• by Michael Shields , July 7, 2004

The Securities and Exchange Commission isn't talking, and TV service providers aren't saying much either, but it appears as though the feds are taking a closer look at the way cable and satellite TV companies calculate their subscribers by taking an unusual step.

While SEC spokesperson John Heine issued an immediate "no comment," officials from several companies--including satellite TV providers DirecTV and EchoStar as well as cable giants AOL Time Warner and Comcast Corp.--Wednesday confirmed they have received requests from the commission for details on their subscriber counting methodologies.

The scrutiny comes at a time of increased corporate oversight overall, and a push for greater accountability within the media industry in particular--not to mention a string of high-profile media auditing debacles, including fuzzy accounting by Adelphia Communications and Time Warner and circulation blunders by magazine and newspaper publishers. Even the most sacrosanct of media industry institutions, including the venerable Media Rating Council and Nielsen Media Research, have come under government scrutiny.

But what makes the SEC's recent query into TV subscriber count practices is that many industry vets say it is unprecedented.

"I don't know of any other letter [like this] that we have received," acknowledged Time Warner spokesperson Mia Carbonell.

Asked whether DirecTV had ever received such a letter, spokesperson Robert Mercer replied: "I don't know." He said that the letter required a response by mid-July.

While TV subscribers counts are not a direct concern for Madison Avenue, where ad agencies rely on Nielsen estimates for cable network and operator subscriber coverage, the federal inquiry raises new concerns about the overall governance of the media industry at a time when many major marketers are pushing for greater accountability and even new forms of media auditing. The probe could be especially damaging for the spot cable TV business, which is finally winning over major advertisers and agencies, and which has been promoting the precise geographic targeting of its subscribers.

The SEC inquiry is not limited to TV providers. Several major telephone service and Internet service providers are also involved in the probe. Ironically, while stories of circulation errors and misdeeds have made headlines in recent months in the print business, the issues of circulation integrity appear to be far more widespread in the telecommunications industry.

Late last week, Verizon Communications admitted that it had overstated its number of long-distance lines by nearly nine percent in the first quarter due to a software error.

Currently, four former executives from cable company Adelphia Communications are on trial for fraudulent practices, including accusations of inflating the company's subscriber count.