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Cable Television, Regulation of - The History of Cable Regulation, Cable Franchises

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Television has proven to be one of the most powerful media of all time. Newspapers, magazines, radio, and the Internet have made substantial contributions to the sharing of ideas and providing entertainment, but none was so immediately pervasive and hypnotic as “the tube,” which is able to deliver breaking news and weather, movies, concerts, and sporting events directly into people’s living rooms.

The History of Cable Regulation

According to Robert W. Crandall and Harold Furchtgott-Roth (1996, p. 1), the first cable system was “either in Mahoney City, Pennsylvania, in 1948, or Astoria, Oregon, in 1949. The first subscription cable system was established in Lans-ford, Pennsylvania, in 1950.” When the 1948 FCC-imposed freeze on new broadcast television stations ended in 1952, the number of television stations rapidly increased, and cable had been established (see Table 1). At first, broadcasters liked the idea of cable, because it increased the reach of their signals and, most important, the size of their audience, which determined how much they could charge advertisers. By the mid-1950s, cable operators could use a new technology, microwave transmission, to beam signals from distant television stations to their subscribers. Anything that involved communications fell under the jurisdiction of the FCC, and in 1954, the commission authorized cable operators to build such microwave transmission facilities so long as the general public could also use them.

Local broadcasters feared that viewers would prefer these out-of-town stations to their local stations. However, the FCC had not established jurisdiction over cable. In Frontier Broadcasting Company v. Collier (1958), the first major FCC ruling to involve cable, broadcasters argued that cable was a common carrier, which meant the FCC could regulate it. The FCC ruled that cable was not a common carrier, but the commission also ruled that cable was officially not like broadcasting. The following year, the commission said it could find no authority with which to regulate cable.

Cable Franchises

Unlike broadcast television stations, which transmit over the air, cable systems use networks of wires to deliver signals. This involves miles of cable and assorted technical gadgets, as well as facilities to coordinate transmissions. It takes the cooperation of the local government to install and maintain this equipment successfully.

In the franchising process, municipalities choose among bids from cable-system operators who wish to build in the area. Bids often include promises of maximum channel delivery and public-service projects in exchange for a negotiated fee to the government. Typically, only one cable operator is selected, essentially granting a natural monopoly. Through the late 1950s and early 1960s, state courts generally ruled that because cable systems used public right-of-ways to install cable, they were public utilities and could, therefore, be regulated. In 1978, the FCC was given authority to regulate telephone-pole attachments that were used by cable operators.

The FCC did not mandate formal franchise processes until the Communications Policy Act of 1984. Before then, local franchise authorities regulated rates and often dictated programming, including channel selection. With the 1984 act, basic cable rates were deregulated, and franchises were limited to specifying only broad categories of programming. Franchise authorities were also limited in how much they could charge cable systems, not to exceed 5 percent of gross revenues. This act also addressed franchise renewal, which became a concern as the importance of cable increased and thirty-year-old franchise agreements were ending. Basically, cable operators could not assume automatic renewal.

The U.S. Supreme Court became involved with the franchising process in Los Angeles v. Preferred Communications, Inc. (1986). Los Angeles refused to authorize another cable system on the grounds that it was too disruptive. Ultimately, franchising was supported, but in a competitive situation, a city could not limit the number of systems to one.

With the Cable Television Consumer Protection and Competition Act of 1992 and a return to regulation, local franchises regulated with the cooperation of the FCC. Cable operators were also mandated to provide written notice to initiate renewal proceedings. At that time, franchising authorities could consider the efforts of a cable operator to expand cable and community services. Rates were again deregulated under the Telecommunications Act of 1996. By the end of the twentieth century, concern had switched from the building of cable systems to overbuilds, where capacity exceeds demand.

Cable Television, System Technology of - The Headend, The Wired System, Amplifiers, Network Architectures, Set-Top Boxes [next] [back] Cable Television, Programming of - Programming Tiers, The Windowing Concept, The Major Cable Programmers, Programming Through the Years

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