I started this series examining the First Amendment’s impact on the development of cable TV by pointing to the tension between media outlets utilizing their rights to decide what content and points of view to present, and advocates of access to the media that seek to leverage the First Amendment to gain a platform for their own content and points of view.

Now I’ll look at how cable’s First Amendment rights underscored the development of a distribution model that led to something we almost take for granted today:  the explosion of content diversity in multichannel video.  Specifically, I will challenge the contention from some quarters that “common carriage” could or should have done better if it had been applied to cable.

In the early days of cable TV – the 1960s and early ’70s – cable television operators were, for the most part, simply retransmitting nearby and distant broadcast stations to rural areas and small towns where over-the-air reception was limited.  At that time, however, some policymakers foresaw that cable might also be used to expand the range of programming options available even in cities where all broadcast networks already could be viewed.

Some policy leaders proposed that the best way to ensure the development, and cable carriage, of expanded programming options would be to require cable operators to make their facilities available to all program providers on a nondiscriminatory basis – in other words, to turn cable operators into common carriers.

There was, of course, no such programming just waiting in the wings.  HBO and Ted Turner’s WTBS hadn’t yet demonstrated the use of satellites to distribute programming nationwide to cable systems.  The cornucopia of satellite cable networks we now take for granted was beyond the imagination of all but a few cable visionaries.  But would that multitude and diversity of program networks have developed in the common carrier environment that was being proposed?  We’ll never know for sure, because such a requirement was ultimately rejected by policymakers in favor of an approach that allowed cable operators to maintain control over the selection and packaging of programming to be distributed to their customers.

Nevertheless, it’s hard to see how a common carrier model could have yielded the same benefits to consumers – in terms of quantity, diversity or packaging.  Under the cable model that developed, cable operators not only chose the program networks they would carry but, in most cases, paid the programmer a licensing fee for the right to carry its programming.  This financial arrangement continues to be critical to the development of new programming options.

Broadcasters were required, in return for their free spectrum, to distribute their programming over the air and free to television viewers in their communities.  Therefore, broadcast programming had to rely wholly on advertising for its economic support, and advertising revenues are based largely on the number of viewers who watch a channel and see the commercials.  The intensity of a viewer’s demand for programming – i.e., how much he or she would be willing to pay to watch it – was irrelevant, since viewers did not pay directly for the programming they watched.

To earn enough ad revenue to support quality programming, broadcasters and broadcast networks needed to maximize viewership by creating programming that appealed to broad audiences.  Thus, the programming provided by the broadcast networks was often a high-quality mix of drama, variety shows, situation comedies, and sports programming.  But it was forced to hew closely to mainstream, middle-of-the-road tastes and interests, and there was little room for diverse, niche programming that could be of interest to smaller audiences (While Mad Men is justly celebrated for its high quality, it generally attracts a smaller audience than Dancing with the Stars).

The cable model provided a way for content providers to augment advertising revenues with payments from cable operators.  A common carrier, leased access model would not necessarily have precluded such payments.  But it would have required programmers to charge customers directly for the programming that they chose to purchase.

For a premium movie or sports channel for which customers might pay $10 or $15 per month, direct billing might have been feasible, although the transaction costs of such billing would certainly have added to the costs of providing such programming.  For many basic, advertiser-supported networks that could only expect to receive small monthly subscriber fees to supplement their ad revenues, however, the transaction costs to recover such fees might have been prohibitive.

A model in which the cable operator assembled (and paid for) packages of programming and billed customers for such programming reduced transaction costs and facilitated the development of a dual-income stream for all types of program networks.  All made possible by the freedom to construct programming packages, ultimately afforded by the First Amendment.

In the next segment of our series, we’ll look more closely at the importance of “editorial discretion.”