The Fiber Optic Revolution

...It is not for them to decide whether the future will come to Cerritos, California...

...Not GTE...

...What the industry realized is that the constitutional challenge to the city's rights in granting a cable franchise, logically extended, also means the end to the city's right to guarant-:e a monopoly to its franchise holder...

...We're in a cash flow mode...

...We may be able to win the case against them but do we really want to...

...As a telephone company, GTE is permitted by law only to own and manage telecommunications networks, not provide any of the information services that use them...

...Perhaps GTE and Apollo Cablevision will find that the people of Cerritos don't want interactive video, multiple channels, and mainframe hookups...

...Louis the mayor boasted that part of the price for getting the local cable franchise was providing the funds necessary to reopen a municipal hospital...

...Steve Effros, president of another of the industry's lobbies, the Community Antenna Television Association, insists that this movement doesn't meanthat cable is giving up its rights to free expression...

...This was true even up to last summer, when a struggle over a franchise granted by the city of Los Angeles went all the way to the Supreme Court...

...GTE, the telecommunications giant, and Apollo Cablevision, a local cable operator, were granted separate franchises by the city to build and operate the first fiber optic community cable television facility in the country...

...had to promise to provide $15 million in seed money for a public access TV corporation, no less than eight municipal channels and another eight public access channels in each of the city's eight wards, $180,000 annually in scholarship education funds, a $5-million grant to purchase equipment for municipal programming, and another $1-million general training grant...

...is worth creating a legal doctrine under which others can force their way into your franchise area...

...If cable operators can prevent anyone else from shipping video signals into the home, the growth of fiber will be severely retarded...

...If the biggest threat to cable television right now is the rise of the...

...It seems to me that if I were a cable operator I'd really want to know about these things, because if we can do it for Apollo we can do it for anyone...

...And let's say they start offering them to people irrespective of whether they had a franchise or not...

...Nobody's ever built the kind of cable that we need to put into this system," says Tom Robak, head of Apollo Cablevision...

...That means Apollo gets to market everything that comes with the fiber, an opportunity that Robak sees as critical to the economic health of his cable company...

...There are strong indications, for exMalcolm Gladwell is a Washington writer...

...There seems little doubt about the ultimate inevitability of the fiber optic revolution...

...We've been deregulated...

...If a government required a newspaper to publish ten pages of letters to the editor, you could be sure the publisher would have objections...

...We have political and business obligations that must be weighed in any equation regarding existing laws...

...We've got to have home shopping, home security, home banking, the ability to link up with mainframes...

...rr en years from now, the objections 1 of the NCTA will not have amounted to much...

...Whenever telephone companies of any sort have proposed to get involved in building cable networks, in fact, the NCTA has kicked up a fuss, and in that sense the Cerritos objection—with its painstaking analysis of the circumstances of the Apollo-GTE relationship, the possibility of a THE AMERICAN SPECTATOR AUGUST 1987 21 debtor-creditor relationship, the investment estimable table, and pages more of fine-tooth combing—is nothing new...

...In April, the Supreme Court struck down a Utah law that prevented cable operators from showing what it termed "indecent" programming...

...Already HBO has moved its satellite transmission onto a more powerful band, and awaits only the high volume production of cheaper, smaller, home satellite dishes...

...We've got to have new products," says Robak of his own operation and those of his fellow cable operators...

...That's where their true interest has been, and when push has come to shove, software has always been the loser...

...In other cases, the NCTA has argued that local regulations that specifically set aside a number of channels for public access broadcasting are unconstitutional...

...A few years ago the president of the country's largest cable operator, TCI, admitted that two-way 'has beit a franchising tool and a promotional gimmick for twelve years," carried out only "to get things through the FCC...

...But, he says, "being a First Amendment speaker and being a litigator who uses any opportunity to eliminate regulations on the claim of First Amendment privilege are two very different things...

...Fiber needs TV transmission, not simply for the revenue this would provide to finance the laying of the cable, but also to make its total information service package attractive to consumers...

...But cable operators have got a huge investment, about $12 billion, in that plant, and that's cash flow for them in the form of depreciation...

...Mooney never responded, and his association's lawyers speak darkly of the threat posed by GTE...

...One strand can deliver all voice, video, and data transmissions to the home, including a host of services in addition to cable TV that leaves the telecommunications industry practically breathless: home banking, home shopping, home security, videotext, automatic meter reading, interactive video services, and on and on...

...Fiberoptic technology is still very much in its infancy...

...Considering the size and diversity of the industry, it's a startling development that, as it gains momentum, is increasingly reflected in the continuous give and take, lobbying and litigation, between governing bodies and private operators...

...It's a guard-dog mentality," says one cable operator of the Cerritos action...

...And any operator bringing his TV programming over fiber has a sharper picture, and a far more attractive cable package...

...According to one NCTA board member: "The question is whether the cost savings of no access [channel requirements], no franchise fees, etc...

...And if HBO goes, who will follow...

...It's an ambitious plan...

...Forget the financial nitpicking of the FCC filing...

...But that is not about to happen given the industry's commitment to existing, conventional coaxial networks...

...It's a cynical calculation...

...Sure there are inherent limitations in the existing cable networks," says Bob Strock, a Washington-based telecommunications consultant...

...Fiber optic technology has revolutionized long distance telecommunications, but no one has yet mastered the challenges of bringing it to the residential market...

...Bizarre as it may seem, when GTE asked the FCC for permission to go ahead with the Cerritos experiment back in February, both the California Cable TV Association and the industry's Washington lobby, the National Cable TV Association, immediately filed objections with the FCC to block the project...

...Chief among them is something it calls video on demand, an innovation that allows any cable customer to call up at any time any number of 3,000 movies from the cable operator for immediate viewing in the home...

...For years the cable industry has stood firm on this point...

...Meanwhile out in California, Robak says that the vehemence of the reaction to his deal with GTE has left him wondering whether he'll end up as the industry's leader or its Benedict Arnold...

...Public access channels are a good example...

...That's why I'm working with GTE...

...But the cable industry was never serious about it...

...Given a choice, in other words, between their short-term economic self-interest and the future, between their money and their life, cable operators have opted for their money...

...After all, the cable industry's war against local regulations on First Amendment grounds has always been, in many respects, entirely justified...

...In fact, he said, he was "totally opposed" to two-way systems on the grounds that they were financially burdensome and unnecessary...

...As a lawyer for the NCTA puts it: "What is at stake here is the cable operator's right to control what he provides to his customers...

...The glittering promise of GTE's cable innovations and fiber optic information services means no more to them than the potential of their medium has ever meant...

...It is not difficult to see who will profit from the advent of fiber...

...The problem, according to cable operators, is that GTE is a telephone company, and they don't like telephone companies...

...But if it works, and GTE officials speak only in terms of when, Cerritos will be quite unlike any other city in the world...

...erected to the future of telecommunications...

...But in another sense, there's something disturbing about it...

...ample, that in the near future cable programmers like HBO will want to beam their movies directly to individual homes, bypassing local cable operators entirely...

...Cable operators have always had far more invested in the hardware of their trade than in what is called, in the industry, the software—the actual programming and cable informationservices...

...The real reason the cable industry doesn't like the Cerritos experiment is that in Cerritos GTE is laying fiber optic, and fiber turns the threat of competition from a theoretical possibility into a reality...

...This is, by any measure, a dramatic shift...

...Cable has been quite simply the only new source of graft in municipal government in forty years, and there's no question that the ludicrous conditions attached to franchises by cities posed a potential threat to the development of cable systems and the free expression of cable operators...

...Ever since the cable boom began ten years ago, operators have successfully fought regulation at every turn by insisting that they have more in common with the print media than with brcarlracters, and as "electronic publishers" are due the full protection of the First Amendment...

...But even if that is true—and there is little reason to believe that it is—there is a principle involved in the Cerritos affair that dwarfs all other considerations...

...All kinds of cable companies are calling me up and asking me, 'What are you doing, why are you letting me down...

...The citizens of Cerritos, of course, will have an array of information service options never before seen...

...What they say they fear is that if GTE enters the cable industry, it will use its enormous revenues from other activities to subsidize its television activities, and might also eventually erase the distinction between what it is allowed to do—transmit programming—and what it cannot do—generate programming...

...In Sacramento, it took a promise to plant twenty thousand trees for an applicant to win a cable franchise approval...

...Perhaps people don't want to include their homes in the high-tech revolution...

...Cerritos is neither the first nor the most important obstacle the cable industry has 'See my article, "Ted Turner's Cable Scam," in the March 1987 TAS...

...But the big winner is Apollo Cablevision...

...Fiber optic carries ten to a hundred times more information than does conventional copper wire...

...In the seventies, you'll recall, it was cable operators who went around promising that their industry would liberate America from the programming tyranny of the networks.' There is cynicism here, tight-fistedness, the complacency of the monopolist, and beneath it all is the simple fact that this is an industry defined overwhelmingly by its capital investment...

...Anyone can come in and give access to every home without having to invest in outside plant or maintenance...

...By playing the regulatory game in Washington and by debasing their own constitutional privileges, the cable industry is attempting to thwart a legitimate competitor...

...They're not particularly anxious to have that replaced with something else...

...We're going to need all kinds of new facilities, all kinds of new research...

...In St...

...ut the cable TV industry is a I) strange beast, and what should be done in the industry's best interest is not always what is done...

...The whole concept of two-way cable communication, for example, is actually possible with conventional coaxial as well, and was an integral part of many of the promises made by cable franchise applicants in the seventies...

...We've got to add all those home services so we can keep our customers on basic cable...

...If we don't make a change, we'll be out of business in five years...

...Fiber will quite simply spell the end of the comfortable monopoly many cable franchise holders enjoy in cable markets...

...Cities want more services, more channels, but a lot of cable companies don't want to spend money to upgrade their systems or do new research," says one operator...

...The industry sold its First Amendment birthright for a litThe real reason the cable industry doesn't like the Cerritos experiment is that fiber optic turns the threat of competition from a theoretical possibility into a reality...

...In recent months, however, a number of cable operators have started to back away from an absolutist position on the First Amendment...

...But it would be wrong to think that cable is powerless in delaying or at least distorting the development of fiber...

...The NCTA has been trained and taught to make sure that the phone companies or anybody that comes into our yard gets bit...

...Certainly it makes a welcome end to the feuding that has marked the relationship between cable operators and the cities that oversee them...

...For anyone to believe that coaxial, which has been around for so long, is going to be able to stand up to fiber over the long haul is simply naive...

...The fact is, though, that none of these reasons is sufficient to explain why the NCTA would try to stop technological developments that are so clearly in its best interest...

...Ideally, cable operators could, like Robak, jump in and switch to fiber optic themselves...

...Let's say that GTE decided to provide these services to not one entity but many entities," says a cable spokesman, explaining his industry's fears...

...The cable industry, in fact, has extended the constitutional battle to the detailed conditions attached to franchise agreements, from franchise fees to public access channels, and even to the notion that a city has the right to grant an exclusive cable franchise at all...

...There are still some hurdles to be overcome right now," says Gillet, "but things are coming so fast right now it's incredible...

...I t is possible to look on this develop- 1 ment as evidence of a new maturity in the cable industry...

...In 1985 the cable industry got the Supreme Court to strike down the so-called must carry rules, which required cable operators to carry all local broadcast stations on their cable systems...

...For Effros, backing away from constitutional challenges to municipal regulation is simply good politics: "There are many good reasons why some of these rules and regulations should be adhered to regardless of their infirmity under the First Amendment...

...To get a franchise in Washington, D.C., District Cablevision, Inc...

...The FCC has all kinds of complicated accounting procedures guarding against cross-ownership, and there is a law on the books which no one is about to change that makes it impossible for phone companies to sell video signals...

...22 THE AMERICAN SPECTATOR AUGUST 1987 tie security...

...The consequences for the future of fiber optic are clear, for it is the fiber optic people who, more than anyone else, would like someday to force theirway into the franchise areas of the country...

...We're trying to make Apollo the leading cable company in the country," says Tom Gillet, director of the Cerritos project...

...Even if the fiber optic experiment in Cerritos fails, GTE is also building a state of the art cable network using theconventional coaxial cable that will also be able to provide many of the services that come with fiber...

...VCR and home movie rental, GTE has an answer...

...fiber makes cable television available to everyone with a telephone, not just everyone with a special cable hook-up, which opens the door for some very easy competition with the existing cable industry...

...In the past few months the industry has even shown a willingness to back away from its formal commitment to First Amendment protection as a means of protecting itself from the threat of competition...

...Gillet says that when he first filed with the FCC, he sent a personal letter to James Mooney, president of the NCTA, saying, "I'm certain you'll find this of interest, and I'd love to chat with you about it and answer any questions you might have...

...It is entirely possible, as well, that nothing much more will come of the matter...

...The situation is not yet critical...

...But now the cable industry has given up on this good fight, having decided that the status quo isn't so bad and that it can live with existing regulation...

...For anyone who has followed the history of the industry, this decision does not come as a surprise...