annals of communications
The New Yorker - June 5, 1995
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With legislation pending, what can a media C.E.O. do to get Congress on his side? PAC funds help, but the new Republicans want more than just money.
Last November at election time, Sumner Redstone, the chairman of Viacom, asked Frank J. Biondi, Jr., Viacom's chief executive officer, if the company's political-action committees had hedged their electoral bets by supporting Republican candidates as well as Democrats. Redstone had reason to be concerned. He was angling for a four- to six-hundred-million-dollar tax break, based on a 1978 law granting tax concessions to companies that sold broadcast or cable propertiesto minority owners (or to consortiums with minority partners in the lead), and last fall Viacom had agreed to sell its cable-television systems to a minority-fronted investor group. According tothe Center for Responsive Politics, a nonprofit nonpartisan Washington research group, political-action committees controlled by Viacom and its Paramount subsidiary had contributed more than a hundred and seventy-three thousand dollars toward the 1994 congressional elections, but only eighteen per cent of that money had been directed to Republican candidates.
Soon after the Republicans took control of both Houses of Congress, Via-com began to fear that it and also the affirmative-action program that provided its tax break would be targets of the new majority. By early April, Congress had passed a retroactive law rescinding the program. The legislation stipulated that to be eligible for the tax concession a company must have filed its applica-tion with the Federal Communications Commission by January 17th. The Chicago Tribune Company, Rupert Murdoch, and Quincy Jones had filed before that date and received the tax benefit. Viacom, which had filed its application on January 20th, didn't. And it was not until last week that Viacom was able to announce a preliminary agreement to sell its cable systems. Biondi concedes that Viacom's lopsided giving to Demo-crats "may have" hurt the company in the House, but thinks that Presiden-tial politics and a backlash against affirmative action were what really killed their tax break. Tony Coelho, the former chairman of the Democratic Congressional Campaign Committee, who is known in Washington as a master fund-raiser, disagrees; he understands the base motivations of many members of Congress. "They were go-ing to lose no matter what," he says of Biondi and Viacom.
COMMUNICATIONS is the United States' fastest-growing industry, and is highly dependent on the government's favor. Its nine major components--broadcasting, cable, telephone, Hollywood and music-recording studios, publishing, computers, consumer electronics, wireless, and satellite--are well aware of the government's power. Last week, the House Commerce Committee passed a sweeping telecommunications-reform bill that will increase competition and, almost certainly, profits. It allows broadcasters to own television stations reaching up to fifty per cent of viewers (up from twenty-five per cent); deregulates cable rates; permits telephone companies to compete with cable companies in some markets; and allows local telephone companies to provide long-distance service and long-distance companies to provide local service. The final legislation may not include all of these changes, since it will have to be approved by the full House and by the Senate; that bill is expected to be sent to the President this year.
Communications companies have invested millions of dollars to affect the outcome. Since the mid-seventies, they, like an increasing number of other companies and most trade and labor organizations, have formed political-action committees, or PACs, which permit individuals within an organization to join a pool, which can donate up to five thousand dollars a candidate, compared with the thousand dollars permitted an individual acting alone.
On May 23rd, the Center for Responsive Politics issued a lengthy report onall the contributions of industry PACs during the 1994 elections. The report notes that the communications industry was the sixth-largest PAC giver, trailing such groups as the finance, insurance, and real-estate sector and the health industry. PACs run by what the center calls the communications-and-electronics sector contributed a total of nine million four hundred thousand dollars to the 1994 congressional elections. Peter Barton, the president of Liberty Media, which is the programming arm of Tele-Communications, Inc., the nation's largest cable company, explained the donations this way: "You buy war bonds on both sides."
But in the 1994 elections, eighty per cent of the contributions from communications PACs were earmarked for incumbents, and since at the time the Democrats controlled both the House and the Senate--as they have for most of the past forty years--they got more than half the money. The largest single contributor was A.T. & T.: it gave candidates $1,295,994, of which fifty-nine per cent went to Democrats. Of the top ten Senate and top ten House recipients of money from communications-company PACs, eleven served on the House Commerce Committee or the Senate Commerce Committee (which oversee the communications industry), and three others were majority or minority leaders. The largest sum of money from com-munications PACs to go to a single recipient was $190,608, and the recipient was Jack M. Fields, Jr., of Texas, who was then the ranking minority member of the House Commerce Committee's Telecommunications Subcommittee and is now its chairman.
As an industry group, the local telephone companies were the most generous givers (three million one hundred and twenty-seven thousand dollars). The Baby Bells gave slightly more than half their money to Democrats. The cable and satellite industries' PAC gifts (a million twenty-nine thousand dollars) also tilted toward the Democrats. The Hollywood studios and media and entertainment companies contributed a total of two million two hundred and ninety-four thousand dollars, and sixty per cent of it went to Democrats. Entertainment companies such as MCA and the music companies were, like Viacom, lopsidedly Democratic. The publishing and computer industries gave relatively small sums.
The nine million dollars in PAC gifts probably represents less than half the total donations to congressional candidates from the communications industry, since individuals also make campaign contributions. The 1994 figures for individual contributions have not yet been analyzed, but for the 1992 election fifty-four per cent of communications-industry giving--ten million dollars, according to the Center for Responsive Politics--came from individuals in the industry, not from PACs. Nor does the 1994 total include four million dollars of so-called soft money that communications companies gave to the Democrats or nearly three and a half million given to the Republicans. (There is no limit on such soft-money donations.) For the 1992 elections, Time Warner dispensed four hundred thousand dollars in soft money, three-fourths of it to the Democratic Party. MCA gave two hundred and fifty-eight thousand dollars, more than ninety per cent of it to the Democratic Party.
Unsurprisingly, there are also less noticeable ways to curry favor. For instance, gifts to the Progress and Freedom Foundation, the think tank closely tied to Speaker Newt Gingrich--or to Senate Majority Leader Bob Dole's charity for the disabled, the Dole Foundation--won't show up in standard campaign-finance reports. And, of course, money is not the only form that gifts can take. Tele-Communications, Inc., has made some of its channel space available to National Empowerment Television, a politically conservative programming service that has been championed by Gingrich. Liberty Media's Peter Barton says that the service was put on cable because it generated a good audience in various markets where it was tested. There may have been other reasons, too, since John Malone, the chief executive officer of T.C.I., is a libertarian conservative, and since documents on file with the Federal Elections Commission reveal that in the week before the November elections T.C.I. shovelled two hundred thousand dollars--soft money--to the Republican National Committee.
SINCE the elections, a lobbyist says, the local telephone companies have shifted from donating their PAC money more or less evenly to awarding about seventy per cent of it to Republicans. Frank Biondi says that since the 1994 elections Viacom's PAC donations have been "more balanced" than they were before November. This month, Viacom had planned to sponsor a fund-raising breakfast for Larry Pressler, of South Dakota, who is now the chairman of the Senate Commerce Committee. According to one Viacom executive, a friend of Pressler's phoned to request the fund-raiser. The intermediary is reported to have said, "The Senator would like Sumner to do it." The goal, another Viacom executive said, was to raise thirty thousand dollars for Pressler's 1996 reelection campaign. According to Viacom, Sumner Redstone, a lifelong liberal Democrat, who worked in the Truman Administration and has raised money for the Kennedys and Clinton, had not yet decided whether to lend his name or his liberal reputation to Pressler, a conservative Republican. But this is about business, not personal convictions. "The practical realities of life are that Republicans are in control of congressional committees," Biondi says. "We recognize that. And we'll deal with it." The practical realities are also that Viacom wants to avoid embarrassing publicity, so last week, after inquiries were made by The New Yorker, the plans for the fund-raiser were dropped.
Pressler has lately been doing a sort of whistle-stop tour: he has held a series of fund-raisers involving the communications industry, and the stops have included T.C.I., in Denver, a five-hundred-dollar-a-head Motion Picture Association of America fund-raiser in Hollywood, and, in New York, an event sponsored by Time Warner at the "21" Club, one sponsored by Rupert Murdoch's News Corp., and one at the home of the former media mogul John Kluge. Asked through a spokeswoman about the propriety of a committee chairman's shopping for money from industries he regulates, Pressler declined to respond.
An experienced telephone-company lobbyist responded to the same question this way: "These committees have these companies by the balls. It's the cost of doing business. What contributions do is prevent your opponent from getting an advantage. If you don't give, you build up subtle resentments."
In the sense that incumbency gets rewarded, none of this is new. Nevertheless, the magnitude of the shift of money is startling. "If you close your eyes you can hear money pouring into Washington," I was told by the communications attorney Nicholas W. Allard, who used to work on Capitol Hill as chief of staff for Senator Daniel Patrick Moynihan. And figures from the Federal Election Commission reveal that in January, February, and March of this year--the latest period for which the F.E.C. has computerized the filings--PAC giving has swung sharply to Republicans. A.T. & T., which has been fighting to make inroads in providing local phone service, and which gave fifty-nine per cent of its political contributions to Democrats in the last election, reported giving four times as much to Republicans as to Democrats in those months, including five thousand dollars to Thomas J. Bliley, Jr., the chairman of the House Commerce Committee, and two thousand dollars each to Pressler, Dole, and Dick Armey, the House Majority Leader. Ameritech, the Chicago-based Baby Bell, which like other local phone companies seeks to add long-distance service, gave three and a half times as much to Republicans as to Democrats, including thirty-five hundred dollars to Pressler and three thousand dollars to Jack Fields. The National Association of Broadcasters, which wants a relaxation of radio-ownership rules, and which gave Democrats the edge last year, has given three times as much to Republicans as to Democrats so far this year, including five thousand dollars to Fields, two thousand to Bliley, and four thousand to Armey.
There is also a Presidential dimension to this shift. The guessing in Washington is that when Dole's PAC reports are made public this summer he will emerge as the major beneficiary of the communications industry. Dole's Presidential PAC, Campaign America, received, according to the Center for Responsive Politics, a hundred and sixty-ninethousand dollars from communications PACs and individuals during the 1994 elections--before he became a Presi-dential candidate. Pressler nominally calls the shots on telecommunications legislation in the Senate, but Dole's voice is more dominant. It is Dole, not Pressler, who will decide when to bring the telecommunications-reform legislation to the Senate floor. And Dole has already softened his long-standing opposition to the long-distance carriers: he now favors legislation requiring the Baby Bells to allow long-distance competitors into their home markets before they may enter the long-distance business themselves. "Communications is the feeding ground that Bob Dole has been looking for," a prominent Clinton Democrat asserts. "Like all animals, Presidential candidates need their own feeding ground."
WHEN Tony Coelho was chairman of the Democratic Congressional Campaign Committee, in the mid-nineteen-eighties, he traded access to Democratic leaders for campaign contributions. Coelho, for example, organized a Speaker's Club: in return for individual donations of five thousand dollars a year or PAC tributes of fifteen thousand dollars, members were listed as "trusted, informal advisers" to the Democratic leaders. In the spirit of the turn-of-the-century Tammany Hall leader George Washington Plunkitt, the Democrats split hairs between "dishonest graft" (unreported cash gifts, which are illegal) and "honest graft" (reported cash gifts, which are legal).
Yet, however sleazy the Democrats have been in years past, the new Republican majority has in some ways been even more crass. "It is a time-honored practice for fund-raisers to hit up the industry affected by the committee assignment of the members," one prominent lobbyist who is a Democrat says. "But now it seems to be noticeably more aggressive in three respects. First, the Republicans who took over the committees moved much more quickly to exploit the leadership positions. In the communications industry, House Republicans, led by Jack Fields, did a clever thing: they invited more than thirty C.E.O.s and other leaders to two days of briefings. There was never any mention of supporting anyone. It was all 'We want to pick your brains.' Much as these C.E.O.s like to think of themselves as savvy, they don't know how politics works in this town. They came out and said, 'This is really terrific. They want to know how I feel about issues.' Then they got the calls from the fund-raisers and the Party chairman. After the meeting, I got three calls from Haley Barbour," the Republican National Chairman. (All lobbyists--regardless of party affiliation--are perceived first as sources of cash.) Then, this Democrat went on to say, came calls to companies and trade associations urging them to get rid of their Democratic lobbyists and hire Republicans. Among the first to switch were the long-distance-telephone companies, which retained the former Republican senators Howard Baker and Paul Laxalt to lead their lobbying effort. "There's a runaway hubris operating here," the lobbyist concluded.
The hubris was visible at the House Commerce Committee briefings, on January 19th and 20th. Held in the Cannon House Office Building, they were closed to the press and to Democrats. At dinner the first night, Gingrich was the featured speaker, and he took the occasion to attack the media as too negative and too biased, and even unethical. After the speech, Time Warner's C.E.O., Gerald Levin, rose and gently rebuked Gingrich for being too general in his remarks. Surely Gingrich did not mean to tar all journalists with the same brush--to lump, say, Time in with the more sensationalist tabloid press? "I hope you don't mean all of us," Levin concluded.
"Yes, I do," Gingrich is reported to have replied. "Time is killing us." And, according to several accounts, he went on to say that he had been particularly incensed by Time's account of his mother's interview with Connie Chung, of CBS--the interview in which his mother confided that her son had called Hillary Clinton "a bitch."
Although spokesmen for both Gin-grich and Levin take pains to say that it was not "a hostile confrontation," and to note that the two men have recently had pleasant one-on-one chats, and to make the fair point that the Speaker has free-speech rights, too, others found it chilling that the Speaker would, in effect, press the C.E.O.s to have their journalistic troops hold their fire. "We're at greater risk now of that kind of pressure having an impact," Nicholas Allard says. "Traditionally, there has been a separation between news and corporate functions. Given the consolidation, you may have more instances where the top business executives, who have many corporate policy objectives, may find it tempting to impose control over their news divisions to advance corporate objectives." The new model may be thatof Mark H. Willes, the new C.E.O. of the Times Mirror Company, who was hired away from General Mills. Although there's no way to know what Willes will do, according to those who recruited him he brings a fresh perspective, because he has no prior involvement with the main business of the company, which is news.
Also bringing a fresh perspective are Republican leaders like Gingrich and Armey, who have called on companies to be more ideological in their giving. An Armey spokesman concedes that in April Armey sent a letter and supporting materials to Fortune 500 C.E.O.s to complain of their philanthropic gifts to such "liberal" charities as the American Cancer Society. The new Republican majority, Tony Coelho observes, has "taken what I did and moved it to a higher level." He explains, "The committee chairmen are saying, in effect, 'We're going to look at who you contribute to. If you expect our help, we don't expect to see you on the Democratic list.' "
This view is nonsense, says Gingrich's spokesman, Tony Blankley. "Read 'Honest Graft,' " Blankley says--referring to Brooks Jackson's book about how Coelho muscled money from corporations--"and see how Coelho raised money. We never did anything like what they did, which was to virtually blackmail contributors. It was as ruthless a system of money extraction as one can conceiveof. He was attempting to extract money from contributors who disagreed with the policies the Democrats were putting forward. We make the case that the free-market principles they support are our principles, and if they're going to support candidates they should support those who share their views. That's a fundamental difference."
But if Republicans threaten, or imply, retribution against those who differ with them--like Time, or pragmatic givers, or corporate philanthropists who donate to "liberal" charities--then they have in fact extended Plunkitt's definition of "honest graft." Like Coelho, they have promised access in return for donations, but by imposing an ideological test on givers they have introduced a new level of coercion. They don't just twist arms for contributions; they now ask givers to profess their unwavering loyalty--or else. Republicans say that such coercion is not their intent, but the best way to judge coercion isnot by what is said but by what is heard. A major communications lobbyist who directs a corporate PAC says, "You're being extorted. People say, 'Contribute.' You feel that unless you contribute you won't have the ability to do what you need to do."
THE line between extorted funds and campaign contributions--between "dishonest" and "honest" graft--can be almost imperceptible. Josh Goldstein, the research director of the Center for Responsive Politics, says, "These contributions to incumbents sitting on the committees that have jurisdiction over the PACs' interests are the clearest circumstantial evidence we have that the money contributed is not, as the donors and the recipients claim, for good government. It's directed money, and it's directed for clear legislative reasons. It's not illegal. But the difference between what one calls a bribe, which is illegal, and a campaign contribution is unclear."
The big loser in all this, of course, is the public. "By and large, the public is not represented by the lawyers and the lobbyists in Washington," Reed Hundt, the chairman of the Federal Communications Commission, says. "The few public advocates are overwhelmed financially. It's all very fine to say that you are in favor of competition. I am. The Administration is. Congress is. But competition won't give you everything the country needs from communications companies. We've got to be able to stand up to business on certain occasions and say, 'It's not just about competition, it's about the public interest.' "
One consequential issue that government must soon decide is how to allocate new broadcast-spectrum space that has been made available by advances in digital compression; Hundt says the extra space will be worth thirty to a hundred billion dollars. Suddenly, there will be roomfor as many as six new broadcast sub-channels within each current channel. Should government allow the existing broadcast stations to use this space to provide movie-quality high-definition images, which require more spectrum space to transmit? Should government allow broadcasters to create, say, new all-sports or all-news or data channels? Will the F.C.C. reclaim and auction off the analog channels currently used by broadcasters after the transition to the new digital channels is complete? Or should it instead auction the extra spectrum? And if the space is auctioned who should be permitted to bid--just broadcasters? Everyone? Should government impose some public-interest requirements as a trade-off for access to what have traditionally been construed as the public airwaves?
"It's getting harder and harder to get people to make the argument for the public interest, because of this chant--'Competition! Competition! Competition!'--which is drowning it out," Hundt says. "That chant is well funded. The funds give you access to Congress and to government of all kinds." (c)