Tele-Communications Inc., the country's largest owner of cable TV systems, and Fox Broadcasting Co. have reached a preliminary agreement that would allow certain TCI franchises to become affiliates of the emerging fourth network.
The deal is significant because it breaks a longstanding taboo against broadcast networks offering their programming directly to cable systems. Until now, the networks have only allowed their programming to be distributed on an exclusive basis to local TV stations.
Under the agreement, Fox will give its programming to TCI systems that fall into rural so-called white areas, where there is no Fox affiliate. Fox reaches only 91% of the country, compared to 99% for the other three networks.
At the same time, TCI said, it would move the Fox signal to Channel 13 or below on its cable systems in order to boost viewing for the network. Fox has 134 affiliates, but 117 of them are UHF stations usually carried on the less desirable upper band by local cable systems, which is believed to hold down viewership.
John Malone, chief executive of TCI, called the agreement with Fox "precedent setting" because it gives local TCI cable systems "network affiliate status" in places where Fox programming is unavailable.
But unlike the customary arrangement with local broadcast affiliates--which Fox pays to carry its programming--TCI will pay Fox 6 cents per month per subscriber. TCI estimates that as many as 800,000 of its subscribers do not receive Fox because there is no affiliate in their area.
Jamie Kellner, president of the Fox network, said the goal is to position Fox on Channel 13 or below on all cable systems around the country. "The way we've done it with TCI is the way we want to do it with the rest of the industry."
That is distressing news to ABC, CBS and NBC, which will face tougher competition from Fox as a result of the repositioning.
In addition, the TCI-Fox agreement appears to undermine the relationship between networks and their affiliates. The networks have long maintained that their programming contracts with affiliates are exclusive and their programming should not be seen anywhere else. Last June, NBC and CBS rejected unsolicited requests from TCI and Continental Cablevision Corp. seeking to affiliate with those networks in so-called white areas.
Since NBC and CBS are in virtually every TV household in the country, however, the request was interpreted as a political ploy to illustrate the contradiction in the network position on program exclusivity.
As part of actions in Congress to reregulate the cable TV industry, NBC heavily lobbied to include language that would compel cable networks such as HBO or ESPN to sell their programming to emerging competitive services, including satellite broadcasting.
Current regulations protect cable networks from having to sell their programming to anybody other than cable systems. NBC is a partner in a satellite broadcasting service set to be launched in 1994, and the partners claim they need access to cable networks to make the venture viable.
But TCI and the cable industry contended that if NBC wanted access to cable programming, the networks should also make themselves available to local cable TV systems. Cable systems could earn significantly more money if they were allowed to sell advertising sandwiched between network TV shows.
Fox and TCI maintain that the only purpose of their agreement is to increase viewers of Fox programs and make those programs available to TCI subscribers who cannot receive a local Fox affiliate. But the action puts pressure on the networks, particularly NBC, to be less insistent in their demands that cable programming be sold to emerging and potentially competitive services.