Though cable cut into broadcast TV’s viewership, both types of programming came under scrutiny from the U.S. government. Initially, thanks to extensive lobbying efforts, cable’s growth was suppressed to ensure that no harm came to local broadcasters and traditional TV networks’ ad revenue streams. Later, as cable developed, FCC officials worried that power and profits were growing increasingly concentrated in fewer and fewer industry players’ hands. Thus the FCC set out to mitigate the situation through a variety of rules and regulations.

Government Regulations Temporarily Restrict Network Control

By the late 1960s, a progressive and active FCC, increasingly concerned about the monopoly-like impact of the Big Three networks, passed a series of regulations that began undercutting their power. The first, the Prime Time Access Rule (PTAR), introduced in April 1970, reduced the networks’ control of prime-time programming from four to three hours. This move was an effort to encourage more local news and public affairs programs, usually slated for the 6–7 P.M. time block. However, most stations simply ran thirty minutes of local news at 6 P.M. and then acquired syndicated quiz shows (Wheel of Fortune) or infotainment programs (Entertainment Tonight) to fill up the remaining half hour, during which they could sell lucrative regional ads.

In a second move, in 1970 the FCC created the Financial Interest and Syndication Rules—called fin-syn—which “constituted the most damaging attack against the network TV monopoly in FCC history,” according to one historian.16 Throughout the 1960s, the networks had run their own syndication companies. The networks sometimes demanded as much as 50 percent of the profits that TV producers earned from airing older shows as reruns in local TV markets. This was the case even though those shows were no longer on the networks and most of them had been developed not by the networks but by independent companies. The networks claimed that since popular TV series had gained a national audience because of the networks’ reach, production companies owed them compensation even after shows completed their prime-time runs. The FCC banned the networks from reaping such profits from program syndication.

The Department of Justice instituted a third policy action in 1975. Reacting to a number of legal claims against monopolistic practices, the Justice Department limited the networks’ production of non-news shows, requiring them to seek most of their programming from independent production companies and film studios. Initially, the limit was three hours of network-created prime-time entertainment programs per week, but this was raised to five hours by the late 1980s. In addition, the networks were limited to producing eight hours per week of in-house entertainment or non-news programs outside prime time, most of which were devoted to soap operas (which were inexpensive to produce and popular with advertisers). However, given that the networks could produce their own TV newsmagazines and select which programs to license, they retained a great deal of power over the content of prime-time television.

With the growth of cable and home video in the 1990s, the FCC gradually phased out the ban limiting network production because the TV market grew more competitive. Beginning in 1995, the networks were again allowed to syndicate and profit from rerun programs, but only from those they produced. The elimination of fin-syn and other rules opened the door for megadeals (such as Disney’s acquisition of ABC in 1995) that have constrained independent producers from creating new shows and competing in prime time. Many independent companies and TV critics have complained that the corporations that now own the networks—Disney, CBS, 21st Century Fox, and Comcast—have exerted too much power and control over broadcast television content.

Balancing Cable’s Growth against Broadcasters’ Interests

By the early 1970s, cable’s rapid growth, capacity for more channels, and better reception led the FCC to seriously examine industry issues. In 1972, the commission updated or enacted two regulations with long-term effects on cable’s expansion: must-carry rules and access-channel mandates.

Must-Carry Rules

First established by the FCC in 1965 and reaffirmed in 1972, the must-carry rules required all cable operators to assign channels to and carry all local TV broadcasts on their systems. This rule ensured that local network affiliates, independent stations (those not carrying network programs), and public television channels would benefit from cable’s clearer reception. However, to protect regional TV stations and their local advertising, the guidelines limited the number of distant commercial TV signals that a cable system could import to two or three independent stations per market. The guidelines also prohibited cable companies from bringing in network-affiliated stations from another city when a local station already carried that network’s programming.

Access-Channel Mandates

In 1972, the FCC also mandated access channels in the nation’s top one hundred TV markets, requiring cable systems to provide and fund a tier of nonbroadcast channels dedicated to local education, government, and the public. The FCC required large-market cable operators to assign separate channels for each access service, while cable operators in smaller markets (and with fewer channels) could require education, government, and the public to share one channel. In addition to free public-access channels, the FCC called for leased channels. Citizens could buy time on these channels and produce their own programs or present controversial views.

Cable’s Role: Electronic Publisher or Common Carrier?

Because the Communications Act of 1934 had not anticipated cable, the industry’s regulatory status was unclear at first. In the 1970s, cable operators argued that they should be considered electronic publishers and be able to choose which channels and content to carry. Cable companies wanted the same “publishing” freedoms and legal protections that broadcast and print media enjoyed in selecting content. Just as local broadcasters could choose to carry local news or Jeopardy! at 6 P.M., cable companies wanted to choose what channels to carry.

At the time, the FCC argued the opposite: Cable systems were common carriers, providing services that do not get involved in content. Like telephone operators, who do not question the topics of personal conversations (“Hi, I’m the phone company, and what are you going to be talking about today?”), cable companies, the FCC argued, should offer at least part of their services on a first-come, first-served basis to whoever could pay the rate.

In 1979, the debate over this issue ended in the landmark Midwest Video case, when the U.S. Supreme Court upheld the rights of cable companies to determine channel content and defined the industry as a form of “electronic publishing.”17 Although the FCC could no longer mandate channels’ content, the Court said that communities could “request” access channels as part of contract negotiations in the franchising process. Access channels are no longer a requirement, but most cable companies continue to offer them in some form to remain on good terms with their communities.

Intriguingly, must-carry rules seem to contradict the Midwest Video ruling, since they require cable operators to carry certain local content. But this is a quirky exception to the Midwest Video ruling—mostly due to politics and economics. Must-carry rules have endured because of the lobbying power of the National Association of Broadcasters and the major TV networks. Over the years, these groups have successfully argued that cable companies should carry most local over-the-air broadcast stations on their systems so that local broadcasters can stay financially viable as cable systems expand their menus of channels and services.

Franchising Frenzy

After the Midwest Video decision, the future of cable programming was secure, and competition to obtain franchises to supply local cable service became intense. Essentially, a cable franchise is a mini-monopoly awarded by a local community to the most attractive bidder, usually for a fifteen-year period. Although a few large cities permitted two companies to build different parts of their cable systems, most communities granted franchises to only one company so that there wouldn’t be more than one operator trampling over private property to string wire from utility poles or to bury cables underground. Most of the nation’s cable systems were built between the late 1970s and the early 1990s.

During the franchising process, a city (or state) would outline its cable system needs and request bids from various cable companies. (Potential cable companies were prohibited from also owning broadcast stations or newspapers in the community.) In its bid, a company would make a list of promises to the city about construction schedules, system design, subscription rates, channel capacity, types of programming, financial backing, deadlines, and a franchise fee: the money the cable company would pay the city annually for the right to operate the local cable system. Lots of wheeling and dealing transpired in these negotiations, along with occasional corruption (e.g., paying off local city officials who voted on which company got the franchise), as few laws existed to regulate franchise negotiations. Often, battles over broken promises, unreasonable contracts, or escalating rates ended up in court.

Today, a federal cable policy act from 1984 dictates the franchise fees for most U.S. municipalities. This act helps cities and municipalities use such fees to establish and fund access channels for local government, educational, and community programming as part of their license agreement. For example, Groton, Massachusetts (population around ten thousand), has a cable contract with Charter Communications. According to the terms of the contract with Groton, Charter returned 4.25 percent of its revenue to the town (5 percent is the maximum a city can charge a cable operator). This money, which has amounted to about $100,000 a year, helped underwrite the city’s cable-access programs and other community services.

The Telecommunications Act of 1996

Between 1984 and 1996, lawmakers went back and forth on cable rates and rules, creating a number of cable acts. One Congress would try to end must-carry rules or abandon rate regulation, and then a later one would restore the rules. Congress finally rewrote the nation’s communications laws in the Telecommunications Act of 1996, bringing cable fully under the federal rules that had long governed the telephone, radio, and TV industries. In its most significant move, Congress used the Telecommunications Act to knock down regulatory barriers, allowing regional phone companies, long-distance carriers, and cable companies to enter one another’s markets. The act allows cable companies to offer telephone services, and it permits phone companies to offer Internet services and buy or construct cable systems in communities with fewer than fifty thousand residents. For the first time, owners could operate TV or radio stations in the same market where they owned a cable system. Congress hoped that the new rules would spur competition and lower both phone and cable rates, but this has not usually happened. Instead, cable and phone companies have merged operations in many markets, keeping prices at a premium and competition to a minimum.

The 1996 act has had a mixed impact on cable customers. Cable companies argued that it would lead to more competition and innovations in programming, services, and technology. But in fact, there is not extensive competition in cable. About 90 percent of communities in the United States still have only one local cable company. In these areas, cable rates have risen faster; and in communities with multiple cable providers, the competition makes a difference—monthly rates are an average of 10 percent lower, according to one FCC study.18 The rise of DBS companies like Dish in the last few years has also made cable prices more competitive.

Still, the cable industry has delivered on some of its technology promises, investing nearly $150 billion in technological infrastructure between 1996 and 2009, with most of the funds used for installing high-speed fiber-optic wires to carry TV and phone services. This has enabled cable companies to offer what they call the “triple play”—or the bundling of digital cable television, broadband Internet, and telephone service. By 2013, U.S. cable companies had signed more than forty-six million households to digital programming packages, while almost fifty million households had high-speed cable Internet service and twenty-six million households received their telephone service from cable companies.19