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The Rationale of Cable Regulation

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Sunny Hughes

on 20 February 2013

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Transcript of The Rationale of Cable Regulation

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Images from Shutterstock.com The Rationale of Cable Television Regulation

Must Carry Rules 1950s
Broadcasters asked the FCC to regulate cable as a common carrier. Frontier Broadcasting v. Collier (1958)

Cable was not a common carrier and was outside of the FCC's jurisdiction.

This was because, although cable provided "interstate" carriage, there still was a "substantial question" as to whether they provided common carriage. 1960s

FCC grew concerned with cable's potential economic injury to broadcasters.

FCC issued first rules to expressly regulate the operation of cable television systems.


All systems had to carry the broadcast signals that place a Grade B signal over a community.
Importation of distant signals that duplicated programming available from a local broadcaster was prohibited.
Any cable operator in the top 100 markets who wanted to import a distant signal had to demonstrate to the FCC that such a thing would be in the public interest. United States v. Southwestern Cable Co.

Supreme Court upheld the FCC's authority to regulate all interstate communication by wire or radio.

Communications Act of 1934 said FCC was responsible to:

"make available ... to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service ..." (47 USC 152(a))

The FCC had been given:

"regulatory power over all forms of electrical communication, whether by telephone, telegraph, cable, or radio." 1970s

FCC freezes "importation" of distant signals by cable companies.

The FCC explored new rules for cable during this freeze.

New rules during this time period:

Cable systems in major TV markets would have a minimum of 20 channels
Cable systems would have two-way capability
Cable systems would provide public access channels.
Cable systems would provide facilities for local program origination 1975

FCC adopted antisiphoning rules designed to keep cable from taking sports/movies from broadcasters. Home Box Office Inc. v. FCC (1977)

The court ruled that the FCC had exceeded its authority and the antisiphoning rules were repealed.

Led to growth of cable movie channels. Economic Relationship Between TV Broadcasting and CATV

FCC found that deregulation of cable would have no serious effect on broadcasting. 1980s

Era of deregulation
Huge period of cable-system growth.

Congress gave FCC authority to regulate cable television.

1984 Cable Communications Policy Act

National Policy for Cable Television 1970-1991
Broadcasters viewing audience went from 90 to 60 percent.

Broadcasters demanded a "level playing field" 1991
FCC Office of Plans and Policy
Report predicted the increased cable penetration for the next decade and concluded that it would lead to the demise of most broadcasters in major markets.

FCC Chairman Alfred Sikes: "The transmission medium that had been dominant is now secondary. Broadcasting has been eclipsed by cable." 1991 Video Dial Tone

Cable providers were concerned that telephone companies would threatened their business in they started providing video.

Telcos could provide even more channels than cable, putting cable systems in the same situation in which they had put broadcasters. 1984 Cable Communications Policy Act

Local franchising procedures were established.
Local governments could control right-of-way and utility pole placement

How to choose between applicants for a local franchise? Broadcasters are granted "licenses"

Cable operators are granted "franchises" City of Los Angeles et. al. v. Preferred Communications, Inc. (1988)

Court upheld that a city may not arbitrarily deny a franchise to a second cable systems unless they city can demonstrate the the city facilities are inadequate to support the second system.

"The business of cable television, like that of newspapers and magazines, is to provide its subscribers with a mixture of news, information and entertainment. As do newspapers, cable television companies use a portion of their available space to reprint (or retransmit) the communications of others, while at the same time providing some original content...."

The Supreme Court refused to hear Preferred.

Central Telecommunications v. TCI Cablevision (1986)

The Eighth Circuit held that an exclusive franchise does not violate the First Amendment where the market could not support two cable companies and where competition for the exclusive franchise furthers First Amendment interests. Group W Cable Inc. v. Santa Cruz (1987)

District Court of Northern California ruled that if exclusive franchises are granted, the franchising authority must demonstrate that cable has some unique characteristic that justifies some exception to the rule prohibiting government intrusion into the functioning of the media.

The city did not violate the First Amendment because it failed to show that existing physical structures could not accommodate all cable operators who sought access. The Cable Consumer Protection and Competition Act of 1992

Grew out of Congressional concern over cable deregulation in the 1980s.

1986-1992: Cable monthly rates for basic cable had increased b y 40 percent.

Most cable systems had no local competition

Cable industry had become vertically integrated (common ownership)

There had been a major shift in market share from broadcasters to cable operators.

The FCC was charged with implementing the act over the next year. Must carry rules

Cable systems must carry the signals of all local television stations.
Originated in 1965.

Meant to preserve "Free TV"

UHF Broadcasters benefited because their weak signals were bolstered by cable carriage.

Cablecasters were given a free source of quality programming.

Turner Broadcasting System, Inc. v. FCC (1983)

Turner argued that the FCC should repeal the must carry rules because it violated teh First and Fifth Amendment rights of cable operators and programmers.

Quincy Cable TV, Inc. v. FCC (1985)

Quincy cable dropped two must-carry signals without FCC approval.

They said the channels were not of interest to their community.

FCC fined Quincy $5000.

U.S. District Court of Appeals for the District of Columbia ruled that the must-carry rules, as drafted, violated the First Amendment and were outside of the FCC's regulatory authority. Interim Must Carry Rules (1987)

New rules to govern five years time while subscribers were "educated" on switching between cable and broadcast services.

Cable operators and Broadcaster sought a compromise.

Small cable systems would be exempt from the new rules

Larger systems were granted more leeway in deciding which stations to carry. Century Communications Corp. v. FCC (1988)

The O'Brien (1967) test was applied to must-carry rules and the rules were struck down.

Is a government restriction on free speech justified?
Must be unrelated to content (not an attempt to suppress free speech)
Narrowly tailored to achieve government's important or substantial interest.
Any incidental restrictions on speech must be essential to furthing the government's interest.

"Our decision is a narrow one. We hold simply that, in the absence of record evidence in support of its policy, the FCC's re imposition of must-carry rules on a five-year basis neither clearly furthers a substantial governmental interest nor is of brief enough duration to be considered narrowly tailored so as to satisfy the O'Brien test for incidental restrictions on speech... Accordingly, we have no choice but to strike down this latest embodiment of must-carry"

Must carry not unconstitutional in itself, the FCC just failed to give sufficient reasoning for implementing the rules. The Cable Consumer and Protection Act of 1992

Broadcasters had the option of exercising must-carry rights or retransmission consent.
Must-Carry: Carry local station on basic cable tier.
Retransmission: Broadcasters and cable operator would negotiate monetary payment for carriage.
No agreement: Cable didn't have to carry broadcast signal.

Cable companies paid for programming from networks like CNN, MTV, etc.

Broadcasters felt they were not being compensated for their programming and their large audiences.

Cable systems said they provided a superior service to viewers. Turner Broadcasting System, Inc. v. Federal Communications Commission

Supreme Court did not find must-carry unconstitutional, but asked lower court to support more adequately its conclusion that the future of over-the-air broadcasting is threatened by cable in the absence of regulation.

Turner Broadcasting System, Inc. v. FCC

Supreme Court upheld must-carry and found the FCC's rules to be content neutral and not in violation of cable TV's First Amendment rights. Must Carry and Digital Television

Now broadcasters had as many as four program streams.

Could a burden of must-carry be imposed on cable operators?

January 2001
FCC issues new rules on cable carriage of digital broadcast signals.

Pg. 121
Carriage would only be considered for broadcast stations withing 50 miles of cable system and capable of delivering high-quality signal to the cable system.

Commercial stations were required to demonstrate scant viewership if they wanted coverage.

Cable systems were not required to carry stations that duplicated programming (network affiliates)

Cable systems had to sell and install A/B switches in customers' homes.

Cable systems had to carry at least one public television station.
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