Profiteering and the Public Interest

...The appeal of catv to investors is at the heart of this conflict It is a parasite, siphoning off commercial tv signals for which it pays nothing, and converting them into clearer, interference-free signals for its subscribers For this service, catv charges tv owners $5 per month, and upwards of $20 for equipment installation catv's own costs are confined to maintaining a system after it is installed (which varies from under $1 million in suburbia to over $50 million for all of Manhattan) The system itself consists of powerful master antennas that pick up distant signals or the best possible local signals from a television station These are then processed through input equipment sent out over coaxial cables to terminal points near subscribers' homes,and relayed to tv receivers through so-called "drop" wires...

...Some municipalities already impose heavy fees on catv franchises, although most systems are modestly taxed For instance, Plattsburgh New York, tabs its local cable system $8,700 annually plus a surcharge over a set number of subscribers To many observers, though, no tax can excuse the fact that catv is prospering at public expense, and benefitting from technical gadgetry that should be utilized in the public interest It it is inevitable that catv operators will sell the nation on tele-vision-by-cable, the argument goes, then lawmakers should at least impose stringent guidelines on their operation, limiting their profit and regulating their activity...

...In the Senate, McClellan's committee hopelessly deadlocked over catv, will probably recommend that the old copyright statute simply be extended a year This would allow McClellan and his allies, the National Community Television Association, time to maneuver while the Supreme Court reviews United Artists Television Inc vs Foitmghtly Coip , the case that could put catv out of business...

...Since television is the principal form ot mass communication--and should no longer be considered a luxury but a national necessity--charging fees for catv services is tantamount to denying the less affluent access to information If, indeed, catv will be as widespread as promoters predict, Washington should consider constituting cable tv as a "communications utility," with sharply reduced public service fees...

...Currently, though, the primary interest in catv is centered in New York City, where three operators are trying to establish themselves If they can sell Manhattan on "wire, they feel it would create a cable-tv boom throughout the country Two years ago the city granted franchises to Manhattan Cable Television for the area south of West 79 Street and East 86 Street, Teleprompter for the area north of these streets, and Gramk-Westinghouse for the northern tip of Manhattan, Riverdale Each operator has spent millions to date erecting antennas, laying cable through underground telephone ducts, and wirmg block upon block of apartment houses The job is far from complete, and immediate projections call for saturating only partot each area Manhattan Cable, tor instance, hopes to wire only 465 densely-populated city blocks out of the 1,500 in its territory...

...The regulators admit they intended to freeze catv out of the cities (except where franchises were granted prior to the Commission's order) until Congress and the courts set guidelines for cable systems The effort has temporarily prevented promoters from urbanizing their wares, but it has not slowed down the fierce marketing in exurbia In Oneonta, New York, recently, catv subscribers saw a boxmg match that people in Albany were paying to see And in Wausau...

...Although many cable systems are currently returning profits ranging from 15-50 per cent on original investments, some are still operating in the red, especially in cities where heavy initial outlays are required "We don't expect to turn a profit tor a long time," declares Irving Kahn of Teleprompter, a major cable entrepreneur "But we've got the resources behind us and we're willing to wait because we think this is a sound mvestment" Apparently others agree with him 60 per cent of the nation's 1,750 catv systems are tied to corporate interests, such as Tune-Life Broadcasting (part-owner of Manhattan Cable), General Tire and Rubber, Westmghouse, rko General, National Broadcasting Company and General Electric Broadcasting Even Ed Sullivan owns a system...

...While the catv franchises in New York are due to run out this December, the city will likely renew them all Howevei, there is speculation that the Lmdsay Administration would like a greater share of the benefits accruing from the cable systems A few months ago, the Mayor asked Fred Friendly to head a task force to study the feasibility of the city somehow "participating" in catv At present, the city collects a 5 per cent fee on catv's gross receipts and has an understanding that city agencies, such as the Police and Fire Departments, will get discounts on any future closed-circuit catv operation For a revenue-starved city like New York, this is a mere pittance No doubt Lmdsay realizes it and would like to increase the city's share of the profits...

...Profiteering and the Public Interest By Jeffrey L. Hodes An unchecked marketing campaign threatens to beguile Americans into spending millions for the benefits of a communications technology that rightly belongs to the public About 2 5 million television viewers have already succumbed to the lure of catv--community antenna and cable tv systems to get better reception or to pick up distant signals on their home screens Within a few years, eight out of 10 tv sets in America are expected to be hooked up by cable...

...This problem is especially acute for the new uhf independents, and is aggravated by the expansion of catv capabilities Most cable systems now pick up anywhere from 12-20 distant tv stations, severely limiting potential uhf audiences For example, it is argued that if a cable operator brought into Philadelphia programming from New York independents, it would adversely affect the advertising market and potential audience for a Philadelphia uhf An estimated 90 per cent of tv viewers watch the major networks during prime time, so the uhf independents would be competing for 10 per cent of the audience with the New York independents, which have expensive, attractive programming Not only would this put uhf broadcasters at a disadvantage, but it would also curtail local expression of views...

...Wisconsin, two years ago, local viewers watched a Packers football game via catv, even though the local tv station was "blacked out" because of its proximity to Green Bay These are an indication of catv's threat to broadcasters, exposing the gossamer regulation of cable systems and raising the question of their function Is catv a substitute for television signals, or merely a supplement...

...Jeffrey L Hodes is a young freelance writer who works in New York...

...catv operators reply that, on the contrary, cable systems can improve the relatively weak transmitting signals of uhf independents and are not directly competing with uhf because they are merely master tv antenna systems The fcc finds this specious it cannot seriously be argued that a system which proposes to employ microwave to bring m signals 400-500 miles away represents master tv antenna arrangements ". The possibility ot originating low-cost local programming on cable systems is the strongest point in catv's favor Some tv critics envision locally-financed stations providing cultural and civic enrichment, addressing themselves to a community's specific needs Assuming the legality of originating programs on catv can be resolved (since this would convert them into broadcasters), the idea of high-level community stations is still wishful thinking...

...A very important investor is Senator John L McClellau (D -Ark ), part-owner of the Midwest Video Cable Corporation of Little Rock, which has holdings in Southwestern states, including 50 per cent of the Austin, Texas, system co-owned by the LBJs As a legislator, therefore, McClellan has more than passing interest in whether catv is liable for the programs it picks up from network signals He also happens to be chairman of the Senate Judiciary Subcommittee on Patents, Trademarks and Copyrights, putting him on a collision course with Congressmen who feel catv should pay some royalties for their programs, and the Federal courts which believe the cable promoters are evading the copyright laws Adamantly McClel-lan says, T will oppose anything I think will destroy catv ". The future of cable television is closely tied to proposed revisions m the 5 8-year old copyright law A jurisdictional dispute in the House of Representatives between New York Democrat Emanuel Celler's Judiciary Committee and West Virginia Democrat Harley Staggers' Interstate and Foreign Commerce Committee forced legislators earlier this year to delete a compromise on regulating catv m an updated copyright bill Promoters would have been exempted from paying royalties to programmers if they provided services to inaccessible, distant, mountainous areas, but liable to "reasonable fees" or copyright infringement penalties if they picked up network signals in competitive, serviceable regions...

...In one Midwest town where catv offered programming, viewers asked that a camera be beamed on Main Street, so they could see who was shopping where and talking to whom In Williamsport, Pennsylvania, an operator used his cable system to promote a private bingo game, and results ot a "pay-as-you-see" tv experiment m Hartford, Connecticut indicated that viewers prefer movies and baseball even if they pay for it...

...Meanwhile, the public has become the forgotten third party No one involved in the present debate is arguing that wave lengths are public property leased to commercial broadcasters in the public interest, and that networks should thus be required to service everyone, just as the telephone companies and utilities were required to do years ago The fcc seems content merely to mediate the conflict between broadcasters and cable operators...

...The cost and logistics of wiring Manhattan are staggering, but in time the operators expect a handsome return on their investment Although only several thousand viewers have subscribed so far, the cable companies are advertising widely and hope to triple their lists by Christmas "People just don't know how bad their tv signals are, Kahn says Daily, Teleprompter's mobile vans and portable demonstration units relay this message to neighborhood residents m upper Manhattan In addition to convincing potential subscribers that they have lousy reception, Kahn has two other selling points a) When people purchase color sets, "ghosts" will bounce back at them as multi-colored explosions, and b) for a year or more while network tv transmitters are being moved from the Empire State Building to the new World Trade Center's twin, 110-story towers, city residents can expect inferior tv reception...

...The public is paying because catv has shrewdly filled a vacuum left by the tv stations Broadcasters have consistently neglected to apply new technological innovations for improving to reception e , high-powered antennas, microwave relays, coaxial cables and translators--since the Federal Communications Commission has never insisted they were responsible for bringing their signals to everyone as a condition for free use of the air waves As a result, catv has quietly expanded into a lucrative new mdustry, and the Fee is bogged down in semantics attempting to define cable tv's function But now that the government is belatedly trying to regulate catv, it finds that cable systems represent formidable corporate investors who will not easily be controlled...

...Nonetheless, 10 per cent ot the cable systems have originated continuous weather and news channels, usually running ap or upj ticker tapes before a catv camera A few have occasionally covered local city council sessions and some plan ventures with high schools where educational tv systems do not exist...

...But if policymakers continue to avoid the hard decisions on copyright liability, origination, regulation and fees, the nation will lose an op-poitumty to plan a coherent communications system for the future As it is, 1,600 catv systems have already been franchised, and hundreds more have applications pending m cities across the nation Cable entrepreneurs insist they are laying the groundwork of a not-so-futuristic system for transmitting facsimile newspapers, educational courses, and shopping-at-home Yet many scientists and communications specialists are less sanguine about the future role of catv, they argue that other electronic devices, such as nationwide satellite tv, may render television-by-wire technically obsolete within a decade...

...Fortnightly, a West Virginian catv operator is appealing Federal court decisions that found it guilty of infringing upon United Artists' copyrights because it picked up ua films being shown by a tv station without paying royalties The courts held that transmitting these signals constituted an "unlicensed public performance" by Fortnightly Public performances are exclusive rights, one court argued, to protect "copy-right proprietors against dilution of the markets for their works " Fortnightly responded that it was only extending and simultaneously reproducing programs paid for by tv stations The Court rejected this contention, calling the cable system a "miniature tv station " "The technical means, declared one judge, "are irrelevant to the issue ". Sandwiched between the policymakers and the judiciary m the dispute over catv is the fcc Fearing that catv was unfairly competing with tv stations because it did not pay for programming, the Commission ruled in February 1966 that it had jurisdiction over cable systems Operators challenged the Commission's claim, arguing that catv was not really a common carrier or a pay-as-you-see tv system And adding to the confusion, the Supreme Court will soon review a case testing the Fee's authority over catv Nevertheless, the fcc has imposed several regulations, including a proviso that cable systems need Commission approval to enter the nation's top 100 tv markets This slap at catv was interpreted to mean that regulators were protecting broadcasters as well as shielding developing ultra high frequency (uhf) stations...

...The growth of cable television actually has retarded developing tv stations in some regions of the country, for until last year, catv systems were not required to carry local stations on their wires Unable to compete with the superior programming from distant cities that catv offered subscribers, the local stations often lost revenue as well as viewers Cables also threaten their chances ot becoming local network affiliates, the networks reason that catv will brmg their programs into a region, so why duplicate efforts...

...Despite all its market potential, then, catv may prove to be as durable as the commercial product it reproduces--once likened by Newton Minow to skywriting "Pool,' he said, and "it escapes in the air...