When General Communication Inc. announced in November that it intended to buy three television stations -- one each in Anchorage, Juneau and Sitka -- it boldly stated it planned to transform the stations into Alaska's finest news product. GCI had the cash to make it happen and hired a longtime, former Anchorage newsman, John Tracy, to get the job done.
What it didn't have was approval from the Federal Communications Commission, a necessary step for the sale and transfer of the broadcast licenses. Now, nearly a dozen broadcast stations across Alaska are urging the FCC to deny GCI permission to make the purchases. Or, if the commission won't withhold its approval, to at least constrain how much havoc GCI and its newly formed news and information arm, Denali Media, can wreak on its competitors.
A telecom giant in Alaska, GCI reported $710 million in revenue for 2012. As the state's largest telecommunications company, it claims 70 percent of the broadband market, which netted the company $86 million last year. Its cable operation has about 128,900 customers, who pay on average about $72 per month per modem, according to 2012 financial results announced Wednesday.
Ultimately, the FCC must decide whether GCI's purchase of TV stations in Alaska has the potential to choke off competitors, the most dominant of which is NBC-affiliate KTUU Channel 2 in Anchorage -- by far the state's largest and most prominent Alaska news broadcaster. The FCC must also determine whether GCI has a genuine public interest in jumping into the news-gathering business, or if the endeavor is really just a muscle-flexing exercise to bring broadcasters, which depend on its delivery platforms, to their knees, forcing them to accept less money for their product to wind up on the TV sets of GCI customers.
KTUU and nine other media outlets have taken legal action to stop GCI from becoming too powerful, inserting themselves into the FCC licensing process by filing formal requests for denial of GCI's application to acquire the licenses of CBA affiliate KTVA Channel 11 in Anchorage, and NBC affiliates KATH and KSCT in Juneau and Sitka.
Several main accusations come from KTUU and other petitioners from Anchorage, Ketchikan, Sitka, Juneau and Fairbanks:
• GCI doesn't really care about a quality news product that serves the public good, instead looking only to use its entry into the news business to benefit its other operations, which are focused on the distribution of information and entertainment via cable and broadband.
• Focused on building its distribution empire and controlling retransmission rates, GCI executives have allegedly said they plan to squeeze out news broadcast competition as much as possible.
• GCI may plan to eliminate broadcast options currently available for free to consumers (like one would get on non-cable TV), and force them to buy cable service to get the same programming.
KTUU executives worry GCI threatens to impinge on more than a third of the TV station's advertising revenue -- generated via KTUU's ability to reach a statewide audience. KTUU also alleges news tailored to GCI's business interests would be a public disservice rather than a civic undertaking.
Fight for rural Alaskan viewership?
A particular concern is GCI's federally-subsidized broadband presence in rural Alaska. The only other rural distribution outlet is the state-funded ARCS, and it could dissolve by 2015 unless it converts from analog to digital. If that happened and GCI was left as the main distributor in rural Alaska, stations like KTUU would have no option but GCI cable or broadband conduits to reach rural viewers.
Without competitive news outlets from which viewers are free to chose among, a deep-pocketed news and cable empire would have the potential to operate unchecked, the argument goes.
The petitioners seeking to block GCI argue that because GCI owns nearly 90 percent of the cable distribution networks throughout Alaska, which nearly half of Alaska households subscribe to, and because it has a lock on nearly 70 percent of broadband penetration in Alaska, with a nearly a full monopoly in rural Alaska, the telecom giant will be uniquely situated to give its own news operation primacy on these delivery systems. Competitors seeking access will get poorer channel positions or unfavorable redistribution contracts, KTUU officials argue.
GCI denies accusations that it's hatching an underhanded plot.
"It's understandable that the incumbents will try to chill or freeze competitive entry," said David Morris, a GCI spokesman. "These charges are brought by folks in the business who do not want to see another entrant come in who is willing to put their money where their mouth is."
"Our plan is to significantly increase news programming in the state, and offer new information options. And we are willing to bring the resources to bear to try to have the best news platform that the state will have," Morris said.
Only the good news?
If that's true, counter KTUU and the other petitioners, then GCI should be willing to sign agreements protecting the ability of independent content producers to compete with any news entity Denali Media creates, not unlike the agreements reached when cable giant Comcast purchased NBC Universal. Comcast was interested in the purchase so could place desired programming on its lucrative cable TV channels and thus generate more advertising revenue.
"Competition is only competition if it is on a level playing field and benefits the consumer with more choice, not less," said KTUU General Manager Andy McLeod. "By refusing to agree to the safeguards developed for cable and content mergers by the FCC in the Comcast and NBC Universal takeover, GCI is seeking to achieve a monopoly in content to match and increase its distribution monopoly. The bottom line is GCI can keep us off the playing field without those safeguards, and that is not competition."
In other markets, satellite television carriers provide competition to cable markets. But in Alaska, KTUU has argued, satellite carriers are a minor player because signals are difficult to provide reliably, especially in rural Alaska. GCI refutes this argument, pointing out that it takes DISH and Direct TV as "serious competitors" covering the entire state, unlike GCI, which doesn't reach every community, let alone every household in the communities it does serve.
Still, if the accusations brought up in the legal filing to block GCI's unrestricted acquisition of TV stations are true, KTUU and its co-petitioners have reason to believe GCI is not only poised to thwart competition, but intends to do so.
"GCI officials have boasted to business executives and employees of other television stations that they intend to use their combined assets to restrict competition in Alaska, and to reduce the diversity of news and information sources for Alaskans," writes the group of media opponents in its FCC filing.
According to the filing, GCI executives, including Bill Behnke, a senior vice president and board member, told the owner of KTBY-TV that he never expected the TV stations GCI was acquiring to be profitable and that the primary reason behind the buyouts is to keep the rates GCI pays to carry local content on its cable system low. Behnke also allegedly revealed that GCI intended to create a news product more favorable to the company's corporate interests, one with a more politically conservative viewpoint.
Tainted newsman?
To underscore its concern that the news product GCI is building may be tainted by conflict, KTUU and others point to the hiring of John Tracy as a consultant to assemble the Denali Media staff and get the operations started.
Tracy, a former news director and anchor for KTUU for nearly two decades, went on to become a co-owner of Bradley Reid & Associates, a prominent advertising firm in Alaska that has represented everything from political campaigns to natural resource companies. GCI has retained Tracy as a consultant to its television acquisitions. The complaintants seeking to block GCI claim Tracy is tainted by his advertising and public relations business when it comes to journalism. Tracy has not given any indication he will abandon his business while overseeing GCI's fledgling operation.
GCI refutes allegations anything is amiss. It characterizes the disparaging of its consultant as "sour grapes on behalf of Outside owners," and is quick to defend the former newsman.
"John Tracy is the Walter Cronkite of Alaska TV news," GCI's Morris said. "He is a consultant tasked to pull together the best TV news organization in Alaska. He isn't in the newsroom, directing the news or writing copy. He is helping us to pull together the organizational structure. We believe the Alaska TV audience is intelligent enough to judge the news product on its own merits."
Because GCI is formulating, but has not yet filed, a legal response to the concerns raised by KTUU and the other media outlets, Morris didn't want to counter point by point the complaints to the FCC.
But he did call the accusations "grossly overstated," saying the motivation for getting into the news business was a natural progression for GCI, which has a history of trying to adapt itself to where the industry is headed. Cross-platform investments are the future, he said, particularly in and industry where "you have to change or you are going to die."
Not to be overlooked, he added, is that programming is king. If you don't have a product to offer that people want to watch, you're in trouble. People can always change channels and seek out the programming that they want to watch, he said.
"We can't control what people think," Morris said.
Jack Goodman, the attorney representing KTUU's owner, Northern Lights Media, expects the FCC process to take at least six months, maybe longer depending on whether the FCC decides to more closely scrutinize GCI's requested license acquisitions.
GCI plans to file its response next week.
Editor's Note: In the interest of transparency, Jill Burke formerly worked at KTVA and at KTUU when John Tracy was news director.
Contact Jill Burke at jill(at)alaskadispatch.com