Time Warner – Media Public Interest Obligations (2003 – 2004)
Outcome: Successfully Withdrawn
Report on Meeting Public Interest Obligations in the Digital Age
Resolved that shareholders request the Board of Directors prepare a report, at reasonable cost and omitting proprietary information, made available to shareholders by September 30, 2004, detailing Time Warner’s current activities to meet its public interest obligations and any strategies for proportionally increasing those activities based on the increase in channel capacity resulting from the conversion to digital transmission.
The Federal Communications Act of 1934 requires media companies utilizing the publicly owned electromagnetic spectrum to act as a public trustee. Both the letter and spirit of the law require broadcasters to fulfill a public interest obligation in exchange for the use of the publicly owned spectrum.
Over the past year a rapidly growing and politically diverse coalition has focused national attention on the role of media companies in our society. When the Federal Communications Commission proposed new rules designed to allow greater media consolidation in June of 2003, 2.5 million Americans were stirred to voice their opposition to these proposed changes to Commissioners and Members of Congress. The increasingly critical attention being given to media companies is the result, in part, of their failure to either a) meet their public interest obligations or b) communicate effectively to the public the ways in which they are meeting those obligations. As investors we believe this rising criticism, if unaddressed, could jeopardize broadcasters’ future profitability and viability.
The cornerstone of every broadcaster’s business model is an agreement with the public: a monopoly license to use the people’s spectrum in exchange for public service broadcasting. Telecommunications companies, by contrast, have been forced to pay hundreds of billions of dollars for the use of far less spectrum and have consequently never attained the profitability of broadcast companies. Should the public come to view broadcasters as failing to uphold their public interest obligations, this crucial grant of free use of public spectrum could be called into question.
We believe great attention will be given to the ways that broadcast companies intend to fulfill their public interest obligations as the industry converts from analog to digital transmission. With this conversion, broadcasters’ channel capacity will greatly increase from one analog channel to six or more digital channels. We believe any broadcaster that does not commit to increase their public service activities proportionally to the increase in channel capacity could become the focus of well-organized public and political pressure. Any such action could damage a broadcaster’s reputation and brand and undercut long-term shareholder value. Furthermore, we believe that reticence to embrace increased public service obligations in the digital environment could result in the FCC denying the mandatory carriage of expanded digital channel offerings on cable television systems. Such a denial would badly undercut the potential increase in profitability offered by the transition to digital broadcasting.
Therefore, we think it is of critical interest of shareholders to understand both how our company is currently meeting its public interest obligations, and the company’s strategic vision for meeting these obligations in the digital age. We urge you to vote in favor of this resolution asking for disclosure of this information.