In re Petition by VALLEY CABLEVISION CORP. For Authority Pursuant to section 74.1107 of the Rules To Operate an Experimental CATV System in the South Bend-Elkhart, Ind., Television Market (ARB 94)

File No. CATV 100-107

FEDERAL COMMUNICATIONS COMMISSION

11 F.C.C.2d 611; 12 Rad. Reg. 2d (P & F) 318

RELEASE-NUMBER: FCC 68-72

January 24, 1968 Adopted

ACTION:

MEMORANDUM OPINION AND ORDER

JUDGES:

BY THE COMMISSIONER: COMMISSIONERS BARTLEY, COX, AND JOHNSON CONCURRING AND ISSUING STATEMENTS; COMMISSIONERS LEE AND LOEVINGER DISSENTING AND ISSUING STATEMENTS.

OPINION:

[*611] 1. The Commission has before it for consideration a request by Valley Cablevision Corp. to conduct an experimental CATV operation in Goshen, Ind.; and supplemental filings by Valley.

2. The Valley Cablevision Corp. proposes to operate an experimental CATV system in Goshen, Ind., in the South Bend-Elkhart television market, approximately 12 miles south of Elkhart. The system is owned in equal parts by the licensees of the three commercial television stations in this market. Valley had on September 9, 1966, filed, and subsequently supplemented, a petition for waiver of section 74.1107 of the rules for permission to carry distant television signals from Chicago, Kalamazoo, and two MPATI stations. On October 10, 1967, Valley filed a letter proposing to construct the CATV system in Goshen; to solicit subscribers on a commercial basis; carry the signals indicated; and offer the traditional CATV information cablecasts. Valley proposed to make a comprehensive study after the system had operated for a sufficient period of time to determine probable penetration levels, probable ultimate penetration, viewing habits, etc., and to cooperate and make available to the Commission all the information gathered in order to assist the Commission in dtermining CATV penetration and impact. The experimental authorization was requested for a period of 5 years. Both the petition for waiver and the request for experimental authorization were unopposed.

3. The considerations which form the basis for our action today in Suburban Cable (FCC 68-71) are equally pertinent here. Additionally, we point out that the main thrust of our major market policy was to determine impact of CATV on independent UHF operations. In the South Bend-Elkhart market there has been no interest evidenced in activating an independent UHF station, and, as petitioners themselves [*612] point out, "the likelihood of a commercial television operation on channel 46 in South Bend within the foreseeable future is exceedingly remote." Thus, the information which might be obtained from the proposed experiment would not in any event be central to the principal basis of our major market policy. Accordingly, in view of the above, the request of Valley Cablevision for experimental authorization will be denied. Its petition, however, will be retained and will be treated as a section 74.1107 waiver request when conslidated consideration of pending market proposals is ripe.

Accordingly, it is ordered, That the request of Valley Cablevision Corp., filed on October 10, 1967, Is denied.

It is further ordered, That the petition of Valley Cablevision Corp. for waiver of section 74.1107 is retained with the same file number (CATV 100-107) and Will be processed as a petition for waiver of the hearing requirements of section 74.1107 of the rules.

FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.

CONCURBY: BARTLEY; COX; JOHNSON; LEE

CONCUR:

STATEMENT OF COMMISSIONER ROBERT T. BARTLEY

In separate actions, the Commission this day denied requests for experimental CATV operations in Philadelphia, Pa., and in Goshen, Ind.

For the reasons given below, I dissented to denying the Philadelphia request and concurred in denying the Goshen request.

My usual effort is toward a clear and concise dissent, but, here, we are doing so many wrong things for the wrong reasons that such a dissent won't write.

First, I believe that CATVs should be permitted to operate on a regular basis in Philadelphia -- as well as any other cities where there is a market for them. I have maintained that it is not sound public policy "to tell people they can't have broadcasts they want and are willing to pay for via CATV" and that "People willing to pay extra be allowed to bring in broadcasts which they would not otherwise receive or would not receive as well." (See my statement of March 22, 1966, before the House hearings on H.R. 13286.) Thus, since I would authorize CATV in Philadelphia on a regular basis, I would authorize it on an experimental basis as here requested, limited as the results might be in analytical value.

Furthermore, the Commission majority's contentions that "there may well be developments in the copyright field this year which might lead to a significantly different kind of operation than that proposed" and thus the CATV situation "may well shortly undergo substantial change" must mean something but I'm not sure what. Certainly a better word than "shortly" should be found if it is to be the basis of inaction. It is beginning to get a little trite. Also, what are the changes in the copyright situation that are expected to "lead to a significantly different kind of operation than that proposed"? The Fortnightly copyright case pending before the U.S. Supreme Court will not solve the problems of the future. The most it can do is indicate to Congress [*613] what the existing law is. But even if the case is decided "shortly" there is little basis for expectation that Congress will pass legislation "shortly." It is reasonable to assume that the Congress will provide an opportunity for cable television to exist and at the same time provide reasonable protection to composers, authors, and publishers. Experience shows that where charges are made for exposure of copyright material they are not so excessive as to "kill the goose that lays the golden egg." There is no justification for belief that copyright owners and CATV interests will be unable to reach an accommodation beneficial to them both. Indeed, past experience establishes that, in sometimes-bitter rate controversies between copyright owner representatives and diverse business such as theaters, picture show houses, hotels, cabarets, muzak, radio, and television, the final outcome has been "live and let live," and the result has been some profit for both. To conclude at this time that revisions in the copyright laws will result in "substantial" changes as regards cable television is, I think, incorrect.

My reasons for denying the Goshen request are that the experimental CATV operation would be carried on by a combine of the three existing television stations in Goshen and that such a combine raises substantial anticompetitive, if not antitrust, questions.

CONCURRING STATEMENT OF COMMISSIONER KENNETH A. COX

I concur in the result reached here. I agree that factual information in this field is desirable. See my concurring statement in Valley Cablevision Corp., decided concurrently herewith.

However, I do not think this test should be authorized. It would not develop information as to the impact of distant independent signals on local independent stations, since such a local outlet has not yet developed. In addition, it would apparently not provide concurrent data as to viewing in non-cable homes, and it is proposed for such a long period that it would not produce information in time to assist us in the decision of cases which must be resolved in the near future. And, of course, the underlying factor of probable significant change in the copyright situation noted in my statement in Valley Cablevision is equally important here.

CONCURRING OPINION OF COMMISSIONER NICHOLAS JOHNSON

CABLE TELEVISION EXPERIMENTATION (II) (IN RE PETITION BY VALLEY CABLEVISION CORP.)

Today the Commission refuses permission to Valley Cablevision Corp. to conduct a so-called "experimental" CATV system in Goshen, Ind., approximately 12 miles south of Elkhart in the South Bend-Elkhart television market. I concur in this decision.

I share Commissioner Loevinger's deep concern, expressed in his opinion dissenting to today's decision, that "in the CATV field the Commission has been acting on assumptions which are not only unsupported by data but which are untested by investigation." I have frequently urged the Commission to adopt experimentation as a mode [*614] of testing those assumptions. (See, e.g., my dissent to the Commission's rejection of a cable television experiment in the Philadelphia market, Suburban Cable TV Company, Inc., 9 F.C.C. 2d 1013, 1017 (1967), in which case we today have denied a petition for reconsideration.)

But, as persuasive as I find Commissioner Loevinger's citations, the proposal before us today is not really an experiment at all. It appears to be little more than a thinly disguised commercial venture, designed to make money in ways which are presently prohibited by FCC policy. Moreover, as Commissioner Bartley has noted, "such a combine raises substantial anticompetitive, if not antitrust, questions."

Present CATV policy, the core of which is an outright ban on the importation of signals from distant broadcast stations into the top 100 television markets, is based on fear that local independent (i.e., nonnetwork affiliated) UHF stations could not prosper or survive in the face of such competition. This Commission has an obligation, as I have said frequently, to explore the facts behind this fear -- to see if and to what extent it is justified. As I stated on a recent occasion. No one knows precisely what impact CATV could have on UHF development and UHF prosperity in the major markets. * * * It is quite likely that some stations would suffer from cable competition, although how many is anyone's guess. It is virtually certain that established VHF network outlets would have little trouble weathering the distant signal storms. * * * Is it really true that our television system could not endure half-pay and half-free? Would a mix of regional, national, and local program sources develop? "CATV: Promise and Peril," Saturday Review, November 11, 1967, pages 87, 88. These questions cannot be answered solely in the hearings prescribed by the Commission Second Report and Order. "* * * [Court] room tactics cannot inform a policymaking body about patterns of social behavior -- especially when the contestants have no data on which to base their arguments," Suburban Cable TV Co., Inc., 9 F.C.C. 2d at 1019 (dissenting opinion of Commissioner Johnson). There is simply no substitute for experience in trying to answer such questions. And experiments are the ideal way to collect such experience -- "If errors are to be made." to draw one more time on my Suburban Cable opinion, "how much better to make them for hundreds of viewers than for millions." Ibid.

So my commitment to experimentation in principle is clear, as, indeed, is my continued regret at the Commission's refusal to sanction Suburban Cable's particular proposal for a CATV experiment. I do not, however, regret the abortion of Valley Cablevision's proposal for the Elkhart-South Bend market.

In the first place, Goshen, Ind., is not an appropriate location for the testing of the major premises of the Second Report and Order. (The Philadelphia metropolitan area, by contrast, was itself cited in the Second Report as the most archetypal instance of the "most critical question posed" by the growing popularity of CATV -- the gravity of the danger posed by distant independent stations' signals to local independent broadcasters in a major metropolitan region.) Not only is it not part of one of the largest urban centers. It has no independent [*615] UHF broadcast stations operating in the market at all -- each has a network affiliation. Moreover, as Commissioner Lee notes, "Goshen is part of the South Bend-Elkhart market which is all UHF." [Emphasis added.] Thus, Goshen does not have any stations within the class of UHF's which are the special wards of Commission policy under the Second Report. (And, as the Commission's opinion quotes from petitioners' brief, "the likelihood of a commercial television operation on channel 46 in South Bend within the foreseeable future is exceedingly remote.") Whatever the proposal would tell us about the nature and potential of CATV in Goshen, it could tell us little of value about CATV policy for the Nation as a whole.

And the proposal would not even tell us much about Goshen. All the petitioners intend to do is, first, conduct a "study" of present viewing habits throughout the community. Since there are but three television stations in the area, all of them network affiliates, this survey will amount to nothing more than an intensive Nielsen survey.

Second, the petitioners will install a normal CATV operation, importing signals from a variety of distant locations verboten under the Second Report and Order. After 2 years (it was originally 5) petitioners will report on the penetration of the new system in the Goshen market -- i.e., they will conduct a new Nielsen-type survey which will show the extent and pace of CATV wooing of viewers from the three network broadcast stations.

Such a procedure will provide us with nothing more than bare statistics. It will tell us how many people watch CATV and, to some extent, how often. It will not tell us why the figures are precisely what they are -- why CATV's relative popularity vis-a-vis network competition is not more or less than it is. It will not tell us what particular factors about the situation – the nature of programming, the number of competing outlets, the kinds of audiences, the quality of broadcast signals -- are significant. There is no effort to provide one of the most fundamental features of such an experiment: A control group (as proposed in Philadelphia). There will be little basis for generalizing from the findings. Especially is this the case since, I repeat, this situation is simply not relevant to the principal problem with which the Second Report is concerned -- the potential threat posed by CATV to independent broadcasters, of which none are to be found in the area covered by the project.

Indeed, as Commissioner Cox points out in his concurring opinion, useful data may now be available, if the Commission chooses to acquire it, from existing commercial CATV operations, especially "grandfathered" systems which were importing distant signals into major markets before the Second Report went into effect. If it be the case, I would tend to agree with him that we should use existing systems for gathering experimental data rather than establishing new systems for these purposes.

And, along with Commissioner Bartley, I agree that it is this Commission's responsibility to take the initiative in analyzing the implications of cable television -- not to sit and do nothing in the vain hope copyright or other legislation will lift the burden of decision from our shoulders. Count decisions and legislation have not come [*616] "shortly." Whether or not they do, our responsibilities remain. After they do, many of the most important issues surrounding cable television will still be unresolved and we will still be responsible for their resolution.

Experiments should be an essential part of our effort to discharge that important responsibility. And it should be up to us, not individual cable televiion entrepreneurs, to define how such experiments should be constructed and conducted, and precisely what results we want them to achieve. The Philadelphia proposal might have provided an occasion for the Commission to undertake such an effort. For that reason I objected to its flat dismissal of the proposal of Suburban Cable. Valley Cablevision's proposal for Goshen, Ind., harbors no such potential. Hence, I concur in the Commission's decision to reject it.

SEPARATE OPINION OF COMMISSIONER LEE LOEVINGER REGARDING PROPOSED EXPERIMENTAL CATV OPERATIONS

The Commission has before it two proposals to authorize experimental operations of CATV systems which will be so conditioned as to gather and furnish to the Commission data regarding various aspects of CATV operation particularly related to actual and potential audience fragmentation and economic impact on television operations. Some review of the background may help to illuminate present positions on these matters.

In the CATV field the Commission has been acting on assumptions which are not only unsupported by data but which are untested by investigation. I have been protesting the Commission course on this ground since 1963.

In 1963 when the Commission instituted the proceedings that led to the present rules, I dissented on the grounds that the Commission should not "prejudge the outcome or assume that CATVs should be limited in their operation" prior to making any inquiry or receiving any data. Dissenting statement of Commissioner Loevinger in dockets Nos. 14895 and 15233, December 13, 1963, FCC 63-1128. At the same time I also said: "Limitations should not be imposed upon the operations of enterprises unless and until some need has been established that is related to the public interest. * * * In the absence of any evidence the presumption should be in favor of free and competitively untrammeled enterprise, rather than of regulation. I dissent from the Commission's proceeding upon the contrary assumption in regard to the establishment and operation of CATV systems." In re TV Cable of Austin, 1 R.R. 2d 587 591 (December 13, 1963).

[*617] In 1964 I again protested Commission action without data, saying, "* * * the Commission has not yet made any finding or determination as to the course it should follow generally with respect to CATVs, and, indeed, has no information on which to make such determination." In re Minnesota Microwave, 3 R.R.2d 692, 697, 699 (1964).

In 1965 the Commission proposed to extend its regulation of CATV from systems using microwave to all CATV systems, regardless of whether they used microwave. Regulation of CATV Systems -- Notice of Inquiry and Proposed Rulemaking, 38 FCC 683, 4 R.R. 2d 1679, 1725 (1965). As in 1963 and 1964, I called attention to the lack of factual basis for Commission action, saying:

"While I heartily agree that the Commission should conduct a sweeping inquiry into the role and scope of CATVs in the field of mass communications, it seems to me that the present inquiry is too little and too late. It is too little because it does not deal with fundamentals. * * * In any event, the present inquiry is too late because the Commission has already formed its opinion on this subject. I believe the Commission should make its investigation and conduct its inquiry before reaching its conclusions, rather than afterwards. " 38 FCC 749, 750.

In 1966 when the Commission adopted its present substantive rules regarding CATV, I concurred in the order, as a legislative compromise, but was at some pains to point out that the result was not supported by data or evidence. I specifically refused to join in the opinion, saying, "The opinion refers to little evidence and much of that is inconsistent, assumptions and speculation substitute for facts, the reasoning is circuitous and illogical, and the statement is so turgid and prolix that it does more to obscure than illuminate the subject." Regulation of CATV -- Second Report and Order, 2 FCC 2d 725, 819, 820 (1966).

In 1967, the CATV rules again came before the Commission on petitions for reconsideration and again I pointed out the lack of factual foundation. I said, inter alia, "The opinion, like those that preceded it, simply fails to come to grips within the issues of the facts and rests almost entirely on semantic confusion and superstition. * * * [The] present opinion has the form of a discussion of the merits but without factual or logical substance." Regulation of CATV -- Memorandum Opinion and Order, 6 FCC 2d 309, 330, 335, 339 (1967).

Later in 1967 the Commission was offered the opportunity to authorize an experimental CATV operation in Philadelphia which would have been specifically conditioned to provide data relating to the effects and consequences of CATV operation in a large market. The proposal was denied with no more justification than a casual statement that there was "the possibility of new important developments in the field. Suburban Cable TV Co., FCC 67-1030 (September 13, 1967). I joined with Commissioner Johnson in a dissenting opinion which said, inter alia: "What is needed are facts. * * * By denying this petition we serve no cause save ignorance, further denying ourselves the opportunity to obtain hard empirical data concerning one of the most vital issues before us. * * * As for deficiencies in the proposal, that may well be true. * * * However a final proposal might look, it is clear that some sort of empirical investigation is a prerequisite for rational policymaking for cable television." Ibid.

Now it is 1968 and the Commission is again offered the opportunity to secure some empirical data regarding the actual operation and effect [*618] of CATV systems. The proposed Philadelphia experiment has been redesigned to eliminate asserted deficiencies, to limit the time of operation, and to provide control data. The proposed Goshen experiment is in a smaller market, with fewer controls and fewer television stations. The objections urged against both proposals are, again, that the experiments are not entirely adequate, and that if we will just wait a little while longer new developments may change the circumstances.

It is true that the proposed experiments are not perfect or entirely rigorous from a scientific viewpoint. However, it is the action of the Commission itself which precludes greater adequacy or rigor. A truly adequate and rigorous experimental investigation would involve operating of CATV systems under varying conditions in a number of matched communities and excluding CATV from specified matched control communities. The proposed revised Philadelphia experiment does involve something very similar to this on a very limited scale. However, the Commission has been willing only to prohibit or exclude CATV in the larger communities and is unwilling to authorize or permit establishment of systems in communities and under circumstances that would provide scientifically valid comparisons. The proposed experiments are the best and most adequate that there is any chance the Commission might permit, and their deficiencies and inadequacies result from an accommodation to the regulatory requirements imposed by the Commission. In these circumstances, an objection to the imperfections of the proposals and an insistence on greater adequacy is simply a means of obstructing or preventing action to secure empirical data and serves "no cause save ignorance."

When we are confronted with the necessity of acting, as we are in this field, any data are better than no data. Even in carefully designed and rigorously controlled scientific experiments, conditions are seldom perfect and the results are seldom unequivocal. Particularly in social, political, and economic matters, we must seek the best data we can get in given circumstances and reach decisions in the light of available information when we act. To refuse to receive or consider information because it is incomplete or derived from imperfect sources is to reject the possibility of intelligent decision in human affairs, as it is humanly impossible to know all the facts or even all there is to know about any one fact. Wendell Johnson, "People in Quandaries," 95 (1946).

The objection that we should wait for a change in legal or political conditions before seeking data in this field is not persuasive in view of the Commission record of refusing to seek empirical data over the years. Furthermore, even if judicial or legislative action does establish different conditions than the present ones, there is no reason to anticipate that the Commission will not continue to confront many of the same questions it now faces. If its jurisdiction is established, limited, or expanded by legislative or judicial action, its need for information will be greater than it is now, and the time will be later. The clarification of the rules of copyright liability will not, by itself, directly affect any of the FCC CATV rules.

The Commission itself, defending its assertion of jurisdiction before the Supreme Court, confesses that it does not have adequate data on [*619] which to regulate CATVs and emphasizes that one of its principal purposes in asserting jurisdiction is to enable it to gather such data. The brief on behalf of the Commission states:

"But neither the Commission nor the industry has yet been able to predict what effect this new development will actually have on 'free,' off-the-air television. Recognizing that the growth of CATV, particularly in the large cities, poses substantial problems of considerable significance to the public interest which must be thoroughly explored, the Commission has asserted jurisdiction in a manner which will permit it to study in detail the potential impact of CATV in particular markets and to preserve the status quo while engaged in that task. * * * It was the Commission's purpose to assert jurisdiction over CATV systems, at a time when that assertion could be effective, to give it an opportunity to study the difficult questions of CATV's potential impact on local stations and on television broadcasting generally. * * * In short, the Commission simply determined that it had the duty to investigate fully the significance of CATV and determine what mode of regulation, if any, this new development in communications should be subject to in the future."

United States and F.C.C. v. Southwestern Cable Co., U.S. Sup. Ct., No. 363, October term 1967, brief for the U.S. and FCC, pages 24, 42, 43. Thus the Commission is in the position of arguing to the Supreme Court that jurisdiction over this entire field should be inferred from the general terms of the Communications Act so that the Commission may explore, "study" And "investigate fully" the facts, while simultaneously telling the industry that no useful purpose would be served by authorizing experimental operations proposed to provide just such study, exploration, and investigation of the facts.

In short, the Commission admits that it lacks data on this subject, pleads that it needs data on the subject, and continuously and adamantly refuses to permit data to be sought and secured in the only effective manner, by experiment and experience. While the proposals before us are imperfect, this is the inevitable result of the Commission's own actions, and these proposals are the best chance we now have to secure data concerning the effects of CATV operation. The results of the experiments might be incomplete or inconclusive, or even quite ambiguous. Obviously, no one can know what the results of the experiments will be until they have been conducted. We cannot know the facts until we look at them. The only rational course is to look at the facts when we can. The refusal to permit an empirical investigation of the crucial disputed facts underlying Commission action -- which results from the shifting majority vote on these two proposals -- seems to me to be rationally inexplicable and indefensible. I favor authorizing both proposed experiments and gathering all the data we can for whatever aid it may give in formulating future policy.

DISSENTBY: LEE

DISSENT:

DISSENTING STATEMENT OF COMMISSIONER ROBERT E. LEE

The experimental CATV proposal at Goshen, Ind., is before us for the first time. The CATV operation here would extend over a 5-year period. I believe that a shorter period of 2 years under proper conditions indicates promise of meaningful results. Goshen is part of the South Bend-Elkhart market which is all UHF.