- Rural Roots and Slow Growth
- Restricted Expansion and Localism, 1965-1975
- Deregulation, National Newtorks, Rapid Development, 1975-1992
- Re-Regulation, 1992 and Beyond
In its history, cable television has redefined television in many ways. It has became a force that profoundly altered news, sports and music programming with services such as Cable News Networks, C-SPAN, ESPN, and Music Television. It generated a huge variety of "narrowcast" programming services, as well as new broad-appeal services, including 133 basic and 20 premium, 9 pay-per-view, and 9 other channels by 1998 (http://www.ncta.com/dir_nettype.html).
Although cable television systems are now present in many regions of the globe, they began in the rural areas of North America. The following history focuses mainly on the development of cable television in the United States from its inception to the Telecommunications Act of 1996.
A product of both the geographic inaccessibility of terrestrial broadcast signals and a television spectrum allocation scheme that favored urban markets, cable systems, also called "community antenna television" or CATV, grew out of simple amateur ingenuity. Retransmission equipment such as extremely high antenna towers or microwave repeater stations, often erected by television repair shops or citizens groups, intercepted over-the-air signals and redelivered them to households that could not receive them using regular antennas. The earliest cable television systems, established in 1948, are usually credited to both mountainous and rural communities. Such retransmission systems spread across remote and rural America throughout the 1950s and 1960s (Newcomb, 1997).
When cable systems began importing signals from more distant stations using microwave links, broadcasters’ objections to the new service intensified. Due to the fact that the technology did not use the airwaves, the FCC (Federal Communications Commission) initially declined the broadcasters’ petition in 1956. However, the agency reconsidered and finally asserted its jurisdiction over cable television in 1962.
The FCC hoped to prevent any harmful effects on broadcasting, and required cable operators to carry local broadcast signals under the "must-carry" rules in 1965. With its ruling on "nonduplication," the Commission required cable companies to limit imported programming that duplicated anything on local broadcasts. A set of rules in 1969 kept cable television from growing toward urban markets or from attaining the capital or benefits of entrenched industries by placing ownership prohibitions or limitations on television and telephone companies and by preventing cable television from entering the top 100 markets. Programming mandates instituted channels for local public access and created a prohibition on showing movies less than 10 years old and sporting events that had been on broadcast television within the previous five years. These rules were intended to promote cable’s local identity and prevent it from obtaining programming that might interest or compete with broadcasters.
During the 1960s, the FCC conceived of cable television as an alternative to broadcasting and promulgated the must-carry, nonduplication, and other rules with the intention of enhancing cable television’s community presence and possibilities and at the same time protecting broadcasters from competition with the new delivery system (Newcomb, 1997).
By the late 1960s and early 1970s, more public interest in cable television, fueled by a coalition of community groups, educators, cable television representatives, and some think tanks, heralded cable television’s potential for creating a wide variety of social, educational, political and entertainment services beneficial to society. In 1972 the Cable Television Report and Order issued new rules that softened some of the restrictions on cable television’s expansion to new markets, particularly with respect to importing distant signals. However, the FCC continued several rules and standards that the industry found burdensome, such as mandatory two-way cable service in certain markets and local origination rules requiring operators to generate programs.
Nevertheless, based on the 1972 Report and Order, as cable delivered more than just local broadcast signals to viewers by importing programs from distant markets via microwave, its attractiveness and profitability grew. In the late 1970s, two significant events urged even more growth. First, HBO became a national service in 1975 by using a communications satellite to distribute its signal. At once HBO demonstrated the ability to bypass AT&T’s expensive network carriage fees, and explored the possibility for many new program services to cost-effectively form national networks. Second, a series of judicial decisions sanctioned the cable industry’s right to program, to enter the top television markets, and to offer new services. This third phase of development was cable television’s highest growth period.
There were two major impediments to HBO’s satellite relay plan. First, the FCC required each cable operator to use large dish antennas to receive a satellite feed, and these receiver dishes were expensive. Second, the restrictive FCC programming rules still prevented cable services from acquiring certain types of programming, i.e., current movies and sports events. HBO then took the commission to court, claiming that the FCC had exceeded its jurisdiction in limiting programming options. The ruling on this appeal was that the FCC’s broadcast protectionism was unjustifiable, and also that cable television service resembled newspapers more than broadcasting and consequently deserved greater First Amendment protections (Newcomb, 1997). This court decision played a significant role in paving the way for the cable industry to argue against other government rules in the future.
With the regulatory barriers to entry reduced, cable systems experienced huge growth from the late 1970s through the early 1980s. The 3,506 systems, serving nearly 10 million subscribers in 1975, leaped to 6,600 systems serving nearly 40 million subscribers just ten years later. Programming services likewise emerged. WTBS (later just TBS) in 1976, Showtime movie service and Spotlight sports service in 1978, and New York’s WOR and Chicago’s WGN all began around the same time. Warner launched the children’s service Nickelodeon and the Movie Channel in 1979, while Getty Oil began the Sports Programming Network (later called ESPN). Other programmers rushed to satellite distribution, so that by 1980 there were 28 national programming services available, according to National Cable Television Association records (http://www.ncta.com/).
As programmers developed new channels to view, cable operators moved quickly to claim new markets in suburban and urban areas. The period of time between roughly 1978 and 1984, often called the "franchise war" era (Newcomb, 1997), saw cable companies competing head to head with each other in negotiating franchises with communities. Most large, urban markets were franchised at this time, and several were promised 100 channel systems with two-way capabilities plus extensive local access facilities.
Expanded markets and new programming services, abetted by favorable judicial decisions, contributed to the cable industry’s power to lobby for more favorable treatment in other domains. The industry’s pleas met with a favorable response within the Reagan administration.
The Cable Communications Policy Act of 1984 addressed the two issues that still hindered cable television’s growth and profitability – rate regulation and the relative uncertainty surrounding franchise renewals. The result of extensive negotiation between the National Cable Television Association and the League of Cities, representing municipalities franchising cable systems, this act provided substantial comfort to the cable industry’s future. Its major provisions created a standard procedure for renewing franchises that gave operators relatively certain renewal, and it deregulated rates so that operators could charge what they wanted for different service tiers, as long as there was "effective competition" for the service. Other portions of the act legalized signal scrambling, required operators to provide lock boxes to subscribers who wanted to keep certain programming from children, and provided subscriber privacy protections.
With rate deregulation and franchise renewal assured, the cable industry’s value soared, and its organization, investments, and strategies changed. MSOs (Multiple System Operators) consolidated, purchasing more independent systems or merging, even as they expanded into new franchises, with large MSOs, getting even bigger. Many of the largest campanies, such as Time (later Time Warner), TCI, and Viacom, acquired or invested in programming services, leading to a certain degree of vertical integration. Investments in programming justified higher rates, and after 1984 rates jumped tremendously – an average of 25% to 30% from 1986 to 1988 alone, according to Government Accounting Office surveys (Newcomb, 1997).
The industry’s growth strategies targeted new markets, predominantly in Europe and Latin America, and also focused on thwarting new domestic competitors such as direct broadcasting satellites. The multichannel capabilities of MMDSs (multichannel-multipoint distribution services) and direct broadcast satellites could provide real competition to cable television.
The Cable Television Consumer Protection and Competition Act of 1992 re-regulated rates for basic and expanded services, and required that the FCC generate a plan (called must-carry/retransmission consent), by which broadcasters would receive compensation for their channels. The act called for new definitions of effective competition and for supervised costing mechanisms for other aspects of cable service such as installation charges, and it decreed that programming services must be available to third-party distributors such as satellite systems and MMDS providers.
The Telecommunications Act of 1996, although primarily focused on restructuring the telephone industry, also affected the cable industry and will have a dramatic impact on the industry’s development. Not only did it designate a new service category, called "open video systems," that allows telephone companies to provide video programming, it also relaxed some of the 1992 Cable Act’s rules. It determined that by 1999 rate regulation would once again be eliminated for all cable services except those in the basic tier. A product of strong industry pressure, with input from citizen groups, the Telecommunications Act of 1996 was landmark deregulatory legislation.
The historical development of cable television is still evolving. Significant investments in new infrastructure and services are expected for cable companies to fully enter the wireline and wireless telephone and data services markets (http://www.ncta.com/glance-body.html). Cable also promises to be a major player in online services, data delivery and high-speed access to the Internet. Because of cable’s use of fiber optics and coaxial cable, cable systems, using high speed cable modems, can offer access at speeds at least ten times faster than traditional telephone lines. In addition, many cable companies offering high speed Internet access have also developed local content to give users access to community information.