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Cable Leased Access
A Flawed Solution Looking for a Problem

by Frank W. Lloyd

Donna Lampert's article "Cable Television: Does Leased Access Mean Least Access?" assumes as its main premise that the American viewing public cannot receive sufficient programming diversity absent legislation mandating a specific and highly detailed scheme of leased access to cable television. Such a scheme would offer cable channels to those who wish to supplement or compete with a cable operator's own programming menu editorially selected for its subscribers.

Ms. Lampert's argument appears not to be that the cable operator will select an insufficiently broad diversity of programming formats and types of services to meet consumers needs. She admits that "if what we seek is diverse programming, the completely vertically integrated programmer may best provide it as it will maximize audience by filling as many market niches as possible." What she is seeking is a greater diversity of sources of information. She argues that weakening the editorial role of the cable operator in choosing the programs for the cable medium would best carry out the First Amendment goal of providing the public with access to diverse sources of speech.

I believe this argument suffers from a number of flaws.

First, Ms. Lampert claims that existing leased access channels provided by cable operators, once provided pursuant to local franchise commitments and now required by the 1984 Cable Act, have remained largely unused. She does refer to comments in the FCC's omnibus cable inquiry that cited a number of leased access users of Continental Cablevision's cable systems. She argues, however, that channel leasing to local services such as classified advertising, entertainment listings, and real estate information in fact benefits cable operators. But nay leased access channel is in some sense competitive for viewers with the cable operator's own offerings. In addition, on many basic services the cable operator is able to provide local or regional interconnect advertising. Leased access channels compete for this advertising.

Nevertheless, cable operators do provide such access. Continental also pointed to "TV Orient," targeted to people from the Middle East in Michigan and leased access programming targeted to Armenian, Arab, Iranian, and Russian audiences in Los Angeles. Other California cable operators have also leased channels to Asian, Hispanic, Black and other ethnically oriented programmers, as well as real estate and other businesses seeking direct access to the public. In Continental's Richmond, Virginia system a 15-hour-per-week leased access program by a single user provides a locally originated talk show that competes directly with Continental's own local origination programs.

Access is not restricted to basic channels. The Playboy Channel, a pay service, has also been able to use the Cable Act's existing leased access channel provisions to gain access to cable operators in Puerto Rico who might otherwise have been unwilling to carry this service. The second major premise in Ms. Lampert's argument is that there are no alternative means for video programmers to reach consumers other than through cable operators. This stance ignores over-the-air broadcast television, which has shown itself to be quite a resilient alternative to cable. While it is true that the viewing share of ABC, CBS, and NBC has dropped, together they are still more widely viewed than all cable networks combined, and there is now a healthy fourth network, Fox, and a large number of independent television stations.4 The home video industry is now a $9 billion industry, more than half of the size of the cable industry.

Ms. Lampert's article recognizes that while cable television passes 90 percent of all American homes, only 59 percent, or less than two-thirds, subscribe to cable. This means that over a third of those able to receive cable have chosen existing alternative video distribution systems.

Over-the-air broadcast television, possibly combined with a VCR, provides an adequate, cost-effective substitute for many viewers. Home satellite dishes provide another existing alternative to cable, with well over two million C-band dishes already in use. In addition, a number of proposed higher power Ku-band direct broadcast satellite services have been proposed to be launched over the next few years. Multichannel, multipoint distribution services (MMDS) using microwave technology, also known as "wireless cable," which are today available in major cities such as Cleveland, New York, Detroit, and Washington, could have a resurgence based on the FCC's recent issuance of new rules allowing far more rapid assembly of the channels needed to begin a successful MMDS operation.6 Cable can provide dramatically increased capacity by adding more fiber, but this will require substantial funds for capital investment.

Cable is also being asked by Congress, the FCC, and state and local regulators to increase its commitment to customer service. The cable industry has responded by adopting a new voluntary code that requires much faster response time for telephone operators and service crews. Many of the larger cable operators have established employee training facilities to upgrade the technical skills of existing workers and new hires, and many more have expanded their office hours into the evening and weekends and added additional telephone customer service representatives. This requires additional funds.

In addition, cable operators are already providing millions of dollars yearly in public, educational, and municipal access support. Cable agreed to continue such support as part of the compromise struck in the 1984 Cable Act. In 1990, cable industry-supported community programming is expected to exceed a quarter of a billion dollars. One operator alone, Continental Cablevision, maintains over a hundred local studios across the country producing tens of thousands of hours of local programs each year. Another cable operator, Cablevision of Boston, produces "Extra Help," a daily live call-in show featuring city teachers answering homework questions, which drew 2000 calls last year. Moreover, cable is being asked to do all this and at the same time keep its basic rates affordable. One way to keep subscriber rates down is through increased advertising revenues generated by cable's own local origination and local advertising availabilities on basic satellite delivered channels. If cable is forced to compete for advertising revenues and market share with access channel users, cable's local advertising revenue stream, which helps cable operators to moderate subscriber rate increases and fund other benefits that are being asked of cable, will be diminished.

Meanwhile, cable operator commitments to leased access channels already reduce the number of available channels that are today at a premium. CNBC, a program providing consumer and business news, is running into channel space difficulties. Two independently planned courtroom channels recently had to merge because of the lack of available space on cable systems nationwide. The Monitor Channel, which intends to use the worldwide news-gathering abilities of the Christian Science Monitor, is similarly constrained. Other channels, from the SciFi Channel to the Cowboy Channel, are chasing each other for space that operators currently must by law set aside of leased access channels.

Ms. Lampert would ask these programmers why they do not use the leased access channels, but they apparently prefer to be selected by the cable operator for its own basic service package. If they are, the cable operator will normally pay the program network for its programming, not ask for payment, as in the leased channel context. In addition, even Ms. Lampert does not suggest that the cable operator be forced to market leased access services, and marketing of channels by the operator is another benefit of being editorially selected for the operator's own package of services.

Another deficiency of the Lampert article is that the benefits of vertical integration are given meager treatment. Vertical integration, however, has contributed greatly to cable's success as a communications medium. Vertical integration works to insure capital, diminish risk and allow programmers to take advantage of operator expertise.

While several major companies such as Time/Warner and Viacom are both program producers and cable system operators, most cable operators do not have any significant ownership interest in most programming services they carry. When Turner Broadcasting experienced financial difficulties, however, cable operators responded in order to keep CNN alive and independent through direct capital infusions. When the Discovery Channel, Black Entertainment Television, and C-SPAN encountered funding problems, cable operators also stepped in to provide financial support and agreed to increases in programming fees.

Even those cable operators that do have program investments, acting in their own economic self-interest, do not just carry those services in which they have a financial interest. When services are not bringing in customers and disconnects are high, the operator will not destroy its retail business in order to support a programming investment. Many other businesses such as grocery stores, drug stores and clothing stores operate successfully with a mix of their own labeled brands and independent brands. Finally, I disagree with the view that telephone company provision of an integrated fiber broadband network will be the salvation of diversity of video information sources. In fact, if telephone companies are permitted to provide programming content over their own wires, they will overwhelm all competitive services in a one-wire future. Full discussion of this topic would require another article as long as this one, but the Associated Press diversity principle would be put at risk far more by telephone company entry into video programming than by the current structure of cable television.10 The cable franchising First Amendment cases such as Preferred12, as Ms. Lampert states, or leased access provisions may be held to a direct restraint on cable operator speech and thus subjected to a higher standard.


1. Member, Minitz, Levin, Cohn, Ferris, Glovsky & Popeo, Washington, D.C. and Boston, Massachusetts.

2. See Playboy Enterprises v. Public Service Commission, 906 F.2d 25 (1st Cir. 1990), cert. denied, 59 U.S.L.W. 3344 (November 6, 1990).

3. See Cable TV Facts 90, Cablevision Advertising Bureau at 4 (1990).

4. As of February 1990, 68 percent of television households owned VCRs. Electronic Industry Association Consumer Electronics Group, Consumer Electronics Annual Review (1990) at 62.

5. See Report and Order, Gen. Docket Nos. 90-54, 80-113, FCC 90-34 (released October 26, 1990).

6. Even the telephone companies now believe bringing fiber all the way to the home is unnecessary. See "Telcos Eye Fiber-to-the-Home Re-Think," Multichannel News, November 20, 1989, at 28.

7. See Multichannel News, November 26, 1990, at 27. Cablevision of Boston has also consistently exceeded requirements for hiring local, minority, and women employees, and is spending $50,000 a year to fund an entry-level job training program in cooperation with the city. Id.

8. A 1988 NTIA study found that while a cable service is somewhat more likely to be carried if it shares an ownership affiliation with a cable system making the carriage decision, there is "scant support" for the theory that vertical integration has led MSOs to discriminate against affiliated services. U.S. Department of Commerce, National Telecommunications and Information Administration, Video Program Distribution and Cable Television: Current National Policy Issues and Recommendations, NTIA Report No. 88-233 (June 1988) at 90-91. Ms. Lampert leaves the impression that a recent dispute between Cablevision and Madison Square Garden was one in which Cablevision refused entirely to carry a competitor to its Sportschannel service. In fact, Cablevision wished to carry Madison Square Garden as a pay service similar to its own Sportschannel service, so that those subscribers who did not wish to pay for sports programming would not have to do so in either case. Madison Square Garden, however, tried to insist on carriage on the basic tier as a preferential service provided to all subscribers.

9. The telephone companies' past action inhibiting competition in electronic publishing and other information services, including its anticompetitive actions towards cable in the 1960s and 1970s that led to the 1978 Pole Attachment Act, are ample testimony to this. And the potential is still real for the telcos to use cross-subsidy and discriminatory practices to eliminate video competition in the future, with no adequate accounting or other regulatory solution yet devised that could hold it in check.

10. There is a pending case before the Supreme Court that raises the issue of cable's First Amendment status for purposes of determining whether discriminatory taxation has been imposed on the media by an Arkansas sales tax on cable that is not also imposed on newspapers and magazines. Pledger v. Medlock and Medlock v. Pledger, Nos. 90-29 and 90-38 cons. (oral argument scheduled January 9, 1991). But all parties to this case have urged that cable's First Amendment status for other purposes, such as franchising regulation and access requirements, need not be addressed by the Court in this case.

11. Preferred Communications v. City of Los Angeles, Case No. CV-83-5846 (CBM) U.S. District Court, Central District of California.

12. 391 U.S. 367 (1968).

13. See, e.g. Quincy Cable Television, Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 1985), cert. denied, 476 U.S. 1169 (1986) striking down the FCC's must-carry rules under the O'Brien standard but reserving the question of whether a more stringent standard of review might apply.

14. Section 612(h) of the Cable Act of 1894, 47 U.S.C. Section 532(h).