LADD, SCHRADER, LEIBOWITZ and OLER VI. GROWTH OF SATELLITE DISTRIBUTION HAS LED TO GREATER PROGRAM DIVERSITY. Cable television's attraction has been its ability to offer subscribers a greater variety of motion pictures, sports and syndicated shows than is generally available over-the-air within the system's local community. Until recently, this diversity was principally achieved by increasing the number of televised broadcast signals either through over-the-air reception by means of a large central antenna or by microwave relay of distant signals. Natural limitations in over-the-air reception and the high transmission costs of microwave relays meant that distant signal carriage was often limited to stations in relatively close proximity to the Cable system. The constraints of technology and cost practically precluded national distribution. At the same time, distribution of motion pictures and other programming through pay cable origination was in its infancy. Home Box Office, then and now the major pay programmer, initially distributed its motion pictures through what now look like “stone age” methods: the actual bicycling of tapes from system to system or microwave relays. And the simplicity of distribution reflected the relatively small size of the market being served: As Chart 1 indicates, 832,470 cable subscribers, representing less than 8% of all cable subscribers, received pay cable as of September 1976. In creating the compulsory license, Congress recognized cable's demand for retransmitted television signals in order to offer its subscribers a wider array of programming. It was expected that the compulsory license would encourage cable growth and benefit the viewing public through program diversity. Unlike microwave relay and over-the-air reception, satellite technology provides an economical means for nationwide distribution of high-quality signals. Recent technological developments, coupled with FCC rule changes (1) allowing the use of smaller, much less expensive earth stations;a1 (2) authorizing resale carriers to utilize satellites for the delivery of distant television signals to cable systems; 42 and (3) eliminating the FCC pay television anti-siphoning rule,43 have fostered an array of cable satellite distribution networks. These networks are changing the character of cable television from a passive retransmission service to a direct alternative to traditional broadcast distribution. 41. 62 FCC 2d 901 (1976). 42. 62 FCC 2d 153 (1976) 43. Home Box Office Inc. v. FCC, 567 F. 2d 6 (2nd Cir. 1977). 24 Summer 1981 Copyright, Cable, The Compulsory License: A Second Chance Pay TV subscriber counts previous to 2/81 include MDS (Multipoint Distribution Service; see Communications and the Law 25 LADD, SCHRADER, LEIBOWITZ and OLER Two general types of program services are presently available via satellite: (a) retransmitted over-the-air broadcast stations, and (b) cable origination networks. a. Retransmitted Over-the-air Broadcast Stations. (1) The Superstation Phenomena. Because a cable system's satellite transmission expenses are the same whether the signal originates from a nearby distant community or from across the nation, an economic incentive exists for the growth of what are commonly termed "superstations". As noted in Chart 2, the signals of three independent television stations, WTBS - Atlanta, WGN – Chicago, and WOR- New York, and one radio stations, WFMT FM - Chicago, presently are distributed nationally to cable systems via satellite. According to Chart 3, the three television superstations reach approximately 56%, 26% and 16% of all cable homes respectively. The program schedule of these superstations generally is comprised of movies, sporting events and syndicated shows. The stations are particularly attractive to cable system subscribers and have caused a partial centralization of distant signal carriage. While some stations clearly program their broadcasts with cable in mind, other stations claim to be unwilling participants. Cable systems have argued that the originating station's permission for this national distribution is not needed for cable carriage because of the availability of the compulsory license. These unwilling superstations (a misnomer in this situation: they are not superstations; only cable makes them so) contend that they may soon be unable to compete for the shows they desire since they may have to pay higher rates to their suppliers, attributable to the increased viewership by distant cable subscribers, without income derived from such retransmissions. The alternative is unacceptable: such stations, because of factors unrelated to marketplace values, may be forced to acquire what they and their viewers may consider inferior programming. Other superstations, such as WTBS – Atlanta, welcome and exploit their new status. They have sought advertising revenue on a nationwide basis in response to their expanded audience. To date, however, the efforts of WTBS in acquiring nationwide advertising have met with less than total success. During hearings before the House Judiciary Subcommittee in May, 1981, Thomas Wheeler, president of the National Cable Television Association (NCTA), noted that program suppliers "have simply raised rates on programs sold to superstations to reflect the increased cable 26 Summer 1981 *SPN's loss of homes is due in part to change in satellite. *** Estimated Spanish-speaking households, affiliates include cable systems broadcast stations and translators. **** Include STV households ***** Penetration based on estimated total number of cable subscribers at 19,700,000 in February 1981. Source: Cablevision Magazine: January 12, 1981, p. 28 and March 16, 1981, p. 17. 28 Summer 1981 |