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II. Background

A. Early Regulatory Efforts

The notion of a certain number of cable channels being available to the public on a first-come, first-served, nondiscriminatory basis, so as to promote diversity of cable "voices" and at the same time minimize intrusion on the cable operator's First Amendment rights, received early endorsement when the FCC first examined the emerging cable industry. In its 1969 First Cable Report & Order,14 the Commission stated that his kind of channel leasing was a way to promote First Amendment goals, especially desirable "[i]n view of the importance of an informed electorate and speech concerning public affairs to self government, the right of the public to receive suitable access to social, political, aesthetic, moral and other ideas and experiences, and the CATV systems' monopoly position over cable access to the subscribers' premises...."15 Without crafting specific rules, the FCC expressed its intent to have cable operators lease cable space to others "for origination of their own choice on a local or interconnected basis...."16 The explicit goal was diversity of control over the media of mass communication.

In 1972, when the Commission promulgated an extensive body of regulations governing cable systems larger than 3500 subscribers,17 it required that such cable systems make available some of their channel capacity on a leased basis. Specifically, the FCC required that each such system:

maintain at least one specifically designated channels for leased access uses. In addition, other portions of [the system's] non-broadcast bandwidth, including unused portions of the specially designated channels [PEG], for leased access services....On at least one of the leased channels, priority shall be given to part-time users.18
With respect to the regulation of such leased channels, they were to be offered on a nondiscriminatory, first-come, first-served basis, and particular rate schedules for leased channel access were to be set by the cable operator.19 Cable operators were not to "censor or exercise program content control of any kind" over the leased access fare.20

At that time, the FCC also considered requiring cable systems to offer all channels on a common carrier basis, that is, offering channels to all programmers at set rates on a nondiscriminatory, first-come, first-served basis, and exercising no editorial control over programming content. The FCC decided, however, to take a "wait and see" approach rather than risk hampering development of the fledgling cable industry. As the FCC saw it, the "appropriate mix" for cable was a "multi-purpose CATV operation combining carriage of broadcast signals with program origination and common carrier service...."21 The Supreme Court sustained only the provisions requiring that cable operators originate programming locally.22

At around the same time, other interested policymaking and government entities were considering a similar approach to cable television. The Sloan Commission on Cable Communications recommended in its comprehensive 1971 Report that cable operators be permitted to program only two cable channels, with the others available for leasing.23 To further increase diversity, the Sloan Commission proposed limiting to two the number of channels any single lessee could operate on each cable system. Further, it recommended that franchising authorities be empowered to require cable operators to build additional capacity if the number of potential lessees outstripped available channels.24 Similarly, in a larger study of telecommunications policy, the Council for Economic Development concluded that cable operators should program only a limited number of channels and lease the remainder.25

In 1974, the Cabinet Committee on Cable Communications issued a Report to the President on cable which enunciated a "separations" policy -- urging that the content and conduit of cable television programming remain in separate hands.26 In the Cabinet Committee's view, "the principal business of the cable operators would be to lease their channels, or sell time on those channels, to individuals or organizations that wish to offer programs or other services to the public."27 Not only would the cable operator be prohibited from controlling content, but it would be completely barred from having any financial interest in the leasing channels. While specifically recommending against rate regulation, the Committee advocated that the rates be set on a nondiscriminatory basis, without reference to the channel content.28 In urging this almost total separations policy,29 the Committee stated that it was better to avert the possible adverse effects of joint ownership (vertical integration") at the outset than "to create the incentives for abuse and invite detailed government regulation to deal with the effects."30 Neither the FCC nor Congress took the recommended approach.

In 1976, the FCC promulgated new regulations for cable, refining its approach to access.31 The Commission reaffirmed its commitment to the "opening of cable channels for use by the public and other specified users who would otherwise not likely have access to television audiences."32 The rules pertaining to leased access still sought to ensure that charges made by the cable operator were nondiscriminatory and not designed to prohibit access; ;that there be access on a first-come, first-served basis; that there be part-time access availability; and that there be sufficient capacity available for those desiring to lease channels.33

In 1979, the U.S. Supreme Court found that these rules, as part of the larger regulatory structure the FCC had designed for cable television, were beyond the FCC's authority under the Communications Act.34 The Court found that the rules, in fact, imposed common carrier obligations upon cable systems. Since the FCC's authority to regulate cable derived from its jurisdiction over broadcasting, and broadcasters were specifically exempted from common carrier regulation,35 the Commission had exceeded its authority in imposing common carrier obligations on cable operators.36 The court did not consider the constitutionality of the rules.

In the early 1980's, local franchising authorities took up the slack in responsibility for regulating cable and, while access requirements were sometimes included in some newly built systems, there was no uniform policy or implementation. In 1981, a petition was filed with the FCC urging the adoption of rules which would limit the number of channels a cable operator could control on systems greater than 30 channels and provide for leased access for a percentage of capacity.37 While there were some comments supporting FCC regulation submitted by interested parties,38 the FCC never acted on the petition.

By 1982, there was a patchwork of access regulation resulting from thousands of different municipal regulators, and increasing pressure from the cable industry for federal action. Numerous franchises were coming up for re-franchising and many cable operators felt that the cities were extracting burdensome promises from them. The lack of federal policy in the cable area needed to be addressed. The Senate Commerce Committee reported a bill that would have, among other things, required cable systems with more than 20 channels to set aside 10 percent of capacity for leased uses.39 Although the bill never reached the Senate floor, it was clear that next Congress was determined to pass broad cable legislation.

B. The Communications Policy Act of 1984

Early in the 98th Congress, S. 66 was introduced in the Senate and H.R. 4103 was introduced in the House. Both bills incorporated the results of negotiations between the cities on the one hand and the cable television industry on the other.40 In the course of the hearings, there was much testimony about the need for leased access for video and nonvideo services.41 Two facts -- that cable was a monopoly,42 and that cable operators had the ability to abuse their control over their systems43 -- were cited as the justification for including independent access requirements in the bills.

Of course, the cable industry did not agree with these arguments and instead urged that leased access would undermine their ability to provide the public with a diversity of programming. Thus, the Chairman of American Television Corporation argued that, without "maximum flexibility" in controlling the price, terms, and conditions of access, there would be an "enormous impact on the economics of the entire business."44 Similarly, the NCTA argued that leased access would create less program diversity (variety) because the independent channel lessor would likely program competitively with programming similar to cable's most popular fare, whereas the cable operator would offer variety in an attempt to secure the greatest audience.45 But, during hearings on the legislative proposals, Chairman Wirth reminded cable representatives that they had already agreed that some sort of leased access was acceptable. "That's what remains," he said, "not should there be access, but how to do it."46

Late in the Second Session of the 98th Congress, Public Law 98-549, the Cable Communications Policy Act of 1984, was passed. It did indeed provide for commercial leased access, in Section 612.47 However, the leased access provision which was incorporated in the Cable Act reflected the fact that the legislation was largely a compromise between two "industries" which did not necessarily have the larger public interest in a diversity of sources as their highest priority.48

Under the Cable Act, the cities were guaranteed a 5 percent franchise fee without conditions as to how it must be spent.49 The cable industry almost entirely escaped rate regulation (premium services are wholly deregulated and over 90 percent of basic (nonpremium) services are deregulated as long as there is "effective competition," or at least three over-the-air television broadcast signals in the franchise area).50 Section 612, the provision governing commercial leased access, was written in a way that almost guaranteed that it would be ineffective to achieve its stated purposes.51

In the House Report, the Committee stated that the bill

...establishes a clear and comprehensive scheme for commercial access. A requirement that channels be set aside for third-party commercial access separates editorial control over a limited number of cable channels from the ownership of the cable system itself. Such a requirement is fundamental to the goal of providing subscribers with the diversity of information sources intended by the First Amendment.52
In this connection, the House Report expressed the view that the commercial access provision was constitutional and fully consistent with the fundamental interest in preserving "an uninhibited marketplace of ideas in which truth will ultimately prevail, rather than to countenance monopolization of that market."53 In short, leased access was aimed at ensuring that the cable operator would not have exclusive control over what was received in cable homes. At the same time, however, the Committee expressed its intention that "[t]he diversity envisioned by this scheme is to be brought about in a manner which is not inconsistent with the growth and development of cable systems."54 According to those involved in the legislative negotiations, key Congressional staffers were informed of the inherent failures of the proposed leased access provision but responded that it was all that could and would be done.55

C. What Section 612 Provides

Section 612(a) of the Cable Act sets forth the purpose of the commercial access provision as follows:

The purpose of this section is to assure that the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with growth and development of cable systems.56
To accomplish this purpose, all systems over 36 channels must dedicate a percentage of those channels for lease to unaffiliated entities. Systems with 36-54 activated channels must set aside 10 percent and systems with over 55 activated channels must set aside 15 percent.57 These set-asides are both minimum requirements and regulatory ceilings, prohibiting local franchising authorities from requiring greater leased access capacity for the provision of video programming.58 Significantly, "commercial use" is defined only to mean the provision of "video programming,"59 whether or not for profit, instead of including all potential uses.60

Cable operators are authorized to establish "the price, terms, and conditions of such use which are at least sufficient to assure that such use will not adversely affect the operation, financial condition, or market development of the cable system."61 The Committee stated that it was not its intent to affect the economic position of the cable operator but rather to limit its editorial control.62 The concern was that "the leased access programmer could unfairly drain audience away from the existing service,"63 and, therefore, the rates, terms, and conditions established by the cable operator are presumed to be reasonable.64

While the cable operator is prohibited from exercising editorial control over the independently provided leased access programming,65 it may "consider such content to the minimum extent necessary to establish a reasonable price for the commercial use of designated channel capacity by an unaffiliated person."66 In setting prices, then, nondiscrimination is not required. In fact, the House Report explicitly so states67 and provides that the cable operator may look to the nature of the service being proposed, how it will affect the overall marketing mix offered, potential market fragmentation, and the impact on subscriber or advertising revenues.68 Moreover, in setting prices, cable systems may consider not only recovery of costs and loss of revenue diverted from other services, but also "a fair profit."69 Finally, the cable operator is under no obligation to provide marketing, billing, or any related services to the channel lessees.70

In terms of enforcement and remedies for failure to provide access, the Cable Act establishes a right of action in Federal District Court.71 While it was acknowledged that this might be extraordinarily cumbersome and undermine the viability of potential users who cannot afford the delays, the Committee felt that the actions could be brought on an expedited basis.72 In deciding reasonableness of the cable operator's actions, the court may "not consider any price, term, or condition established between an operator and an affiliate for comparable services."73 Moreover, the burden is on the aggrieved party to show by clear and convincing evidence that the cable operator was unreasonable.74 The Court may award actual but not punitive damages if it finds a violation by the cable operator.75 Finally, if there have been three or more adjudicated violations, aggrieved parties may petition the FCC, which can establish additional rules and provide similar relief as the court.76

So as to ensure some future flexibility, a provision was included in the Cable Act to permit the FCC to promulgate "any additional rules necessary to provide diversity of information sources" when a "70/70" threshold is met: When cable systems with more than 36 activated channels are available to 70 percent of American households, and 70 percent of the households to whom cable is available choose to subscribe.77

The detail with which the leased access structure is described reflects Congressional concern with the provision of leased access channels and their importance to the overall regulatory scheme imposed by the Cable Act. In fact, in the Committee Report, more pages are devoted to discussion of the subject of commercial access than to any other provision. However, the provisions of the Act have not achieved the goal of diverse information sources for the American public.