CATV Hearings Special (Reel 2)

The impact of cable television on the country's biggest television stations the top 100 markets was the next subject. These hearings fill which markets are the top 100. And how is the impact on of cable on them. Do you link the the top 100 markets are determined by the largest circulation of any one station in that market taking New York once again. There is one station in New York City which is watched by approximately five million eight hundred thousand persons each week. This is the most in the country so New York is ranked the number one market the top 100 go right down the line to market number 100. Now it's important to note that there is not a direct correlation between markets and a city's population. Since some markets are made up by combining cities such as Hartford New Haven or Seattle Tacoma or even Norfolk Portsmouth Newport News Hampton Virginia. So first of all we define the core cities of the top 100 markets recognizing that a good number of the listeners are going to be living in the suburbs. The commission then draws

a circle around each market with a radius of thirty five miles. Everything within that circle is then recognized as part of the New York market or the Seattle Tacoma market or what have you. So as you can see if you draw a 35 mile circle around each of the top core cities you've taken in a lot of territory and a lot of population. Five years ago the commission decided it wanted to protect stations especially struggling u h f stations in the top 100 markets in order to do this the commission said CATV systems operating in these markets could not carry distance signals. This had the effect for all intents and purposes of freezing CATV development in a large part of the country. That economic base of distant signals that we were talking about a few minutes ago just wasn't available in the largest markets. I might add this a lot of people thought at that time and still think so now that the commission was protecting the wrong stations that protection should have been afforded the stations

in the smaller markets regardless of what should have been done however the commission's policy stifled cable growth in the big markets. Now there is a discernible attitude toward loosening that protection somewhat. This was apparent even by the compromise suggestion offered by Jack Harris representing the association of maximum service Telecasters. He said that his group would be willing to allow cable systems in the top 100 markets to carry all three networks one independent station. I want to educational station if these were not available locally then the system could bring in distant signals to fill up the complement speaking in this segment our Leland Johnson of the RAND Corporation a research or research organization FCC Commissioner Thomas Hauser and Michael Horn representing some of the top 100 markets. As you know Rand is a nonpartizan organization we have no business interests in either cable or broadcasting. Our whole objective is to provide research and analysis

which we hope will provide insight into well conceived policies in the public interest. We have been centrally concerned about the question of cable growth and broadcasting. And our studies on the impact of cable have by now been widely distributed and discussed after having gone through the comments of other parties regarding impact. We are throughly persuaded of the following that is in the top hundred markets. The growth of cable along the lines we recommend will not have a devastating impact on so-called free television. Whatever threat cable poses for broadcasting is primarily in the smaller markets markets which today have only two or three stations. And the reason for that is clear enough in the very large markets the audience is already fragmented. What we have five six stations to bring in several additional signals

will not add that much more to fragmentation. But clearly in a small market with one or two stations the import of let's say for distance signals can make a very substantial difference. Well for today in concentrating on the top 100 markets then let us consider the kinds of rules that would be appropriate. Now we base our conclusions regarding the impact of cable on a rather elaborate statistical analysis. Plus whatever other evidence we can we can garner. Unfortunately there is much less evidence than one would like to have at one's disposal to really make definitive judgments here. But everything we have seen so far suggests that the kinds of conclusions typically drawn by broadcasters simply are exaggerated. That is there may be some impact on over the air broadcasting but not all that much. And again not at least in the top 100 markets.

In this regard it's interesting that a leading television network executive once told me just a few days ago that he is much less concerned about the growth of cable. Then he hears about possible new rules concerning children's programming. In general this leads to the general conclusion that whatever the impact of cable will will have on broadcasting well over the long run kind of get lost in the static that there are simply many things that will be affecting television over the next 10 to 20 years. The loss of cigarette advertising the growth of television homes the general ability of television to compete with other media for advertising. And of course FCC rules with respect to children's programming etc.. So that in a sense the impact of cable on broadcasting is kind of a second order question

in the top hundred markets that over the next 10 years I would suspect television will have its ups and downs but at the after the end of the ten years it will still be hard to determine exactly what effect cable did have in those large markets. Now again I say the evidence is spotty. We don't our statistical analysis based on a large sample of cable systems and broadcasting stations but we can pick out now certain specific cases. San Diego has already been mentioned as a market where cable has grown extensively and where television station profits appear to be healthy. In fact according to FCC financial data profits for the stations in San Diego together are today running at about 20 percent of revenues. Yesterday Mr Baltimore poultice about his problems and in Wilkes-Barre had a map showing the many CA TVs in his broadcasting area. But we find him in Wilkes-Barre that revenues for the three stations have been growing

at about 5 percent per year during the period one thousand sixty one thousand sixty eight. Now granted this is a bit below the 7 percent per year per station for the industry taken as a whole excluding the network owned and operated stations. But somehow a 5 percent annual growth rate doesn't seem to me to be all that bad. We know that in that market in 1968 profits ran to about 10 percent of total revenues. Now to be sure this is not as good as the extraordinarily high profit of 25 percent for all stations in the industry taken together but still it's high enough to dive. I for one am won't lose any sleep over it. We have also looked at Canada where cable growth has been far more extensive than it has been in the United States and have found nothing to support the conclusion that there is going to be a there would be a devastating impact on so-called free television.

Now when I say this I don't mean to imply that cable therefore should be permitted to grow in a completely unlimited fashion that it should simply be permitted to bring in whatever signals it wants whenever it wants and our analysis is really based on the import of four very attractive independent signals. You've used the word dangerous you use the word threatening I think you use one or two other terms to characterize the situation could you elaborate on what you mean by dangerous threatening. Well I mean can you. In other words let me rephrase it. Can you give me some thoughts from my viewers point of view. Can you give me some public interest arguments in the top 15 markets as to why the importation of signals will be harmful. All right. It costs money to put on programs. It costs a great deal of money to put on the kinds of programs that the commission is most anxious to encourage. Now the

station is. It gets a certain amount of revenue out of that it has to pay for its transmitter and all its fixed costs and studio and that has to buy programming to create programs. It also has to have some return on investment in order to crack capital. This is the CATV people claim they need a return on investment to get the capital they need. If you reduce the revenues of the station such that you eliminate its profit or put it into the red. Something's got to give the station asked to cut back on its expenses or it has to go into bankruptcy. Now how do you are you saying that's going to happen a top 50 markets not the every station certainly it's not going to be I don't it's not going to happen I don't think to WCBS in New York City but that's there there are 49 other top 50 markets.

It's Spartanburg South Carolina a top 50 market and that's a little bit smaller than New York City and there are a lot fewer homes there to support the stations. Louisville Kentucky is a top 50 market. And and bear in mind when you get down this range of markets the lower top 50 and the bottom. A station will be a top 50 market under one way of ranking them and a BOLO top 50 on another way because they're all so close together trying to get you to define dangerous or threatening and you seem to be saying that that situation occurs when a station is about to be driven out of business. No I mean it was or are or are driven to the point where it is no longer possible for them to carry out a viable business. Well I don't don't think it's just a matter of station shutting down. I mean

you could run a television station that consisted of a camera on a disc jockey playing records all day long. You have kind of a visual radio station and I think the costs of that kind of operation would be so low that it could be supported with fairly modest revenues. But I think if a station that has 50 new stringers all around its coverage area as does the Green Bay station I represent it has 4 5 newsmen 6 sound on camera and color capacity cameras news automobiles. Announcers multiple cameras studios if it has to give up all those things and go to A as to it was visual Top 40 radio station. I think the public has lost a lot

even though the station is still on the air. A session on the impact of cable TV on smaller markets also show that the commercial broadcasters thought it would hurt the cable people but it wouldn't. The fifth session dealt with who should own cable systems and in particular should educational and public such as municipal entities own them. Still one of the interests involved here link the the role of the noncommercial and educational interests was highlighted by this fifth session. The question came down to whether these non private groups should get into cable ownership and if so if so should they receive some preference in attempting to get franchises. The Ford Foundation said that nonprofit ownership could help cable technology best serve the public interest and recycle the profits. It said even at this moment before the commission acts. There are serious ramifications to the question for instance of the commission and seeking a diversity of voices within the

community has rules which bar the licensee of an educational station from owning a CATV system in its service area and exactly the same way that commercial licensees are barred. Suppose there is municipal ownership of systems. The city being both the franchise or and the franchisee doesn't the specter of government control rear its head. With the exception of Donald tavern our president of the Cable Television Association all of the members of the panel favored some sort of public involvement in the basic organizational structure of cable systems. Some of the panelists thought that it would be a good idea to have complete public ownership while others believe that an adequate goal would be access to channels with financial support directly from the cable system itself. Most of the panelists seem to think that public ownership would result in better ultimate service. None seemed especially worried about financing. Speaking in favor of private enterprise running cable systems was Donald Tavenner head of the National Cable Television Association in favor of public broadcasting

operations of cable was William Harley of the National Association of educational broadcasters and adding her concern for what is carried on the cable systems. Was Miss Theodora school over a consultant to the New York State Council of the arts. It was the pollution going to have cable television Association and my personal belief that a significant development of greater communication go opportunity to cable television will be best accomplished by private ownership of cable television. This is not to say that we do not recognize a liar to implement in significant form the programming needed services for true public service for education for the religious community for the broader community a minority community service agencies and organizations. Certainly when I recognize that the open television people can and must undertake very real community communications activity in these and in other areas it is obvious that the real and overriding need is for communications availability

for minorities education and other identified public or community concerns. Our experience covers that to attempt to accomplish by taking cable television from the free enterprise and replace it in the government or other public ownership or control can in fact create limitations in funding management objective programming which in turn can a century for the commission's goal for development of many new telecommunications services so greatly desired by the seek such public ownership. I think that the development of people for this country has such great potential. That it cannot be left soley to the development by private entrepreneurs. I don't mean this in a priority of sense. I mean it's a business operation. They're in it to make money and their inclination therefore is to put in these have the greatest return for the smallest amount of output. That's reasonable and understandable. Just as we have in our

total broadcasting system the need for a noncommercial public broadcasting system to compliment the commercial system. I think we need this same kind of alternative in the development of cable. And there are number of reasons for that as I think that is where the probability factor major in the minds of commercial entrepreneurs. They're not going to be quite so adventurous and they're going to be disinclined to go into new inventive kinds of programming areas they may be disinclined to purchase the kind of equipment that my facilitate new approaches and new technologies that could be used in providing services. Whereas a nonprofit enterprise with a recycling of funds and without the compulsion of making a fast buck. It would be more inclined we believe to use that these funds for a more adventurous programming and to perhaps purchase the equipment that would allow them to apply new techniques to serve the

community needs. We also feel that the kind of board of directors of a consortium representing a whole range of community needs is much more apt to be responsive to requests for access to the system and for the development of programming that would need a vast spectrum of community needs. Then the management of a commercial enterprise. Whatever contains whether as a broadcaster I mean really think about people taking the time and in trying to develop just that idea because that is what everybody is talking about when I talk about television we're talking about this wonderful service for people. They talk about a fantastic opportunity for open access and yet when it comes right down to it is to create is just point that nobody's taking the time to think about how can you develop a system. Truly does give access to no one here besides myself and even spoke a little to the question of liability this is a

very serious problem. The way most franchises Now now constructed the cable operator since the lot build anything that go over the system when you create something like that to create a situation where the cable operator must act as a censor. In so doing you are already limiting access. You are limiting what can be carried over a system that I've merely don't believe that the educational broadcaster is is going to be any different situation if indeed he's given a cable franchise as it now stands for non commercial broadcaster is in a similar situation. Whatever goes over his channel over the broadcasting he is responsible for. Therefore he cannot open it up and really give the kind of open access to community that of a television or music not commercial television. Conley says that it does. I like specifically to comment on what Mr. DAY said I mean I think all the rationales that he gave in terms of of the programming is great. Thank you for the education Broadcasting Corporation here on one point beautiful for them to be a

problem for us. But I do not see what any of that movement can do any better than operating on tell from another member of this panel was Frederick Redmond head of the Jacksonville Florida public television station in a rather scary recitation he pointed the way into the next panel and the topic of who should regulate CATV systems the federal government states or cities. He strongly opposed letting the cities do it because he felt city governments were vulnerable to pressure and he cited a telephone call he got just before the awarding of a contested cable franchise by his city to make his point that some powerful forces can come to bear on local governments and call I'm going to relate to you is not verbatim. However I did write it down I had some fear for my life actually after getting it and I did write it down to the best of my recollection exactly as it occurred. Caller Mr. Redmond This is Mr. Smith I understand you folks are going into the cable television business in Jacksonville.

Redmond Yes we are. CALLER We are one of the biggest in the business and would like to go in with you. Are you interested. REDMOND No we have had several offers to do that and feel it will go it alone. Caller do you guys that you guys really don't have any money and probably don't even realize what it will take. Redmond Yes it will take 15 to 20 million dollars and we have a commitment from the New York bank to lend all of it to us. Caller I see but we had better luck persuading politicians who will ultimately award the franchise revenue. Then why are you calling me. Caller because we want to make this thing clean and help you out. Redmond not so my friend it's because you think we're going to win. CALLER We just don't want to fight. But I'll admit you have a chance. Redmond right. The chance lies in 2000 people willing to take petitions out and that are who you own in city government. You can't fight a referendum. Caller you're a goody little bastard. You know I place more millions in one day than you are old Redmond. You must be a very lucky man. Caller

Why don't you manage the system for us we'll pay you fifty thousand a year for the rest of your life and you don't even have to show up for work. How does that sound. Redmond it sounds like after the franchise of war the rest of my life may not take you on. Collar laughter you're great. I tell you what will give you the money at no interest and build the whole damn thing for you under one condition. Redmond What is that. Caller. Well we're building north from Miami and south from New York. When we get to that great big county of yours for the beginner connect you to real good friend Redmond thanks anyway Bennett. I enjoy doing difficult things keeps me out of trouble. Calling your great talking to the old man like that. I'll be calling you again. There was more to the car which I omitted for brevity but it was a clear indication that the caller had had access to information in my office and on a continuing basis. He made many references to private information that is not going to my board of trustees.

FCC chairman Birch commented after this that he felt Redmond really was criticizing the whole system of government and not the cable television industry. Donald Tavenner of the cable Association expressed the objection that the cable industry should not be judged by that one phone call and the subsequent witness asserted that this was simply an isolated case. Redmond agreed that he had not meant to indict the whole cable industry. His phone call does point out I think the increasing importance of cable television as a business which many people view as potentially very lucrative. The following session on HU city state or federal governments should regulate cable TV and saw the usual divergence of views. Link the commission has never really resolved exactly what its role is because of the state and local governments when it comes to the regulation of cable television. In 1066 for instance the commission asked Congress to direct its Congress's attention to that relationship with particular reference to initial franchising rate regulation and extension of service. So far

there's been no resolution by Congress. The FCC recognizes three main approaches to the relationship. The first is total federal licensing of CATV. It's important to remember that while CATV is regulated by the FCC It is not licensed by the FCC. The second approach is regulation much as the commission has been doing so far. This however has clear limitations and the commission recognizes this. The third area and the one the commission wants to adopt is some federal regulation with some local or state regulation the standards being set up by the commission. The FCC would set minimum standards to which the local actions would conform. For instance if the commission required a certain number of channels on a system the local jurisdiction could not allow a cable system to begin operation with fewer channels. Part of this discussion focused on whether the regulation should be one two or three tiered. In other words should the regulation include the city and the state along with the

FCC or just the city or just the state. Only a handful of states have attempted to assert CATV jurisdiction but in the absence of federal preemption the state jurisdiction has been upheld by the Supreme Court. Most of the cable interests seem to favor the two tiered regulation. They're willing to deal with the federal government and if necessary with the cities what they seem to want to avoid is that three tiered regulation involving the states. The fear is that something analogous to public utility regulation might result. Chairman Birch emphasized that if the cities are involved then by definition the states are involved since the cities are given their powers by the states. Nevertheless the cable interests argue the commission can totally preempt the field giving only certain prescribe authority to another governmental body speaking in behalf of state regulation federal regulation and the city's interest were Steven Barnett a University of California law professor Kenneth Cox a

former FCC commissioner Thomas Atkins of the Boston City Council and William Jones of New York State Public Service Commissioner. Reasons why I come out in favor of a state role or briefly that the existing municipal regulation is in my view often tantamount to no regulation. I think these are areas these are areas that shape the future of this medium that require some governmental control. I think the state is generally better qualified than the municipality to shoulder this role. The state has or can develop more expertise in the cable area. It can have this expertise on a continuing basis rather than getting into the franchising business. Once every 20 or 30 years a city may do just more capable of having an ongoing enforcement machinery than the city is. It is perhaps more capable of rising above monetary considerations and looking at the long range benefits that

cable can provide instead of simply how much money you can bring to the municipality in the in the near term. Finally it seems to me that as a practical matter the vacuum of regulation at the local level at present is such that if the state does not step in this commission necessarily will have to and I with all respect to this commission I agree with its own conclusion that the state government is better qualified to handle this role than this commission is at least that's what I take to be this Commission's conclusion from several of its orders in this area.