The race to wire up the world
His MCI deal could make Rupert Murdoch the king of the information superhighway. Maggie Brown and Mathew Horsman report
Friday 12 May 1995
And what deals.
Even by his frenetic standards, this week's news of a world alliance between News Corporation, his master company, and MCI, the American long- distance telecommunications operator, is both bold and imaginative. "The deal of the decade" quipped one adversary.
True to form, Mr Murdoch is poised to become the first to establish fully a set of multi-media global alliances which cover all the potential future routes into people's homes.
Until this deal starkly pointed the way, new media operators have tended to specialise and play to a particular strength, be it programme-making or digging trenches in the road for laying cables. With MCI on side, Mr Murdoch potentially brings broadcasting and telephony together.
With a powerful telecommunications partner to add to his newspapers, film studio, network television, cable and satellite channels, Mr Murdoch appears to have it all.
Most experts think that telephone networks are the most vital building block in devising a media empire for the next century. This is because the phone is already a genuinely two-way, flexible and international tool. One only has to compare the ease of using the telephone to order, say, a takeaway pizza with the painfully slow systems offered even by a top- quality interactive cable-TV system such as Videotron.
The information superhighway, of course, is about a lot more than ordering pizzas. Information, television programming, home banking: the products and services soon to be available at the touch of a button constitute a near limitless list. But all that is in the future. For now, it is not yet clear just how consumers will gain access to the information superhighway. By phone? Cable? Microwave? Mr Murdoch is apparently hedging his bets.
Most informed observers believe that victory may go to the operator, like News Corporation, which understands that there is no one single, indisputable way of delivering new media services to the consumer.
Much of the developing world, for example - notably India and China - are far more likely to receive new services by satellite. In parts of northern Europe (the Netherlands, Germany), cable distribution may come to dominate.
In Britain, the outcome is genuinely uncertain because of the restrictive regulatory regime. Regulators won't let BT broadcast television over its networks until 2001 at the earliest, to give cable a chance to grow. The cable industry hasn't done much with its legislated head-start, proving to be poor at marketing. Typically, Mr Murdoch has taken advantage of the situation, pre-empting some of his competitors by launching satellite pay TV.
What has greatly assisted Mr Murdoch on the global media stage has been his ability to sidestep domestic regulations: governments everywhere are struggling to keep up with his nimble footwork.
Most recently he has even managed to jump regulatory hurdles in the United States. Last week the Federal Communications Commission ruled that his Fox TV network was indeed in contravention of foreign ownership limits. But rather than insist on a restructuring, the regulators gave him time to prove that his ownership was in the public interest. By now Fox Broadcasting, the fourth US TV network, can probably do this: for example, it has assisted in driving advertising rates down and has provided viewers with greater choice.
So, if Mr Murdoch has correctly positioned himself (and yesterday's soaring share price suggests that in the short term he has the support of the market), then at some point in the future he will be poised to cater for your every whim in a streamlined and comprehensive way.
When it comes to entertainment, he certainly has products to sell. Through his ownership of the 20th Century Fox studio and strong presence in Hollywood, News Corporation has been able to tie up the best satellite movie packages. With the income building from pay television, BSkyB is outbidding rivals for certain popular sporting events (Premier League football, boxing) and reshaping other sports (rugby league in the UK and Australia) to fit small-screen schedules here and in Australia
Mr Murdoch's exclusive right over the system used to scramble and unscramble TV signals for the UK market obliges even other powerful media players to do things his way. On Wednesday Disney confirmed that its long-awaited channel would be part of the Sky multichannel package. And MTV is also going to switch from being in the clear to belonging to the encoded package.
Yet in the long term the interactive superhighway will extend way beyond entertainment. Mr Murdoch is bidding to provide business services to companies, as well as home banking and home shopping to consumers.
Once it is up and running a truly interactive system will create a data bank on individuals, select and direct to one's home services and information geared to lifestyle and personality. Golfers will be e-mailed with offers for anything from golfing holidays to clubs, while an interactive golf channel will invite them to subscribe.
Exhilarated? Or horrified? Do you want to buy this vision? There are plenty of older people who probably don't. Many consumers are reluctant to pay for things like television programmes that they believe should be free.
But even if the information superhighway is only half-heartedly embraced, Mr Murdoch is clearly ahead of the pack. All the same, he must surely be tempted to look over an increasingly hunched shoulder at the rest of the field.
Reuters, for example, is a key provider to the financial services market. Ted Turner's Turner Entertainment Networks is flush with both cash and global ambitions.
And Rupert Murdoch's credibility only runs so far: he almost bankrupted himself in 1991 through his overweening ambition.
None the less his rivals are uncomfortably aware that the MCI deal leaves him $2bn better off. Every broadcaster is desperate to enter the new age but know the cost will be enormous. $2bn will help to pay for these ambitions.
Here we go again?
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