TWO DECADES AGO Paramount Pictures made a film called “The President’s Analyst,” which depicted telephone companies as the villains behind most of the ills of society. The movie was clearly satiric, but that did not ward off a stern visitation to the studio from two FBI agents who claimed they spoke for the phone company as well as for the feds. Top execs at the studio and its corporate parent, then called Gulf & Western, were warned that the film was “controversial” and were urged to make the identity of the heavies “fuzzier.”
The studio was astonished that its comedy would be subjected to this sort of tacit censorship and, despite noises from the top, it refused to comply. Nothing ever came of the threat, but a year later top execs at the studio discovered to their chagrin that their telephones had all been tapped.
I was reminded of that incident by the outpouring of newspaper stories about the so-called Baby Bells that were prompted by the TCI-Bell Atlantic deal. While all the “in-depth analyses” offered the appropriate facts and figures, they were oddly vague and bloodless in describing the companies themselves and the men who run them.
EARLY IN 1991, when MCA was acquired by Matsushita, Hollywood expressed alarm that so little was known about the Japanese giant. Well, Matsushita was an open book compared with Bell Atlantic and other telcos now circling around Hollywood.
So little is actually known about these vast entities, in fact, that I thought it might be constructive, not to offer more instant wisdom, but rather to toss out a list of dumb questions and see whether anyone wants to step up and answer them.
The first dumb question is this: Since most of us have always thought of Baby Bells as regulated semi-utilities, how is it that they ended up with more money than anyone else?
At a time when so many companies are starved for profits, we learn that Bell Atlantic runs almost $ 13 billion in annual sales and generates an annual cash flow of $ 5 billion. With numbers like that, I wish I were regulated. These telcos are so rich they casually make billion-dollar investments — witness the $ 2.5 billion U S West recently sunk into Time Warner — without having to explain what they get for their money.
Which brings me to my second dumb question: Is the sheer financial weight of the telcos so imposing that a character like John C. Malone, 52, would humbly go to work for an electrical engineer from Pittsburgh named Ray Smith, who happens to run Bell Atlantic?
Now I’m aware that, as a result of the Bell Atlantic-TCI deal, Malone’s TCI shares have increased in value to $ 1.1 billion from only $ 49 million three years ago. That’s cause for gratitude. We’ve all been told that Malone is really a laid-back type who prefers to tool around Boothbay Harbor in his vintage 1920s boat than hammer out billion-dollar deals. Nonetheless, it seems unlikely that the man who reshaped the landscape of American showbiz would end up as an employee of a telco titan — even Ray Smith.
Then there’s a more basic dumb question: Whatever happened to the fierce competition that was supposed to rage throughout the ’90s along the electronic superhighway? Suddenly the telcos and cablers, instead of duking it out, are converging under the same corporate umbrellas.
REMEMBER THE THICKET of regulations that allegedly separated cables and telcos? Under the consent decree breaking up AT&T, the Baby Bells weren’t allowed to beam signals across so-called local-access transport areas. Cable programming fell under this prohibition, so everyone thought.
Yet now it’s conceivable that the same company that owns the wire transmitting entertainment and information into your home will also own the material that flows along that wire. Not that many years ago the Justice Dept. was up in arms because movie studios owned their own theaters. The future would seem to hold far greater threats to free competition.
Which underscores another dumb question that no one has had time to address: Should the people who produce the nation’s software find the developments of the past few weeks encouraging or faintly ominous — or both?
The execs who presided over the Bell Atlantic-TCI press conference smoothly described the bright side of the ledger. New capital would pour into the entertainment business. The advent of movies-on-demand would open up new opportunity for filmmakers. All this is fine and well, but exactly who is going to be in on the decisionmaking process?
The telcos are extremely conservative companies that might provide ideal targets for zealots who would impose their own brand of censorship on filmed entertainment. That’s not to suggest the Baby Bells resemble the heavies once depicted in “The President’s Analyst”– just that, as regulated pseudo-utilities they represent fair game for pressure groups.
Another question: Since huge semi-monopolies are apt to charge exorbitant prices for their products, who do they think will be able to buy their interactive software? It’s symbolic of ’90s economics that the announcement of the Bell Atlantic deal coincided with the closing of 970 Woolworth stores and the elimination of 13,000 jobs — Woolworth being the ultimate symbol of middle-American stability.
FINAL DUMB QUESTION: Will every prospective merger in the future set off the sort of Pac Man feeding frenzy we’ve witnessed in recent weeks?
One can imagine the following fictional scenario: Tiny Trimark decides to buy into tinier Kings Road. Alarmed, Kings Road folds itself into ITC while Trimark melds into J & M Entertainment. Not to be outdone, ITC then is conveniently annexed by Ameritech while J & M arranges a shotgun wedding with Cablevision Systems. Raising the ante, Ameritech finds a mate in U S West even as Cablevision runs off with BellSouth. And so it goes until the whole corporate glob is absorbed by the principality of Liechtenstein.
Bigness is one thing. We’re talking about elephantiasis here. In examining the remarkable innovations in the computer industry, much of the energy emanated from small companies or start-ups. What impact will hugeness have on industries that depend, most importantly, not just on capital but on imagination?
That may be the dumbest question of all since, by the time this newspaper is printed, it probably will have been taken over by some telephone company I’ve never even heard of.