Station Breaks

The government's campaign against cable television

Thomas W. Hazlett from the February 1995 issue

(Page 2 of 5)

In 1966, the commission stated its cause for concern about marketplace competition in ominous bureaucratic tones: "We must thoroughly examine the question of CATV entry into the major markets, and authorize such entry only upon a hearing record giving reasonable assurance that the consequences of such entry will not thwart the achievement of the congressional goals. We cannot sit back and let CATV move signals about as it wishes, and then if the answer some years from now is that CATV can and does undermine the development of UHF, simply say, 'Oh well, so sorry that we didn't look into the matter.'"

That consumers might like to be "fragmented" or "siphoned"--indeed, that only willing channel-flippers could be fragmented or siphoned--was not a big concern. While the First Amendment might have looked slighted by this ham-handed government intervention in the workings of the electronic press, the scholars at the FCC had a handy explanation of how their scheme fit tidily under the Constitution. It furthered First Amendment values to have government provide for the goals sought by the Founding Fathers: diversity of expression, local control of the media, and fairness. This, after all, was how the commission and, generally, Congress defined the public interest.

By buying that line, the courts allowed the commission to go into the editorial business in a funny way: While the FCC couldn't directly tell broadcasters what to air, it certainly could hammer them with regulations in "the public interest." So it embarked on various schemes to encourage what the FCC dubbed non-entertainment programming--news, talk, and public affairs. In the commission's scheme, informational programming was inherently non-entertaining and, hence, unprofitable. Regulators had to force the market to supply this meritorious product--to uplift the public and improve our democracy--despite the financial interests of licensees in producing a steady stream of police dramas, sitcoms, movies, and sports.

The regulators' lament was that greedy licensees had to be carefully watched by publicly minded civil servants such as themselves. Left to their own devices, the vile private broadcasters would think only of their own profits and produce a shoddy product. In fact, we had already arrived in this video sewer, which Newton Minow, the greatest FCC regulator of all, famously decried as "the vast wasteland." Running the Kennedy administration's FCC, Minow beamed with regulatory pride in coercing broadcasters to do more of what they inevitably tried to stint on. "News, information, and public affairs programs are the heart of broadcasting in the public interest," he said in 1961. Indeed, a chapter in his 1964 book, Equal Time, is titled: "News, News, Never Enough."

Minow claimed that the FCC did not engage in censorship because that required prior restraint; all the FCC did was threaten to yank a broadcaster's license after the fact. Stalin would have loved this definition of censorship; it surely did not take long for the editors of Pravda to notice that the ability to write articles consistent with the views of the sovereign was a survival trait. Indeed, the most ruthless tyrant need engage in relatively little actual enforcement and perhaps no prior restraints whatever.

Minow claimed that licensees had been regulated far too loosely in the past, and that--thanks to the emergence of earnest and careful overseers imbued with the spirit of the New Frontier--a new ship of state was about to sail: the S.S. Minow. The Minow FCC would not kowtow to private profiteers. The new deal embarked upon in 1961 would, in Minow's words, encourage "local expression...the presentation of controversial issues ...educational and political shows, local news and programs for children." These were almost the precise words that the FCC had spoken for decades when describing its mission, but Minow really meant it. With new boldness and courage, the re-energized FCC immediately set out to make its point by dealing a near-fatal blow to cable competition. Cable was siphoning off audience share from FCC-regulated speakers and messing up the entire FCC plan.

That the vast wasteland was the logical and foreseeable product of just the industry structure that FCC policies had mandated merited no investigation in "the public interest." Sensationally, the very industrial arrangement that made lowest-common-denominator programming the order of the day was at that precise moment under attack from agents of creative destruction lurking in the competitive marketplace--an attack that Minow's regulatory warriors would gallantly fend off for two wasteland-infested decades. Greedy, bottom-line absorbed capitalists were champing at the bit to give the American public informational programming and localism and diversity; it was the FCC that resisted--to protect "First Amendment values."

Abandoning The Plan

Give the FCC credit: They stuck to their story. They hummed it like a mantra: "diversity, localism, fairness; diversity, localism, fairness...." The federal courts even bought it for awhile, curiously allowing the commission to expand its regulatory reach over cable, which it had no statutory power to control, far beyond what it had been able to regulate in broadcasting, which it was explicitly created to control. But the economics of competition were too strong and the cable regulation palace crumbled in the deregulatory wave of the mid- to late-1970s.

And then a curious thing happened: Americans finally tuned into unlicensed, unregulated television.

It came to them via wires, and no FCC-regulated airspace was involved. The product was sold on a subscription basis; there was no "pervasiveness" involved. Hence, the courts finally struck down the FCC's attempt to regulate the speech that occurred over such wires. And, due to the deregulation of satellites under the "Open Skies" policy in the early 1970s, it became possible to distribute new programming for cable systems on a cheap, nationwide basis. In 1975, Home Box Office took the opportunity; in 1976, Ted Turner's WTBS followed suit. Cable was still rather iffy, since federal regulation had the genie bottled up. But as the anti-cable regulations fell away in 1977, 1978, and 1980, massive new investments came in: New cable systems were built, new satellite networks launched.

It took 30 years for the cable industry to reach 18.7 percent of U.S. homes by 1978; by 1984, over 40 percent of Americans subscribed. Today, some 60 percent do. In 1978, there were only eight cable networks; by 1984 there were 47. (By 1993, there were 99.) Even during the worst recession since World War II, consumers were ravenous for video choices, and those avaricious, fast-buck television operators were eager to give those choices to them. The Information Superhighway was beginning to take shape in a field the FCC had so recently attempted to strip mine.

The rush to wire America's cities was on and, not surprisingly, city councils attempted to step into the shoes of the federal regulators. Municipal officials, feeling as New York Mayor John Lindsay had when he remarked that cable franchises were like "urban oil wells beneath our city streets," offered exclusive licenses to those companies willing to ante up most generously. Cable firms experienced a new-found interest in funding drug treatment centers, public television, local video productions, tree- planting efforts, and art museums. Cable executives became quite civic minded, regularly attending political luncheons and contributing eagerly to $100-a-plate dinners. They enjoyed politics so much that they hired thousands of local government aides, officials, and ex-officials. And they invested in people, particularly people with municipal clout. "Rent-a-citizens" popped up everywhere--the cooperative folks who were given stock at preferential terms by cable companies aspiring to win local franchises. The ex-city councilman or the downtown lobbyist or the manager of the local PBS station were prime candidates. If their team won the franchise their stock would be worth zillions; if they lost, zippo. It was an excellent incentive system, and large cable firms routinely dished out between 5 percent and 20 percent of the stock in local subsidiaries when engaged in tough franchise competitions.

Local pols did provide some drag on progress, but they were impotent to stem for long the ferocious public demand for the new technology. At first, the regulators were a nuisance. Then they were irrelevant. By the time the nation was wired--71 percent of the country had access to cable by 1984--Congress pre-empted local regulation of cable. The Cable Communications Policy Act of 1984 was essentially written by the cable industry, and the happy president of the National Cable Television Association posted a framed copy of the legislation on his wall as a sort of hunter's trophy.

The measure, sponsored by then-Rep. Timothy Wirth (D-Colo.), often called the congressman from TCI (Tele-Communications Inc., the largest U.S. cable operator, is headquartered in Denver), eliminated local rate controls and virtually ensured franchise renewals for cable companies. It also mandated that new competitors obtain a municipal cable franchise before leaping into the market, and it barred the likeliest cable competitors--local telephone companies--from providing video service. This was "deregulation" the way corporate lobbyists believe it ought to be: Protected from competition, cable companies could exploit their local monopolies to the hilt.

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