History

Cable television began in 1948 as a way to bring broadcast signals to locations where over-the-air signals were poor.  Today, it is a multi-billion dollar industry, transforming the viewing habits of the approximately seven out of ten households that are subscribers.  Cable has come a long — but rocky — way. 

In the Beginning

By the early 1960s, there were almost 800 cable systems serving 850,000 subscribers. Cable was able to import distant broadcast signals to local communities – an attractive proposition in many rural areas.  Over-the-air broadcasters pushed the Federal Communications Commission (FCC) to place restrictions on the ability of cable operators to import these signals, and for a decade or so, cable was slow to take off as a real competitor to over-the-air broadcast television.

By the 1970s, though, things changed.  The FCC began a policy of cable deregulation, modifying restrictions on the importation of distant signals.  This, and the cable industry's use of new satellite communications technology, led to a growth in business and an increase in the number of cable subscribers.  The introduction of such services as HBO's pay television network and Ted Turner's sports and classic movies "superstation", WTBS, also helped attract subscribers.  By the end of the 1970s, 16 million households were subscribing to cable.

Cable Takes Off

But cable began to really take off in the 1980s, helped in large part by favorable government policies.  In 1984, Congress responded to the industry's argument that broadcasters provided sufficient competition to cable and, along with, the promise of satellite, could undercut cable in the marketplace. Congress deregulated cable rates and also provided the cable industry with another important boost – requiring utility companies to carry cable wires, and requiring the broadcasters to provide their signals (and their programming) to cable providers.     

Under the 1984 Cable Act, Congress also authorized cable companies to hold exclusive or monopoly franchises in communities regardless of the wishes of local regulators.  This effectively prohibited any other cable competitors from entering the market in that community.  In addition, the legislation established a requirement for cable to provide the community with Public Education and Governmental (PEG) channels that would be filled with programming controlled by the community.  Today, those channels still exist, carrying programming such as local town meetings.  Despite these many pro-cable industry concessions in 1984, Congress continued to expand the rights of the industry.  For example, the 1986 Cable Act essentially deregulated cable rates. 

The growth of the cable industry and the effective price deregulation that coincided with it engendered huge price increases for consumers.  Cable companies took advantage of their government-granted monopoly status and essentially unregulated rate structure to raise cable prices on consumers who wanted cable and had no choice but to pay these increased prices. The public continued to pay these rate hikes, but not without an outcry.

Cable Rates Gets Regulated – But Not for Long

The public outcry over rate hikes led to the passage of the Cable Act of 1992.  This Act included a number of reforms, and chief among them was the regulation of cable rates.  It also eliminated government protection of monopoly franchises and required cable companies to allow consumers to purchase set top boxes and remote controls at a local retailer, rather than renting them at exorbitant fees from the cable operators themselves.

This regulation of cable rates came to an abrupt halt with passage of the Telecommunications Act of 1996 ("The 1996 Act").  This Act deregulated all cable service beyond the basic tier of programming, which many consumers get only for reception of over-the-air signals.  This means that today the price for the package of channels most consumers subscribe to is set by the cable company, which is almost totally a local monopoly; 98% of Americans have only one cable provider in their community.

Cable Fights for More Control

Since passage of the 1996 Act, cable operators have begun to offer new services like high-speed Internet access, high definition and advanced digital video services and two-way voice services.  While these new services hold promise and may bring further innovation, they have also facilitated price increase.  That's because cable companies often "bundle" traditional services with these new technologies, putting potential competitors, such as satellite, at even more of a disadvantage.  This has been exacerbated by the increased trend toward consolidation, with more and more cable mergers.  Today, four companies control two-thirds of the nationwide cable television market.  According to the FCC, the largest two, Comcast and Time Warner, together control about half of all cable subscribers.  And now those two are trying to buy up the fifth largest company, Adelphia, in its bankruptcy sell-off, giving some local cable markets to Comcast and others to Time Warner.

Making matters worse, these cable giants already own much of the programming that they deliver.  This lets them offer "all or nothing" packages of cable channels, which leads consumers to pay for many channels they do not want.  The average consumer watches only 17 channels but gets many more. Growing consumer demands for Cable Channel Choice is an urgent issue facing the industry.

Consumers will want to remember cable's history while paying close attention to what lies ahead in this important industry.