Court Ruling May Bring New Age in Cable : Ending of ‘Must-Carry’ Rules Hailed by Industry

A court ruling last week that declared unconstitutional a set of obscure Federal Communications Commission regulations could result in some of the most sweeping changes in cable-television programming since satellites began delivering TV signals nearly a decade ago.

If upheld upon appeal to the U.S. Supreme Court, last week’s court decision over time could severely curtail the viewing of public and independent over-the-air TV stations while greatly increasing the potential audience for so-called basic advertising-supported cable-only networks.

“It’s the Emancipation Proclamation in terms of program choices for the consumer,” said Nicholas Davatzes, president of the New York-based Arts & Entertainment cable-TV network. “In total, there will be more programming made available.”

Program Duplication

The decision, handed down last Friday by a federal appeals court in Washington, held that the FCC’s so-called must-carry rules are an unconstitutional infringement on the First Amendment rights of cable operators. The 20-year-old rules require cable operators to retransmit the signals of all nearby over-the-air TV stations and all public-TV signals within 35 miles.

Those requirements have resulted in many cases of duplicated over-the-air programs being shown on cable systems while subscribers have been unable to view original programs from national satellite-delivered cable networks.

“Cable operators will drop these duplicate signals and, in return, you’ll get cable-satellite programming that people have been waiting to receive,” said Bert Carp, executive vice president of the Washington-based National Cable Television Assn.

Carp estimated that it will take 45 to 60 days before many of the nation’s nearly 8,000 cable systems will begin dropping local stations from their lineups.

Michael Morris, attorney for the Oakland-based California Cable Television Assn., called the court decision “one of the most significant rulings that has come down in quite some time. It’s a decision that consumers will see significant results from. The (cable) operator will now have the discretion not to carry two or three or four stations with the same programming.”

The National Assn. of Broadcasters is taking the case to the Supreme Court because commercial broadcasters could lose millions of potential viewers who have abandoned over-the-air TV for cable.

“If you’re not on the cable, it means, for all intents and purposes, that you’re not reaching homes in your service area that subscribe to cable,” said John Summers, executive vice president of the National Assn. of Broadcasters.

Could Lose Audiences

In large urban TV markets, such as Los Angeles, broadcasters could stand to lose huge segments of their audiences as a result of the court decision. In the 10 largest cable-TV markets, for example, only Chicago has fewer than 30% of its homes wired for cable. In Pittsburgh, nearly 60% of the homes have cable.

“We will certainly be going to the Supreme Court,” Summers said. “We will certainly exhaust all of our legal remedies.”

On cable systems throughout much of the country, the must-carry rules have effectively barred some cable-only networks from reaching subscribers because systems have had to devote limited channel capacity to over-the-air stations. The must-carry rules have been especially troublesome to operators of older cable systems with 35 or fewer channels. Such systems serve nearly 70% of the nation’s more than 30 million cable-TV households.

The decision means “that a cable operator will be able to remove a duplicated signal or one that doesn’t have any popular appeal for one that does have popular appeal,” said William R. Cullen, president of United Cable of Los Angeles, which operates a cable system in the San Gabriel Valley and holds the franchise for the eastern half of the San Fernando Valley.

“The must-carry rules,” Cullen said, “were struck down because they did limit the editorial discretion of cable operators and totally ignored cable subscribers.”

Redrafting of Rules

The three-judge appeals court panel said that the FCC regulations “profoundly affect values that lie at the heart of the First Amendment.” The court invited the FCC to redraft its rules to conform with the Constitution.

The FCC and the broadcasting industry long have viewed the must-carry rules as the means of assuring local program service in areas where geography made over-the-air TV reception difficult. The cable industry, however, viewed the rules as a way of protecting broadcasters from competition.

The judge who wrote the appeals court’s decision agreed with the cable industry. The purpose of the rules, wrote Judge J. Skelly Wright, “is to bolster the fortunes of local broadcasters, even if the inevitable consequence of implementing that goal is to create an overwhelming competitive advantage over cable programmers.”

Prospering most from the rules have been newer public and independent (non-network) TV stations that have started up since the late 1970s. Many of these newer stations have grown up on UHF (ultra high frequency) television channels 14-83, which offer neither the over-the-air signal quality nor the wide-area coverage of more established VHF (very high frequency) channels 2-13. On cable systems, however, the technical disadvantages of UHF stations are virtually non-existent.

Still Studying Decision

“UHF, especially public stations, would be nowhere without cable,” said Peter Fannon, president of the Assn. of Public Television Stations. “I hope that cable operators won’t jump to a quick decision in dropping alternative public stations.” Fannon said his association was still analyzing the court decision to determine an appropriate legal response.

In major cities, the FCC’s rules often have resulted in small-town or suburban UHF stations reaching large urban audiences (and reaping larger advertising revenue) than they would have without cable. In suburbs and smaller towns, cable systems were often required to carry channels from any number of larger nearby cities.

Under the rules, densely populated areas, such as the Eastern Seaboard and the West Coast, often wind up with a crazy quilt of TV viewing patterns. In the San Francisco Bay Area, for example, some cable systems must carry as many as 23 TV signals from Sacramento, San Francisco, Oakland and San Jose, even if the stations in those cities offer many of the same programs. In portions of the Bay Area, as many as five public TV stations must be carried by some cable systems.

Valerie Castellano, general manager of Viacom Cablevision in Marin County, said that her 28-channel system currently has 18 must-carry channels and is under orders to add a fifth public TV station by the end of the year. Still studying the appeals court decision, Viacom, she said, is undecided whether it still must add the new channel. “Right now, we’re planning to go ahead and add it, but that decision may change,” Castellano said.

Ernest Nelligan, president of Concord TV Cable in Concord, Calif., has 17 must-carry stations on his 36-channel system serving more than 38,400 subscribers. Among the stations are two ABC affiliates, four public TV stations, two religious broadcasters and two foreign-language stations. It’s “not impossible,” Nelligan said, that his system will drop some of those stations and replace them with at least two and possibly more national programmers.

“I don’t expect anything to happen immediately,” Nelligan said. “Nothing will be done for 60 to 75 days, until we hear about the appeals that we expect to be filed.

“Our assumption is that the appeals will be turned down. At that point, we will probably survey our subscribers to see what they want.”