Our Cable Monopoly
How the state's secret deal with AOL/Time Warner and Oceanic imperils the future of public access TV in Hawai‘i.

Ian Lind

April 16, 2003

In a controversial mover hidden from the public, and even from most insiders when it occurred in mid-2000, state cable regulators gave a multimillion dollar windfall to Oceanic Cable and its corporate parent, AOL-Time Warner. The windfall came in the form of lowered franchise fees to be paid by the cable company and a cut in the number of channels required to be set aside for future public, education and government use. Supporters of public-access television, which uses cable franchise fees to provide community programming, say the state’s action was just one example of political pressures that threaten to undermine the fragile arena of free speech carved out by local access providers.
     The unexpected dose of corporate welfare was buried in the state’s lengthy review and approval of the $350 billion merger of Internet pioneer America Online with the entertainment and media conglomerate Time Warner, which could not be finalized until it got an official blessing in each community where the company owned cable systems, including Hawai‘i.
     At that time, Oceanic was the sole cable provider on O‘ahu, the Big Island and Maui County. It established a statewide monopoly last year when, with little fanfare, it took over Garden Isle Telecommunications on Kaua‘i, the last independent cable provider in the state. Now if you want or need cable anywhere in the state, from Ka‘ü to Hanalei, Oceanic is your only option.
     Regulators had only limited discretion in dealing with the AOL-Time Warner merger, but in some parts of the country the occasion was used to try to leverage additional public benefits from the cable company. Few succeeded, but here in Hawai‘i state regulators went in the opposite direction, apparently paying tribute to AOL-Time Warner’s political clout.
     Decision and Order No. 261 was signed by then-director of the Department of Commerce and Consumer Affairs (DCCA), Kathryn Matayoshi, on Aug. 11, 2000. It slashed the number of cable channels Oceanic is required to set aside for future public, education and government use (known as PEG access channels), and at the same time changed a key formula that essentially lowered the rent Oceanic pays to string its cables along publicly owned rights-of-way.
     For example, Oceanic had previously been required to devote up to 10 percent of available channels for PEG access on O‘ahu, but Matayoshi’s order reduced that to just five channels, the number of channels already being utilized. Although not considered an absolute cap, it makes future expansion for public access channels more difficult to justify. With Oceanic now bragging about delivering 220 digital channels, the reduction from the former 10 percent standard takes on additional significance. Although putting a value on the lost channel capacity is difficult, knowledgeable observers estimate the value of each channel at upwards of $500,000 annually.
     Those directly and immediately affected by the cuts in Oceanic’s fees include the public access or community media centers on each island. Cable fees also go to PBS Hawaii’s KHET, to an educational consortium that includes the University of Hawai‘i and the Department of Education, and to support an electronic network tying together schools and public buildings statewide, allowing for teleconferencing and other data services. The DCCA’s Cable Television Division itself retains a share of the fees to pay the costs of regulation.
     Those who followed the process closely were stunned when the changes were discovered. Although a series of public hearings was held across the state to solicit comments on the merger, there was no public notice that any giveaways of this kind were even being considered.
     “It came as a very unpleasant surprise,” said Lurline McGregor, president and CEO of ‘Ölelo Community Television, Hawai‘i’s largest public access provider and one of the largest in the nation.
     “I first learned of it when I read the signed D&O, after it was a done deal,” McGregor said. “We were not given an opportunity to comment. Had I known this was in the works, believe me, I would have.”
     Sean McLaughlin, director of Akakü, the nonprofit group that operates Maui’s community access stations, was also caught by surprise.
     “As a practical matter, we didn’t find out until our check was reduced,” McLaughlin said. “We received no direct notice.”
     Dirk Koning, director of the Community Media Center in Grand Rapids, Michigan, and president of the Washington, D.C.-based Alliance for Communications Democracy, a legal defense fund supporting access centers across the country, told the Weekly that he doesn’t know of any other place where a local community voluntarily gave up funds or future channel capacity during the AOL-Time Warner merger process.
     In a world where global access to information and entertainment is controlled by fewer than 10 mega-corporations, the merged company took its place as the world’s largest media company, according to Advertising Age magazine.

Ethics concerns
     Although cable regulators defend the changes in franchise terms, they have little comment on the secrecy with which the decisions were made, feeding the perception that state policies are unduly influenced by backroom deals between cable regulators and the industry they are supposed to regulate.
     It wasn’t simply that the public didn’t figure out what was going on until it was too late. The record seems to show the issues were systematically hidden in order to eliminate any opportunity for public questioning or debate.
     Adding to the perception of backroom deals was the disclosure that Pamela Sonobe, wife of Cable Division Administrator Clyde Sonobe, began working for another Time-Warner company in 2001, just a year after the merger was approved and as Oceanic was preparing to establish its statewide monopoly.
     In September 2002, the Community Television Producers Association filed a complaint with the State Ethics Commission, alleging that Pamela Sonobe’s job with Time Warner Telecommunications in Honolulu created a conflict of interest for her husband in his oversight of Oceanic, another Time Warner company. The complaint cited an ethics provision that prohibits any state employee from taking any official action directly affecting a business “in which he has a substantial financial interest. …”
     The Ethics Commission agreed that Sonobe’s employment gave her husband “a substantial financial interest” in Time Warner Telecommunications. But the commission concluded it was not a conflict of interest. The commission’s ruling is contained in a Nov. 20, 2002, letter, a copy of which was provided to the Weekly by current DCCA Director Mark Recktenwald.
     According to the commission’s findings, the cable and telecommunications firms are separate and distinct subsidiaries of AOL-Time Warner with separate offices and no shared officers. Further, the commission determined Clyde Sonobe’s cable duties do not require him to take any action “directly” affecting his wife’s employer.
     “We have not been presented with any evidence that any specific action you take as the Cable Television Administrator directly affects Time Warner Communications,” the commission concluded, a finding that is unlikely to give access advocates much comfort.
     However, in a March 11, 2003, letter to the Ethics Commission, Recktenwald disclosed that the Cable Division and Time Warner Telecommunications are parties in a pending Public Utilities Commission proceeding involving the state’s communications infrastructure. According to Recktenwald’s letter, the Cable Division has not “actively” participated in the case since Clyde Sonobe took his post in 1995.
     For purposes of the ethics law, however, “official action” is defined as “a decision, recommendation, approval, disapproval, or other action, including inaction, which involves the use of discretionary authority.” As a result, even the decision not to participate actively in the PUC case could raise additional ethics concerns, and the matter is again being reviewed by the Ethics Commission.
     Clyde Sonobe declined to discuss the conflict of interest charges with Honolulu Weekly except to refer to the commission’s November letter, but did defend his role in handling the AOL-Time Warner merger hearings.
     “There were public hearings giving the community opportunity to voice whatever concerns they would have on this change of ownership,” Sonobe said, referring to hearings held on each island except Kaua‘i during April and May 2000.
     But records show Oceanic did not request changes in the franchise agreement and gave the public no warning of other issues that were ultimately addressed.
     “Time Warner Entertainment [the corporate subsidiary that controls cable operations] will continue to honor its existing contract with the state which is embodied in cable franchise,” Honolulu attorney John Komeiji stated in testimony on behalf of the cable company. The company’s commitment to the franchise’s existing terms “will not be affected by AOL-Time Warner merger in any way,” he said.
     Reminded of Oceanic’s public position, Sonobe backpedaled.
     “I can’t answer specifically if these items were offered for public comment or not,” Sonobe said. “I can’t remember. It may be the public was not aware of them.”
     Former DCCA Director Matayoshi was unable to explain how issues of channel capacity and franchise fee payments entered into the proceedings if they were not in AOL-Time Warner’s application and did not come up during the hearings.
     “I just actually don’t recall,” Matayoshi said.
     One group that should have had a hand in the process is the Cable Advisory Committee, established by state law to offer advice to cable regulators.
     In making decisions on cable franchise matters, the DCCA director is legally required to consider any objections raised by the advisory committee. But the committee was effectively eliminated by then-Gov. Ben Cayetano, who took office in 1994 and refused to appoint any members to the committee. As terms of existing members expired, they were not replaced.
     Akakü’s McLaughlin was the last official member of the Cable Advisory Committee. His term expired on June 30, 1996.
     “It was never formally disbanded,” McLaughlin says of the committee. “It just sort of faded away.”
     McLaughlin said he occasionally contacted Cable Division staff before his term expired.
     “I would call and ask, what’s going on? Any meetings?”
     “They would tell me, ‘We don’t need your advice,’” McLaughlin said.

Access to free speech
     The public access movement dates back to the 1970s and ’80s, when federal law recognized the importance of the public stake in alternatives to commercial television. As television became the dominant source of news and community understanding of public issues, lawmakers realized the public has to be provided a way to participate in what is otherwise a prohibitively expensive medium, just as leaflets and pamphlets gave individuals or groups a way to express themselves in print.
     As a result, federal law gave communities the right to demand cable companies pay a fee and set aside channels for public, education and government programs. In order to avoid First Amendment issues that would quickly arise if local governments directly controlled these programs, they are administered by separate nonprofit organizations designed by cable regulators and funded by franchise fees.
     ‘Ölelo, O‘ahu’s access provider (broadcast on Oceanic Channels 52-56), was incorporated in 1989, and others followed — Akakü on Maui, Na Leo ‘O Hawai‘i on the Big Island, and Ho‘ike on Kaua‘i. All offer free or low-cost training in television production, support for individuals and groups that want to produce their own television programs, and several channels to reach the public.
     In the midst of the increasingly vociferous national debate over the concentration of media ownership and control in fewer and fewer corporate hands, public access or community television has become a primary battleground where free speech advocates confront corporate domination of the airwaves.
     “Public access cable is the only place where the average, ordinary person can take the podium and have a voice,” said Richard Turner, a longtime advocate for community media and state policy coordinator for the Washington, D.C.-based Alliance for Community Media.
     “The whole principle underlying the First Amendment is that the people have a right to speak, but if it weren’t for public access, this would no longer be possible in this electronic age,” Turner said.
     Public access provides the only broadcast channels without prior restraint, according to Akakü’s McLaughlin. “Any other commercial or public channel would have to pre-screen and pre-approve everything that gets on the air.”
     The upside, McLaughlin said, is that some very good programs are produced about local community issues and public affairs that would otherwise not exist. On the neighbor islands, where there are no locally originated commercial television stations, public access provides the only available local television programming.
     The down side is sometimes uneven quality.
     “We provide unfluoridated public speech,” McLaughlin said with a laugh. “No chlorine, no fluoride, and its got other imperfections.
     “With every other channel, whether commercial or public, you don’t know what’s been taken out or put in by hidden interests,” McLaughlin said. “We deliver it unfiltered.”

Pressure on providers
     Public access television has grown in sophistication and influence since ‘Ölelo was formed in 1989, providing a way for groups outside of the political establishment to make their views known and to impact public policy. It is not a contribution that is universally appreciated.
     Michael Edwards, an independent access producer on Kaua‘i, said he ran afoul of corporate interests when he began documenting the debate over the proposed sale of the island’s electric utility and creation of a utility co-op several years ago.
     Edwards said Kauai Electric officials first tried to block him from videotaping public meetings where the utility discussed its plans. Later, after Edwards completed a show and scheduled it for showing on Ho‘ike’s public access channel, the program was suddenly pulled from the schedule in the face of pressure from the utility. Although the program was later rescheduled, it did not appear at the announced times, reducing its potential audience.
     “It was a sad commentary for me that public access would just roll over and give into censorship like that without so much as a whimper,” Edwards said.
     Sean McLaughlin on Maui tells a tale of arranging a lunch meeting with an island business leader who he hoped would help underwrite Akakü’s broadcast of a series of candidate forums during last year’s election campaign.
     Before McLaughlin could make his pitch, the developer interrupted.
     “He says, ‘Before we get started, let me just tell you I hate Akakü,’” McLaughlin recalled. “‘You guys use public funds to give a voice to people who misrepresent my projects. If I could, I would shut you down, I would put you out of business because you are giving a voice to irresponsible people.’”
     McLaughlin said he offered a standard response — that the answer to irresponsible speech is even more responsible speech rather than censorship.
     But the businessman responded: “Sean, I can buy that [favorable programming]. I don’t need you for that. I need you to not let those people on your station.”
     Akakü did not give in, and it isn’t clear from McLaughlin’s telling whether his developer friend ever seriously pushed his attempt to silence critics. But it’s a clear warning of the pressures facing access providers.
     Open access is also threatened by an internal dynamic, what Dirk Koning calls “the PBS-ing” of public access and community television.
     “The original kind of activist movement that public access grew out of is losing some steam,” Koning observed. Whereas the original mandate was not to produce programming but to enable others to produce their own programming on a first-come, first-serve basis, many access organizations are being reshaped into PBS-style production companies.

Ideological tensions
     There has traditionally been a basic philosophical difference between public television and public access television, although both started from similar motivations. Public television says: “Support us and we will provide you programming that we select and control, and that we think will be beneficial.”
     Public access, on the other hand says: “Support us, and we’ll take those resources and provide a free platform and production resources so that anyone can produce television programs that reflect their point of view.”
     One vision is elitist, the other grassroots. Although not necessarily mutually exclusive, there is a clear tension between the two approaches.
     As a result, ‘Ölelo has drawn heavy criticism from a group of access users for its increasing readiness to use its resources to produce and air professional quality programs, which critics say compete unfairly with volunteer efforts. They say ‘Ölelo fails to assure that all have fair and equitable access to resources, including equipment, studio use, air time, production assistance and promotional resources.
     Lurline McGregor says in-house productions take advantage of ‘Ölelo’s underutilized resources but do not crowd out other access users. Although she rejects the view that ‘Ölelo is shifting its emphasis, she also articulates the reasons for pursuing precisely such a path.
     “When public access started out, it was as a facilitator, but I’ll tell you, it hasn’t panned out,” McGregor said. “On the Mainland, communities are anxious to get rid of it because you don’t want that stuff in your living room.”
     McGregor says Hawai‘i has largely been spared offensive programs like those seen in some Mainland cities.
     “We don’t have Nazi programs, hate programs, or the penis-piercing programs,” she said. “But we are the place where the disenfranchised have a voice.”
     “Look,” McGregor said, “everybody pays for access, but less than 1 percent of the community ever comes down and actively participates. What about the other 99 percent?”
     ‘Ölelo, in McGregor’s view, has stayed a step ahead by assessing the community and attempting to serve up quality programs that match viewers’ perceived interests. Sometimes that can be done by providing training and resources, or steering volunteers towards particular productions. In other cases ‘Ölelo responds by taking over full responsibility.
     “I really make no apologies for the in-house productions we do,” McGregor said. “We’re not a production house, but if there is a hot event, and we deem it will be beneficial to the community, we will send our staff. But we don’t want to let an opportunity go by just because we can’t get volunteers.
     “We’re not exactly changing the paradigm, but expanding it,” she said. “We’ve got to do something to get community support. If we don’t, the community is not going to give a damn if we went away.”
     Although ‘Ölelo remains committed to expanding its core of active users, McGregor dismissed calls for more internal democracy in ‘Ölelo’s governance, including more representation of active access users on its board of directors.
     “It’s kind of like the food bank,” she said. “It’s not like foodless people are voting for members of their board. You want people who will bring in different qualities.”
     But Richard Turner warns that pursuing both production and access requires a very delicate balance that is difficult to maintain.
     “It’s a slippery slope,” Turner said. “When access providers become producers, there are unintended consequences. There’s a tendency to play more towards some opinions than others. And who’s controlling the message? Is it a staff member or a community group?”
     “On the practical side, people who are volunteering long hours to produce access programs feel disenfranchised when the access organization puts its staff and financial resources into producing its own programs, with the natural tendency to devote advertising and promotional resources to be sure those programs are watched. Individual producers begin to feel disenfranchised, and wonder why they can’t get comparable treatment.”

Public access advocacy
     The three years since the merger have not been kind to AOL-Time Warner. The company’s total market value has plunged by more than 80 percent, falling from an estimated $350 billion at the time of the merger to just $55 billion today. Company Chair Steve Case, architect of the merger, was forced to resign.
     Any hopes that reduced franchise fees might translate into lower consumer prices were quickly dashed when Oceanic raised its rates almost immediately, leaving consumers paying as much as before. And the company has continued to raise rates, with another round just announced for O‘ahu consumers.
     But Oceanic President Nate Smith said rates have actually increased at a slower pace than the company’s costs of providing programming, and “our charge to consumers remains one of the lowest in the country.”
     At the same time, Oceanic has retained its reputation for providing cutting-edge cable services, while investing millions in rebuilding and upgrading its neighbor island cable systems.
     “With Time Warner owning them all, we’re able to bring the same quality of service enjoyed on O‘ahu to Kaua‘i, Maui and the Big Island,” Smith said.
     Meanwhile, access advocates took their case to the Legislature again this year, with unsuccessful attempts to get a legislative audit of access providers and to require them to comply with state open meetings and records laws.
     Cable watchers are waiting to see when Governor Linda Lingle will move to shake up the DCCA Cable Television Division. Both during the campaign and after the election, Lingle has publicly called for shifting power over cable issues to the counties.
     An extreme move might be to transfer all regulatory powers to the local level, where cable decisions are made in many parts of the Mainland. A less ambitious plan might aim to spread PEG resources more evenly among the counties, although that would mean further reductions in funds available to ‘Ölelo.
     An immediately useful step would be to simply appoint new members to the Cable Advisory Committee, which is still authorized by law, a quick way to reestablish a degree of public accountability to the cable regulation process.