Television often plays an important role in introducing American children to new ideas and developing common worldviews, and has generally been through the mass media that most Americans develop a national and global awareness.
Many shows are broadcast over the entire U.S., delivered to the home via the air or by cable and thus have an influence on a very large set of the population, as 99 percent of all American households have at least one television and the majority of households have more than one.
In the United States, the TV broadcast industry can be divided into two distinctive sectors: local TV stations and national TV networks.
Strictly speaking, TV stations are local in nature. There are thousands of stations in the United States; each station holds a license from the Federal Communications Commission (FCC) to use a specific channel in a designated area to broadcast TV programs. The stations' programs come from three sources in most cases: in-house production (local programs), syndication (independently acquired programs), and, most importantly at most stations, TV networks. For commercial stations, revenue is based on local advertising and network compensation (a fee received from a network in exchange for airing the network's programs and advertisements). For non-commercial stations, income is from donations, sponsorships, and government grants.
In 1999, American Telephone and Telegraph (AT&T) (as well known as any name in corporate America) suddenly became the largest player in cable television, an arena for which it was not known. AT&T entered cable with its acquisition of TeleCommunications, Inc. (TCI) just months earlier, and offered more than $56 billion to acquire MediaOne, catapulting it to the top of the cable industry. This was the biggest deal in media history.
Although the play, by-play of the AT&T-MediaOne deal may not have long-term consequences, it is nonetheless instructive in identifying the shifting base of new and old players and their goals in the merging video and telephony arena. The chain of events began when Comcast offered nearly $50 billion to acquire the larger MediaOne. MediaOne itself was largely the combination of several small cable franchises acquired by regional telephone operator USWest, which then added Continental Cablevision. In 1998, USWest spun off MediaOne into a separate company, having apparently decided that the cable and telephone businesses were not a good fit.
A month later, AT&T topped Comcast's offer. Comcast attempted several approaches to raise its own offer, including the possibility of partnering with Microsoft and America Online (AOL). Microsoft had an interest in promoting its operating software in the new generation of "smart" cable boxes. AOL wanted to guarantee high speed access for its online service. But none of these deals with Comcast came together. Instead, Microsoft, which had previously made a $1 billion investment in Comcast, made a deal worth $5 billion to supply AT&T's cable operation with digital set-top boxes. And AOL struck an agreement with direct broadcast satellite (DBS) provider DirecTV to use that satellite-to-home service as a high speed pipeline for its Internet service.
Thus, in the 1990s, AT&T (still thought of as a long distance phone company) became cable's dominant player, with direct access to one third of all cable customers, plus one third more through joint agreements. AT&T would become the dominant cable player in 18 of the top 20 media markets in the United States. At the same time, it became a potential, but still unrealized, competitor to provide local exchange service in the same territory.
These and other players knew that the stakes in the TV industry in the United States were high. Nearly 98% of U.S. households had television sets. Cable was growing and so was DBS direct to home satellite TV service. Broadcast, cable and DBS were the technologies that comprised the television industry. . .
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