Joint Appendix — Turner Broadcasting System, Inc. v. FCC

Supreme Court brief1997

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JUL 19 1996

SLERK

——————

No. 95-992

In THE

Supreme Court of the United tutes

OCTOBER TERM, 1995

TURNER BROADCASTING SYSTEM, INC., et al.,

Appellants,

Vv.

FEDERAL COMMUNICATIONS COMMISSION, ef al.,

Appellees.

Appeal from the United States District Court

for the District of Columbia

JOINT APPENDIX

Volume IV

H. BARTOW FARR, III * Drew S. Days, III *

RICHARD G. TARANTO Solicitor General

FARR & TARANTO FRANK W. HUNGER

2445 M Street, NW Assistant Attorney General

Suite 225 LAWRENCE G. WALLACE

Washington, DC 20037 Deputy Solicitor General

(202) 775-0184 PAUL R.Q. WOLFSON

Counsel for National Cable Assistant to the Solicitor

Television Association, Inc. General

ROBERT D. Jorre DOUGLAS N. LETTER

STuaRT W. GOLD BRUCE G. FORREST

RowAN D. WILSON JOHN R. TYLER

CRAVATH, SWAINE & MOORE JAMES J. GILLIGAN

Worldwide Plaza Attorneys

825 Eighth Avenue DEPARTMENT OF JUSTICE

New York, NY 10019 Washington, DC 20530

(212) 474-1000 (202) 514-2217

Counsel for Time Warner WILLIAM E. KENNARD

Entertainment Company, L.P. General Counsel

(Additional Counsel for CHRISTOPHER J. WRIGHT

Listed : Deputy General Counsel

oo on Inside Federal Communications

Commission

Washington, DC 20544

* Counsel of Record

APPEAL DOCKETED DECEMBER 21, 1995

PROBABLE JURISDICTION NOTED FEBRUARY 20, 1996

BRIAN CONBOY

THEODORE CASE WHITEHOUSE

WILLKIE FARR & GALLAGHER

Three Lafayette Center

1155 21st Street, NW

Suite 6000

Washington, DC 20036-3384

(202) 328-8000

Counsel for Time Warner

Entertainment Company, L.P.

Bruce D. SOKLER

CHRISTOPHER A. HOLT

TARA M. Corvo

MINTZ, LEVIN, COHN, FERRIS,

GLOVSKY AND PopEo, P.C.

701 Pennsylvania Ave., NW

Washington, DC 20004-2608

(202) 484-7300

Counsel for Turner Broadcasting

System, Inc., et al.

ALBERT G. LAUBER

PETER VAN N. LocKwoop

CAPLIN & DRYSDALE, CHTD.

One Thomas Circle, NW

Washington, DC 20005

(202) 862-5000

Counsel for Discovery

Communications, Inc. and The

Learning Channel

Bruce J. ENNIS, JR.

Kit A. PIERSON

DONALD B. VERRILLI, JR.

THOMAS J. PERRELLI

JENNER & BLOCK

601 Thirteenth Street, NW

Washington, DC 20005

(202) 639-6000

Counsel for National

Association of Broadcasters

and Association of Local

Television Stations

CAROLYN F. CORWIN

MARK H. LYNCH

CAROLINE M. BROWN

COVINGTON & BURLING

1201 Pennsylvania Ave., NW

P.O. Box 7566

Washington, DC 20044

(202) 662-6000

Counsel for the Association of

America’s Public Television

Stations, Public Broadcasting

Service, and Corporation for

Public Broadcasting

EDITOR'S NOTE

THE FOLLOWING PAGES WERE POOR HARD COPY

AT THE TIME OF FILMING. IF AND WHEN A

BETTER COPY CAN BE OBTAINED, A NEW FICHE

WILL BE ISSUED.

TABLE OF CONTENTS

VOLUME I

Order, Turner Broadcasting Sys., Inc. v. FCC, Civ.

Docket No. 92-2247 (and consolidated cases) (D.D.C.

Mar. 6, 1996) (amending judgment of Dec. 20, 1995)...

Memorandum Of Discovery Communications, Inc. In

Support Of Plaintiffs’ Motion For Summary Judgment,

App. A (May 26, 1995) (ELRA Group, Inc., Outdoor

Antennas, Reception of Local Television Signals and

Cable Television (Jan. 28, 1986) ) .........-.ccc0ccccceecoeeeeeeeemm

Defendants’ Joint Submission Of Congressional Record

In Support Of Motion For Summary Judgment

(“DCR”), Vol. LCC, Exh. 170 (May 26, 1995) (Com-

ments of the NAB in FCC Docket No. 85-349 (Apr. 25,

ne EE TS SS

DCR, Vol. I.DD, Exh. 183 (Joint Petition For Reconsid-

eration of National Cable Television Association, Inc.

in FCC Docket No. 85-849 (Dec. 17, 1986)) 2.000000...

Exhibits Cited In Time Warner Entertainment Com-

pany, L.P.’s Memorandum Of Law In Opposition To

Defendants’ And Intervenors’ Summary Judgment

Motions And In Further Support Of Its Summary

Judgment Motion (“TWE Opp. Exhs.”), Vol. I, Exh.

4 (June 16, 1995) (Memorandum from John Abel to

Dick Hollands (Feb. 12, 1987)) —...........-----...ccccccccccccee

DCR, Vol. LP, Exh. 52 (FCC Cable Carriage Survey

i secteetenepocnnecoezs

Exhibits To Affidavit Of Gregory M. Loss In Support Of

Time Warner Entertainment Company, L.P.’s Motion

For Summary Judgment (“LAX”), Vol. I, Exh. 11

(May 26, 1995) (NAB, Advertising Revenues Per Tele-

vision Household: A Market By Market Analysis

EE LEE

LAX, Vol. I, Exh. 6 (Research and Planning Memo-

randum From Rick Ducey To Jeff Baumann, attaching

Television In Transition: The Values of Broadcast

Television In A Changing Marketplace (Jan. 30,

EEE EE EE

TABLE OF CONTENTS—Continued

TWE Opp. Exhs., Vol. I, Exh. 20 (Memorandum from

Rick Ducey to Jeff Baumann, et al. Re: Cable Drops

And Repositions Survey (Jan. 30, 1990)) -.............-....---

TWE Opp. Exhs., Vol. I, Exh. 17 (Comments In Sup-

port Of Fox Broadcasting Company’s Petition For Re-

sumption Of Rulemaking And Request For Temporary

Relief, FCC Docket No. 82-845 (Mar. 5, 1990) ..............

LAX, Vol. I, Exh. 12 (NAB, Advertising Revenues Per

Television Household: A Market by Market Analysis

(|)

LAX, Vol. I, Exh. 138 (TV Digest (Jan. 7, 1991)) -.......

Defendants’ Joint Submission Of Additional Evidence In

Support Of Motion For Summary Judgment (“DAE”),

Vol. VII.M. Exh. 288 (May 26, 1995) (OPP Working

Paper Series: Broadcast Television In A Multichannel

Marketplace (June 1991) ) ........------------e--eeeseseeneennennennns

LAX, Vol. I, Exh. 14 (Research & Planning Memoran-

dum From Mark Fratrik To Jim May Re: Results From

Television Financial Survey (July 19, 1991)) -..............

TWE Opp. Exhs., Vol. III, Exh. 42 (APTS, Harm To

PTV Stations From Cable System Shifts and Drops

CD |)

DCR, Vol. I.Q. Exh. 71 (Comments of the NAB, attach-

ing A/B Switch Availability And Use (Sept. 25, 1991) ..

DAE, Vol. VII.K, Exh. 239 (Larry Zipin, Local Cable

Advertising Sales: 1992 and Beyond (Nov. 20, 1991) )..

LAX, Vol. II, Exh. 18 (FTC Staff Study, Carriage of

Television Broadcast Signals By Cable Television Sys-

BN GG _———————EEE

LAX, Vol. II, Exh. 18 (NAB, Advertising Revenues Per

Television Household: A Market By Market Analysis

| a ee

Affidavits In Must Carry Proceedings (Feb. 12, 1993)

(Affidavit of Edward J. Weiss, Exh. 2 (Paul Kagan

Assocs., Cable TV Investor (June 23, 1992))) -............

Page

113

116

120

126

134

157

iii

TABLE OF CONTENTS—Continued

LAX, Vol. II, Exh. 19 (CPB, Viewer and Listener Mem-

bership Income for Public Television and Radio Grant-

ees: Fiscal Year 1991 (Sept. 1992))

DAE, Vol. VILG, Exh. 157 (Time Warner, Memoran-

dum from T. Bigelow to E. Hamowy (Oct. 20, 1992) ).

LAX, Vol. II, Exh. 21 (1998 NAB Cable System Elec-

tion Survey Charts (1906)) ..................:...........................

LAX, Vol. II, Exh. 22 (TV & Cable Fact Book (1993) ) ..

Affidavits In Must Carry Proceedings (Feb. 12, 1993)

(Affidavit of Joseph J. Collins (Feb. 11, 1993) _...._.

DAE, Vol. VII.K, Exh. 232 (The Cable Television In-

dustry: New Technologies, New Opportunities And New

Competition (Mar. 8, 1998)) 0.000000

DAE, Vol. VII.K, Exh. 247 (Paul Kagan Assocs., Cable

TV Advertising (June 22, 1998))

DAE, Vol. VII.M, Exh. 292 (Memorandum from W.

Ciciora to L. Yaeger, et al. Re: A/B Switches (June 25,

EE ee oo NS ree a OS eee

| EIT Ps Ee ee aaa

DAE, Vol. VII.K, Exh. 246 (Paul Kagan Assocs., Cable

TV Advertising (July 28, 1998))

DAE, Vol. VIII, Exh. 200 (Memorandum From D. Orr

To P. Beckham and B. Grumbles Re: TCNS 1994 Mar-

keting Overview (Sept. 17, 19983))

DAE, Vol. VIL.G, Exh. 161 (The History Channel: 1994

Business Plan & Financial Forecast (Nov. 1998) )........

DAE, Vol. VIII, Exh. 198 (Memorandum From D. Orr

to P. Beckham Re: KNWS/TV (Dec. 6, 1993))

DAE, Vol. VILE, Exh. 91 (Horowitz Assocs., Inc.,

State of Cable 1994 (1994) )

FFT ee He ree re mnt e wns ee ewww eweee

215

245

247

TABLE OF CONTENTS—Continued

Time Warner Entertainment Company, L.P.’s Corrected

Appendix To Brief In Support Of Its Motion For Sum-

mary Judgment (“TWE App.”), Exh. 16 (May 26,

1995) (NAB, The Television Industry: 1994 Market-

By-Market Review (1994) ) -........--...--<----cc-sseeeseeneneeeenennes

TWE Opp. Exhs., Vol. II, Exh. 33 (Broadcasting and

DAE, Vol. VII.K, Exh. 244 (Paul Kagan Assocs., Cable

TV Advertising (June 15, 1994) ) -.........-.-..-...eccccceeeeees

Plaintiffs’ Exhibits In Support Of Their Motion For

Summary Judgment, Vol. II, Exh. V (May 26, 1995)

(Letter from NAB to FCC General Counsel (June 21,

a one eS ee ee

DAE, Vol. VII.K, Exh. 248 (Paul Kagan Assocs., Cable

TV Advertising (Sept. 30, 1994) ) -......-.....-.-----cccceece-eonees

DAE, Vol. VII.K, Exh. 266 (Turner Broadcasting, Top

F ff $5 ae

DAE, Vol. VII.K, Exh. 242 (Paul Kagan Assocs., Cable

TV Advertising (Oct. 26, 1994) ) -...............-.--ccc-----eeeeeee"

TWE Opp. Exhs., Vol. Il, Exh. 25 (CPB, Public Broad-

casting Income: Fiscal Year 1993 (Dec. 1994)) ............

LAX, Vol. III, Exh. 35 (Paul Kagan Assocs., The Kagan

Media Index (Feb. 24, 1995) ) -...------..-------cce------eeceennneeee

Defendants’ Rebuttal Declarations And Exhibits, Vol.

VIII (“Def. Reb. Decls.”), Exh. K (June 16, 1995)

(Stipulation and Supplemental Protective Order Con-

cerning Pre-Trial Use of A.C. Nielsen Data in Turner

Yo 2 | ee ee eee

Deposition of David Brugger (Apr. 7, 1995) ..................

Deposition of James Mooney (Apr. 13, 1995) ................

Deposition of Brendan Clouston (Apr. 14, 1995) ..........

Deposition of John Huddy (Apr. 14, 1995) ......................

Deposition of Jack N. Goodman (Apr. 17, 1995) ............

Page

281

TABLE OF CONTENTS—Continued

Deposition of M. Peter Downey (Apr. 18, 1995, May 18, 7

EE RSE 341

Deposition of John C. Siegel (Apr. 18, 1995) —............. 345

Deposition of James J. Popham (Apr. 20, 1995) ........... 346

Expert Report of Stanley M. Besen On Behalf Of Plain-

tiffs Turner Broadcasting System, Inc., et al. (Apr. 21,

RRB ok OC sh Cd SRE RE A aN 349

Expert Report of Eldon J. Haakinson (Apr. 21, 1995).. 352

Expert Report of Tom Meek (Apr. 21, 1995) —.......... 357

Deposition of Bernadette McGuire (Apr. 21, 1995)... 360

Deposition of Joseph L. Stern (May 8, 1995) 362

Deposition of James N. Dertouzos (May 4, 1995) ........ 380

Deposition of Eldon J. Haakinson (May 4, 1995) ......... 385

Deposition of Linda McLaughlin (May 8, 1995) ........... 441

Deposition of Tom Meek (May 8, 1995, May 9,1995).... 442

Deposition of Roger G. Noll (May 10, 1995) 446

Deposition of Richard Feldman (May 11, 1995) ........... 460

Deposition of John Haring (May 12, 1995) 0... 461

Deposition of Charles L. Jackson (May 12, 1995) _........ 469

Turner Broadcasting System, Inc.’s Motion For Sum-

mary Judgment, Exh. I (May 26, 1995) (Cable Takes

Fresh Angle On Services, Electronic Media (May 15,

| EE SE SC ee 471

Deposition of Harry M. Shooshan III (May 15,1995)... 477

Deposition of David J. Large (May 16, 1995)... 480

Deposition of Jonathan C. Abbott (May 18, 1995)... 510

Deposition of Lucie Salhany (May 18, 1995) —........... 512

Def. Reb. Decis., Exh. H (Transcript of Telephone

Conference on Discovery Issues (May 18, 1995)) ......... 515

TABLE OF CONTENTS—Continued

VOLUME Il

Appendix To Public Broadcaster Defendant-Inter-

venors’ Motion For Summary Judgment (“Publ.

App.”), Vol. 2 (May 26, 1995) (Declaration of Dr.

Charles Anderson (May 18, 1995) ) ..............---.------.--.-0

Publ. App., Vol. 2 (Declaration of John L. Beabout

(Bag 16, 1905) ) ...~--.2c-c.c---n--0-cccneoeesnovesescsesenensnnesenesesssssnsseess

DAE, Vol. IILA (Declaration of Douglas Johnson

(Bay 1B, 1GBB) ) .--acnececcececceceeeeceesnsceecsecsccccececssnsnoeneneensnseesees

Publ. App., Vol. 2 (Declaration of David Dial (May 19,

—————————————————————— EE

Publ. App., Vol. 3 (Declaration of Carolyn Bailey

Lewis (May 19, 1995) ) ..... ae cers ace nica

Publ. App., Vol. 3 (Declaration of Denins = (May

Publ. App., Vol. 3 (Declaration of atts K. Meuche

» 2» ) |)

Publ. App., Vol. 8 (Declaration of Virgle Smith (May

DAE, Vol. IL.B (Declaration of Eldon J. Haakinson

1 2 9) ee

DAE, Vol. II.A (Declaration of Tom Meek (May 23,

1995) ) ..........

ee elie

anda tai Taian (el Bee

Memorandum Of National Cable Television Associa-

tion, Inc. In Support Of Plaintiffs’ Motion For Sum-

mary Judgment (“NCTA Br.”), Exh. B (May 26,

1995) (Declaration of Peter D. Shapiro (May 23,

1995) )

Page

521

vii

TABLE OF CONTENTS—Continued

DAE, Vol. II.A (Declaration of Harry M. Shooshan III

I a I ili ih a Atiteeneee

Discovery Communications, Inc., Statement Of Material

Facts Not In Dispute (May 26, 1995) (Affidavit of

Joseph L. Stern (May 28, 1995) ) 0...

Declaration of Stanley M. Besen on Behalf of Plaintiffs

Se RE: GRAN, Bee. et al. (May 24,

ee a ee an 1 a lla SE RE cE

DAE, Vol. ILB ‘(Dediaration of James N. Dertouzos

ARR A ae a A

Publ. App., Vol. 4 (Declaration of Richard Feldman

Discovery Communications, Inc., Statement Of Material

Facts Not In Dispute (May 26, 1995) (Declaration of

William Goodwyn (May 24, 1995)) 0.

DAE, Vol. II.B (Declaration of Roger G. Noll (May 24,

Publ. App., Vol. 4 (Declaration of Jonathon C. Abbott

(May 25, 1995) )

VOLUME III

Affidavits In Support Of Time Warner Entertainment

Company, L.P.’s Motion For Summary Judgment

(“TWE Affs.”) (May 26, 1995) (Affidavit of E. Thayer

Bigelow (May 25, 1995) ) 2.0.0.0...

TWE Affs. (Affidavit of Brendan Clouston (May 25,

i RET FE ES

Publ. App., Vol. 4

(May 25, 1995) )

eee LLL LL LEE LEE ELLE TTT

Mea G2 RES RSS NE er ll ES a

TWE Affs. (Affidavit of Charles W. Ellis (May 25,

8 ERS STORIE, DRESS EES <a ee

TWE Affs. (Affidavit of John F. Gault (May 25,

1995) )

ieee te LLL LETT TT TTT eee

755

775

955

975

983

998

1032

viii

TABLE OF CONTENTS—Continued

DAE, Vol. II.A (Declaration of John Haring (May 25,

DAE, Vol. II.B (Declaration of Charles L. Jackson

(2 _, ) ane nnn ee

TWE Affs. (Affidavit of David Kinley (May 25,

BID cceinccccinintnstlbinsisinnisneihisiiiinilitencaibiicaidniiasniainbiaciinliianaitise

DAE, Vol. II.B (Declaration of Jeffrey H. Rohlfs (May

25, 1995) )....... et Pee tek oe Ok a aemmmmengings

TWE Affs. (Affidavit of Laurence Zipin (May 25,

Publ. App., Vol. 1 (Declaration of David J. Brugger

(Baa BE, BODBD ) acececececccccnsccsesctvcraresecscuynscenqncnsocccupoasaseraseeses

Discovery Communications, Inc., Statement Of Material

Facts Not In Dispute (May 26, 1995) (Affidavit of

David J. Large (May 26, 1996) ) -..............-.-..--.ccceeeeeeeeeee+

All Parties’ Joint Statement Of Undisputed Facts (May

BE, SOT ccnercancscsdccneniinntiinctetandaetnegtntrintenatpiiameadiitianraitlesigiee

DAE, Vol. VII.K, Exh. 249 (Cable Advertising Over-

Ok | a ee

Defendants’ Joint Statement Of Evidence Before Con-

gress, Parts 1 and 2 (May 26, 1995) .................-.............

VOLUME IV

Defendants’ Joint Statement Of Evidence Before Con-

gress, Parts 1 and 2 (May 26, 1995) (continued) ...........

Public Broadcaster Defendant-Intervenors’ Supple-

mental Statement of Evidence Before Congress (May

Re Se SE ne oa a

DAE, Vol. VII.J, Exh. 217 (February Industry Issues

SR Ge, CIGD Aincctntncvinsiititsiinectitnantentitiabasiiingutasindtacuiiitinain

Page

1098

1109

1111

1128

1134

1151

1155

1170

1180

1213

1245

1247

1249

1567

TABLE OF CONTENTS—Continued

Time Warner Entertainment Company, L.P.’s Affi-

davits In Opposition To Defendants’ And Intervenors’

Summary Judgment Motions And In Further Support

Of Its Summary Judgment Motion (“TWE Opp.

Affs.”) (June 16, 1995) (Supplemental Affidavit of

Charles W. Ellis (June 18, 1995) ) ....-..---

Memorandum Of Discovery Communications, Inc. In

Opposition To Defendants’ Motions For Summary Judg-

ment (“Discovery Opp. Br.”) (June 16, 1995) (Supple-

mental Affidavit of David J. Large (June 13, 1995) ) ....

TWE Opp. Affs. (Supplemental Affidavit of Brendan

Clouston (Jume 14, 1006) ) -...............22.0....-00.cc.c00e-..ceceeeesee

Def. Reb. Decls. (Rebuttal Declaration of Roger G.

ERE EG TET Peay ee CET

TWE Opp. Affs. (Supplemental Affidavit of Laurence

Second Declaration of Stanley M. Besen On Behalf of

Plaintiffs Turner Broadcasting System, Inc., et al.

ge RR re oe? BA are I eh RE

Def. Reb. Decls. (Second Declaration of Tom Meek

NE ie CM athitnsitaeamaninicatenitaln. coibeteddberb actnadsc de kdenseion,

Def. Reb. Decls. (Rebuttal Declaration of Jeffrey H.

i i Dt te

Def. Reb. Decls. (Rebuttal Declaration of David E.

si al il a i a

Def. Reb. Decls. (Rebuttal Declaration of James N.

Dertouzos (June 16, 1995) ) 2.2... ee ceecccceccececeeececeeeeee

Discovery Opp. Br. (Supplemental Affidavit of Joseph

fn, Ba eet Hi pdt ll oneal

Memorandum Of Turner Plaintiffs In Opposition To

Defendants’ Motions For Summary Judgment, App. A

(June 16, 1995) (Carriage Chart (June 16, 1995)) _.

Defendants’ Supplemental Appendix In Opposition To

Plaintiffs’ Motion For Summary Judgment (June 16,

1995)

SOOO POSS SOOO SSSOSO SPSS SOSSOO SESS SSOSSOSSSESESESESESESSOSEO SECO SSESSESCESSSESOESSSCSCOS

Page

1764

1769

1784

1788

1808

1811

1853

1869

1878

1894

1906

1925

TABLE OF CONTENTS—Continued

Defendants’ Reply Declarations And Exhibits, Vol. IX

(“Def. Reply Decls.”) (June 30, 1995) (Reply Declara-

tion of Roger G. Noll (June 22, 1995) ) ...................-.-------

Def. Reply Decls. (Reply Declaration of James N.

Dertouzos (June 28, 1995) ) ........--------------------es-eeeeenenennnnees

Def. Reply Decls. (Supplemental Declaration of Eldon

J. Haakinson (June 28, 1995) )

Third Declaration of Stanley M. Besen On Behalf of

Plaintiffs Turner Broadcasting System, Inc., et al.

(June 29, 1995)

Def. Reply Decl. (Third Declaration of Tom Meek

Pe iy GS SILENT OLS

Appendix To Public Broadcaster Defendant-Intervenors’

Reply Memorandum In Support Of Motion For Sum-

mary Judgment (June 30, 1995) (Declaration of

Edward J. Coltman (June 30, 1995)) -....................---.---.

Federal Defendants’ Statement In Response To The

Court’s Order of September 7, 1995 (Sept. 18, 1995) ....

Plaintiffs’ Joint Objections To Federal Defendants’

Dhatemmats Cam, Ti, BD eccctecerecvecsccscenencerevsicinitiitieiccndinin

VOLUME V (Under Seal)

TWE Opp. Exhs., Vol. II, Exh. 22 (APTS, Public Tele-

vision Service and Structure Analysis (May 1991) ) -....

TWE Opp. Exhs., Vol. Il, Exh. 26 (APTS, Critical

System Objectives for Public Television (1992 Status

Report) (Oct. 1992)) ....

~ DAE, Vol. VILL, Exh. 284 (Memorandum From F.

Lopez to T. Baxter, et al. Re: Adlink’s Presentations

on Retransmission Consent (June 14, 1993) ) -................

DAE, Vol. VIIK, Exh. 228 (Tele-Communications,

Inc., Cable Advertising Executive Summary (Mar.

BOOED inti eda dtiaadccncent rs

TWE Opp. Exhs., Vol. II, Exh. 23 (APTS, Public Tele-

vision in the Information Age (July 1994) ) ..................

2052

2073

2080

2101

2111

2114

2117

TABLE OF CONTENTS—Continued

DAE, Vol. III.A (Declaration of Edward Lau (May 18,

Ee eaten mae 0, a ae Alt ttl lel RN at Dae

DAE, Vol. ILA (Declaration of Harry M. Shooshan

i eg , |) _:)

DAE, Vol. II.A (Declaration of John Haring, Exh. B

I ac ical cieniesiainininiibenipeaiinnitanentssese

DAE, Vol. VII.M, Exh. 291 (Tele-Communications,

Inc., Corpus Christi Retransmission-consent Research

FR I ee

TWE Affs. (Affidavit of Linda McLaughlin (May 25,

iterate aia tata eee eee ee ee

TWE Opp. Affs. (Rebuttal Affidavit of Linda Mc-

i i

Surrebuttal Affidavit of Linda McLaughlin (June 29,

PE SE Sere See a, ee ee a ee

Time Warner Entertainment Company, L.P.’s Memo-

randum Of Law In Opposition To Defendants’ And In-

tervenors’ Summary Judgment Motions And In Further

Support Of Its Summary Judgment Motion, 8-17 (June

16, 1995)

Time Warner Entertainment Company, L.P.’s Reply

Memorandum Of Law In Support Of Its Motion For

Summary Judgment, Exhs. A and B (June 30, 1995) ....

Time Warner Entertainment Company, L.P.’s Broad-

cast Station Rebuttal (June 16, 1995)

These documents do not appear in the Joint Appen-

dix. They can be found in the Jurisdictional Statement

on the following pages:

Memorandum and Order, Turner Broadcasting Sys.,

Inc. v. FCC, Civ. Docket No. 92-2247 (and consolidated

a nen

Judgment, Turner Broadcasting Sys., Inc. v. FCC, Civ.

Docket No. 92-2247 (and consolidated cases) (D.D.C.

Dec. 20, 1995)

Page

2136

2139

2143

2159

2169

2190

2221

2234

2242

1567

645. The record indicated that: “For the holders of

the more than 200 outstanding television construction

permits, cable carriage may determine whether their sta-

tions are actually built.” Source: “Hearings on Cable

TV Consumer Protection Act of 1991” at 426 (State-

ment of Roy M. Speer); CR VOL. LI, EXH. 17, CR

06884.

646. The following information was in the record:

“A decline in revenue generating capability can be

expected to discourage or delay construction of un-

built stations for which construction permits have

been issued. Apparently, between December 31,

1990, and June 30, 1991, three UHF construction

permits have been forfeited. [Citing Public Notice,

‘Television Channel Utilization’ (March 20, 1991);

Public Notice, ‘Television Channel Utilization’ (Aug-

ust 30, 1991). The number of pending CP’s has

decreased by seven, while the number of licensed

stations has increased by four.] Similarly, between

June 30, 1989, and June 30, 1991, 32 UHF con-

struction permits have been forfeited. [Citing Pub-

lic Notice, “Television Channel Utilization’ (Septem-

ber 7, 1989); Public Notice, ‘Television Channel

Utilization’ (August 30, 1991). The number of

pending CP’s has decreased by 59, while the number

of licensed stations has increased by 41, and the

number of applications granted was 14. Meanwhile,

the number of vacant channels increased by 41, in-

cluding nine new channel allotments.] Between June

30, 1989 and June 30, 1991, two VHF construction

permits also have been forfeited. [Citing Public

Notice, ‘Television Channel Utilization’ (September

7, 1989); Public Notice, ‘Television Channel Utili-

zation’ (August 30, 1991)]. These forfeited per-

mits represent stations applicants were willing to

build prior to 1989. Most undoubtedly filed their

1568

applications before must-carry rules met their second

demise in December, 1987. Notably, it is almost

as many stations as did commence operation (41) in

the same period.”

Source: Comments of the Association of Independent

Television Stations, Inc. in M.M. Docket No. 90-4 at

63 (Sept. 25, 1991); CR VOL. LK, EXH. 21, CR

08384.

647. The record indicated that: “Lack of assured

carriage also has stifled construction of authorized facili-

ties. Since December 11, 1987, when the must carry

rules were held unconstitutional, 116 construction per-

mits have been granted for new broadcast television

stations. However, only 33 have commenced operation,

and one of those already has ceased operating. Applica-

tions are pending for 42 channels, and 223 channels

remain vacant. The same trend is evident in the number

of pending applications for new television stations.

Among communities in which applications are still pend-

ing, applications for 11 communities were filed in 1987,

but for only six in 1988, for seven in 1989, for five in

1990, and for three in 1991. Yet, the number of unbuilt

stations, pending applications, and vacant channels pro-

vides an enormous opportunity to expand and improve

broadcast television, as well as exert increasing price

discipline on cable rates.” Source: Reply Comments of

the Association of Independent Television Stations, Inc.

in MM Docket No. 90-4 at 20-21 (Oct. 25 1991); CR

VOL. I.Q, EXH. 81, CR 11378-79.

648. The record indicated that: “Absence of must

carry makes it very diffcult for new stations to attract

start-up financing, particularly for minorities who are

often the last in the market, with high channel UHF

stations and less than optimal transmitter locations.”

Source: Testimony of Ed Parker, Blackstar Communica-

1569

tions, Inc., Orlando, FL, in MM Docket 89-600 at 1

(March 2, 1990); CR VOL. LR, EXH. 84, CR 11486.

649. The following information was included in the

record: “The precarious position in which many existing

UHF independent stations find themselves raises the very

real possibility that a significant number of this country’s

independent UHF television stations will not be able to

survive cable noncarriage or cable channel relocation.

[Citing ‘Pop Goes the Stations’ Channels, January 1988,

at 73.] Likewise, it has become much more difficult

for prospective independent UHF station owners to bor-

row the money needed to start and operate a new station.

Failure to arrange for adequate cable carriage, usually

means that no financing is forthcoming.” Source: “Hear-

ings on Competitive Problems” at 333 (Statement of

Edward O. Fritts); CR VOL. LH, EXH. 14, CR 05266.

650. The following information was also in the record:

“The recent experience of Robert Broadcasting, a

minority owned company, in constructing WHSL-TV,

Channel 46, the first new commercial television sta-

tion in St. Louis in 20 years, illustrates how the

financing of new local television stations has become

tied to cable carriage since The Cable Act. Roberts

Broadcasting applied to the FCC for a construction

permit to build Channel 46 in 1981 and then en-

gaged in a six year, expensive comparative hearing.

In 1987, Roberts Broadcasting was awarded a con-

struction permit. After receiving the CP, however,

Roberts Broadcasting began what became the more

difficult process of securing construction financing.

In 1981, in securing a financial commitment, the

company found that banks were interested in two

primary considerations: the capability of station

t and the station’s proposed program-

ming. By 1987, a significant new consideration had

arisen. In addition to management capability and

programming proposals, banks demanded to know

the cable penetration in the market and whether the

1571

ating risks of running what is usually the third or

fourth independent station (sixth or seventh overall)

permittee had guarantees that the new station would

effective must carry regulation. Absent the assur-

ances which must carry offers, i.e., that the minority

Source: Joint Reply Comments of Blackstar Communi- owned station will be viewed through local cable

cations, et al., in MM Docket No. 89-600 at 3-4 (Apr. 2, systems with a competitive signal compared to others

1990); CR VOL. LX, EXH. 120, CR 14404-05. in its market, the —— > a station to —

651. The record also indicated: embitiews Snanciel geal and to mest weighty

“Minority entrepreneurs seeking to construct or ac-

quire UHF, independent television stations face an

uphill battle under any circumstances. These indi-

iduals usually possess relatively little capital, and

depend on creative financing and inordinate amounts

tense 4st testes Gemang soetee puejetions os ered countless others, I sincerely believe that without

meet interest and principal payments to lenders and ia decals tenekaebounntian-ens Gn pecenst

=e bh plan: Neca shales

sacles, which even if overcome, place them in an — bos

operating environment with little room for error. Source: Reply Comments of the National Association

Already bearing the financial risks of raising huge of Broadcasters, in MM Docket No. 88-138 at 2-3 (Aug.

amounts of debt with little equity, and meeting bur- 8, 1988) (Memorandum from John E. Oxendine); CR

densome debt service obligations, the minority tele- VOL. LZ, EXH. 143, CR 15388-89.

;

652. The record included the following:

1572

“Scanning the predicament that the limbo of Must

Carry Legislation has been in, it has become clear

to me that the financial status of local stations with-

out must carry protection is jeopardized.

Sadly, the stations most affected would be new

In recent years, I have seen stations that were strug-

gling that needed new ownership and re-capitaliza-

tion to better program in their city of license.

However, Prospective investors shied away from a

Prospective investment, not knowing whether a par-

ticular station would have an opportunity to com-

pete on a similar playing field as other stations or

cable channels.”

Source: Reply Comments of the National Association of

Broadcasters, in MM Docket No. 88-138 at 1 (Aug. 8,

1988) (Letter from Brian E. Cobb); CR VOL. LZ,

EXH. 143, CR 15385.

653. The record indicated that: “Renck, Levy & Co.,

Inc. is 2 Broker/Dealer which over the past two years has

been involved in the raising of capital for television sta-

tions. We were co-underwriters in an $8,000,000 Lim-

ited Partnership offering for Channel 38 Associates which

resulted in a 1984 sign on of WNOL-TV in New Orleans,

LA. During this time period we have been

in over 60 instances by business people seeking financing

for television stations. More than one-third of these

situations involved the sign on of new Independent sta-

tions. Historically, in reviewing the economic forecasts

of new television stations, we have assumed that a new

sign on station would achieve both full Cable TV carriage

within 35 miles of its city license during the first full

year of operation and full parity with the existing com-

1573

mercial stations during the stations’ second year of oper-

ation with regard to Cable TV carriage. In my opinion,

if television stations should lose their rights to be carried

on local Cable-TV systems, it would have a disastrous

effect on the economics of financing on a new Independ-

ent Station. Making the assumptions that a station would

have less than full carriage, and that in some instances

Cable TV systems would extract significant carriage fees

from local Independent television stations, both a de-

crease in revenues and an increase in expenses could

result. The elimination of the ‘must carry’ rules would

cause substantial difficulty in the raising of capital for

new television stations being built.” Source: Comments

of the National Association of Broadcasters, Appendix

Volume, in MM Docket No. 88-138 at 1 (July 8, 1988)

(Letter from Robert Renck); CR VOL. LY, EXH. 128,

CR 15021.

654. The record indicated that: “Absent assured

cable carriage in cable markets, would-be new stations

are caught in a vicious financial vise. On the average, to

put a new television station on the air now costs between

$3 million and $4 million, according to Thomas J. Buono,

President, Broadcast Investment Analysis, Chantilly, Vir-

ginia. Attracting and retaining investment capital of this

magnitude is difficult or impossible if there is the possi-

bility that the new station, once operational, will be

hobbled during its start-up period by the inability to even

begin to compete for the attention of the cabled portion

of its potential audience.” Source: Comments of the

National Association of Broadcasters, Appendix Volume,

in MM Docket No. 88-138 at 36 (July 8, 1988); CR

VOL. LY, EXH. 128, CR 15018.

655. The record indicated that: “[NJew station appli-

cations to the FCC are down by about 80 percent over

numbers of applications. No explanation is apparent than

the loss of assured carriage; there is not, for example, any

1574

significant reduction in available channels, and except

for the threat noted by the carriage problem, new stations

are generally considered an attractive investment.” Source:

Comments of the National Association of Broadcasters,

Appendix Volume, in MM Docket No. 88-138 at 36-37

(July 8, 1988); CR VOL. LY, EXH. 128, CR 15018-19.

656. The record included the following:

“Minority business that are undercapitalized have

even greater risk of failure because of cable system

droppage or channel repositioning. Research evi-

dence has confirmed that only a very small percent-

age of cable subscribers may also-teceive over the

air broadcast signals, and that over the air recep-

tion obtained only with the addition of internal

and/or external hardware, is likely to be of inferior

quality. Potential audiences for these stations would,

as a consequence, have strong disincentives from

viewing, which would subsequently decrease adver-

tising demands for commercial time on these stations,

and ultimately diminsh the existing minority owned

station’s opportunity for economic viability. While

the threat to existing minority owned stations without

must carriage is great, must carry’s absence poses

an even greater threat to future and aspiring minor-

ity television owners. Minorities are, in general, late

entrants to the broadcast industry, in a time when

rising demand for more viable VHF, network affili-

ates has made such stations prohibitively expensive

and all but unobtainable for traditionally under-

capitalized minorities. Independent UHF stations,

although also having risen dramatically in cost and

value, remain within reach of some serious minority

entrepreneurs and investors. Such stations, however,

are the most likely to be affected by the lack of

effective must carriage regulations. Testimony col-

lected by the NAB has already documented the

1575

negative impact on one such station, of the only 38

television stations most recently estimated as being

minority owned in the nation.”

Source: Reply Comments of the National Association of

Broadcasters, in MM Docket No. 88-138 at 2 (Aug. 8,

1988) (Memorandum from John E, Oxendine); CR

VOL. I.Z, EXH. 143, CR 15388.

657. The record included the following: “Thanks in

large part to Commission policies, the number of local

television stations owned by minorities has increased from

17 in 1982 to 46 today and 10% of the 215 outstanding

TV construction permits are held by minorities. While

this is real progress, minorities are only 3.2% of all TV

stations. I am convinced that the number will not con-

tinue to grow and, indeed, may shrink if local stations

are not given the same access to the home as cable

delivered programming. Many minority and other hold-

ers of construction permits are discovering that lending

institutions know that cable carriage and financial viabil-

ity are closely intertwined. A fundamental concern of

lenders now is the station’s guarantees of cable carriage.

No guarantees often means no money to build. I am

convinced that many, indeed most, of the 215 stations

authorized by the Cps will not be build as long as cable

systems are not required to carry all local full power

television stations in their market.” Source: Letter from

Blackstar Communications, Inc. to Federal Communica-

tions Commission, in MM Docket No. 89-600 at 2 (rec'd

April 11, 1990); CR VOL, LX, EXH. 123, CR 14530.

658. The record also indicated that: “The precarious

position in which many existing UHF independent stations

find themselves raises the very real possibility that a sig-

nificant number of this country’s independent UHF tele-

vision stations will not be able to survive cable non-

carriage or cable channel relocation. [Citing ‘Pop Goes

the Stations’ Channels, January 1988, at 73.] Likewise,

1576

it has become much more difficult for prospective inde-

pendent UHF station owners to borrow the money needed

to start and operate a new station. Failure to arrange

for adequate cable carriage, usually means that no financ-

ing is forthcoming.” Sourcs: “Hearings on Competitive

Problems” at 33 (Statement of Edward O. Fritts); CR

VOL. I.H, EXH. 14, CR 05266.

4. Evidence That The Absence Of Cable

Carriage Had Already Jeopardized The

Continued Operation Of Some Broadcast

Stations.

659. Congress was informed by FCC Commissioner

Quello that:

“Twenty-three independent stations are now in Chap-

ter 11. The trend is growing. Is it caused by no

must carry? No, not completely and in some cases

not at all. But the mere threat of no must carry

is a contributing cause. Banks are reluctant to lend

money to station’s with no assurance of carriage.

Will the independent stations’ viability be threat-

ened by no must carry o. even by the power of a

cable company to inflict no must carry at any time?

The answer has to be a resounding yes. To any

practical businessman, or to any fair-minded body,

no must carry or the threat of it can only aggravate

‘an already economically pressed local independent

service.”

Source: “Hearings on Media Ownership” at 314-15

(Statement of James H. Quello); CR VOL. L.D, EXH.

9, CR 02400-01.

660. The record included the following:

“I represent the investors and the financial institu-

tions who financed the construction and operation of

WCOM-TY in Mansfield, OH, a small market UHF

1577

station that be to air in February of 1988 and

subsequently ae dark in June of 1989. The sta-

tion’s original date of air was just two weeks after

the must-carry rules were rescinded in February of

1988, but after an investment of $3 million had

already been made to build the technical facility for

the station.

WCOM-TV exerted every effort, throughout the en-

tire period that it was on air, to gain cable carriage

from the approximately 82 households within it’s

grade B contour but was never able to clear car-

riage on more than 12 systems representing only

approximately 48,000 TV households. As a result,

the advertising community within that area consid-

ered the station ‘invisible’ and a poor advertising

investment.

The station’s technical facility included a 1600 foot

tower and 2% million watt transmitter so that

WCOM-TV could to provide service to a number

of smaller communities in Central Ohio hat do not

receive local programming and news attention from

the stations in the larger adjacent markets of Colum-

bus and Cleveland. We saw a tremendous oppor-

tunity to provide local service to, at minimum, the

approximately 300,000 homes in these smaller com-

munities who, additionally, are not provided local

service from the approximately 70 cable systems

‘serving’ this same area.

During the approximately 16 months the station

remained on the air, absolutely every cable operator

within 50 miles of our city of license was contacted

(begged) to carry the station. We had worked hard

to assure that virtually none of the programming

carried by WCOM-TV was duplicated by stations

in either of Cleveland or Columbus so WCOM-TV

would be considered totally unique.

1578

Unable to clear but a fraction of the cable systems

in the area, the station finally ‘bled’ to death. The

station’s primary service area is approximately 70%

cable penetrated and, as noted in the Second Further

Notice, cable subscribers do not have antennas with

which to watch over-the-air TV. WCOM-TV was,

therefore, effectively invisible, and unable, as a re-

sult, to generate enough advertising support to keep

the station on the air.”

Source: Comments of George E. Coles, President,

WCOM-TYV, Columbus, Ohio, in MM Docket No. 90-4 at

1-3 (Sept. 24, 1991); CR VOL. LP, EXH. 61, CR

10764-65.

661. The record indicated that: “This problem has

become so widespread and so severe that it has effectively

halted the growth of free over-the-air broadcasting by

drying up sources of financing for new stations. More-

financial difficulties of the 23 Independent stations that

have filed for bankruptcy.” Source: Comments of the

Association of Independent Television Stations, Inc. in

M.M. Docket No. 90-4 (Sept. 25, 1991) (“Free Tele-

vision Under Siege,” INTV (May 1988); CR VOL. LK,

EXH. 21, CR 08547.

662. The record also indicated that. “For example,

WCVX-TV, Martha’s Vineyard, MA, was unable to se-

cure carriage to a substantial portion of its viewing area.

Ultimately, its largest creditor took over the station. The

single largest factor forcing the bank to foreclose was

the station’s inability to access the vast majority of cable

subscribers.” Source: Appendices to Testimony of James

B. Hedlund, President, Association of Independent Tele-

vision Stations, Inc. Before the Subcommittee on Tele-

communications & Finance, Committee on Energy & Com-

merce, U.S. House of Representatives at 16 n.19 (State-

ment of James H. Quello); CR VOL. I.M, EXH. 24, CR

09169.

2 —-— — -

1579

663. The following information was in the record:

“Moreover, local UHF independent stations are the most

vulnerable financially. Although INTV’s studies indicate

that a majority of UHF independents currently on the air

ultimately achieve profitability, a very substantial minority

are unprofitable. Indeed, according to data compiled by

NAB and summarized in a document to be appended to

NAB’s Comments in this proceeding, 58 of the 124 inde-

pendents (46.8%) responding to NAB’s 1985 financial

study reported pre-tax losses for 1984, and 55 percent

of the responding UHF independents reported pre-tax

losses. Thus, it is clear that the absence of any local

signal carriage regulation would impact most severely the

very stations which are least capable of incurring addi-

tional operating handicaps. As the cable operator in

Oxnard, California declared: ‘Without cable’s coopera-

tion, they won't survive.’” Source: Comments of Asso-

ciation of Independent Television Stations, Inc. in MM

Docket No. 85-349 at 80-81 (Jan. 29, 1986) (citing

Cable TV Franchising, Dec. 23, 1985 at 3 (reefrring to

KTIE)); CR VOL. L.BB, EXH. 162, CR 15908-09.

664. The record indicated that: “I am Leon A.

Crosby, the former licensee of WPTJ-TV (formerly

WFAT, WJNL, WARD) channel 19, Johnstown, Pennsyl-

vania. I owned and operated the station from February

1983 through the Fall of 1989. WFAT was literally

forced off the air by harsh treatment it received from

the cable systems located in the Johnstown-Altoona area.”

Source: Comments of Leon A. Crosby, Former licensee

of WPTJ-TV, Johnstown, PA in NM Docket No. 90-4 at

1 (Sept. 25, 1991); CR VOL. LP, EXH. 63, CR 10780.

665. The record indicated that: “Once dropped or

assigned to ‘channel Siberia,’ a station loses access to its

potential audience and never could even hope to re-enter

the video marketplace and compete. Indeed, in a time of

uncertainty about carriage status, dark stations are likely

1580

i k. When lack of carriage or channel Posi-

gy oe a mortal blow to a station, no rational

entrepreneur is at all likely to step in and attempt a

‘turnaround’ of the failing station.” Source: Comments

of the Association of Independent Television Stations,

Inc. in M.M. Docket No. 90-4 at 62 n.115 (Sept. 25,

1991); CR VOL. LK, EXH. 21, CR 08383.

. The record included the following information:

sei sign-on stations have met with a virtual stonewall

of cable resistance. The absence of must-carry regulations

has resulted in a dramatic increase in the number of un-

built television broadcast construction permits being sur-

rendered to the FCC. Appended hereto at Attachment

No. 4, is a copy of a letter notifying the FCC of the

cessation of operation of in Independent station because

of the inability to secure cable carriage.” Source: or

ings on Must Carry” at 72 (Statement of Preston Pad-

den); CR VOL. LF, EXH. 12, CR 04082.

667. The following information was in the record:

“Since the invalidation of the must-carry rules, a far

greater number of stations are failing and going silent, a

fact which the Commission has noted. Since the invalida-

tion of the must-carry rules, far fewer stations have been

built, because new stations, particularly, have no assur-

ance that they will be carried on any cable system or

given access to the viewers which new stations need to

build audience to survive. Since the invalidation of the

must-carry rules, many more broadcast construction per-

mits have been forfeited. In point of fact, a review of

the Commission’s records will show that the construc-

tion of new television stations has ground to a practical

halt. The lack of expansion of television service, in fact,

its contraction since the invalidation of must-carry rule,

is the direct result of the lack of cable carriage. Source:

Reply Comments of the Trinity Broadcasting Network in

MM Docket No. 90-4 at 5-6 (Oct. 25, 1991); CR VOL.

1.Q, EXH. 77, CR 11276-77.

1581

668. The record indicated that: “Given the marginal

financial position of many UHF independents, deletion

from cable or relocation to an undesirable cable channel

location is likely to cause some of these stations to go

‘dark.’ Likewise, financing for new UHFs is likely to be

severely limited in the absence of a cable Carriage agree-

ment.” Source: “Hearings on Competitive Problems” at

338 (Statement of Edward O. Fritts); CR VOL. LH,

EXH. 14, CR 05271.

669. The record also indicated that: “Indeed, thirteen

stations which commenced operation after January 1,

1988, have since left the air. The Commission staff has

predicted continued decline in the industry, especially

outside the top 10 markets and in the independent tele-

vision sector even in large markets.” Source: Reply

Comments of the Association of Independent Television

Stations, Inc. in MM Docket No. 90-4 at 18 (Oct. 25,

1991); CR VOL. I.Q, EXH. 81, CR 11376.

670. The record included the following: “The pre-

carious position in which many existing UHF independent

stations find themselves raises the very real possibility

that a significant number of this country’s independent

UHF television stations will not be able to survive cable

noncarriage or cable channel relocation. [Citing Pop

Goes the Stations’ Channels, January 1988, at 73.] Like-

wise, it has become much more difficult for prospective

independent UHF station owners to borrow the money

needed to start and operate a new station. Failure to

arrange for adequate cable carriage, usually means that

no financing is forthcoming.” Source: “Hearings on

Competitive Problems” at 333 (Statement of Edward O.

Fritts); CR VOL. I.H, EXH. 14, CR 05266.

671. The record indicated that: “Cable operators

now view new commercial Independent broadcasting sta-

tions as little more than unwanted competition for view-

ers’ eyeballs and advertisers’ dollars. As a consequence

all across the country new stations have met with a vir-

1582

tual stonewall of opposition from cable operators who

have refused to add these new stations to their service

offerings. For example, my company was forced to seek

the intervention of a member of Congress in order to

secure carriage of our Cleveland station on one area

cable system. Cable industry resistance has contributed

significantly to the bankruptcy of 23 new Independent

television stations.” Source: “Hearings on Competitive

Issues” at 547 (Statement of Milton Maltz); CR VOL.

L.C, EXH. 8, CR 01886.

672. The record also indicated that: “Twenty-three

commercial Independents are in various stages of bank-

ruptcy proceeding. While cable carriage practices were

not the sole cause of these bankruptcies, they certainly

were a contributing factor. Dozens of other stations have

been forced to cease operations or convert into ‘home

shopping’ outlets.” Source: “Hearings on Must Carry”

at 72 (Statement of Preston Padden); CR VOL. LF,

EXH. 12, CR 04082.

673. The record included the following information:

“WSIJT first came on the air in July 1991, as WRBV

(licensed to Renaissance Broadcasting Corp.). At

that time, most cable systems within the station’s

viewing area refused requests to carry under the

‘must carry rules.’ The station’s financia' resources

were depleted by the costs of construction delays and

normal start-up expenses; it had no resources to

initiate and follow through on litigation to enforce

its cable carriage rights. The station entered receiv-

ership (and eventually bankruptcy) on December 4,

1981. The bankruptcy trustee, seeking to preserve

the station’s operation for the benefit of New Jersey

and the City of Vineland, expended large sums of

money to litigate with the cable systems. Such large

systems as NYT Cable (100,000-+- subscribers),

Atlantic Coast TY Cable (15,000+ subscribers)

and Crosswicks Industries (12,000 subscribers) were

1583

required to add then-WRBV’s signal, and remaining

cable systems not specifically mentioned in that pro-

ceeding quickly followed with carriage. The in-

essary audienec to permit it to run at an operating

profit during the bankruptcy period... . If WSJT

loses its current status of full carriage within its

specified zone, as defined by the ‘must carry’ rules,

I estimate an immediate loss of 50 per cent of

WSIJT’s advertising revenue. Such a loss would be

—_— ~~ dhe ¢- Jersey’s largest broadcast tele-

station, the only one serving the enti

southern half of the state.” ; E a

Source: Comments of the Motion Picture Association

of America, Inc. in MM Docket No. 85-349 at $4 6,8

(Jan. 9, 1986) (Affidavit of Brian Echert); CR VOL.

I.AA, EXH. 151, CR 15603-05.

674. The record also included information identifying

thirteen broadcast stations that went off the air between

January 1, 1988 and April 9, 1991. Source: Reply

Comments of the Association of Independent Television

Stations, Inc. in MM Docket No. 90-4 at 1 (Oct. 25,

1991) (Exhibit C); CR VOL. LS, EXH. 81, CR 11436.

675. The record indicated that:

“Another illustration of the effects of lack of cable

and is on the verge of converting its Chapter 11

reorganization into a Chapter 7 liquidation proceed-

ing. The conversion would result from the station’s

debt

located. Twenty-seven systems with 95% of the

cable subscribers in the market refuse to carry the

station. Consequently, the station has no access to

1584

nearly 50% of the households in the market. The

station finds advertisers reluctant to buy time on the

station because it is not carried on cable. The serv-

ice lost if the station fails will be significant. KFTH

is a Spanish-language station serving a large niche in

the market, which is 23% Hispanic. The station

broadcasts 18 hours of Spanish-language program-

ming seven days per week including six hours per

week of locally-produced programming. This service

will vanish from the market if the station is forced

into liquidation.”

Source: Reply Comments of the Association of Independ-

ert Television Stations, Inc. in MM Docket No. 90-4 at

17-18 (Oct. 25, 1991); CR VOL. LQ, EXH. 81, CR

11375-76.

676. The record indicated that: “Last year twenty-

three commercial Independents were in various stages of

bankruptcy proceedings. A recent survey conducted by

the INTV Journal found that 12 Independent stations

went off the air in 1989. While cable carriers practices

were not the sole cause of these bankruptcies, they cer-

taily were a major factor.” Source: “Hearings on Cable

Television Regulation” at 876 (Statement of James B.

Hedlund); VOL. LJ, EXH. 18, CR 07880.

677. The record included the following: “Independent

UHF television stations constitute the most vulnerable

class of over-the-air broadcast stations with respect to

cable non-carriage or relocation. This is not only due

to the reasons noted above (i.e., significant reduction in

viewership and subsequently advertising revenues expected

to result from noncarriage or unfavorable relocation), but

also because many of these stations are only marginally

profitable. During 1986, the average UHF independent

station lost $1.4 million dollars; 25 percent of these sta-

tions lost more than $2.5 million dollars and 50 percent

lost more than $1.2 million. According to one report, 20

independent television stations are currently under Chap-

1585

ter 11 protection.” Source: “Hearings on Competitive

Problems” at 332-333 (Statement of Edward O. Fritts)

(citing “Pop Goes the Stations”, Channels, Jan. 1988, at

73); CR VOL. LH, EXH. 14, CR 05265-66.

678. The record indicated that: “WAYK, Channel 56,

Melbourne, Florida, and WAYQ, channel 26, Daytona

Beach, began operations in March, 1986, and September,

1988, They are commonly-owned. In early

1990, the owners reported: ‘We are close to bankruptcy

and going dark . [W]e have not access to

Cablevision of central Florida, 170,000 subscribers in

Orlando, Orange, Seminole, and Osceola Counties. . . .

' part time now.’” Source: Comments of the

Association of Independent Television Stations, Inc. in

M.M. Docket No. 90-4 at 50 (Sept. 25, 1991); CR VOL.

I.K, EXH. 21, CR 08371.

679. The following information was in the record:

sion vacating the FCC's ‘must carry’ rules. From

the outset, the station was faced with a severe handi-

Sie, Cont of eas coy’ somes in the less of

Carriage on cable systems, representing xi-

mately 115,000 subscribers. Because Ay wee

cable operator in the area was doing a news pro-

gram and aggressively selling advertising at a very

low rate, they deemed it inappropriate to put WCVX

on their system.

To compound the economic woes of the station,

pea mand wey A: BoB adhe whos ae

dence of Boston I., thereby severely

efforts to sell national and region a edeioaes onl

impairing the stations ability to purchase first-rate

Broadcasters, Appendices, in MM Docket No. 89-600 at

1-2 (April 2, 1990) (Affidavit of Donald P. Moore);

CR VOL. LX, EXH. 119, CR 14288-89.

1587

attached hereto as Exhibit C. WPTJ went dark in mid-

1990 after being on the air continuously for 30 years!

The Johnstown-Altoona market is 80% cable households,

and the station reports it simply could not survive with-

out cable carriage.” Source: Reply Comments of the

Association of Independent Television Stations, Inc. in

MM Docket No. 90-4 at 16 n.18 (Oct. 25, 1991); CR

VOL. LQ, EXH. 81, CR 11374.

681. The record indicated that: “In the earlier paper,

we suggested that non-carriage could have a perilous im-

pact on certain broadcasters who were at that time facing

severe financial difficulties. This too has only increased

in its likelihood. Many stations, especially independent

stations, are losing considerable amounts of money. In

fact, in 1987, 20 independent station were under Chapter

11 bankruptcy protection.” Source: Comments of the

National Association of Broadcasters, Appendix Volume,

in MM Docket No. 88-138 at 1 (July 8, 1988); CR

VOL. LY, EXH. 128, CR 14982.

682. See also discussion of KTIE in Section VI.B

supra (“It is virtually impossible for a small, local TV

station to become a viable, profitable operation with such

a major portion of its market denied to it”); id. (“The

effects of cable non-carriage [on KTIE] have been deva-

stating. . . . We have been forced to invest additional

funds at the rate of $200,000 per month to keep KTIE

on the air. During the past ten months ended October 31,

111986, KTIE suffered losses of $1,900,000.”).

683. See also discussion of KWBI in Section VI.B

supra (indicating that “‘there is no other factor more

important to the viability of [KWBI] than cable carriage’

and that it is in a ‘survival mode’ and will probably go

dark if local carriage is not obtained in the next two

years.”””).

1588

5. Evidence That Regardless Of Whether A

Station Goes “Dark,” Loss Of Cable Car-

riage Substantially Diminishes The Sta-

tion’s Broadcasting Service To The Com-

munity.

684. The following information was in the record:

“When the ability of local television stations to be

and remain viable is threatened, the quality of local

merit programming—news, public affairs and infor-

mational programming—suffers. For example, at

WKPT-TV, Kingsport, Tennessee, an ABC affiliate,

the weekly cost of producing and airing 6% hours

of local news and public affairs is about the same as

the cost of syndicated programming for all other

non-network hours on the station. When revenues

decrease, items necessary to improve the quality of

local news—mobile satellite dishes, electronic news

gathering equipment, mobile radios, travel budget

for the news staff—must be cutback or eliminated.

This is because the cost of syndicated non-news pro-

gramming will remain the same, and costs can’t be

cut there short of turning the station off for periods

of time during the otherwise normal broadcast day.

Sure, local stations can maintain the quantity of local

news and public affairs—such stations can resort to

the ‘talking head in front of the blue curtain’ ap-

proach to local news. But, how does this serve the

public interest—presenting a newscast no one will

watch.

Therefore, the very essence of localism—the highest

quality local news and public affairs shows designed

for the local viewing areas—will suffer if the ability

of small-market television stations, and especially

small-market UHF television stations, to generate

revenues is impaired.”

1589

Source: Comments of Buffalo Broadcasting Company,

Inc. in MM Docket No. 85-349 at 4-5 (January 29,

1986); CR VOL. LGG, EXH. 211, CR 18289.

685. The record indicated that: “Particularly in a

context where nonbroadcast video services are proliferat-

ing and audiences are increasingly difficult to attract, a

broadcaster subjected to such cable practices will not in

the long run be able to produce or purchase the program-

ming needed to function as an effective competitor.”

Source: Comments of Chris-Craft Industries, Inc. in MM

Docket No. 90-4 at 19-20 (Sept. 25, 1991); CR VOL.

LQ, EXH. 74, CR 11248-49.

686. The record also indicated that: “For the most

part, the loss of revenues occasioned by lack of carriage

has its greatest impact on local news and public affairs

programming.” Source: Reply Comments of Telecom-

munications Research and Action Center in MM Docket

No. 90-4 at 3 (Oct. 25, 1991); CR VOL. LQ, EXH.

76, CR 11265.

687. The record indicated that: “It is estimated that

34.9% of a station’s expenses are for program and pro-

duction. NAB/BCFM 1991 Television Financial Report

at VII.” Source: A Report of the Register of Copyrights,

“The Cable and Satellite Carrier Compulsory Licenses:

An Overview and Analysis” at 53 n.84 (March 1992);

CR VOL. IM, EXH. 26, CR 09534.

688. The record included the following information:

“It is axiomatic that commercial television stations derive

their revenues from the sale of advertising, and that those

sales are a function of audience. It is also well established

that programming is generally a major—and often the

major—expense item for local stations; in 1984, for ex-

ample, on the average, stations spent 47.7 percent of

their revenues upon program production and acquisition.

[Citing NAB, 1985 Television Financial Report, at 6

(1985)] Local programming is costly, representing ap-

1590

proximately 29 percent of total expenses and 20.5 percent

of net revenues, on the average in 1984. [Citing id. at

40, 70].” Source: Comments of the National Association

of Broadcasters in MM Docket No. 85-349 at 34 (Jan.

29, 1986); CR VOL. I.BB, EXH. 165, CR 16192.

689. The record indicated that: “An indication of

the magnitude of these programming costs can be seen

from the 1984 NAB Financial Survey of all commercial

stations. From that survey, it was found that in 1983

the average (including affiliated and independent sta-

tions) amount spent on programming, production and

news was $3,444,600, or 46.8% of the total expenses for

the average station. For independent stations (both

UHF and VHF stations), the average amount spent for

these programming-related categories was $5,876,300, or

55.2% of total expenses.” Source: CRT Reform and

Compulsory Licenses: Hearings Before the Subcommittee

on Courts, Civil Liberties, and the Administration of Jus-

tice, House Committee on the Judiciary, 99th Cong., Ist

Sess. at 312 (June 19, 1985); CR VOL. I.B, EXH. 6,

CR 00900.

690. The record indicated that: “My revenue is solely

derived from my audience delivery. When I cannot reach

viewers because of cables placement of my signal, I lose

revenue. This will ultimately affect my ability to air qual-

ity programming that serves the public’s interest.” Source:

Statement of Harvey E. Cohen, President and General

Manager of WDZL, Channel 39, Miami, Florida, Before

the FCC, in MM Docket No. 89-600 at 3 (March 2,

1990); CR VOL. LR, EXH. 85, CR 11505.

691. The record also indicated: “WMFP signed on

the air in October 1987, while the FCC’s new must-carry

rules were still in effect. Prior to thier on-air date, the

Station sent letters to all 53 cable systems operating within

50 miles of Lawrence. However, as of mid-April 1988,

WMFP had achieved carriage on only three cable systems

in its market. The President of the station, Avi Nelson,

1591

observed that ‘. . . as a new local station, the cable situa-

tion has certainly been adverse for us. It has compro-

mised our ability to develop the new station, and it has

caused us to scale back our plans for programming, espe-

cially in the area of local programs.’” Source: Comments

of the Association of Independent Television Stations, Inc.

in M.M. Docket No. 90-4 at 19 (Sept. 25, 1991) (“Free

Television Under Siege,” INTV (May 1988); CR VOL.

I.K, EXH. 21, CR 08573.

692. The record included the following:

“When it signed on October 1985, KOOG became

only the second Independent station in the entire

Salt Lake City market. Despite a very respectable

program schedule, the station was unable to achieve

any cable carriage whatsoever. Virtually all of the

cable systems within 50 miles of Ogden are owned

by TCI.

During this period, TCI President John Malone

was qg/uoted in the press as having advised financial

analysts of his plans to create regional cable chan-

nels that would resemble Independent television sta-

tions. Dr. Malone was further quoted as stating that

his new cable channels would be most effective in

those regions where multiple over-the-air Independ-

ents were not well established. He specifically cited

the Rocky Mountain States as one such region.

Thus, TCI’s absolute refusal to carry KOOG had the

appearance of anti-competitive behavior.

KOOG’s owners and INTV spent a year begging

and cajoling TCI to give the station a chance. TCI

finally put KOOG on its Ogden system but refused

to add it to any of its big Salt Lake City area sys-

tems. Because the station was locked out of almost

all the cable homes in its market, its ratings were

poor and it was unable to meet the payment on its

programming contracts. As a result, KOOG affiliated

with Home Shopping Network for part of each day

1592

just to keep the lights on. TCI, which owns a com-

peting home shopping service, then used their format

change as a new excuse to deny KOOG carriage.”

Source: Comments of the Association of Independent

Television Stations, Inc. in M.M. Docket No. 90-4 at 4

(Sept. 25, 1991) (“Free Television Under Siege,” INTV

(May 1988); CR VOL. LK, EXH. 21, CR 08557.

693. The record also included:

“WYED-TV currently features ‘Home Shopping’ pro-

gramming, although its goal is to feature community

issue-oriented programming. For instance, WYED-

TV is currently looking for a sponsor for one seg-

ment of a new program entitled ‘Hometown, North

Carolina.” This particular segment features the city

of Goldsboro. WYED-TV is also in the process of

doing a segment featuring the town of Clayton.

Future segments featuring each of the towns within

WYED-TV’s service area are in the planning stages.

‘Home town North Carolina’ is an interview pro-

gram, featuring local political officials discussing the

past, present and future of the particular community.

WYED-TV also has plans to feature a program

entitled ‘Speak Out.’ During this program, local

political officials will discuss current community

issues.

WYED-TV has been denied carriage by all but one

cable system in its service area. In an attempt to

gain access to these cable systems, WYED-TV has

offered them local programming, such as ‘Hometown

North Carolina,’ at no charge, for carriage on the

cable system’s local access channels. Unfortunately,

not one of the nineteen cable systems has expressed

any interest. In fact, one cable system manager

stated to a principal of Group H, that his system

would carry WYED-TV only if the government or-

dered it to do so. Some of these cable systems, how-

1593

ever, are carrying the signals of broadcast stations

located hundreds of miles away from Goldsboro, in

another state. See Table 3, Appendix. [Cablevision

of Fayetteville, Fayetteville, NC, Essex Cable TV,

Franklin, NC] Clearly, a station located in Spartan-

burg, South Carolina, well over 200 miles away from

Goldsboro, North Carolina, will have very little in-

terest in addressing the needs of Goldsboro or any

of the communities in Wayne or Wilson counties.

WYED-TV’s inability to obtain carriage on all but

one cable system has made it practically impossible

to attract advertisers to sponsor its local programs.”

Source: Comments of Group H Broadcasting Corp. in

MM Docket No. 88-138 at 6-7 (July 8, 1988); CR VOL.

I.Z, EXH. 133, CR 15231-32.

694. The record indicated that:

“The deletion of WHMB from local cable systems

has resulted in station customers removing their ad-

vertising or paid programming, seeking to renegoti-

ate contracts, or refusing to purchase additional time

until the station is carried on cable. It has also

forced the cancellation of locally produced program-

ming specifically directed to communities in the sta-

tion’s service area. As a result of the dropped car-

riage it is no longer possible to obtain the advertising

revenue from these communities which is necessary

to support such programs.

WHMB devotes approximately twenty hours per

week to locally produced programming, including a

weekly thirty-minute public affairs program, a daily

broadcasts locally produced high school basketball,

football and soccer games, as well as local religious

programming. The station provides informational

programming during local emergencies, operates a

live, twenty-four hour prayer line which receives, in

1594

, more than 1,500 calls per month, including

audi $0 thirty potential suicides. In addition to its

local programming, WHMB also broadcasts family

entertainment and religious programming.

The $120,000 paid annually to Comcast for carriage

on its Indianapolis system deprives WHMB of those

funds and of its ability to provide more local pro-

gramming directed to Indianapolis and surrounding

communities.”

Source: Comments of LeSEA Broadcasting Corporation,

- in MM Docket No. 90-4 at 7-8 (Sept. 25, 1991); CR

VOL. LP, EXH. 65, CR 10835-36.

695. The record included the following information

about KWHE in Hawaii:

“KHWE, like the other LeSEA stations, offers a mix

of family entertainment, religious, and locally pro-

duced programming. KWHH is a satellite of KHWE,

rebroadcasting KWHE programming in its entirety,

but on a tape delayed basis. Approximately 40% of

the KWHE programming originates locally, with

about 25% religious programming, and the remain-

ing 15% public affairs, local soprts, and entertain-

ment. KWHE currently has an opportunity to enter

an agreement with two local universities to provide

evening sports programming, but to take advantage

of the opportunity must have access to the 83% of

television households in the Honolulu market which

subscribe to cable. Without access to these viewers,

KHWE cannot afford to provide this local program-

ming. The Honolulu system continues to refuse to

carry KWHE on anything other than a part-time

basis terminating at noon. The local sports program-

ming which KWHE broadcasts, and would like to

broadcast, competes directly with the Honolulu sys-

tems’ local sports carriage.”

1595

Source: Comments of LeSEA Broadcasting Corporation,

in MM Docket No. 90-4 at 17 (Sept. 25, 1991); CR

VOL. LP, EXH. 65, CR 10845.

696. The record indicated: “The loss of carriage on

the Centre Video system alone would devastate WPTT-

TV since the station would lose over half of its audience

in the Metro area. WPTT-TV’s ratings are a function of

the number of households its reaches. If the station can-

not reach a sizable number of households in its Metro

area, its ratings will plummet. Any decline in ratings

directly affects advertising revenues from national, re-

gional and local advertisers. Losses in revenues affect the

type and amounts of programming which WPTT-TV can

afford to provide or produce. Deletion of WPTT-TV’s

signal by Centre Video and/or other Metro area cable

systems, with a resulting loss of over half of the station’s

audience, will force WPTT-TV off the air due to eco-

nomic hardship within six to nine months of such dele-

tion.” Source: Comments of the National Association of

Broadcasters, Appendix Volume, in MM Docket No. 88-

138 at 2 (July 8, 1988) (Affidavit of Julian S. Smith);

CR VOL. LY, EXH. 128, CR 14725.

697. The record also indicated: “As noted in the

earlier paper, non-carriage of these financially strained

stations might put them over the edge. If carriage is not

guaranteed, they will lose a significant portion of their

audiences and subsequent revenues. If these stations do

not go off-air, they will certainly have to restrict the

amounts spent on programming. Both outcomes will seri-

ously affect the non-cabled households who do not pres-

ently have a variety of viewing options.” Source: Com-

ments of the National Association of Broadcasters,

Appendix Volume, in MM Docket No. 88-138 at 4

(July 8, 1988); CR VOL. LY, EXH. 128, CR 15014.

698. The following information is in the record:

“Moreover, not only do WYED-TV’s ratings affect the

1596

gramming. ‘Hometown North Carolina’ is a perfect ex-

ample of the problems WYED-TV faces regarding local

programming. WYED-TV has finished taping a segment

featuring the city of Goldsboro, however, it has been un-

able to obtain a sponsor. WYED-TY, therefore, is caught

in a ‘Catch-22-situation. WYED-TV cannot achieve good

ratings because its maximum share of the viewing and

audience is 47%. Consequently, it can neither obtain

advertising nor programming. This inability to provide

diverse programming results in even lower ratings, which

in turn make it even more difficult to obtain programming

and advertising. The data submitted paints a grim picture

for new facilities, such as WYED-TV.” Source: Com-

ments of Group H Broadcasting Corp. in MM Docket

No. 88-138 at 10 (July 8, 1988); CR VOL. 1.Z, EXH.

133, CR 15235.

699. The record also included the following informa-

tion about WCVX:

“The scenario described above may have a devastat-

ing impact on our ability to sustain meaningful, lo-

cally produced, quality programming. At present,

18 percent of our broadcast week is comprised of

rapidly. However, the revenue loss resulting from

Ae age On cable systems may delay or eliminate

objective. It may also force a review of

that programming already

is by nature cost and labor intensive."

Source: CRT Reform and Compulsory L

icenses: Heari

—- the Subcommittee on Courts, Civil Liberties, oa

Administration of Justice, House Committee on the

Judiciary, 99th Cong., Ist Sess. at 360-6

: 1d

1985); CR VOL. LB, EXH. 6, CR 61088-99. -

700. The record included the following: “Second

positioning a broadcaster to an unfavorable channel posi

on the cable system can have a significant impact on

the quality of the broadcaster's programming, which in

rar twee shandrine, Meh icy gun Since a television sta-

$ audience size dictates the amount it receives for its

sale of advertising, repositioning will reduce the broad-

Broadcasters in MM Docket No. 89-600 at 1 (April 2,

1990) (Appendix 1);

1990) ppendix I); CR VOL. LW, EXH. 118. CR

701. The record also included the following:

Sen. Gore: “I am informed that Channel

50 in Suf-

folk County, Long Island, provides an outstanding

program competing with the New York

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702. The record included the following information

located

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1598

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a local

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Source: oes mah Must Carry” at 112-13; CR VOL

LF, EXH. 12, CR 04122-23.

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[

know the cable penetration in the market and whether

the permittee had guarantees that the new station would

be carried on local cable systems. In the Roberts Broad-

casting case, even though its business plan demonstrated

strong abilities in management and programming, cable

carriage was so unpredictable that bank after bank re-

fused to extend construction financing. . . . Roberts

Shopping Network, Inc. and signed on last September.”

Source: Joint Reply Comments of Blackstar Communica-

tions, et al., in MM Docket No. 89-600 at 3-4 (Apr. 2,

1990); CR VOL. LX, EXH. 120, CR 14404-05.

709. The record also included the following informa-

tion about KWHD: “Distributors of syndicated barter

ness to carry KTFH-TV, even if paid to do so, is

resulting in much of Houston’s Spanish speaking

WHMB, which airs about twenty hours a week of

local programming, is unable to afford providing

additional local programming to Indianapolis resi-

dents because it must pay a local cable operator

$120,000 to get carriage. The residents of Kenosha,

Wisconsin, cannot get WHKE, the only station li-

censed to their community, which carries local sports

and other local events and public affairs

ming, on their own cable system. Moreover, all

Kenosha residents have suffered from WHKE’s hav-

ing discontinued its local news and daily talk shows

because of its inability to support production costs

in absence of local carriage. Viewers in Honolulu

are unable to enjoy evening sports provided by two

local universities because KWHE is unable to pro-

vide this programming in the absence of local car-

riage during the evening hours.”

Source: Reply Comments of the National Association

of Broadcasters in MM Docket No. 90-4 at 19-21 (Oc-

tober 25, 1991); CR VOL. LO, EXH. 80, CR 11348-

50.

1604

and resulting forced reductions in local news, public

affairs, and other public interest programs, the inability

of new stations to obtain financing to commence opera-

tions, and bankruptcy for existing stations.” Source:

“1992 House Report” at 51-52; CR VOL. L.A, EXH. 4,

CR 00430-31.

VI. THE CABLE INDUSTRY’S STATEMENTS

THAT MUST CARRY REQUIREMENTS

WERE IN THE PUBLIC INTEREST AND

WERE SUPPORTED BY CABLE.

712. Congress was told the following in testimony by

the cable industry's leading association: “Let me begin

by stating that NCTA supports Congressional enactment

of a constitutionally sound must carry law. We believe

cable system carriage of local broadcast stations benefits

those stations, benefits the cable operators, and—most

important—benefits the public.” Source: “Oversight

Hearings” at 8 (Statement of James P. Mooney); CR

VOL. LF, EXH. 12, CR 04018.

713. Similarly, another congressional committee was

informed by the NCTA that: “NCTA supports Con-

gressional enactment of a constitutionally sound must

carry law. We believe that carriage of local broadcast

stations by cable systems benefits these stations, cable

operators, and—most importantly—the public.” Source:

“Hearings on Cable Television Regulation (Part 2)” at

129 (Statement of James P. Mooney); CR VOL. LI.

EXH. 16, CR 06296.

714. The record indicated: “I believe cable must be

willing to adjust the rules of broadcasters-cable competi-

tion from time to time in recognition of changing realities

in the marketplace and in technology. Consequently, I

favor reimposition of ‘must carry’ rules and acceptance

of an ‘on-channel’ standard, where technically fcasible,

for broadcast placement on cable channel alignments.”

1605

Source: “Oversight Hearings” at 39 (Statement of John

Malone); CR VOL. LE, EXH. 10, CR 02763.

715. Congress was told: “I want to assure you that

Time Inc. is committed to the carriage of local broadcast

signals and strongly supports NCTA’s current efforts to

negotiate a statutory embodiment of must-carry.” Source:

“Hearings on Competitive Problems” at 157 (Statement

of Gerald M. Levin); CR VOL. LH, EXH. 14, CR

05090.

716. The NCTA advised Congress that: “NCTA

agrees with this Committee’s desire to reinstate must

carry... .” Source: “Oversight Hearings” at 15 (State-

ment of James P. Mooney); CR VOL. I.F, EXH. 11, CR

03461.

717. Congress was also told that: “(T]he cable in-

dustry for five years consistently held itself out as ready

and willing to work with the principal representatives of

the broadcast industry to produce reasonable must carry

rules that would not unduly burden the rights of cable

Source: “Hearings on Cable Television Regulation” at

806-07 (Statement of James P. Mooney); CR VOL. LJ.

EXH. 18, CR 07810-11.

IX. EVIDENCE THAT THE MUST CARRY RE.

QUIREMENTS CONGRESS CHOSE TO IM-

POSE WERE BETTER CALCULATED TO

ACHIEVE ITS OBJECTIVES THAN ALTER-

NATIVE REGULATORY APPROACHES.

A. Evidence That The Use Of A/B Switches Is

Not A Realistic Alternative.

1. The Cable Industry, As Well As The

Broadcast Industry, Has Recognized That

A/B Switches Are Not A Workable Or

Appropriate Solution.

718. The following research by the NCTA’s Engineer-

ing Committee was in the record:

1606

“NCTA’s study also indicates that the mandatory

universal installation of A/B switches pursuant to

the Commission’s rule will create significant tech-

nical problems for cable subscribers and the general

public. Most seriously, the study suggests that wide-

spread installation of switches is likely to result in

increased signal leakage. In particular, according to

the study, it can be expected that in many cases

switches sent to subscribers for self-installation will

(notwithstanding the instructions sent with the

switch) be connected incorrectly. As a result, cable

signals may be radiated over the subscriber’s antenna

at high gain, threatening harmful interference with

other services, including those serving commercial

aviation. Another switch-related problem identified

by the NCTA study involves the deterioration of the

signals received by cable subscribers. Many cable

subscribers will find that they suffer significant signal

quality degradation due to poor isolation between

the ‘A’ and ‘B’ sides of their switches. Finally, in

a growing number of cases, compliance with the

Commission’s A/B switch rule will inconvenience

cable subscribers by rendering ineffective certain

features of their television sets, VCRs, and cable con-

verters. The Commission observes that these prob-

lems can be overcome by ‘minor’ equipment modifi-

cations and by an increase in the availability of sets

with built-in switches. Report and Order, paras.

166-67. In fact, however, the development of read-

ily available solutions to the technical problems de-

scribed does not appear imminent. Although elec-

tronic switches, such as those occasionally built into

top-of-the line television receivers and cable con-

verters, do not suffer from some of the technical

drawbacks of stand-alone mechanical switches, the

technologies utilized in an electronic switching device

are not, as a practical matter, transferable to a stand-

1607

alone device. Moreover, it is likely to take several

years before an apreciable number of consumers have

receivers and converters with built-in switching capa-

bility. In the meantime, cable operators and their

subscribers will have spent millions of dollars in-

stalling technically deficient switches.”

Source: Joint Petition for Reconsideration (filed by

NAB, NCTA and CATA) in MM Docket No. 85-349

at 6-8 (Dec. 17, 1986); CR VOL. IL.DD, EXH. 183, CR

16731-33.

719. The record included the following information:

“The NCTA Engineering Committee report indicates that

the financial impact of the Commission’s switch rule will

be prohibitively expensive. Focusing on the mandatory

and universal character of that rule, NCTA’s report con-

cludes that the cost of the switches and connecting hard-

ware alone will be nearly $1.4 billion. While NCTA did

not specifically calculate the additional labor expenses

related to the installation of switches and the additional

material expenses related to the purchase of antennas,

it is safe to say that the inclusion of these costs will in-

crease the total price tag of the new rulesby additional

billions of dollars.” Source: Joint Petition for Recon-

sideration (filed by NAB, NCTA and CATA) in MM

Docket No. 85-349 at 5-6 (Dec. 17, 1986); CR VOL.

I.DD, EXH. 183, CR 16730-31.

720. The record indicated: “According to new infor-

mation developed by NCTA, however, there are good

reasons to believe that the Commission is mistaken in

this regard. More specifically, immediately following the

announcement of the new rules last August, NCTA’s

Engineering Committee undertook an investigation of the

financial and technical ramifications of the specific A/B

switch approach adopted by the Commission. The results

of that investigation are contained in a detailed report,

a copy of which is attached hereto. That report demon-

1608

strates that compliance with the Commission’s A/B switch

will be prohibitively expensive; that currently available

switches will unavoidably cause serious technical prob-

lems and confuse the public; and, most importantly, that

the economic and technical costs of the Commission’s A/B

switch approach are not justifiable.” Source: Joint Peti-

tion for Reconsideration (filed by NAB, NCTA and

CATA) in MM Docket No. 85-349 at 5 (Dec. 17, 1986);

CR VOL. LDD, EXH. 183, CR 16730.

721. The record also indicated: “One point on which

the broadcasters and most cable operators agree is that

so-called ‘A/B switches’ are not a responsible, effective

or adequate means to assure consumer access to local

television stations. In fact, the National Cable Television

Association has prepared an exhaustive engineering an-

alysis which demonstrates that A/B switches frequently

fail, wear out quickly, and would pose a threat to both

consumer safety and air navigation (because of increased

signal leakage on aeronautical frequencies).” Source:

“Hearings on Must Carry” at 80 (Statement of Preston

Padden); CR VOL. I.F, EXH. 12, CR 04090.

722. The record indicated: “It is worth noting that

the A/B switch is not a substitute for cable access. While

both the Courts and the FCC appear to have embraced

this purported solution, the record evidence proves that

the A/B switch simply does not work. In fact, both the

broadcasting and cable industries agreed that the A/B

switch was not a viable solution to the problem. See

Joint Petition for Reconsideration by NAB, NCTA and

CATA filed in MM Docket No. 85-349 December 17,

1986; Joint Request for Stay Pending Reconsideration

filed by NAB, NCTA and CATA in MM Docket No.

85-349, December 17, 1986.” Source: “Hearings on

Cable Television Regulation” at 901 n.84 (Statement of

James B. Hedlund); CR VOL. 1.J, EXH. 18, CR 07905.

1609

2. Evidence That A/B Switches Are Not

Effective Without Antennas, And That

Most Cable Television Households Do Not

Have (And In Many Cases Are Not Per-

mitted To Have) Antennas Necessary To

Receive Broadcast Television Signals.

723. The record indicated: “Apart from the costs,

an A/B switch is only effective if it is connected to an

antenna. On numerous occasions INTV has provided

evidence that the A/B switch is not an effective alterna-

tive in areas where natural terrain or buildings impede

off-air reception. In addition, zoning regulations and

restrictive building covenants prevent the installation of

outdoor antennas. For many cable subscribers, an A/B

Swith is not a realistic alternative.” Source: Comments

of the Association of Independent Television Stations,

Inc. in M.M. Docket No. 90-4 at 120 (Sept. 25, 1991);

CR VOL. LK, EXH. 21, CR 08441.

724. The record included the following information:

“The purpose of the A/B switch rule is to ensure

that cable subscribers have access to off-air recep-

tion of local VHF signals not carried by the system.

However, if a subscriber does not have an antenna

for off-air reception, the A/B switch will be totally

superfluous. There are a number of situations in

which a subscriber might not have an antenna for

off-air VHF reception. For example, some communi-

ties have zoning regulations which, for aesthetic rea-

sons, bar the erection of external television antennas.

While set top antennas are, of course, commonplace

and readily available, some consumers may not ap-

Preciate the ‘clutter’ of yet more equipment attached

to their television sets or may feel that the off-air

reception provided by set top antennas is inadequate.

Other subscribers (such as apartment dwellers who

previously relied on MATV or SMATV), may never

have had an antenna of any kind.”

1610

Source: Joint Petition for Reconsideration (filed by NAB,

NCTA and CATA) in MM Docket No. 85-349 at 21-22

(Dec. 17, 1986) (Appendix A); CR VOL. LDD, EXH.

183, CR 16759-60.

725. The record indicated that:

“Most cable subscribers would not have access to

local broadcast signals if those signals were not car-

ried on local cable systems. A national survey of

cable households concerning antenna use and other

factors related to the availability of local broadcast

signals to cable subscribers revealed:

* Only about 1% of cable subscribers currently

have an outdoor antenna and an A-B switch;

* 98% of cable homes do not have roof top an-

tennas connected to their cable sets;

* Well over half of all cable subscribers—57 % —

have never had an outdoor antenna;

* 43% of cable subscribers who had an outdoor

antenna took it down because of their belief that

cable made them unnecessary;

* 18% of cable subscribers may not be able to have

an outdoor antenna because of local ordinances or

other reasons.”

Source; Cable Television Regulation (Part 2): Attach-

ments to NAB Testimony in Hearings Before the Subcom-

mittee on Telecommunications and Finance of the Com-

mittee on Energy and Commerce, 10\st Cong., 2d Sess.

(May 16, 1990) (Appendix H) (citing ELRA Group,

Inc., Jan. 28, 1986, “Outdoor Antennas, Reception of

Local Television Signals and Cable Television”); CR

VOL. L.L, EXH. 22, CR 08828.

726. The following information was in the record:

“Even if A/B switches worked, they would be of abso-

727. The record included the following information:

“In many communities served by cable, rooftop an-

tennas are prohibited or restricted by covenant, by-

law, condominium rule, lease provision or other re-

striction. In many instances calle subscribers would

be unable to install rooftop antennas for off-air re-

ception even if they wanted and could afford to do

so. Rooftop antennas may be prohibited altogether,

as they currently are in Burke Centre, Prince William

County, VA; Dunn Loring Village, Fairfax, VA;

St. Charles Communities, Charles County, MD; and

Mililani Town, Oahu, HA, to name but a few ex-

amples. Other communities require that prior writ-

ten approval be obtained from a board or committee,

as in Saddle Ridge, Silver Spring, MD; Fairlington

Villages, Arlington and Alexandria, VA: Dorsey's

Search Village, Howard County, MD; Oak Mills

Village, Howard County, MD; Hickory Ridge Vil-

lage, Howard County, MD; Kings Contrivance Vil-

lage Covenants, Howard County, MD; Owen Brown

Village, Howard County, MD; and Montgomery

Village, Montgomery County, MD. In some cases,

home-owners and tenants must show hardship or spe-

cial need. Many communities ‘strongly encourage’

the use of indoor antennas. In other locations, in-

stalling an antenna requires paying a fee and/or

going through the process of obtaining a permit

before-hand.”

1612

Source: Comments of the National Association of Broad-

casters in MM Docket No. 85-349 at 21-22 (Jan. 29,

1986); CR VOL. LBB, EXH. 165, CR 16181-82.

728. The record included the following:

antennas and transmission lines with time is substan-

tial and the effort needed to provide the ability to

switch from cable to antenna is often beyond the

capability of the householder. The consequence is

that few cable viewers have a viable alternative to

cable.

Source: Jules Cohen & Asociates, P.C., Consulting Elec-

tronics Engineers, “Engineering Statement on Behalf of

Television Operators’ Caucus,” submitted in MM Docket

No. 85-349 at 2; CR VOL. LAA, EXH. 158. CR

729. The record indicated that: “Recent research

conducted by the ELRA Group for NAB and detailed

in NAB Exhibit 1 reveals that hardly any cable subscrib-

difficult.” Source: Comments of the National Associa-

tion of Broadcasters in M MDocket No. 85-349 at ii

(Jan. 29, 1986); CR VOL. LBB, EXH. 165, CR 16157.

730. The record also indicated that:

is also greatly exaggerated by the cable industry.

First, fewer than 24 percent of the 610 cable sub-

scribers interviewed in the ELRA study currently

have an outdoor antenna in place, and most of these

antennas are more than 12 years old. Indeed, over

30 percent of the subscribers who had ever had an

outdoor antenna were told that upon subscribing to

cable they would no longer need an antenna, and

over 42 percent of subscribers who once had an an

tenna but removed it reported that they did so be-

cause cable service made the antenna unnecessary.”

Source: Comments of Association of Independent Tele-

vision Stations, Inc. in MM Docket No. 85-349 at 75-76

(Jan. 29, 1986); CR VOL. LBB, EXH. 162, CR

15903-04.

731. The record indicated that:

“In many communities served by cable, rooftop an-

tennas are prohibited or restricted by covenant, by-

law, condominium rule, lease provision or other re-

striction. See, comments of the lease provision or

other restriction. See, comment sof the National

Association of Broadcasters, MM Docket No. 85-

1614

349, January 29, 1986, pp. 21-23 (relevant pages

attached hereto as Appendix H-2). San Diego, Cali-

fornia, for example, 85% of all homes have been

built with zoning regulations, restrictions and/or

covenants that prohibit the ability of residents to put

up outside antennas.”

Source: Cable Television Regulation (Part 2): Attach-

ments to NAB Testimony in Hearings Before the Sub-

committee on Telecommunications and Finance of the

Committee on Energy and Commerce, 101st Cong., 2d

Sess., Appendix H at 1 n.2 (May 16, 1990) (“First

Amendment Analysis of a Must Carry Statute,” by P.

Cameron Devore); CR VOL. LL, EXH. 22, CR 98828.

732. The record included the following:

“For many subscribers, the best reception of over-

the-air signals will be obtained through the use of

roof-top antennas. However, most cable subscribers

do not own such antennas. In responce to PCTA’s

survey, Donald B. Herold of Millersburg TV Com-

pany reports that ‘maybe a dozen of our 3700 plus

subscribers may have antennas at their homes.’ Mr.

Herrold replied that most of the Millersburg sub-

scribers ‘were so glad to get rid of their antennas at

time of connection to our system that I don’t think

they would ever consider putting one back up, even

for a free A/B switch.” Thomas E. Freemen of

Mansfield Video Systems, Inc. of Mansfield, PA

reported that ‘a conservative estimate of 90% of

homes in our cabled area do not have a functional

UHF or VHF antenna.”

Source: Peittion for Reconsideration by Adelphia Com-

munications Corp. et al., in MM Docket No. 85-349 at

33 (Jan. 12, 1987); CR VOL. LDD, EXH. 184, CR

16898.

733. The record indicated that: “For the past fifteen

years, 85% of all homes built in our ADI area (San

1615

Diego) have been built with zoning regulations, restric-

tions and/or covenants that prohibit the ability of resi-

dents to put up outside antennas. With few exceptions

all utilities including electric and telephone lines are

placed underground in housing developments.” Source:

Comments of the National Association of Broadcasters,

Appendix Volume, in MM Docket No. 88-138 at 1 (July

8, 1988) (Letter from James M. Harmon); CR VOL.

I.Y, EXH. 128, CR 14964.

734. The record included the following research:

“Working in the Collin County clerk’s office, the

author reviewed all deed restrictions recorded in the

county between June , 1986 and March 1, 1987.

A total of 35 CC&R documents for residential devel-

opments were recorded during that period. Of the

35, 11 prohibited all outdoor antennas, 10 others

permitted one radio or television receiving antenna

while banning all other antennas, and 5 imposed

severe height limitations (e.g., no antenna more

than 5 feet above the roof line). The other nine-

most of them rural subdivisions with very large lots

far from the Dallas suburbs—had no antenna re-

strictions.”

Source: Comments of the American Radio Relay League,

Inc. in Response to Notice of Inquiry in MM 88-138

at 18 (July 8, 1988) (Statement of Dr. Wayne Over-

beck); CR VOL. I.Z, EXH. 132, CR 15225.

735. The record included the following information:

“A total of 18 new developments of single-family

homes or condominiums in Contra Costa County

were advertised in various Bay Area newspapers.

Deed restrictions applicable to all 18 developments

were inspected. Only 3 of the 18 permitted outdoor

antennas without restriction. In a fourth tract, each

homeowner was authorized to have a single outdoor

television antenna until cable television service be-

1616

came available; outdoor antennas were to be for-

bidden thereafter. Among the other 14 develop-

ments, 9 flatly prohibited all outdoor antennas while

the remaining 5 permitted outdoor antennas only

with express prior authorization of an architectural

committee or homeowner’s association governing

board. It was noted that not a single outdoor an-

tenna has been installed at any home in any of these

five developments, although all five included neigh-

borhoods that had been occupied for at least one

year.

Thus, outdoor antennas were effectively barred by

deed restrictions, in 14 of 18 new housing develop-

ments in Contra Costa County, and they were to be

prohibited in a 15th as soon as cable service became

available.”

Source: Comments of the American Radio Relay League,

Inc., in Response to Notice of Inquiry in MM 88-138

at 17 (July 8, 1988) (Statement of Dr. Wayne Over-

beck); CR VOL. 1.Z, EXH. 132, CR 15224.

3. Evidence That Signal Quality Issues Made

A/B Switches An Ineffective Alternative.

736. The following information was in the record:

“As shown by a recent study submitted with the Com-

ments of TOC in this proceeding, indoor antennas often

deliver reception which is markedly inferior to that pro-

vided by a cable system, even in such relatively flat and

obstruction-free locations as the Washington, D.C., metro-

politan area. The Commission has recognized that, as a

practical matter, a signal can be received only at a level

of quality that is inferior to that of other channels.”

Source: Comments of the National Association of Broad-

casters in MM Docket No. 85-349 at 13 (Jan. 29, 1986);

CR VOL. I.BB, EXH. 165, CR 16173.

737. The record also included the following informa-

tion:

1617

“In many American communities ther

off-air reception to switch to, due to ton hy be

terrain (even including foliage). There, cable deliv-

ery is the only way, as a practical matter, to receive

atin cn ee ne. This is true in large

poe nted by the City of New York in its

> 7 Re. 1985, amicus curiae brief in suport of

pendh, petition for writ of certiorari in the Quincy

‘Modern cable television systems are ca

. accomplishing many communications aoe.

= But their original function was, and a

undamental purpose remains, to facilitate the

a of local broadcast television signals.

many parts of the City, for example, and

particularly in the Borough of Manhattan—

where cable franchises were first granted by the

City in 1976—broadcast television reception is

often of poor and frequently unviewable quality

because of the ‘ i

tall belldiags ghosting’ effect resulting from

a the City first granted cable franchises

anhattan primarily to facilitate the

]

ee ea of local broadcast television

rey 3 of City of New York at 7. Outside cities, off-

pars of crane inpenlty i many

esapalee mountainous or

ere bya oh - i onan Aanteiation of Broad-

1986); CR VOL. LBB, EXH. 165, CR 6171.40"

738. The record included the following information:

“Engineering tests have shown

that even tho

switches designed by their manufacturers to seonide

1618

90 Db isolation frequently fall short of this level in

practice. Even if a new switch initially meets manu-

facturer specifications of 90 Db isolation, after as

little as six months of use, corrosion of terminating

resistors will likely degrade the switch’s isolation

performance. Thus, it appears that no currently

available A/B switch would provide over time the

necessary level of isolation to ensure that picture

quality is preserved.”

Source: Petition for Reconsideration by Adelphia Com-

munications Corp et al., in MM Docket No. 85-349 at

28-29 (Jan. 12, 1987); CR VOL. LDD, EXH. 184,

CR 16893-94.

739. The record indicated that: “Even in the small

number of cases where A/B switches will be useful to

subscribers few A/B switches will provide adequate isola-

tion of the over-the air and cable signals. Where isolation

is inadequate, signal quality will deteriorate and sub-

scribers will be dissatisfied.” Source: Petition for Re-

consideration by Adelphia Communications Corp et al.,

in MM Docket No. 85-349 at 27-28 (Jan. 12, 1987);

CR VOL. I.DD, EXH. 184 CR 16892-93.

740. The record indicated that: “In sum, any station

not carried by cable will be severely disadvantaged in

cable homes. If no ‘A/B switch’ is provided or used, the

station will lose all access to cable subscribers, and the

subscribers will lose all access to the station. In many

homes, the same tota loss of access would occur even

with an A/B switch, such reception will in most cases be

markedly inferior to that provided on cable channels.”

Source: Comments of the National Association of Broad-

casters, Appendix Volume, in MM Docket No. 88-138

at 32-33 (July 8, 1988) (Appendix G); CR VOL. LY,

EXH. 128, CR 14941-42.

741. The record also indicated that: “The significance

of these results is clear. While television viewers will

1619

watch an inferior off-air signal when no alternative is

available, viewers will Rot generally watch an inferior

signal when high quality signals are readily at hand.

This has been demonstrated repeatedly where UHF and

VHF stations offering substantially equivalent program-

ming compete in intermixed markets.” Source: Comments

of the National Assoication of Broadcasters, Appendix

Volume, in MM Docket No. 88-138 at 31 (July 8, 1988)

(Appendix G); CR VOL. LY, EXH. 128, CR 14940.

4. Evidence That Viewers In Cable House-

holds Are Not Willing To Use An A/B

Switch. |

742. The record indicated that: “According t

1986 ELRA study, 10% of cable homes had the —

bility to switching back and forth between cable and off-

air stations. However, only 15% of these households or

1.5% of all cable homes actually used the switch. The

recent 1991 survey found that only 16% of all cable

households have A/B switches that are connected to an

outside antenna, and only 6% of all cable households

have actually used the switch at least once. Thus, 94%

of all cable households do not use an A/B switch to

access local signals.” Source: Comments of the Associa-

tion of Independent Television tSations, Inc. in M.M.

Docket No. 90-4 at 121-22 n.212 (Sept. 25, 1991);

CR VOL. LK, EXH. 21, CR 08442-43,

743. The record included the following resul

I ) ts of th

study of A-B Switch Availability and Use.” by Dr. Mark

R. Fratrik, a Vice President and Economic at the Na-

tional Association of Broadcasters:

“In 1986, as part of the Interim Rules concerning

the carriage of local broadcast signals, the FCC

included a set of rules on the provision of A-B

switch by local cable systems. These rules included

the requirement that cable systems off i

aes | y s offer these switches

1620

This study examines the prevalence of these

switches sind cable households and the amount

that they are used for years after the rules came into

effect, during most of which time there has been no

must carry rules... .

.. « [O}f all cable households, only 16% have A-B

switches and are attached to an outside antenna.

With respect to all cable connected sets, only 11.7%

are attached to outside or set-top antennas and have

an A-B switch.

, to a sense of how much these switches

ata we tet cable subscribers who have the

- switch if they ever have used that switch. Only 38%

of that small group responded yes, with 58% saying

no. The group that have used the switch only corre-

sponds to 6% of all cable households.

. . . What these results show is simply that after

several years of a government mandated program of

providing A-B switches consumers and aa simul-

taneous education program on their use, there is

still not a significant number of A-B switches in use

in cable subscribing households.”

1621

casters. iWth the up to 104 channels available on

cable with superior reception, the subscriber's incen-

tive to install an A/B Switch to receive (if at all) an

off-the-air signal on an indoor antenna would be

negligible.”

Source: “Hearings on Competitive Issues” at 721-22

(Memorandum Re: Joint Comments of the Monopoly of

Cable Television Systems and the Demise of Independent

Free Television (March 17, 1988)); CR VOL. LC,

EXH. 8, CR 02060-61.

745. The record indicated that:

“While it is possible that a cable subscriber will re-

tain an operational antenna and ensure the installa-

tion of an A/B switch to select between an off-the-

air signal or cable signal, as a practical matter very

few subscribers will do so.

First, no cable systems routinely install A/B switches.

and subscribers themselves are not allowed to tamper

with a cable company installation. Second, having

committed themselves to a monthly charge to receive

a large number of TV channels, few persons will be

inclined to spend additional money to install, or re-

suurce: M. Fratrik, “A-B Switch Availability and Use,”

at 3-4 (Sept. 23, 1991), appended to Comments of the

National Association of Broadcasters in MM Dock. No.

90-4 (Sept. 25, 1991); CR VOL. LQ, EXH. 71, CR

11020-21.

744. The record included the following information:

tain in working order, another antenna system that

will receive a few additional signals off-the-air which

will probably be of significantly lesser picture quality.

Indeed, cable operators have been known to offer to

remove outside antennas as an inducement to new

subscribers.”

“While the FCC’s post-Quincy must-carry rules had

provided for an input selector switch (the 4, B

Switch) to permit cable subscribers to be able to

switch from cable to over-the-air television, this re-

Source: Comments of State Public Broadcasting Networks

in MM Docket No. 85-49 at 15-16 (Jan. 29, 1986);

CR VOL. LCC, EXH. 166, CR 16243-44.

746. The record included the following information:

quirement were resurrected in some manner as a

supplement or substitute for must-carry, it would

provide little, if any, practical relief to local broad-

“As we noted in our initial comments, cable sub-

scribers simply won't use the switch. The A/B

switch rules absolutely ignore consumer viewing

1622

tterns and behavior. ‘The growth of the cable

we a industry has led to a user-unfriendly en-

vironment for the average television viewer. A view-

ers living room will likely include a confusing array

of multiple wires and cable interconnecting his tele-

vision receiver, cable television converter, video-

cassette recorder, and possibly an outdoor antenna. . .

This uncoordinated and unstructured proliferation

of signal sources has led to a multiplicity of set-top

converters, other black boxes and interconnecting

cable whose instalaltion and use may be beyond the

ken of some engineers, let alone the average viewer

viewer.’ ”

iati Inde-

Source: Reply Comments of the Association of

pendent Television Stations, Inc. in MM Docket No. 90-4

at 40 (Oct. 25, 1991) (Quoting comments of Richard

S. Leghorn, in MM Docket No. 90-4, at 22-23); CR

VOL. 1.O, EXH. 81, CR 11398.

747. The record indicated that: “The realities of tele-

vision viewing in an age of remote controls makes switch-

ing an unlikely possibility. — Audiences tend to graze

through and witch those stations that are easily accessi-

ble.” Source: Comments of the Association of Independ-

ent Television Stations, Inc. in M.M. Docket No. 90-4 at

124 n.215 (Sept. 25, 1991); CR VOL. LK, EXH. 21,

CR 08445.

748. The record included the following:

“Moreover, the FCC cannot ignore the real behavior

of television viewers. In an age of remote controls,

the average television viewer remains content to

graze among the channels carried on the cable sys-

tem. The Commission can certainly criticize the

‘couch potato’ mentality of viewers. However, con-

sumer behavior is the essence of the television busi-

ness. The networks spend millions of dollars every

year to develop program lineups that will keep viewer

1623

‘on the couch’ and discourage them from switching

channels. Many of the Commission’s rules, such as

PTAR, are specifically designed to ensure that pro-

gramming appears at a time where there is high

television viewing.

Assuming arguendo that the A/B switch works tech-

nically, forcing television viewers to engage in ‘extra’

activity to access local broadcast signals has direct

competitive consequences. It creates a ‘screen bias’

for those broadcast stations and cable program serv-

ices that appear on the system.”

Source: Comments of the Association of Independent

Television Stations, Inc. in M.M. Docket No. 90-4 at

120-21 (Sept. 25, 1991); CR VOL. LK, EXH. 21, CR

08441-42.

749. The record indicated that: “At the beginning of

this debate, in 1986, NAB submitted evidence that only

1.5% of cable subscribers possessed and used an A/B

switch to retain access to off-air signals. [Citing ELRA

Group Inc. ‘Outdoor Antennas, Reception of Local Tele-

vision Signals and Cable Television,’ January 28, 1986.]

A recent survey conducted by NAB demonstrates that

94% of cable subscribers do not have and/or do not

use an A/B switch for the purpose of accessing local

broadcast signals.” Source: Comments of the Association

of Independent Television Stations, Inc. in M.M. Docket

No. 90-4 at 121-22 (Sept. 25, 1991) (citing NAB, ‘A-B

Switch Availability and Use’ September 23, 1991): CR

VOL. I.K, EXH. 21, CR 08442-43.

750. The record included the following:

“The existing state of affairs was accurately described

in the Comments of Richard Leghorn:

‘External switch devices installed by the cable oper-

ator or subscriber only add to the clutter of equip-

ment and cables attached to the viewer's television

receiver. . .

1624

Furthermore, by declining to require that switches

be built into receivers, the Commission failed to take

any action that would realistically lead to the wide-

spread adoption and use of such switches. Little has

been accomplished by the current notice requirement.

Predictably, few subscribers read these notices and

fewer still understand them and have a switch in-

stalled.’ ”

Source: Reply Comments of the Association of Inde-

pendent Television Stations, Inc. in MM Docket No, 90-4

at 39-40 (Oct. 25, 1991) (citing Comments of Richard

S. Leghorn at 22-23); CR VOL. 1.0, EXH. 81, CR

11397-98.

5. Evidence That Installation And Mainte-

nance Of A/B Switches Involves Significant

Expense.

751. The record included the following:

“I have reviewed data compiled by the Racine system

on usage of mechanical A/B switches during the

period from 1979 through 1985. During this period,

the annual mechanical A/B switch replacement rate

ranged from 40.8 percent (in 1979) to 25.6 percent

(in 1980). The average mechanical A/B switch

replacement rate for the entire period was 33.2 per-

cent. We estimate that two-thirds of these replace-

ments were due to switch failure.

The system used several different types of A/B

switches during the period. The price of these

switches, purchased in lots of 19,000 ranged from

$3.34 to $4.30, with an average cost of $3.80. The

system currently pays $4.30 per switch in lots of

10,000.

The majority of mechanical switches installed during

the period 1981-1985 were manufactured off-shore

and were of the ‘RCA’-type design. These switches,

1625

which are equipped with impact resistant cases

heavy-duty push button detent mechanisms, and gold-

plated contacts.

The most common A/B switch failure modes involve

mechanical malfunction leading to intermittent oper-

ation. Switch failure is by far the largest cause of

service disruptions. We estimate the cost of a service

call to replace an A/B switch to be $20.00.”

Source: Joint Petition for Reconsideration (filed

. NAB,

NCTA and CATA) in MM Docket No. 13.368 1-2

(Dec. 17, 1986) (Appendix A, Attachment 1, Affidavit

of Nicholas E. Worth); CR V

hepa ) OL. L.DD, EXH. 183, CR

752. The record included the following:

“I have examined A/B switch usa

ge by the Na

system between January 1981 and August 1986.

ry - that period, the system had an average of

, subscriber sets in use with A/B switches.

ggg 4,200 A/B switches were replaced

ually, representing about 27 in-

stalled subscriber i oo

The failure mode requiring replacement f an

A/B

switch normally was intermittent contacts due to

corrosion or wear. The cost of a service call to

replace a malfunctionin itch j

$25.00. g swi is estimated at

It has been our experience that switches not on

result in additional costs due to failure, but also wm

the installation of the switch causes consumer con-

fusion and dissatisfaction, parti

me particularly where the sub-

Source: Joint Petition for Reconsideration, filed

. by NAB,

NCTA and CATA) in MM Docket No. 85.349 at 1-2

(Dec. 17, 1986) (Appendix A, Attachment 1, Affidavit

1626

of Joseph E. Van Loan); CR VOL. LDD, EXH. 183,

CR 16768-69.

753. The record indicated that: “It is worth noting

that the incredible replacement costs for malfunctioning

A/B switches ($540 million) provides strong evidence

that the switches are technically unreliable.” Source:

Comments of the Association of Independent Television

Stations, Inc. in M.M. Docket No. 90-4 at 117 n.207

(Sept. 25, 1991); CR VOL. LK, EXH. 21, CR 08438.

754. The record indicated that:

“Although the wide range of possible instalaltion

scenarios makes cost estimates necessarily imprecise,

the Engineering Committee anticipates that, in most

instances, the equipment expense of complying with

the A/B switch rule will be at least $5.00 per sub-

scriber set, with the cost reaching $10.00 or more in

a growing number of cases. On an industry-wide

basis, the Committee projects that the capital ex-

pense of the installation of A/B switches in new and

existing subscriber homes will exceed $860 million

dollars over the next five years.”

Source: Joint Petition for Reconsideration (filed by NAB,

NCTA and CATA) in MM Docket No. 85-349 at 2-3

(Dec. 17, 1986) (Appendix A, “The A/B Switch Re-

quirement: A Report by the NCTA Engineering Commit-

tee); CR VOL. I.DD, EXH. 183, CR 16740-41.

755. The record included the following: “The suscepti-

bility of switches to failure will do more than create a

mere inconvenience for cable subscribers; it will increase

the total capital cost involved in complying with the A/B

switch rule to nearly $1.4 billion dollars during the next

five years. Switch failures also will lead to an upsurge

in the number of customer service calls. The cost of

these service calls (at between $20.00 and $30.00 each)

will add billions of dollars to the overall financial burden

attributable to the A/B switch rule.” Source: Joint Peti-

1627

tion for Reconsideration (filed by NAB, NCTA and

CATA) in MM Docket No. 85-349 at 3 (Dec. 17, 1986)

NCTA Engineering Committee); f

EXH. 183, CR 16741. 9 yee

757. The record also included the following cost

projections:

estimated by the National Cable Television Associa-

tion’s Engineering Committee. The NCTA estimated

hardawre cost (i.e., the cost of the switch

1628

expenses associated with the A/B switch. NCTA

estimates that capital costs associated with replacing

defective A/B switches would be about $540 mil-

lion over the next five years. Furthermore, NCTA

states that the cost of service calls (estimated at be-

tween $20 and $30 per call) would add billions of

dollars to the overall cost attributable to an A/B

switch.”

Sess. at 49 (May 16, 1990) (Economic Appendix to

Reply Comments); CR VOL. LK, EXH. 22, CR 08951.

6. Evidence Of Serious Technical Problems

Associated With A/B Switches.

758. The record indicated that:

“A/B switches will not operate without great diffi-

culty with an increasing number of television receiv-

ers. Exhibit 3 to these Comments is the technical

analysis of NAB engineer Ralph Justus detailing the

problem of the incompatibility of A/B switches and

‘cable ready sets,’ which during the first half of 1985

accounted for 65 percent of all color television re-

ceivers sold in the United States. Exhibit 3 details

the multiple switchings, connections and reconnec-

tions that cable-ready set viewers would have to un-

dertake the use an A/B switch, and indicates that no

remotely controlled add-on A/B switches are cur-

rently available for any viewer, meaning a trip to

the set and back is require deach time the switch is

used.”

Source: Comments of the National Association of Broad-

casters in MM Docket No. 85-349 at 23-24 (Jan. 29,

1986); CR VOL. LBB, EXH. 165, CR 16183-84.

1629

759. The record also indicated that:

“Moreover, if the subscriber owns a newer ‘cable-

ready’ television receiver, he cannot bypass the ca

system to tune into local stations without additional

and highly cumbersome adjustments. As explained

in the attached affidavit of NAB telecommunications

engineer Edmund A. Williams, cable-ready sets have

become the choice of buyers of new television sets.

The percentage of such new set sales rose from

45.6% in 1982 to 56.8% (9.6 million units) in

1984. These cable-ready or cable compatible tele-

vision receivers, employing common UHF/VHF

coaxial input, require as many as three separate

switch actions by the television viewer to go from

the cable mode to the off-air, antenna-connected

mode of operation.”

Source: Comments of Association of Independent Tele-

vision Stations, Inc. in MM Docket No. 85-349 at 73

(Jan. 29, 1986); CR VOL. LBB, EXH. 162, CR 15901.

760. The following information was in the record:

“‘Cable ready’ sets require the use of a special

switch to go from cable mode to off-the-air frequen-

cies mode; this switch is generally located on the

back of the receiver or inside a door which contains

seldom-used color adjustment or set-up controls, and

in some cases a special tool is required to operate the

switch (para. 5). In the cable mode the UHF an-

tenna input is rendered useless (para. 6). In some

sets, a Separate automatic frequency control (“AFC”)

switch must be employed along with the aforemen-

tioned special switch when adjusting for a change

from cable to normal receiver operation (para. 7).

When an A/B switch is used between cable TV

mode and an external antenna, as when a viewer is

watching one channel while simultaneously recording

another on a video-cassette recorder, ‘the viewer

1630

must, in addition to activating the A/B switch, also

activate the cable/normal switch and, in some cases,

the AFC switch as well’ (para. 9).”

Source: Comments of Association of Independent Tele-

vision Stations, Inc. in MM Docket No. 85-349 at 73-74

n.92 (Jan. 29, 1986); CR VOL. I.BB, EXH. 162, CR

15901-02.

761. The record indicated that:

“Mechanical, stand-alone A/B switches of the sort

that probably will be supplied in compliance with the

Commission’s rule are potentially ‘consumer-

unfriendly’ devices capable of creating serious tech-

nical problems. For example, the installation of such

switches is likely to result in increased signal degra-

dation and signal leakage. Such switches also may

inconvenience subscribers by rendering ineffective

certain features of their television sets and cable

converters. These problems flowing from the use of

mechanical switches will be aggravated by the man-

datory and virtually universal character of the Com-

mission’s A/B switch rule, which guarantees that

switches will be installed in many homes where they

are not needed and will not be properly used.

is there any readily available solution to these prob-

lems. Although electronic switches, such as those

being built into certain television sets and cable con-

verters, are not subject to many of the technical

flaws of mechanical switches, the built-in electronic

switches utilize technologies that are not readily

transferable to a stand-alone device.”

Source: Joint Petition for Reconsideration (filed by

NAB, NCTA and CATA) in MM Docket No, 85-349

at 3-4 (Dec. 17, 1986) (Appendix A, “The A/B

Switch Requirement: A Report by the NCTA Engineer-

ing Committee); CR VOL. I.DD, EXH. 183, CR 16741-

42.

1631

762. The record indicated that:

“I have reviewed the number of switches replaced in

the Castro Valley system during the period January

1985 through August 1986. During this period, the

average number of subscriber sets connected to the

system was 12,352. Based on the number of

switches purchased and the number of new installa-

tions and reconnects, I estimate that the number of

replacement switches installed was approximately

6,345, a 54 percent of the average sets

connected. an annual basis, this represents a

replacement rate of 32.4 percent.

The most commonly reported reason for replacin

A/B switches is intermittent contacts. Worn Salbches

also cause problems with premium channels utilizing

sync suppression encoding, resulting in service calls.”

Source: Joint Petition for Reconsideration (filed by

NAB, NCTA and CATA) in MM Docket No. 85-349

at 1-2 (Dec. 17, 1986) (Appendix A, Attachment 1,

Affidavit of Steve Hubbard); CR VOL. IL.DD, EXH. 183,

CR 16764-65.

763. The record included the following information:

“In summary. (1) a systematic approach to mati

cable TV with television receivers combined a

ability to receive off-air signals is exceedingly diffi-

cult to characterize; (2) there is rapidly increasing

trend toward using a common coaxial VHF/UHF

receiver antenna input; (3) the need for the con-

sumer to activate selector switches (often hard to

locate increases the difficulty of combining off-air

reception with cable hook-ups; (4) alternative input

or built-in A/B switches are available only on spe-

cial or top-of-the-line receivers; and (5) considerable

confusion exists not only with VCR tuning systems

but also with their hook-up arrangements with cable

TV systems and off-air antennas.”

1632

Source: Petition for Reconsideration of Association of

Independent Television Stations, Inc. in MM Docket No.

85-349 at 6-7 (Jan. 7, 1987) (Attachment 1, Affidavit

Edmond A. Williams); CR VOL. I.DD, EXH. 189, CR

17016-17.

764. The record also included evidence that:

“If an A/B switch is installed improperly or inse-

curely, cable signals may be radiated through the

subscriber’s over-the-air antenna into the atmosphere

at a high gain, violating the FCC’s signal leakage

rules and threatening interference with other serv-

ices, including air navigation safety and other crit-

ical communications. Furthermore, a noted by

Glenn W. Witner, Director of Technical Develop-

ment of SBC Cable Company in response to PCTA’s

survey, ‘if the switch becomes defective there is po-

tential for coupling the CATV signal into the sub-

scriber antenna even when wired properly.’

In addition, even if A/B switch installation is prop-

erly configured, loose fitting (which may be unavoid-

able over time) may cause a problem in this regard.

Daniel L. Wynen of American Television and Com-

munications Corporation’s BerksCable system in

Reading, PA had advised the Commission that this

problem poses ‘a high risk situation.’ See Letter

from Mr. Wynen to Mr. James C. McKinney dated

December 8; 1986.”

Source: Petition for Reconsideration by Adelphia Com-

munications Corp et al., in MM Docket No. 85-349 at

30 (Jan. 12, 1987); CR VOL. LDD, EXH. 184, CR

16895.

765. The record indicated that:

“A/B switches will also operate only with great dif-

ficulty with ‘cable ready sets’ which during the first

have of 1985 accounted for 65% of all color tele-

vision receivers sold in the United States.”

1633

Source: Reply Comments of the National Association of

Broadcasters in MM Docket No. 89-600 at 2 (April 2,

1990) (Appendix H); CR VOL. LW, EXH. 118, CR

766. The record included the following:

“Furthermore, serious questions have been raised as

to the effects of A/B selector switches on the tech-

nical quality of over-the-air, local television station

service. The Association of Maximum Service Tele-

casters, Inc. (“MST”) filed engineering studies in

MM dockets No. 85-349 and 87-107 addressing the

adverse effect of these switches on the quality of

broadcast television service. MST’s engineering

studies demonstrate that A/B switches have the po-

tential for creating serious interference to broadcast

television service.”

Source: Comments of Group H Broadcasting Corp. in

MM Docket No. 88-138 at 9 (July 8, 1988); CR VOL.

I.Z, EXH. 133, CR 15234.

767. The record also indicated that:

“With the increasing use of video cassette record-

ers, the problems associated with the installation of

A/B switches will become increasingly complex.

Cable operators are required to provide existing sub-

scribers with the option of self-installation. It can

reasonably be expected that many, if not most, sub-

scribers will attempt to install their own switches in

order to save some money, These complex installa-

tions may be difficult for many subscribers, and will

increase the risk of signal degradation and si

leakage (as demonstrated above). As tee

Ronald J. Risley of Harron Communications of Mill-

ville, NJ, ‘many of our subscribers use an A/B

switch for recording on their VCR’s and the addition

of another switch would only create a confusing

1634

situation which would generate a subscriber com-

plaint.’”

Source: Petition for Reconsideration by Adelphia Com-

munications Corp. et al., in MM Docket No. 85-349 at

32 (Jan. 12, 1987); CR VOL. LDD, EXH 184, CR

16897.

7. Further Evidence Confirming That A/B

Switch Requirements Are Not A Suitable

Alternative To Must Carry.

768. The record indicated that:

“Both NAB and the cable industry have documented

in FCC proceedings why the ‘A/B switch,’ a mech-

anism that ostensibly allows subscribers to select

between cable and over-the-air reception, is in fact

inadequate as a substitute for cable carriage of local

stations. For many homes, this switch will not de-

liver adequate off-air reception, because the over-the-

air signals are obstructed by tall buildings in urban

areas, hilly terrain, or even faliage. Many viewers

subscribe to cable in whole or in part to get better

reception of local television signals.

Even where over-the-air reception of local signals is

possible, nearly all viewers must use an outdoor an-

tenna with the switch. In most cases, indoor anten-

nas are inadequate.

NAB’s 1985 survey of cable subscribers revealed that

any cable subscribers had A/B switches. Only

1% of subscribers had an A/B switch and an out-

door antenna. Many subscribers no longer had ac- ~

cess to an outdoor antenna, either because they never

owned one, they were told by the cable system that

they no longer needed, one, or they (or their cable

system) removed the antenna once they subscribed.

In many communities, outdoor antennas are pro-

hibited or restricted, or viewers live in multi-unit

1635

buildings in which access to outdoor antennas is im-

possible or impractical. In addition, with increas-

ing use of VCRs and other equipment that attaches

to the television set, the installation and use of A/B

switching devices has become exceptionally confus-

ing and difficult.

In short, the overwhelming majority of cable sub-

scribers would have to invest or reinvest in a costly

and complex array of equipment to have access to

local stations not carried by cable. Once the equip-

ment was installed, cable subscribers would have to

use it correctly each time they wanted to view sta-

tions not carried on cable, rather than merely time

passively to whatever programming was on the cable.

Cable systems thus have effective gatekeeper control

over local stations’ availability to the same viewers

these stations are licensed to serve.”

Source: “Hearings on Must Carry” at 38-39 (Statement

of Edward O. Fritts); CR VOL. LC, EXH. 8, CR

04048-49.

769. The record included the following:

“In any event, approximately three-fourths of cable

homes have no access at all to any outdoor antenna,

new or old. Even if such cable subscribers were to

install A/B switches, they would be forced to use

some type of indoor antenna as an alterantive to

cable reception. These indoor antennas are typically

‘rabbit ears’ devices for VHF stations and simple

wire loops for UHF stations.

The signals provided to television receivers by such

indoor antennas are far weaker than the signals pro-

vided by a cable system. As explained in the Engi-

neering Station (pp. 5-6):

‘The best signals [from indoor antennas] would be

expected to be at least 10 db below that obtainable

from cable and the spread can be almost 30 db at

1636

the upper end of the UHF band. (Stated in terms of

power input comparison, the use of indoor antennas,

in an area where the nearby field strength would be

the equivalent of Grade A, would result in receiver

input ten to one thousand times lower than that to

be expected from a cable system. )’

Even these predicted signal levels for indoor an-

tennas assume unobstructed reception of a television

signal, a circumstance seldom obtaining in the real

world, where serious reception problems are fre-

quently created by terrain obstructions, buildings,

and foliage. Owing to these real world difficulties,

the signal strength actually delivered to a television

set by an indoor antenna is likely to be far lower

than that predicted on a theoretical basis. Moreover,

and often more seriously, multiple images (ghost-

ing) produced by reflected and diffracted signals

tend to impair indoor antenna reception to a very

significant degree. Engineering Statement, p. 6.”

Source: Comments of the National Association of Broad-

casters, Appendix Volume, in MM Docket No. 88-138

at 27-28 (July 8, 1988) (Letter from E.W. Tucker); CR

VOL. LY, EXH. 128, CR 14936-37.

770. The record included the following information

about A/B switches:

“Virtually no homes—certainly fewer than one per-

cent—have A/B switches that would enable them to

use off-the-air antennas, if they had them. I believe

that very few of WFAT’s listeners have even heard

of A/B switches, and, base don information and be-

lief, I do not believe that the cable television com-

panies make them aware that such devices exist.

Even if cable subscribers were aware of A/B

switches, relatively few would use them. A/B

switches are difficult for laymen to install, they won’t

do any good in most cases unless expensive receive

1637

antennas are also purchased and installed, and in

many, perhaps most, cases they still will do no good

because of terrain blocking of over-the-air broadcast

signals.”

Source: Comments of the National Association of Broad-

casters, Appendix Volume, in MM Docket No. 88-138

at 2-3 (July 8, 1988) (Affidavit of George Plenderleith) ;

CR VOL. LY, EXH. 128, CR 14716-17.

B. Evidence That Antitrust Litigation Is Not An

Efficient Means To Achieve The Objectives Of

The Must Carry Requirements.

771. The record included the following information

regarding litigation against the cable industry: “Self help

through private antitrust litigation is an imperfect and,

under current law, an uncertain remedy for us. At best

it is extremely costly and time consuming. On a case-by-

case basis, when adequately funded Wireless Cable oper-

ators have pursued this route, they have sometimes suc-

ceeded. For an entire industry to rise or fall on private

legal actions, however, is not much in the way of rational

public policy, especially when there is an immediate need

for increased competition in the marketplace.” Source:

“Hearings on Cable Television Regulation” at 300 (State-

ment of Robert Bilodequ); CR VOL. I.J, EXH. 18, CR

07305.

772. The record indicated that: “The important ques-

tion to ask is: if existing antitrust laws are adequate to

attach anti-competitive behavior, then why do we need

legislation? The answer is, that, if, as a matter of public

policy, you agree that there should be competition and

consumer choice in the marketplace across the country,

if you agree that there is a need for the different forms

of distribution to be successful and get out there in the

market, then it is not a very satisfactory solution to expect

individual, entrepreneurial, start-up companies, who are

relatively less well funded, to take on some of the coun-

1638

try’s largest companies on a case-by-case, market-by-

market basis in antitrust litigation. That’s why, although

legal remedies are available, they ar not really completely

satisfactory from an industry perspective, or indeed from

a public policy perspective.” Source: “Hearings on Cable

TV Consumer Protection Act of 1991” at 306 (State-

ment of Robert L. Schmidt); CR VOL. LI, EXH. 17,

CR 06764.

773. The record also indicated that: “Litigation is, of

course, an available remedy. But it is wholly unsuitable

to the national interest in developing competitive cable.

In most instances, resort to the judicial system is time

consuming, not promising, expensively wasteful of re-

sources that can be better employed in improving com-

petitive cable service offerings, and is likely to produce

spotty results.” Source: Comments of Competitive Cable

Association in MM Docket No. 89-600 at 15-16 (Feb.

27, 1990); CR VOL. LS, EXH. 94, CR 11801-02.

774. The record included the following: “Other

forums provide no meaningful remedies, as much as cable

interests would like to deflect adoption of new rules. Anti-

trust and unfair trade practice litigation is inordinately

expensive, especially for a station on the brink of failure

or just beginning operation.” Source: Reply Comments

of the Association of Independent Television Stations,

Inc. in MM Docket No. 90-4 at 30 (Oct. 25, 1991); CR

VOL. LQ, EXH. 81, CR 11388.

C. Evidence That Establishing Must Carry Re-

quirements For All Cable Systems Within A

Broadcast Station’s Area Of Dominant Influ-

ence (“ADI”) Is The Most Appropriate

Standard Of Must-Carry Protection For Com-

mercial Broadcasters.

775. The record included the following information:

“[U]sing mileage limits to determine which signals

are qualified for carriage may create anomalous re-

1639

sults. Depending on a station’s location within it

market, it will not be qualified for carriage on some

cable systems within its market and yet may be a

must carry signal on cable systems serving subscribers

in another market whose interests may not be served

by the television station’s programming.

Therefore, full power television stations should be

qualified for inclusion in the carriage pool on all

cable systems within their ADI.”

Source: Comments of the National Association of Broad-

casters on the Further Notice of Proposed Rule Making

in MM Docket No. 90-4 at 33 (Feb. 14, 1991); CR

VOL. L.O, EXH. 45, CR 10347.

776. The record included the following information:

“In establishing signal carriage rules, the Commis-

sion’s goal must be to reflect the realities of the tele-

vision market, thus ensuring that local broadcasters

will have access through cable to the same viewers

that they would reach over-the-air in the absence of

the cable systems. As a practical matter, the viewers

which a television station and its advertisers consider

to be in its market are those viewers in the television

station’s Arbitron Area of Dominant Influence

(ADI). The Commission in other contexts has

shown its appreciation for the importance of ADI

lines in defining ‘clevision markets. For example, in

calculating ‘national audience reach’ for application

of the multiple ownership rules, the Commission uses

the number of television households in a television

station’s ADI, recognizing that the ADI establishes

the market. 47 C.F.R. § 73.3555(d)(3)(i). The

Commission also uses ADI classification to determine

waivers of the radio-television cross-ownership rules

in the top 25 market. /d. n.7. Application of the

prime time access rule also turns on ADI definitions.

Id. § 73.658(k) n.1.”

1640

Source: Comments of the National Association of Broad-

casters on the Further Notice of Proposed Rule Making

in MM Docket No. 90-4 at 31-32 (Feb. 14, 1991); CR

VOL. LO, EXH. 45, CR 10345-46.

777. The record indicated that: “By focusing on the

location served by the cable system, ‘he proposed rules

eliminate any disputes arising from changes in cable sys-

tems’ headend locations. Determining the ADI in which

a cable system is located should be straightforward in

almost every instance. If there are cable systems which

cross ADI lines, the system should be deemed to be in

the ADI in which the majority of its subscribers are

located.” Source: Comments of the National Association

of Broadcasters on the Further Notice of Proposed Rule

Making in MM Docket No. 90-4 at 33 n.38 (Feb. 14,

1991); CR VOL. LO, EXH. 45, CR 10347.

778. The record included the following information on

changes in the television marketplace and the growing

importance of the Area of Dominant Influence as the

relevant area of competition (and the relevant area for

obtaining cable carriage):

“Increasingly, cable systems are joining interconnect

arrangements which allow them to sell advertising

across an entire ADI, duplicating local television sta-

tions, market reach. In 1986, the Cable Advertising

Bureau reported only 57 interconnect arrangements,

of which the largest two offered access to just over

one million subscribers. By 1990, there were 101

cable interconnects, the largest of which—the New

York Interconnect—claimed 3.1 million subscribers.

That represented 82 percent of all of the cable sub-

scribers in the New York ADI. Similarly, the Bay

Area Interconnect offers advertisers access to 73 per-

cent of all cable subscribers in the San Francisco

ADI. Advertisers are told that interconnects ‘offer

the efficiency of developing a multi-system buy, often

Source: Comments of the National Association of Broad-

casters on the Further Notice of Proposed Rule Making in

MM Docket No. 90-4 at 32-33 (Feb. 14, 1991); CR

VOL. LO, EXH. 45, CR 10346-47.

779. The record included the following: *

households. In addition, there is an annual update

of ADIs which reflects changes in television viewing.

There is little or no evidence that reliance on ADI

designations has created a problem in FCC enforce-

ment...

Two principal areas of concern appear to be

raised about ADI must carry provisions. The first

is that situations would be entitled to carriage where

they cannot be seen over the air; the second argu-

ment is that some stations would not be entitled to

carriage in areas where they can be received over the

air and have been traditionally viewed. Let us ad-

dress each of these in turn.

Although in the Western part of the country, some

ADIs stretch far beyond the reach of an ordinary

television signal, the choice to place counties into

a particular ADI is not an arbitrary one, but reflects

* Exhibit 30 is a memorandum from Stephen Jacobs (NAB Vice

1642

the actual historical viewing pattern in those

Thus, ADI boundaries, albeit imperfect, are the

most common definition of television markets. This

fact is reflected in the FCC’s multiple ownership

rules. One group owner is restricted to controlling

stations which serve no more than 25 percent of total

television audience. The FCC used the number of

television households in a station’s ADI as the bench-

mark for determining the population the station

serves.

Furthermore, the people in the remote parts of

the ADI are part of the Denver market for pro-

gramming and advertising purposes. When a Denver

station purchases a program, it pays for the right

to serve all of the households in the ADI. If the

cable system in part of the ADI cuts it off in favor

of a station from another market, part of the money

the station paid for its programs will be wasted.

Even more important, as an advertiser-supported

medium, the ability to sell access to a predictable

number of households is crucial to television stations’

viability.”

1643

tisers access to 3.1 million subscribers, 82 percent of

all cable households in the New York ADI. The

Cable Advertising Bureau promotes buys through

interconnects since they ‘offer the efficiency of de-

veloping a multi-system buy, often an enti

in which only one contract need be negotiated.’ A

must carry regime which ignores television market-

ing patterns will permit cable systems to organize

Source: Memorandum from S. Jacobs & J. Goodman to

Repr. Eckart at 4-5 (June 10, 1992); CR VOL. LN,

EXH. 30, CR 09713-14.

781. The record also indicated the following problem

with mileage based requirements:

“Another problem which is presented with mileage-

based must carry rules is establishing the precise

point to be measured to determine if a station is

within a cable system’s must carry complement. The

FCC’s short-lived interim must carry rules included

all cable systems whose headends were located within

50 miles of the reference point of a station’s com-

Source: Memorandum from S. Jacob & J. Goodman to munity of license. This proved difficult to enforce

Repr. J 10, 1992); CR VOL. LN, EXH. as many cable systems appear to have multiple head-

30 plhare 8 a , ends and some used this architecture to avoid signal

obligations. Last Con cable legislation

780. The record included the following information: cartiags oblige gress’ gi

sought to avoid this problem by requiring each cable

“Cable systems increasingly sell advertising in the

same way broadcasters do across entire television

markets. In some markets, one MSO operates vir-

tually all of the area cable systems and can easily

sell block insertions across all of its systems. In

markets where cable ownership is more diverse, the

cable industry is rapidly developing interconnects

which offer similar benefits to advertisers. In 1990,

there were 101 cable interconnects in operation. The

largest, the New York Interconnect, offers adver-

system to designate to the FCC a ‘principal head-

end’ to be used in carriage determinations. The FCC

was to be given authority to override designations

which were made to diminish stations’ must carry

rights.

Basing must carry obligations on ADI boarders

does away with this compliance problem. ADIs run

along county lines. Most cable systems are similarly

divided along municipal and county lines as they

1644

are franchised by local communities. If the cable

community is in a television station’s ADI, the sta-

tion will be entitled to signal carriage, regardless of

where the cable operator chooses to process signals.

Thus, the number of administrative disputes over

carriage will be fewer than under a 50-mile

standard.”

Source: Memorandum from S. Jacobs & J. Goodman to

Repr. Eckart at 6-7 (June 10, 1992); CR VOL. LN,

EXH. 30, CR 09715-16.

D. Evidence That Imposition Of A Viewing

Standard Would Be Inconsistent With Con-

gress’ Policy Objectives And Would Be

Inappropriate.

1. Evidence That Carriage Of All Local

Broadcast Stations Was Necessary To

Insure Financing For Non-Established

Stations.

782. See Sources cited in VII.A.3. supra.

2. Evidence That Carriage Of All Local

Broadcast Stations Was Necessary To

Insure The Continued Operation Of Those

Stations, And To Maximize Their Poten-

tial For Future Growth And Programming

Improvements.

783. See Sources cited in Section VII.B.1 & VII.B.5

supra.

3. Evidence That Restricting Must Carry Rights

To Stations Meeting A Specified Viewing

Standard Would Be Contrary To Its Obje-

ctives Of Maximizing Diversity And Protect-

ing Vulnerable Broadcast Stations.

784. The record included the following information

from Turner Broadcasting Systems, Inc. :

1645

“No Nexus With Those Likely to be Harmed.—Yet

another flaw in the new regulations is that they do

not reveal a link between mandatory carriage and

the financial health of the stations whose signals are

entitled to free carriage. Underlying the regulatory

scheme is the fear that, in the absence of must-carry

rules, local stations would be unable to survive in

the short term, five years, until the A/B switch edu-

cational program was effective. But the new stand-

ards would hzve the opposite effect. Other than new

UHF or non-commercial stations, only the most finan-

cially stable stations—those that satisfy the 2% and

5% viewership standards—would enjoy carriage

rights. Yet these are precisely the stations that are

already extensively viewed and are most likely to

continue to be viewed without mandatory carriage

regulations—and are the least at risk over the next

five years. “This blanket protection, by sweeping

even the most financially secure broadcaster under

the rules’ beneficent mantel, reaches well beyond the

rules’ asserted objective of assuring that the advent

of cable technology not undermine the financial via-

bility of community-oriented, free television.”

Source: Petition for Reconsideration or, in the Alternative,

Petition for Stay Pending Review, filed by Turner Broad-

casting Systems, Inc. in MM Docket No. 85-349 at 18

(Jan. 12, 1987); CR VOL. LDD, EXH. 194, CR 17119.

785. The record also included the following informa-

tion: A viewing standard causes “great harm to a group

of broadcast stations which can ill afford to bear any more

disadvantage—independent television stations. Such sta-

tions, attempting to provide local viewers in most markets

across the nation with alternative programming to that on

the national networks, are especially hard hit by the view-

ing standards set by the Commission.” Source: NITC’s

Petition for Reconsideration in MM Dock. No. 85-349 at

4-5 (Jan. 12, 1987); CR VOL. LDD; EXH. 187, CR

16961-52.

1646

4. Evidence That A Viewing Standard Would

Be Unworkable, Unfair, Expensive And Ad-

ministratively Burdensome.

786. The record included the following information:

“The FCC’s ‘Compromise’ must-carry rule incorpo-

rated a provision requiring stations to demonstrate

a 2% share of viewing in no-cable homes in order

to be qualified for carriage. Any similar provision

included in must-carry and channel position legisla-

tion must anticipate the increased fractionalization

and decreased audience shares likely to be found in

the video marketplace of the future.

As cable penetration continues to grow, finding a

representative sample of non-cable homes in which

to conduct ratings surveys will become increasingly

problematical and costly. For this reason, any audi-

ence requirements should be pegged to all homes and

not just non-cable homes.

In the video marketplace of the future, most con-

sumers will have access to 50 or more channels.

Moreover, all of those channels are likely to become

core competitive. In a 50 channel environment of

competitively equal channels, a 2% share would re-

flect an average audience size, not a substandard

audience size. For this reason, the 2% share require-

ment in the compromise rules shoul dnot be included

in new legislation.”

Source: “Hearings on Must Carry” at 87 (Statement of

Preston Padden); CR VOL. I.F, EXH. 12, CR 04097.

787. The record indicated that: “The diary has come

under increasing criticism in recent years as audiences

have been offered more and more channels and have, by

most accounts, failed to accurately record much of the

viewing; particularly of cable channels and independent

stations. The problem is exacerbated by the custom in

1647

many homes of one family member (usually the mother

filling out the diary for all. In the 1950’s and 1960’s the

diary was acceptable, industry executives say, because

there were only three main sources of viewing, ABC, CBS

and NBC. But now, with many more viewing sources,

the consensus is that the diary is an obsolete tool for

measuring demographics. To make matters worse, the

usable diary sample (known as the in-tab sample) has

been shrinking in recent years as viewing choices have

increased.” Source: Petition for Partial Reconsideration

of Spanish International Communications Corporation and

SIN, Inc. in MM Docket No. 85-349 (Jan. 12, 1987);

CR VOL. I.DD, EXH. 186, CR 16943.

788. NCTA also took the following position on the

record:

“NAB shows that, in some cases, the ratings of inde-

pendent television stations exceed the ratings of even

the most popular cable networks. Even where this

is the case, it does not necessarily follow that ‘[r]e-

placement of local over-the-air television stations on

cable systems with new cable program services, there-

fore, is not a response to consumer demand since

more viewers watch the over-the-air stations.” NAB

wrongly relies upon viewership shares as the sole

measure of consumer demand. Because they are able

to sell their programming directly to consumers

rather than only to advertisers, cable operators can

identify and response to true consumer demand—

including the intensity of demand—by providing the

programming that is most highly valued by consum-

ers. Ratings are the ultimate measure of whether a

program meets advertiser demand; they cannot fully

measure the extent to which a program meets con-

sumer demand.”

Source: Reply Comments of the NCTA, Inc. in MM

Dock. No. 90-4 at 20 (Oct. 25, 1991); CR. VOL. I.Q,

EXH. 78, CR 11314.

1648

ecord included the following information:

Prieta ae network research executives, including

CBS’s David Poltract, cite lower levels of ———

with Nielsen when it comes to having people oy tral

stalled, compared to Audiometers. And a ava a ~ “

rate within the people meter sample base. bn . >

they suggest, is a people meter base that less oe wad

reflects the viewing universe than the NTI - = “4

base. The ‘bias’ appears to be in favor of = a

with higher income and education levels, larger tami 4

and people who are generally more weit spot . Bn

‘high tech’ items as personal computers an vere ;

Rubens said that according to some people meter tes -

teenagers and children represent the biggest —_ y

problem. ‘No one has devised a meter that pty c “2

dren, 2-5, to push the buttons accurately, “ sai a

Source: Petition for Partial Reconsideration o a = .

International Communications Corporation and a _

in MM Docket No. 85-349 at 60 (Jan. 12, gdh

tachment 1); CR VOL. I.DD, EXH. 186, CR 1

_ The record also included the following: For

onl administration, stations should not be required ha

meet a viewing standard to become qualified. —_

standard requires broadcast stations to age re) ,

costly viewer surveys. In markets with high cable aod

tration, it is difficult to obtain useful survey data o ,

non-cable households which are hard to anges So

whose viewing habits may be unreprese ntative. ~ *

a viewing standard creates difficulties for new statio -

Stations that have begun operations since the demise :

the must carry rules have not had an opoprtunity in many

markets to establish an audience for their programming,

a point recognized by the Ce ee tat).

i carriage rules. See F.R. § 76. }).

— tr en at stations also may have difficulty o

ing accurate counts of their viewers.” Source: ee “

of the National Association of Broadcasters on gine

their Notice of Proposed Rule Making in MM e

1649

No. 90-4 at 30-31 (Feb. 14, 1991); CR VOL. 1.0, EXH.

45, CR 10344-45.

791. The record indicated that: “Arbitron warns users

that its methodology ‘may preclude full participation of

certain groups within the population such as . . . house-

holds whose primary language is other than English.’

Arbitron Television Market Report (Houston) (November

1990) at iv.” Source: Comments of the National Associ-

ation of Broadcasters on the Further Notice of Proposed

Rule Making in MM Docket No. 90-4 at 31 n.34 (Feb.

14, 1991); CR VOL. 1.0, EXH. 45, CR 10345.

792. The following information was in the record:

“Overcoming these problems with a viewing standard

would result in a complex standard difficult for cable

systems and broadcasters to apply in concrete situations.

That would increase the cost of administering signal car-

riage rules and would add to the burden on the Com-

mission which would be forced to resolve the inevitable

disputes about whether a particular station qualified for

an exception. If adequate channel capacity is reserved

for broadcast signals, therefore, the Commission should

not set a viewing standard as a condition for a station

being qualified for inclusion in the signal carriage pool.”

Source: Comments of the National Association of Broad-

casters on the Further Notice of Proposed Rule Making

in MM Docket No. 90-4 at 31 (Feb. 14, 1991); CR

VOL. 1.0, EXH. 45, CR 10345.

793. The record indicated: “Surveys required to estab-

lish ‘significantly viewed’ status can range from 9,000

to 15,000 dollars per community, depending upon cable

penetration.” Source: Comments of the National Associ-

ation of Broadcasters on the Further Notice of Proposed

Rule Making in MM Docket No. 90-4 at 30 n.32 (Feb.

14, 1991); CR VOL. I.0, EXH. 45, CR 10344.

794. The record included the following information:

“Cable systems enjoy a favored status over independ-

ent broadcasters in that under current law such sta-

1650

tions are not currently given exclusive rights against

cable networks for their programming in their own

markets. Cable systems may bring in distant, out-of-

market independent and network affiliated signals or

even many national non-broadcast cable networks

which carry some or even many national non-broad-

cast cable networks which carry some of the very

same programming provided by the local station.

This obviously handicaps the local independent sta-

tion in obtaining ratings, since the multiplicity of

cable signals reproducing its syndicated programs

fragments the audience. Indeed, such fragmentation

can cut significantly into independent broadcasters

share of the audience by providing much of the same

programming imported from other sources. This fur-

ther undercuts any possible rationale for a ratings

test for cable signal carriage.”

Source: NITC’s Petition for Reconsideration in MM Dock.

No. 85-349, at 5 (Jan. 12, 1987); CR. VOL. L.DD,

EXH. 187, CR 16952.

795. The record included the following information:

“In March 1966, Arbitron measured the audience

of San Antonio Licensee KWEX-TV, in two separate

studies, conducted simultaneously. One study com-

missioned on behalf of the station was a telephone

survey, which reported that the station reached an

average of 23,400 households in prime time, Mon-

day-Friday. This was ten times the audience reported

by Arbitron’s regular syndicated study, which used

the diary methodology.”

Source: Reply Comments of Spainsh International Com-

munications Corporation, Bahia De San Francisco Tele-

vision Company and the Seven Hills Television Company

in MM Docket No. 85-349 at 14-15 (March 21, 1986);

CR VOL. LCC, EXH. 168, CR 16308-09.

796. The record included the following:

1651

“The problems encountered by the diary method in

English-language television become absolutely over-

whelming when one examines the unique require-

ments of the Spanish market. To build a sample of

diary-keepers, the ratings services place telephone

calls to a universe of telephone homes and request

the respondent to participate in a television survey.

Since the call is initiated in English, Licensees believe

that Hispanic respondents are encouraged to ‘Think

English.” If the respondent does not speak English

and the interviewer does not speak Spanish, theo-

retically, a follow-up call is made by a Spanish-

speaking interviewer. Many Hispanics feel that such

call-backs in Spanish are demeaning. Clearly, this

does not inspire a desire to cooperate and, as later

discussed significantly lowers the response rate for

Spanish-speaking viewers.

Another complication in measuring the Spanish

market is that maintaining a diary, according to

Arbitron, requires a high school education. This re-

quirements eliminates less educated viewers generally,

and particularly handicaps research of Hispanic view-

ing since only 47% of Hispanic adults 16 or older

meet the ‘high school or better’ requirement for fill-

ing out a diary, compared to 70 percent for the total

United States population.”

Source: Reply Comments of Spanish International Com-

munications Crporation, Bahia De San Francisco Televi-

sion Company and the Seven Hills Television Company

in MM Docket No. 85-349, at 10 (March 21, 1986)

(citing Spanish USA-1984: A Study of the Hispanic

Market, Yankelovich, Skelly & White, Inc. at 7): CR

VOL. I.CC, EXH. 168, CR 16304.

797. The record included information that ratings data

“consistently and significantly understate[s] discrete view-

ing audiences. Their mission is to measure mass. homoge-

nized audiences which justify the major networks’ adver-

1652

tising rates. The rating services fail miserably to measure

minority, foreign language, educational, and other ‘non-

dominant’ viewing audiences.” Source: Reply Comments

of Spanish International Communications Corporation,

Bahia De San Francisco Television Company and the

Seven Hills Television Company in MM Docket No. 85-

349 at 10 (March 21, 1986); CR VOL. LCC, EXH.

168, CR 16299.

798. The following information was in the record:

“Furthermore, it is acknowledged by Arbitron that His-

panics do not return diaries in the same proportion as

respondents in the general market. Consequently, both

Arbitron and Nielsen have implemented special ‘ethnic

controls’ such as increased monetary compensation and

reminder telephone calls to encourage the response rate.

Despite these efforts, the Hispanic return rate is widely

believed to be only half the return rate of the general

market.” Source: Reply Comments of Spanish Interna-

tional Communications Corporation, Bahia De San Fran-

cisco Television Company and the Seven Hills Television

Company in MM Docket No. 85-349 at 11 (March 21,

1986): CR VOL. I.CC, EXH. 168, CR 16305.

799. The following information was in the record:

“Licensees are convinced by independent research

and their own extensive experience with the recog-

nized ratings services that the diary, and with the

possible exception of two bilingual markets, meter

methodologies used for English-language television

are ineffectual in the case of Spanish-language tele-

vision. While the industry has acknowledged that

the diary methodology is imperfect, it was believed

to be practical and extremely affordable and, conse-

quently, has long been a staple of Arbitron and

Nielsen. However, diary reliability has more recently

become the subject of considerable concern. The

significant increase in viewing choices over the past

25 years provided by cable, satelilte and low power

1653

television have rendered the diary an impractical and

cumbersome way to record viewing. Even the most

conscientious diary-keeper would suffer diary fatigue

in an effort to chronicle accurately his viewing of

- 4 myriad channels of programming available to

Source: Reply Comments of Spanish International Com-

munications Corporation, Bahia De San Francisco Tele-

vision Company and the Seven Hills Television Company

i MM Docket No. 85-349 at 8-9 (March 21, 1986); CR

VOL. LCC, EXH. 168, CR 16302-03.

5 800. The following information was in the record:

“Finally, and most importantly, the diary methodology

inaccurately measures Hispanic viewing because the sam-

ple frame from which diary homes are selected consists

entirely of telephone homes, listed and unlisted. Attempts

to place diaries in non-phone homes were abandoned

recently by Arbitron. Nielsen never made the effort. Arbi-

trarily omitting non-phone homes means that 33 percent

of all Hispanic homes are not represented in diary re-

search. The absence of a telephone in these homes is

not always due to economics. A study by Yankelovich,

Skelly & White determined that two-thirds of Hispanic

residents 16 and older were born outside of them United

States. Coming from countries where a telephone is not

an essential part of their culture, it is not always a pri-

ority for them in the United States.” Source: Reply Com-

ments of Spanish International Communications Corpo-

ration, Bahia De San Francisco Television Company and

Po og mage Company in MM Docket No.

arch 21, 1986); CR VOL. I.

168, CR 16305. —

801. The following information was in the record:

“In February 1975, Arbitron measured New York Spanish-

language audiences in two separate studies. One study,

commissioned on behalf of licensee WXTV, utilized tele-

phone surveys in conjunction with diaries. Thus study

1654

concluded that WXTV reached an average of 72000

homes in prime time. This was roughly triple the audience

reported by Arbitron’s simultaneous syndicated study,

using diaries.” Source: Reply Comments of Spanish Inter-

national Communications ion, Bahia De San

Francisco Television Company and the Seven Hills Tele-

vision Company in MM Docket No. 85-349 at 15 (March

21, 1986); CR VOL. LCC, EXH. 168, CR 16309.

802. The following information was in the record:

“Meanwhile, Arbitron and Nielsen continue to publish

data which drastically undermeasure Licensees’ audience.

For example, in fall of 1985, Arbitron reported that Los

Angeles Licensee KMEX-TV reached only 145,000 homes

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