I: Rural Roots And Slow Growth

Although cable television systems are now present in many regions of the globe, they began in rural areas of the North America. A product of both the geographic inaccessibility of terrestrial broadcast signals and a television spectrum allocation scheme that favored urban markets, cable systems, also called "community antenna television" or CATV, grew out of simple amateur ingenuity. Retransmission apparatuses such as extremely high antenna towers or microwave repeater stations, often erected by television repair shops or citizens groups, intercepted over-the-air signals and redelivered them to households that could not receive them using regular VHF or UHF antennas. The earliest cable television systems, established in 1948, are usually credited to Astoria, Oregon or Mahoney City, Pennsylvania, both mountainous, rural communities. Such retransmission systems spread across remote and rural America throughout 1950s and 1960s. According to Television Factbook 1980-81, there were 640 systems with 650,000 subscribers in 1960. By 1970 these numbers had grown to 2,490 systems with 4,500,000 subscribers. The systems were generally "Mom-and-Pop" operations with 12 channels at best, although the MSO form of cable system ownership, in which one company owned several cable distribution systems in different communities, was already spreading.

When cable systems began importing signals from more distant stations using microwave links, broadcasters' objections to the new service escalated. Many broadcasters had never been happy with cable service, claiming that such systems "siphoned" their programming since cable operators had no copyright liability and therefore never paid for the programming. In 1956 broadcasters petitioned the FCC to generate a policy regarding cable television. The Commission initially declined; it did not possess clear regulatory authority over CATV because the technology did not use the airwaves. The agency reconsidered, however, and finally asserted jurisdiction over cable television in 1962 in the Carter Mountain Transmission Corporation v. FCC case. Its rationale for regulating CATV focused on cable's impact on broadcasters: to the extent that cable television's development proved injurious to broadcasting--an industry the FCC was obligated to sustain and promote--cable television required regulation. While this justification sustained the FCC's position throughout the second phase of cable television's development, it later crumbled under judicial scrutiny.

II: Restricted Expansion And Localism, 1965-1975

While the Carter Mountain case addressed only the microwave--and hence over-the-air--portion of CATV service, the FCC eventually extended its authority to all aspects of cable television, and issued two major policy statements, the First Cable Television Report and Order, 1965 and Second Cable Television Report and Order, 1966. In these orders the FCC, hoping to prevent any deleterious effects on broadcasting, required cable operators to carry local broadcast signals under "must-carry" rules. With its ruling on "nonduplication" the Commission required cable companies to limit imported programming that duplicated anything on local broadcast. A set of 1969 rules deliberately kept cable television from growing toward urban markets or from attaining the capital or benefits of entrenched industries by placing ownership prohibitions or limitations on television and telephone companies and by preventing cable television from entering the top 100 markets. Programming mandates instituted channels for local public access and created a prohibition on showing movies less than 10 years old and sporting events that had been on broadcast television within the previous five years. These rules were intended to promote cable's local identity and prevent it from obtaining programming that might interest or compete with broadcasters.

Although cable operators continued to press for limitations on the FCC's ability to impose such program obligations, the courts rebuffed their claims. For example, when Midwest Video Corporation challenged the FCC's requirement that it originate local programming, the Supreme Court found that such a rule was "reasonably ancillary" to the FCC's broadcasting jurisdiction (U.S. v. Midwest Video Corp., 440 U.S 689, 1972).

The net effect was to severely constrain the programming options for cable television operators, and in particular to diminish opportunities for a pay television service that would show movies or sports. During the 1960s the FCC conceived of cable television as an alternative to broadcasting and promulgated the must-carry, nonduplication, and other rules with the intention of enhancing cable television's community presence and possibilities and at the same time protecting broadcasters from competition with the new delivery system. The agency positioned cable television as a hybrid common carrier- broadcasting service, one limited to mandatory channels (the must-carry rules, local access channels, constrained non-local programming) with regulated rates. This fettered opportunities for networking, for national distribution, and for direct competition with broadcasters.

By the late 1960s and early 1970s, more public interest in cable television fueled by a coalition of community groups, educators, cable industry representatives, and think tanks such as Rand Corp. heralded cable television's potential for creating a wide variety of social, educational, political and entertainment services beneficial to society. These constituencies objected to the FCC's policies because they seemed to inhibit the promise of the "new technology." Ralph Lee Smith's 1972 book, Wired Nation, captured many people's imaginations with its scenarios of revolutionary possibilities cable television could offer if only it were regulated in a more visionary fashion, particularly one that supported developing the two-way capabilities of cable and moving it toward more participatory applications. The discourse of cable as a cornucopia, as progress, as an electronic future captivated many.

In 1970-71 the White House's Office of Telecommunication Policy spearheaded a series of meetings among cable, programming and broadcast companies that culminated in the FCC revising its cable rules. This 1972 Cable Television Report and Order issued new rules that softened some of the restrictions on cable television's expansion to new markets, particularly with respect to importing distant signals ("leapfrogging"). However, it continued several rules and standards that the industry found onerous, such as mandatory two-way cable service in certain markets and local origination rules requiring operators to generate programs. Still more programming restrictions on movies and sporting events adopted in 1975 chafed at the cable industry's desires to offer something new and appealing to subscribers.

III: Deregulation, National Networks, Rapid Development, 1975-1992

Nevertheless, in the wake of the 1972 Report and Order, as cable delivered more than just local broadcast signals to viewers by importing programs from distant markets via microwave, its attractiveness and profitability grew. Two significant events spurred even more growth in the late 1970s. First HBO became a national service in 1975 by using a communications satellite to distribute its signal, at once demonstrating the ability to bypass telephone companies' expensive network carriage fees (commercial television networks depended on AT and T's lines for their national transmissions) and the possibility for many new program services to cost-effectively form national networks. Second, a series of judicial decisions sanctioned the cable industry's rights to program as it pleased, to enter the top television markets, and to offer new services. This third phase was cable television's highest growth period.

As early as 1972 HBO had offered, on the East coast, event programming such as sports on a "pay cable" basis using a microwave relay, but with satellite feeds it could reach cable operators across the country. HBO wanted to switch from microwave relays to the new RCA satellite Satcom I, which would take its signal across the entire country once the satellite launched in 1975. There were two major impediments to this plan. First, the FCC required each cable operator to use large, nine meter dish antennas to receive a satellite feed, and these receiver dishes were expensive. Second, the restrictive FCC programming rules still prevented cable services from acquiring certain types of programming. HBO helped pay for the receiving dishes cable operators needed to receive its signal, and became Satcom I's first television customer. Just two years later the service was being taken by 262 systems around the nation, yet the best programming, current movies and sporting events, was still off limits. HBO then took the Commission to court, claiming that the FCC had exceeded its jurisdiction in limiting programming options. Supporting HBO's position in HBO v. FCC, the District of Columbia Court of Appeals concluded that the FCC's broadcast protectionism was unjustifiable and, perhaps more important, that cable television service resembled newspapers more than broadcasting and consequently deserved greater First Amendment protections. This reasoning paved the way for the cable industry to argue against other government rules, which fell aside one by one after the strong message sent by the HBO case to the FCC.

Even as the agency stripped away federal syndicated exclusivity rules, reduced the size and consequently the cost of allowable satellite dishes, and eliminated remaining distant signal importation rules, the courts underscored cable television's rights to expand as it wished and to use any programming it desired. On the heels of the HBO case, the 1979 United States v. Midwest Video Corp. decision found that the FCC's rules imposed unacceptable obligations on cable operators, undermining the earlier Midwest Video decision. Insofar as those rules required cable operators to function as common carriers with the access channels--operators had no control over the content of access channels and they had to carry community programs on a first-come, first served basis--and insofar as they prescribed a minimum number of channels, they violated cable's First Amendment rights. The industry claimed these court decisions affirmed its status as an electronic publisher, and has continued its fight against regulatory obligations under this banner ever since. The cable industry has advanced its electronic publisher label to underscore its First Amendment status: like print publishers, cable television selects and packages materials for exhibition, and like print, should be under no obligation to exhibit material that regulatory powers prescribe.

With the regulatory barriers to entry now reduced, cable systems experienced huge growth from the late 1970s through the early 1980s: The 3,506 systems serving nearly 10 million subscribers in 1975 leaped to 6,600 systems serving nearly 40 million subscribers just ten years later. Programming services likewise emerged. Ted Turner's UHF station WTCG, renamed superstation WTBS (and later just TBS) followed HBO's lead in national satellite delivery in 1976, as did Christian Broadcast Network's CBN Cable (later the Family Channel). The Showtime movie service and sports service Spotlight followed suit in 1978. Two other superstations, New York's WOR and Chicago's WGN began around the same time. Warner launched the children's service Nickelodeon and The Movie Channel in 1979, while Getty Oil began the Sports Programming Network (later called ESPN). Ted Turner's Cable News Network launched in 1980, to the jeers of broadcast network news operations who dubbed it the "Chicken Noodle Network" and claimed an upstart like Turner could not do justice to the news. Other programmers rushed to satellite distribution, so that by 1980 there were 28 national programming services available, according to National Cable Television Association records.

These programming innovations affected broadcasting and related industries in several ways. For example, Turner's CNN, though it lost money for about five years before moving into profitability, had a substantial audience even in its earliest years. In fact, many network affiliates contracted with Turner for late night news in the early 1980s, prompting the broadcast networks to launch their own competing late night news shows such as NBC's News Overnight, CBS' Nightwatch, and The CBS Early Morning News. MTV, a popular music program service which began in 1981, prompted copycat programming on the part of the broadcast networks as well, and even episodes of popular NBC police drama Miami Vice were likened to one long music video. Music videos also assumed a new and critical role in establishing popular hits for the music industry. Program competition between broadcasting and cable drove up the cost of certain program categories, especially sports, and cable networks eventually outbid broadcasters for certain offerings even as they developed cost-effective ways to deliver regional sporting events to local audiences. New cable networks provided an after-market for broadcast series reruns and for series such as The Paper Chase that did not succeed in network broadcasting. Some networks repackaged older, mainstream broadcast series to render them more appealing. For example, Nickelodeon's Nick at Night relies on popular series from the 1950s, 1960s and 1970s repositioned as trendy, tongue-in-cheek fare.

As programmers developed new channels to view, cable operators moved quickly to claim new markets in suburban and urban areas. Their systems finally had something new to offer these urban areas already used to several over-the-air broadcast signals, and they sought to wire the most lucrative areas as fast as possible. The MSO ownership form bought out many independent cable systems even as they sought new territories to wire. The period of time between roughly 1978 and 1984, often called the "franchise war" era, saw cable companies competing head to head with each other in negotiating franchises with communities, often promising very high capacity, two-way cable systems in order to win contracts, only to renege on these promises later. Warner Amex's QUBE system, a highly publicized but actually very limited, two-way cable service that the company promised to develop in many of its markets, was one such casualty, as were security systems, special two-way institutional networks called I-Nets, and a host of other cost-inefficient services, including public access channels. Most large, urban markets were franchised at this time, and several were promised 100 channel systems with two-way capabilities plus extensive local access facilities although few ended up with such amenities. Companies such as Time's American Television and Communications Corporation, Warner-Amex, TelePrompTer, Jones Intercable, Times-Mirror, Canada-based Rogers, Cablevision Systems, Cox, United, Viacom, Telecommunications, Inc. (TCI) and other large MSOs garnered the lion's share of these franchises. In spite of their historically harsh rhetoric against cable television, broadcasters too became convinced of cable television's profitability. They invested in transmission systems and ultimately made substantial investments in programming as well, with ABC's acquisition of ESPN a notable early success and CBS Cable, launched in 1981, a notable failure.

Expanded markets and new programming services abetted by favorable judicial decisions contributed to the cable industry's power to lobby for more favorable treatment in other domains. The industry's pleas met favorable response within the Reagan Administration, and Mark Fowler, the Reagan-appointed Chairman of the FCC from 1981 to 1987, supported a marketplace approach to media regulation that would essentially put cable on a more equal footing with broadcasting.

The Cable Communications Policy Act of 1984 addressed the two issues that still hindered cable television's growth and profitability: rate regulation and the relative uncertainty surrounding franchise renewals. Largely the result of extensive negotiation and compromise between the cable industry's national organization, the National Cable Television Association, and the League of Cities representing municipalities franchising cable systems, the act provided substantial comfort to the cable industry's future. Its major provisions created a standard procedure for renewing franchises that gave operators relatively certain renewal, and it deregulated rates so that operators could charge what they wanted for different service tiers as long as there was "effective competition" to the service. This was defined as the presence of three or more over-the-air signals, a very easy standard that over 90% of all cable markets could meet. The act also allowed cities to receive up to 5% of the operator's revenues in an annual franchise fee and made some minor concessions in mandating "leased access" channels to be available to groups desiring to "speak" via cable television. Other portions of the act legalized signal scrambling, required operators to provide lock boxes to subscribers who wanted to keep certain programming from children, and provided subscriber privacy protections. When in the following year must-carry rules were overturned in Quincy Cable TV v. FCC (1985), the cable industry's freedom from most obligations and regulatory restraints seemed final.

With rate deregulation and franchise renewal assured, the cable industry's value soared, and its organization, investments, and strategies changed. MSOs consolidated, purchasing more independent systems or merging, even as they expanded into new franchises, with large MSOs getting even bigger. The growth of TCI, shepherded by John Malone to become the largest MSO for many years, garnered a great deal of criticism. Several systems changed hands as large MSOs sought to "cluster" their systems geographically so they could reap the benefits of economies of scope by having several systems under regional management. More finances poured into the industry after 1984 since its future seemed assured, and the industry's appetite for expansion made it a leader in the use of junk bonds and highly leveraged transactions, questionable financial apparatuses that later received Congressional scrutiny. Many of the largest companies such as Time (later Time-Warner), TCI, and Viacom acquired or invested in programming services, leading to a certain degree of vertical integration. The issues both of size and vertical integration became the subject of Congressional inquiries in the late 1980s, but resulted only in warnings to the industry. Investments in programming, operators argued, justified higher rates, and after 1984 rates jumped tremendously--according to Government Accounting Office surveys, an average of 25% to 30% from 1986 to 1988 alone, vastly greater than the inflation rate. Subscription charges increased so much so quickly that a backlash among consumer groups grew. As the industry's market penetration and control over programming escalated, its growth strategies targeted new markets, predominantly in Europe and Latin America, and also focused on thwarting new domestic competitors such as direct broadcasting satellites, multipoint distribution service (MDS) and its offspring system called multichannel-multipoint distribution service (MMDS). The multichannel capabilities of MMDS and direct broadcast satellites could provide real competition to cable television.

In this profitable decade many new programming services launched and flourished. The 28 national networks in 1980 grew to 79 in 1990. New systems were built, bringing cable television to 60 million television households by 1990; channel capacity expanded, making the 54-channel system common (in about 70% of all systems). Although pay service subscriptions leveled off as most American households purchased videocassette recorders (VCRs), and although offerings such as pay-per-view--single programs or events subscribers could order for a premium fee on a one-time basis--never worked well technologically or economically, cable services quietly grew, so that by 1992 they were in over 60% of all American households.

However, several issues simmered on throughout the 1980s. One concerned the rate increases that many consumers and policy makers felt escalated too rapidly. Another was the availability of reasonably priced programming to rural viewers who expected to receive them using their own satellite dishes; that such newly scrambled services (after the 1984 Act that legalized scrambling) were unavailable to them or only available at what they considered very high prices created an especially heated exchange in Congress. The size and vertical integration of several MSOs worried some policy makers, who felt the companies had undue opportunities to exercise their power over a captive market. Broadcasters continued their cry for remuneration for the three major network channels carried by cable television. Even though most cable subscribers still spent much of their viewing time with network channels, operators paid nothing for that programming. Moreover, as cable operators' power grew, concerns rose about the convention of municipalities authorizing only one cable system for a given territory, thus creating a de facto monopoly. One company, TCI, for example, was singled out for criticism because its systems served more than half of all television households in some states, a situation some critics felt conceded too much power to large cable operators. Finally, the growing deregulation of telephone companies made cable television services a target of their expansion desires.

IV: Re-regulation, 1992 And Beyond

The cumulative weight of these criticisms swung back the regulatory pendulum when the Cable Television Consumer Protection and Competition Act of 1992 attempted to resolve some of these issues. The act re-regulated rates for basic and expanded services, and required that the FCC generate a plan(called must-carry/retransmission consent), by which broadcasters would receive compensation for their channels. The retransmission consent portion of this legislation was the culmination of years of lobbying by the broadcast industry, and effectively forced cable operators to financially acknowledge the importance of broadcast programming on their tiers. The act called for new definitions of effective competition and for supervised costing mechanisms for other aspects of cable service such as installation charges, and it decreed that programming services must be available to third-party distributors such as satellite systems and MMDS providers. However, portions of this legislation, the only legislation during President Bush's administration to command an override of his veto, ultimately succumbed to the considerable momentum behind reducing government regulation and promoting marketplace forces in industries such as telephony and its growing family of related services.

The Telecommunications Act of 1996, though primarily focused on restructuring the telephone industry, also affected the cable industry. Not only did it designate a new service category, called "open video systems", that allows telephone companies to provide video programming, it also relaxed some of the 1992 Cable Act's rules; significantly, it determined that by 1999 rate regulation would once again be eliminated for all cable services except those in the basic tier. Rate regulation of small cable operators was available immediately. The 1996 Act recognizes the convergent capabilities of the many media systems that historically had been viewed as very separate and consequently were regulated differently. A product of strong industry pressure and with scant input from citizen groups, the Telecommunications Act of 1996 was landmark deregulatory legislation.

With growing competition from the new multi-channel providers such as MMDS and direct broadcast satellite services, and with telephone companies entering the video entertainment marketplace, cable television's future appears far less certain as the 21st century begins. Major deregulation initiatives, legislative and judicial, for telephone companies in the 1990s enable them to move into new home information and entertainment services. As the "other wire" entering homes, telephone systems are well positioned to compete with cable television, although they may choose to collaborate with cable television by buying cable systems rather than competing with them: telcos are very interested in joining with both computer and cable companies to mold a new service capable of Internet-style interactivity as well as video programming. An attempted merger between the largest cable operator, TCI, and a major Bell Operating Company, Bell-Atlantic, in 1993 is symptomatic of the cable industry's scramble to forge strategic partnerships with media systems that may eclipse its technological capabilities. The cable television industry's key advantages are that its 1980s-built plant is already in most American homes, its lines could serve fully 95% of U.S. households, and its channel capacity is considerable. Since beginning to experiment with video compression and upgrading coaxial cable to fiber, cable operators are poised to continue to expand signal carriage capacity and to offer competitive one-way video. Additionally, the extensive vertical integration among many operators and programmers appears to guarantee that the cable industry will maintain a favored position with regard to the critical resource of programming.

Whether the cable industry will be able to keep abreast of peoples' desires for programming and interactive services epitomized by the Internet remains uncertain. The 1990s have been marked by consolidation among operators and programmers and other entertainment companies as a dominant organizational response to regulatory and technological opportunity. As Time-Warner merges with the Ted Turner empire, and as Disney merges with Capital Cities/ABC, the large, vertically-integrated and multi-faceted company with international holdings seems to be the new industry template for survival. The cable industry remade the television world of the "Big Three" networks, upsetting their hold on programming and viewers and initiating a 24-hour, tumultuous and changeable video domain. As the larger video media industry changes, the cable industry's boundaries, roles and influences will likewise be reshaped, but the historical legacy of its accomplishments will surely continue to be felt.

-Sharon Strover

In its short history, cable television has redefined television in many ways. It became a cultural force that profoundly altered news, sports and music programming with services such as Cable News Network (CNN), C-SPAN (Cable Satellite Public Affairs Network), ESPN (Entertainment and Sports Network), and Music Television (MTV). It spawned a huge variety of "narrowcast" programming services as well as new broad appeal services, including 94 basic and 20 premium services by 1994. It altered the structure of the programming industry by developing new markets for both very old and very new program types. It became an entertainment service that contributed to changed viewing practices, suggested by the proliferating use of remote controls to "surf" along the now extensive channel lineup. And it began an important debate concerning the ability to citizens to control, and contribute to, local media. Cable's organizational development, economic relationships, and regulatory status profoundly altered the video landscape in ways entirely unforeseen, and in the course of its growth and development many accepted notions about First Amendment rights of speakers and listeners or viewers, and about the functions and obligations of communication industries have been challenged. The cable television industry eclipsed broadcasting's asset and revenue values by the late 1980s as it created moguls and empires that joined the largest media firms in the United States. The first of many communication systems to stretch the meanings and boundaries established in the Communication Act of 1934, cable television has had a pivotal role in altering conceptions about television.

Now the dominant multi-channel provider in the United States, cable television contributed to the substantial drop in the broadcast network viewing from 1983 to 1994 when weekly broadcast audience shares dropped from 69 to 52 while basic cable networks' shares rose from 9 to 26 during the same period according to A. C. Nielsen as of 1995. Cable television service is available to 95% of all television households in the United States, and about two-thirds of all television households subscribe to it. Most of those systems offer at least 30 channels (57% have between 30-53 channels and 13% have 54 or more channels according to the 1995 Television and Cable Factbook). Even with this number of channels, however, broadcast fare carried over cable is still among the most heavily viewed, and most viewers regularly spend their time with only five to nine of those many cable channels.

Cable service comprises a collection of several industries. Primary among them are the distributors of video product called operators or sometimes "multiple system operators" (MSOs). Cable operators establish and own the physical system that delivers television signals to homes using coaxial cable, although in the 1990s optical fiber began to replace much of the traditional coaxial cable in portions of the network. Programming services produce or compile programming and also sell their services to cable as well as to direct broadcast satellite (DBS) operators. Other entities and institutions connected to the cable industry include investors underwriting distribution or production efforts, the creative community, and loosely coupled groups such as advertisers, local community groups and producers, recording companies, equipment suppliers, satellite and terrestrial microwave relay companies, and telephone companies.

Cable service relies on three fundamental operations. The first is signal reception, using satellite, broadcast, microwave and other receivers, at a "headend" where signals are processed and combined. Second, signals are distributed from that headend to the home using coaxial cable or optical fiber or microwave relays, abetted by amplifiers and other electronic devices that insure quality of signal to households. Third, components at the home or near the home such as converters must change cable signals into tunable television images, descramblers must be able to decode encrypted programming, and still other equipment may be used to allow for delivery of services on demand, a process called "addressability." Cable television's traditional tree-and-branch system network design typifies one-way delivery services, in contrast to telephone services' star design which maximizes interconnection. Its huge and always-growing channel capacity or bandwidth enables cable television to support a variety of programming services and has always left it favorably positioned to expand into other service areas, such as high definition television, compressed video, and pay-per-view channels. However, the tree-and-branch network limits its interactive potential, a factor that became significant in the 1990s as interactive services were explored more intensively.

Programming on cable television began with retransmitted broadcast fare, but evolved to services unique to cable, some targeted at specialized audience groups such as children, teenagers, women, or ethnic groups, and some providing only one type of programming--weather, news, or sports for example. Such narrowcast programming that appeals to specific demographic groups rather than to broadcast television's wide audience attracts advertisers who require more targeted approaches.

Traditionally cable operators organized their programming into "tiers," with different subscriber charges accruing at different levels. At the base was the least expensive "basic tier" which includes retransmitted broadcast channels. Moving up leads to special cable-only packages of channels often called "expanded basic." And on the most expensive tier are single-channel premium services such as Home Box Office (HBO), Showtime, Disney or Playboy with separate fees. Programming in each of these levels has expanded because cable television's surplus of channel space and low costs helped to spawn several new formats after the early 1970s, including infomercials, 24-hour news and weather services, music video services, home shopping channels, arts channels, and a host of other narrowly targeted programming. Federal regulations of the 1970s that required cable operators to support community access channels dedicated to public, educational and governmental programming likewise led in many cases to distinctive public service programming. Although cable systems have always been engineered as predominantly one-way delivery systems, they have some capability to provide limited two-way services and could be designed to offer more interactivity. Future cable systems will focus on developing two-way services even though one-way programming has been the foundation service.

Because cable systems must lay cable in the ground or string it along telephone or electric poles, they must negotiate for the use of poles and rights of way. This is the crux of cable television's dependence on municipalities since cities and towns control their own rights-of-way and in many cases also own the utility poles used by cable companies. Cable operators must negotiate franchises with municipalities that entitle them to use rights-of-way in exchange for fees, capped at 5% of revenues, to the city. A conventional franchise lasts for 15 years. Several aspects of cable television resemble those of traditional utilities: it uses public rights-of-way and deploys a capital intensive network; it conveys but does not create content; it bills subscribers on a monthly basis. These utility-like aspects encouraged communities to treat it as a utility in early years: generally only one cable company has been franchised in a single municipality, effectively rendering it a monopoly. Rates charged to subscribers (and sometimes even rates of return) have been regulated differently at different points in time. And service quality is monitored. One source of long-standing friction between cities and cable companies often develops in the area of franchise conditions, particularly the designation of specific services a municipality may expect a cable operator to provide (e.g., specialized channels or funds for public, educational or government access). These controversies have been attributable, in part, to cable television's common carrier or utility characteristics.

Cable television, like home video, taps viewers' willingness to pay directly for programs, a source of revenue untouched by traditional broadcasters. Subscribers pay a monthly fee for programming to the operators, and the operators in turn pay programming networks such as ESPN or MTV for the right to use the services. The price of the programming depends on the specific programming (ESPN is more expensive generally, for example, than The Learning Channel) and the size (subscribership) of the MSO or operator, although the very largest MSOs take advantage of their economies of scale to obtain smaller unit prices on programming. Most basic programming services carry advertisements, and also allow local cable operators to insert ads (called "ad avails") during designated programming segments. Advertising revenues, both national and local, were slow to develop for programming services, awaiting significant subscriber levels and solid ratings data that could indicate viewer levels. Nevertheless, ad revenues grew steadily and have proved to be an important part of programming services' revenues. Premium services such as HBO, Showtime, and the Disney Channel eschew ads and instead rely on higher, separate subscription fees assessed to subscribers.

Cable television's development was very dependent on the regulatory treatment and economic models developed for predecessor systems of telephony and broadcasting. As a hybrid communications system unanticipated in the Communication Act of 1934, cable television challenged regulators' conceptions of what it should be, how it should operate in a landscape already dominated by broadcasters, and how it might take advantage of its delivery system and capacity. The consequences of this uncertainty included some dramatic shifts in ideas of cable obligations to the public and to the communities it serves, and in the scope of cable television's First Amendment rights. The changing shape of cable television has four distinct phases. The first slow growth period, from cable television's inception through 1965, predates any major regulatory efforts. During the second phase, from 1965 to roughly 1975, the FCC attempted to restrict cable television to non-urban markets and to mold it into a local media service. In the third phase, from 1975 to 1992, a series of judicial, legislative and regulatory acts including the Cable Communications Policy Act of 1984 catalyzed cable television's expansion across the country and promoted dozens of new satellite-delivered programming services. The fourth phase, signaled by the Cable Television Consumer Protection and Competition Act of 1992 and the Telecommunications Act of 1996, re-regulated certain aspects of cable television and deregulated others, even as new competitors to the service appeared in the form of MMDS, direct broadcasting satellites and new telephone company ventures into video media. As cable television moves into a more competitive environment in which many different delivery systems can duplicate its services, its separate identity is fading as very large, merged telephone-cable-entertainment conglomerates move into video programming and transmission.