: It would be powerful and of course that led to the development of Premiere, the Premiere network, when all the movie studios got together just about at the same time, to come up with their competitive pay television network.
SCHLEY: So if you can’t beat ̕em, beat ̕em. If you can’t beat ̕em, join ̕em.
BROTMAN: Exactly. I remember the announcement of Premiere—I think it was at an NCTA convention—but they hired Charlton Heston to be the host for the announcement. And it was staged almost as if God was coming to announce. It started out in complete darkness, and then you heard Charlton Heston’s voice and then the lights went up, and Charlton Heston was on the stage. And then they brought out each of the partners in Premiere. But that was a seminal case also because the United States government came in and said, we believe that’s a violation of the antitrust laws.
SCHLEY: It was a collusion—
BROTMAN: It was a collusion of the movie studios against the cable industry.
SCHLEY: We will note today that HBO still exists, Premiere is long gone. So that’s the denouement there.
BROTMAN: Right.
SCHLEY: What influence ultimately do you think that four volume report, that exhaustive look at this difficult question of really vertical integration, content, conduit—what did the report ultimately do? What was its impact in your view?
BROTMAN: Well, I think we had a really long-term view of this and as you say, these issues continue as we speak. I think the long-term impact obviously has been that we recommended that cable continue as an integrated medium between content and conduit. And you can imagine what it would have been like if—
SCHLEY: Had you separated the two…or recommended separation of the two.
BROTMAN: Exactly. So we were really in the position to make that recommendation. NTIA is a policy agency, so in order to implement it, it would have had to be implemented by Congress or by the FCC. But they were looking to us because we were the policy operation and, in some ways, we were like the government think tank.
SCHLEY: Absolutely.
BROTMAN: And we had the most knowledge and broadest view. We also had a very, very close relationship with the FCC and with Congress at the time.
SCHLEY: Did you, to the extent that you can say, did you personally think that sort of allowance of vertical integration was the right thing to do from a consumer vantage point, from a policy vantage point? What were your—you had to have these warring thoughts going on in your head, I presume.
BROTMAN: I did not come from the history that Henry had lived and some of the other people I dealt with. I thought cable needed a separate part of the Communications Act. I didn’t think you could just say, this is a wired medium, therefore it looks like a telephone company. Or this is a visual medium so it looks like television. I thought it was a whole new category. And so I always was an advocate which is why I was very satisfied to see Congress ultimately step in in ’84 and then in ’92. And obviously the Cable Act in ’96. Because I had the belief this was such an important medium.
SCHLEY: It’s such a rich part of history and I’m glad you articulated it. I do want to ask you—we talked about the ’84 Cable Act and its impact on rate policy and the economics of the business. In ’92 can you just describe what that legislation was about and what instigated it?
BROTMAN: I think there was a lot of pressure because politically once we had a national cable act, people started to pay attention to cable in their local districts. Congressman would go back and hear from constituents about cable, which they hadn’t heard of before. Many of those constituents were saying, you know, our cable rates just went up 20%. They went up 30%. You have this cable law, and you can deal with this, Congress is obviously involved. So I think between ’84 and ’92, there was this local political pressure and there were people like Ed Markey, who was a Representative—in fact, was my Congressman in Massachusetts—who was also the chairman of the House Subcommittee on Telecommunications. And would go into District 8 in Massachusetts and campaign on a platform that included “we will help control cable rates.”
SCHLEY: It’s just that there’s an irony because you go from this obscure industry nobody really knew about to now. This is a big political issue in the United States by the early 1990s.
BROTMAN: Absolutely. So the ’92 Act essentially was dealing with this pressure between the local political people who were feeling the heat of their constituents. And also an industry which really needed to have that pressure relieved because in order to grow, it could not be restricted by rates. So I think the ’92 Act to some extent was almost like a safety valve where you needed to have that pressure released. It’s very rare when you have Congress do a major piece of legislation and then come in eight years later and rewrite it. When you look at any other piece of legislation, typically these things go on for decades before you have a rewrite.
SCHLEY: That’s a short time span.
BROTMAN: That’s a very short period. So if you think of it as a tea kettle with a lot of pressure building up, I think there was a necessity to have a second act to begin to relieve that pressure. I think the other interesting aspect, there was a lot of pressure building up obviously between the broadcast industry and the cable industry regarding must-carry. What to do about must-carry. Because there had been a series of decisions which had been FCC decisions, but the law itself, Congress had never really addressed the must-carry issue.
SCHLEY: Was must-carry addressed in the ’92 Act legislatively?
BROTMAN: Yes. Must-carry was one of the—
SCHLEY: If I could just explain the principle, whether a local over-the-air television station had a right to be transmitted, correct, through a cable pipeline to a viewer’s home.
BROTMAN: Correct. And the theory in the original Communications Act is that Congress had allocated broadcast spectrum to serve local communities, and as part of that allocation and that goal of localism, if you had a cable system, Congress essentially would feel that it should be carried on that local cable system in that same local community. So that was the principle of must-carry. Obviously, the cable industry didn’t like must-carry particularly at that point in time because there were technical issues every time you had to do a must-carry station. And then you had to give up channel capacity.
SCHLEY: It ate up capacity.
BROTMAN: Exactly. And if you’re talking about a large market, an urban market, you might have to give up eight, ten, fifteen channels. And if you have a 36-channel cable system, you’ve just given up a third of your system with no revenue potential to essentially carry broadcast signals.
SCHLEY: I want to talk about some of the people considerations in a minute. But you mentioned earlier, just to kind of finish the legislative trio we talked about, that the 1996 rewrite of the Communications Act was maybe the most important or influential of those pieces of legislation.
BROTMAN: Yes, because I think by then we finally began to say the word “competition.” And competition used to be a sort of a code word but people really didn’t say “competition” as something that they thought could happen. But I think by 1996, certainly, we had had the divestiture of AT&T, we had had the re-organization of the telephone industry. And the telephone industry really needed to re-invent itself at that point, particularly the Baby Bells. The obvious place for them to re-invent themselves would be to extend into the video marketplace. But they were prohibited from doing so. So you needed some legislative relief to allow them to do it and at the same time, the cable industry, which is always in the process of reinvention, realized that it had a technical plan which could be very robust for video, voice and data, which meant that they could be formidable competitors to the telephone industry. And what you needed to do was to have government essentially say, we are going to allow you to play ball.
SCHLEY: I remember John Malone saying around that time, “The idea was, you bomb us, we bomb you.” And everybody was in each other’s—with permission, with full authority of the government—business. Did it have pro-consumer impacts ultimately…?
BROTMAN: Absolutely. We see that today just about every time we wake up we see that these companies are competing vigorously. And of course we have the telephone companies not just involved in wire services, but in wireless. They have basically put together their own array of services, and the cable industry as well. And that’s why we have triple-play, because the companies are competing against each other…
SCHLEY: Day to day warfare.
BROTMAN: Absolutely.
SCHLEY: Your history is so interesting because you’ve bridged the worlds of policy and regulation and legislative action with a business perspective, an industry perspective. And you know a lot of people in the industry and you’ve studied it. Who are a couple of names of people that you would point to as being particularly influential or impactful in the development of the industry either from a policy perspective, or from a—you mentioned Ted Turner—a business perspective?
BROTMAN: Ted Turner obviously. Amos Hostetter from Continental Cablevision, also a client. He’s had enormous influence. He was a great statesman of the industry and I think part of when the industry grew up, the industry needed statesmen. And every great industry needs people that are out there and can articulate very forcefully for the industry and that are accepted. We’ve seen that certainly in the movie industry I think that’s why Jack Valenti became so successful because he was the statesman of the movie industry. You needed someone comparable—I don’t necessarily say they were comparable, but certainly Amos was universally respected within the industry, highly articulate, very intelligent, could articulate for the cable industry. He was chairman of NCTA at important periods of time.
SCHLEY: Had a very authentic kind of presence.
BROTMAN: Exactly. And was a very public-spirited person as well. So he was not viewed merely as a businessperson, but a person who contributed to society at large as well as the economic interests of his company. So I treasure having been able to work with him and certainly credit him in that area as well.
SCHLEY: I mean obviously it sounds like Henry Geller was a big part of your life…
BROTMAN: Absolutely. I’ve also had the great fortune of working with Newton Minow, who’s the former FCC chairman. And for a period of time, I was a senior fellow at the Annenberg Washington program—a think tank for communications policy, which was headed by Newt. So we worked very closely together and continued to be in touch. Newt is now 92 years old and Henry is now 94 years old.
SCHLEY: Can you talk just maybe toward the closing of our conversation about sort of your proudest moments or areas where you thought you made, what John used to call it, a ding in the universe, a difference, either on the policy front or just sort of influencing maybe the thinking around this industry?
BROTMAN: Well, I think part of it goes back to this era at NTIA when the thinking was maybe we should separate transmission from content. And I think I was relatively influential in helping to shape the thinking to a more integrated industry, and certainly that has had long-term impact. I think from a business standpoint, I was the outside adviser for Nabisco Brands, when Nabisco Brands got a call from Leonard Goldenson asking if they might be interested in investing in this company that ABC had acquired called ESPN.
SCHLEY: I do not know this story.
BROTMAN: This is a story that is probably useful to tell a little bit, but in 1984, Getty Oil had sold out to Texaco and Getty Oil had owned part of ESPN along with ABC. Because Getty also had a satellite and that’s where the uplink for ESPN went. There was a provision in that contract that if Getty Oil sold to another country, that ABC would have the right to buy Getty’s interest.
SCHLEY: OK.
BROTMAN: Getty sold to Texaco, ABC wound up with 100% of ESPN. ABC then was in the process of being acquired by Cap Cities. And Cap Cities was coming in and looking at all of the ABC assets as part of the transaction. One of the really bad assets of ABC was ESPN. It was bleeding.
SCHLEY: Really.
BROTMAN: It was bleeding money, it was not successful. It was at that point run by the Rasmussens.
SCHLEY: Sort of hard to imagine.
BROTMAN: It is. And it didn’t have the rights to virtually any sport. It was doing dog-sledding and roller skating, and all of that. So ABC wanted to get ESPN off of its books when Cap Cities came to look at that. And the way that it could do it, is if it could have a joint venture, it would not be viewed as a pure ABC asset. It would be viewed in a sort of as a joint venture column and they wouldn’t pay that much attention to it. As ABC said, we need to go out and find a partner very quickly for part of the interest of ESPN and what we’ll do is we’ll have an 80-20. We’ll keep 80, but we need a 20 percent partner because I think that would qualify as technically a joint venture. So one of the mysteries of life, and I don’t think it’s ever been told, is that ABC put together a book essentially on ESPN to go out and market it. And they sent it to Gillette. And Gillette at the time was a shaving company, and home products, but was also involved in sports because it advertised on baseball programs and other things. So there was a little bit of logic. That was sent to Gillette and someone in Gillette—I don’t know the name of that person—had that on their desk, looked at it and it said “television” on it—and that person said, “We are not in the television business. We’re in the shaving/home products business.” And they sent back that book Federal Express to ABC.
ABC had a short period of time to go out and find someone else. They then reached out to Ross Johnson, who was the CEO of Nabisco Brands. And Nabisco had sponsored golf tournaments and was involved in sports. Ross just loved sports, loved hanging around sports celebrities, and he looked at the ESPN part and saw the sports. And he said, “Boy, this might be interesting. But I don’t know anything about television.” So he called Leonard Goldenson, who was the chairman and CEO of ABC, and sent a letter, “We might be interested in looking at this, but we really don’t know enough about it. Do you have an expert that you could recommend that we could hire that could work with us to evaluate this deal?” And ABC at that point was being advised by Paul Bortz, who was a friend and colleague of mine at NTIA. And Paul recommended me to Leonard Goldenson. Leonard Goldenson recommended me to Ross Johnson, so the next call I received was the call from Ross Johnson telling me he would like me to begin looking at ESPN. That process took about a year because ultimately it had to go to the ABC board, it had to go to the Nabisco board. Then also Nabisco had acquired a 30% interest in a company called Ohlmeyer Communications. Don Ohlmeyer is one of the legendary people in sports broadcasting. He created Wide World of Sports on ABC. He then became the executive producer for the 1980 Olympics for NBC, but then President Carter pulled the United States out of that because of Russia so there were no 1980 Olympics. And at that point, Don Ohlmeyer said, “I’m not going to stay at NBC. I’m going to go out and start my own company to do sports production and then also to be an advertising agency.” So he formed a company called Ohlmeyer Communications. He went out and got Nabisco to be his partner and so they invested in him. So all of a sudden we had some very interesting pieces to assemble because we had someone who was one of the pre-eminent sports producers. We had an advertiser who liked sports. We had a broadcast network. And then most critically, we had some rights. So I think a few of the things I worked on did have real long-term impact. I had the idea that perhaps we could take ABC’s coverage in 1984 of the Olympics, which basically were in Los Angeles and were dramatically successful.
SCHLEY: I remember.
BROTMAN: Everyone was still talking about the Olympics then. I said, “What if we rerun the Olympics on ESPN with ESPN announcers rather than ABC?” So essentially, ABC as the partner gave us the footage for the—gave ESPN the footage—
SCHLEY: To sort of re-purpose.
BROTMAN: To re-purpose. And a year later, the entire summer of ESPN programming was the Olympics. And to some extent that really changed ESPN because all of a sudden, ESPN had the best sports programming in the world. It was sports programming that people already knew, and it was also a way to begin to hire talent for ESPN that could be associated. People like Chris Berman. So they brought in a bunch of people. The other thing I worked on was the notion that ESPN should not be just a sports programmer, it should also be a source for sports news. So I was part of that team that conceptualized, didn’t implement that. That happened later on. This notion of a sports center. And that obviously was very important to the growth of ESPN.
SCHLEY: It became a staple of the brand and the product.
BROTMAN: Absolutely. So there was a lot going on. I spent much of that time in the world of ESPN on behalf of Nabisco Brands. What was so important is because Nabisco was going to be a 20% partner, Nabisco had never been a minority partner for anyone. And Ross Johnson, if you remember “Barbarians at the Gate,” was the lead character in it. He was one of the great corporate cowboys of the 1980s, and had an outsize personality. So one of the things Ross told me and wanted—he wanted to make sure that Nabisco would not be a junior partner. That Nabisco would be seen as an equal partner to ABC. That meant you had to structure the board in a way; we had supermajority votes. Anytime something major at ESPN had to be done, essentially had to be done with the partners agreeing to it as opposed to ABC imposing its will.
SCHLEY: That strange bedfellows alliance I think is a little-known part of ESPN’s history. I think it’s interesting that you sort of brought or helped glue these disparate guys together.
BROTMAN: It is. And certainly when you ask for something that has long-term impact in something that I’m proud of, and something I can turn on every day. One of the other ironies, of course, so ESPN, the portion that Nabisco purchased was for $60 million for 20% of ESPN. And then, Nabisco was acquired by KKR (Kohlberg Kravis Roberts) in a buyout a few years later. They sat down, and when they were restructuring their assets, they realized that ESPN was not a core asset in their portfolio. So they decided to sell that asset for $175 million.
SCHLEY: That’s a pretty good investment that Nabisco made originally.
BROTMAN: It was, and obviously had they kept it, it would have been enormous. But over the course of their investment, they made about a quarter of a billion dollars. They sold their stake to Hearst, which then became the joint venture partner with ABC, and Hearst is still part of the ESPN enterprise.
SCHLEY: And history is thus made.
In your spare time, you’ve also served as the president of the Museum of TV and Radio. I think I’m getting the name almost correct.
BROTMAN: The Museum of Television and Radio, which is now called the Paley Center.
SCHLEY: Right. It is a terrific entity and organization. Through it all, beyond making a living, what’s been fun about being a participant in this business?
BROTMAN: I think the people. The people in this industry and in the policy community and even in the academic world, there’s a sense of passion, there’s a sense of fun. We all sort of love seeing what develops. Building things. It’s very future oriented. It’s nice to know history, but history only goes so far. It’s great to see things happen that are not just historical. And there’s a sense of energy, I think, that’s just been incredible. So I’ve loved it.
SCHLEY: Do you think you deal with students here in academic environments—do younger generations, how do they think of the cable industry? Do you see the entrepreneurialism and the spirit? Do they think it’s a staid, boring category? What are your perceptions about…?
BROTMAN: Sadly, I’m not sure that there is an imprint of the cable industry now among students. I think many of them look at this as broadband and obviously the cable industry is broadband. But I don’t think there’s much—there aren’t many courses now in media history, which seems very ironic, but I think this is probably the time to have more training in media history because I think, as I’ve illustrated, it’s important to understand the history as you begin to develop thinking for the future.
SCHLEY: Stuart, I’d also like to bring this fast forward to talk about two issues that are hugely important today for cable industry participants. One is the beast that has become out of retransmission consent. Can you first sort of explain what that means, and what’s going on in the marketplace today that’s either troubling or interesting?
BROTMAN: This goes back to the 1992 Cable Act, because that was the time that Congress was addressing the must-carry issue. And the broadcast industry said, “We don’t just want must-carry, we want the option of being able to perhaps get some compensation for the carriage.”
SCHLEY: For our signal.
BROTMAN: For our signal. And the movie studios, content providers certainly, supported that because they would get compensation through that as well. So Congress crafted this very strange new beast called must-carry and retransmission consent. I think if we were to rewind history, Congress would have been more thoughtful about what it was doing at the time because it essentially took these two concepts and pushed them together. And that has created enormous tension. And then over time, obviously as the broadcast industry saw that its advertising revenues were dropping, it needed a new source of revenues and retransmission consent has become a new source of revenues…
SCHLEY: Multibillion dollars.
BROTMAN: Multibillion dollars.
SCHLEY: Revenue, right.
BROTMAN: I was involved very early on after the ’92 Act in advising the cable industry what to do about retransmission consent when it negotiated with broadcast. And I advised the cable industry at the time that the cable industry should hold firm and essentially not pay any money, but have flexibility for other types of compensation. At which point the broadcasters came back with ideas for new networks.
SCHLEY: So if I’m the broadcast—rather than paying me money, you’re going to give me channel space to launch…
BROTMAN: I’m going to give you channel space.
SCHLEY: Fox News is a great example.
BROTMAN: Fox News. CNBC. ESPN2. FX. So all of those cable networks were created, I think, because the cable industry held firm. Had the cable industry essentially said, we’re just taking your money, there would have been no other bargaining chip in terms of saying, we need to have new programming and we have channel capacity for you.
SCHLEY: It just to me still seems odd in this day and age that a television signal that I can get free over-the-air with a nice digital HD antenna, the cable company has to pay for in order to deliver that same pre-signal to my home. What am I missing?
BROTMAN: Well, you’re missing the fact that we still have the United States Congress and the Congress doesn’t really want to act in this area. But there have been initiatives. I don’t expect any near-term fix of this, which is unfortunate. But as recently as a few years ago, there were people like John Kerry who were big advocates of having Congress look at this area again and provide more guidance. And I think that really is the ultimate solution here. Obviously, it depends on what the guidance is. But philosophically, I am a big believer in the structure of having Congress tell the FCC or provide more guidance. Obviously, that’s very difficult to do when you’re writing legislation. But it also means that you can have periods so that Congress can do something and say, we’re doing it for five years and we’ll re-evaluate it at a period of time. We’ve seen that in the broadcast, in the mass ownership area, where we have the quadrennial review where Congress essentially says, we want you every four years to review what’s going on in media ownership. It would be great if we had a similar situation…
SCHLEY: That mechanism of…
BROTMAN: That mechanism in must-carry/retransmission consent. And if we had something like that, talking about everyone being able to have a little dish to receive the signal now, it might be taken into account. But we have no mechanism for doing that.
SCHLEY: Recent changes in federal policy around what’s called “net neutrality” either mean the end of civilization, or an invitation to a great flood of innovation and investment. Where do you stand in…?
BROTMAN: I don’t think it’s a binary area. Obviously it has become a political touchpoint depending on where you are. I think it goes back to many of the principles that we were talking about in cable, which is, are there incentives to discriminate if you control interest in the transmission and the content? And how do you deal with those incentives. And who deals with them. I actually think the new Internet Freedom Order is the appropriate way. I think what we’ve seen is the industry has also stepped up and said, we’re going to adhere to certain net neutrality principles. We’re not going to block sites. We’re not going to throttle or…
SCHLEY: Or slow down performance…
BROTMAN: Obviously for transparency purposes, I think, companies will tell customers what they’re getting or what they’re not getting, and people will be able to make decisions on that basis. So I think we’re in a pretty good space now in terms of policy. Again, I think a better space would be if Congress would look at this issue and provide more guidance and clarity in terms of what the FCC might be doing. Because right now we’re a little bit in a seesaw mode because we had the prior Commission under Tom Wheeler go one way. We now have the Commission under Chairman Pai go another way. We have a series of court cases, and this can go on for years and years. I think again Congress is the best forum to be able to create greater stability. I think that would be good for both consumers and for the industry itself.
SCHLEY: And one more for you. Because you’ve thought about this a lot, and this is a recent buzz issue for me, but when you think about vertical integration and the symmetry among the pipe and the content, do you see a world emerging in which certain content begins to become exclusive to a particular carrier’s network? Or is there any policy that would prevent that from happening? In other words, maybe going forward, Channel X is only available from AT&T’s network, or Comcast’s network, or pick a network.
BROTMAN: I think it’s difficult to do in our media environment today. I think the name of the game is to try to get as much exposure—
SCHLEY: Scale.
BROTMAN: Scale. The economy of scale probably beats the vertical integration card because you want to try to get to as many people as possible.
SCHLEY: It is a mass business.
BROTMAN: It’s a mass business and particularly as the business moves into heavy digital advertising. Digital advertising is based on eyes and ears, getting to mass people, and then also segmenting those masses, and you can’t do that if you just say, my content is going to be available on my platform.
SCHLEY: OK. Well, you and I are doing our part here. This has been a great discussion. I particularly loved your explanation of the NTIA role, which was new to me and very interesting. We’re out of time, but I want to thank our guest, Stuart Brotman, for walking down memory lane and also giving us some views about the current state of affairs in the media business.
For the Cable Center’s Oral History Series, I’m Stewart Schley.
