Cable vs. Broadcast: Split Decision

October 07, 1993

At first glance it appears cable television firms got the best of the broadcast industry in round two of the Great Cable Reformation. But in the cable business, things are not as simple as they seem.

It will take months to sort out what happened to subscribers' fees under the new law aimed at rolling them back. It may take a flock of MBAs months to figure out who got what in this week's showdown between broadcasters and cable operators.

Cable operators no longer have the right to pluck broadcast signals from the air and retransmit them to customers. Either the TV station can require the cable operator to carry its signal -- for free -- or they must negotiate an agreement. Broadcasters expected to collect hundreds of millions of dollars in return for their popular network programming. Cable companies argued they would be strangled by such fees. The deadline was last Tuesday night.

With a few exceptions, all of the broadcast stations were on cable systems Wednesday morning. The cable operators claimed, more than a little ingenuously, they had not paid to carry those signals. Victory for the cable systems? Not yet.

A substantial number of the "agreements" are temporary, allowing a few more months for bargaining. Some contracts are barter deals in which the cable systems agreed to carry new channels sponsored by broadcast companies. Those agreements involve payments by cable companies for the new programming -- in some cases adding up to tens of millions of dollars.

So who won? It may turn out that no one did, least of all the cable subscriber who was supposed to be the prime beneficiary of all this legislating. The cable companies can insist they stood fast in refusing to pay retransmission fees. The broadcasting companies can show large revenues flowing to them from these deals. Ultimately that income will come from subscribers' pockets.

The nature of electronic home entertainment is changing so fast the new agreements may prove irrelevant. Telephone companies, among others, are poised to compete directly with the cable systems. Meanwhile, cable companies are getting ready to enter what was not long ago the exclusive turf of the phone systems. The electronic highway is opening so quickly that government regulation can't keep up with it. Some long-needed competition would do for the cable industry what competition has already accomplished in telephone service.

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