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Vertical integration and the must carry rules in the cable television industry: An empirical analysis
Unformatted Document Text:  Must carry rules 1 Vertical integration and the must carry rules in the cable television industry: An empirical analysis Introduction In 1992, Congress codified a new scheme of must carry rules when passing the Cable Competition and Consumer Protection Act (Cable Television Consumer Protection and Competition Act of 1992, hereafter 1992 Cable Act). 1 In a nutshell, the must carry rules require that cable system operators in the U.S. dedicate some of their cable channels to the free carriage of local broadcast stations, if the stations so demand. 2 The 1992 must- carry rules were immediately challenged in court. After years of litigation, the Supreme Court, applying an intermediate level of legal standard applicable to content neutral regulations of speech, upheld the rules’ constitutionality in Turner Broadcasting System, Inc. v. FCC (1997, hereafter Turner II). When restating the 1992 must carry rules, Congress foresaw a real threat facing the broadcast industry without mandatory local signal carriage rules. In its own words, cable system operators would “delete, reposition, or not carry local broadcast signals” and seriously jeopardize the economic viability of free local television (1992 Cable Act, p.1462). Some broadcast stations were denied carriage by some cable systems in the late 1980s when must-carry rules were not in force. 3 To the cable industry and its supporters, these non-carriage instances are random and sporadic at most. In fact, as many have 1 Under the 1992 must-carry rules, a television station can choose either retransmission consent or must carry. If choosing the former, a station negotiates with cable systems in its Area of Dominant Influence (ADI) for specific carriage terms (including monetary compensation). 2 The must carry rules in various forms date back to as early as the 1950s when the cable television industry was still in the development stage. In the mid-1980s, the D.C. Circuit Court twice struck down the must carry rules, ruling that government interest in the rules was unsubstantiated (Quincy Cable v. FCC, 1985; Century Communications Corp. v. FCC, 1987/1988). For a detailed history of the must carry rules, see Smith (1997). 3 A 1988 survey conducted by the FCC found that, out of 4,303 responding cable systems, 869 systems (i.e., 20.2%) indicated that they dropped or denied carriage to 704 television stations in a total of 1,820 incidents (FCC, 1988, p. 10).

Authors: Yan, Zhaoxu.
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Must carry rules
1
Vertical integration and the must carry rules in the cable television industry:
An empirical analysis
Introduction
In 1992, Congress codified a new scheme of must carry rules when passing the
Cable Competition and Consumer Protection Act (Cable Television Consumer Protection
and Competition Act of 1992, hereafter 1992 Cable Act).
1
In a nutshell, the must carry
rules require that cable system operators in the U.S. dedicate some of their cable channels
to the free carriage of local broadcast stations, if the stations so demand.
2
The 1992 must-
carry rules were immediately challenged in court. After years of litigation, the Supreme
Court, applying an intermediate level of legal standard applicable to content neutral
regulations of speech, upheld the rules’ constitutionality in Turner Broadcasting System,
Inc. v. FCC (1997, hereafter Turner II).
When restating the 1992 must carry rules, Congress foresaw a real threat facing
the broadcast industry without mandatory local signal carriage rules. In its own words,
cable system operators would “delete, reposition, or not carry local broadcast signals”
and seriously jeopardize the economic viability of free local television (1992 Cable Act,
p.1462). Some broadcast stations were denied carriage by some cable systems in the late
1980s when must-carry rules were not in force.
3
To the cable industry and its supporters,
these non-carriage instances are random and sporadic at most. In fact, as many have
1
Under the 1992 must-carry rules, a television station can choose either retransmission consent or must
carry. If choosing the former, a station negotiates with cable systems in its Area of Dominant Influence
(ADI) for specific carriage terms (including monetary compensation).
2
The must carry rules in various forms date back to as early as the 1950s when the cable television industry
was still in the development stage. In the mid-1980s, the D.C. Circuit Court twice struck down the must
carry rules, ruling that government interest in the rules was unsubstantiated (Quincy Cable v. FCC, 1985;
Century Communications Corp. v. FCC, 1987/1988). For a detailed history of the must carry rules, see
Smith (1997).
3
A 1988 survey conducted by the FCC found that, out of 4,303 responding cable systems, 869 systems
(i.e., 20.2%) indicated that they dropped or denied carriage to 704 television stations in a total of 1,820
incidents (FCC, 1988, p. 10).


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