For many independent videomakers, the leased access provision of the Cable Act of 1992 is the key to getting programming on the air. The provision requires cable system operators with more than 36 activated channels to make a portion of their capacity available to all comers for a reasonable fee.
Through the law, Congress places a vital means of distribution within the reach of most independent videomakers. Coupled with the drastically reduced cost of producing video, leased access makes it possible for just about anybody to have a TV show.
Yet, surprisingly few videomakers are taking advantage of leased access. Why not? The answer is two-fold: 1) a general lack of awareness on the part of videomakers; and 2) the reluctance of many cable system operators to allow unaffiliated programmers onto their systems.
“It’s an interesting area of the Cable Act that is tremendously under-utilized,” says Rich Esposto, executive director of the Sacramento Metropolitan Cable Television Commission, the cable franchise authority for the city and county of Sacramento. “And, of course, the cable companies hate it.”
Reaction among cable operators to leased access varies from system to system. But complaints from videomakers about the cable operators’ foot dragging and animosity abound. In Videomaker‘s own phone survey of cable systems around the country, many operators hesitated to make their rates available; some even refused outright. (Which, by the way, violates the law.) A few of the system managers didn’t even know what the survey was about. (“Leased access? What’s that?”)
It’s a Control Thing
Cable companies chafe at the leased access laws because they require system operators to turn over revenue-producing channels to outsiders they can’t control.
“The cable companies,” Esposto says, “want to own the systems and the programming. They want to sell all the advertising. They sure don’t want some leased access guy to come along and start competing with them.”
But competition is exactly what Congress wants. Section 612 of the 1992 Act, which deals with leased access, reads: “The purpose of this section is to promote competition in the delivery of diverse sources of video programming and assure the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with growth and development of cable systems.”
Section 612 encourages the production and distribution of competing commercial programming, programming not affiliated with the cable systems. In other words, while Congress wants to foster diversity of information and programming, it wants to do it in a for-profit environment.
So, unlike users of typically free public, educational and governmental access (PEG), leased access users may sell advertising to support their programming. And while local cable franchise authorities may establish PEG access on their systems at their discretion, 612 requires cable operators to provide leased access. Only 25 percent of the cable systems in this country currently offer PEG access; but all of them with more than 36 activated channels must provide leased access. Operators with more than 54 activated channels must set aside 10 percent of their channel space for leased access; with systems with 55 channels or more, it’s 15 percent.
“The leased access concept is really a more valid one to me than community access,” says Esposto, “because of the commercial aspect of it. If you are a leased access producer, you have to make the numbers work or you don’t stay on the air.”
Clearly, Congress wants individual entrepreneurship to penetrate the monopolistic cable industry.
Old Concept, New Approach
Leased access laws have been on the books since the original Cable Act of 1984. Congress has said the legislative history of the cable laws indicates that lawmakers always intended leased access to provide a “genuine outlet” for unaffiliated commercial programmers. Yet during the past decade, relatively few videomakers have used leased access to get their programming on the air.
“From ’84 to ’92 there was hardly any leased access in this country,” Esposto explains. “But it wasn’t because no one wanted it, as the cable companies would have you believe.”
In 1992, Congress recognized that the 1984 Act had failed to give videomakers true access to the cable systems. One of the biggest obstacles: the lack of regulation. Any terms and conditions set by the cable operators were presumed to be reasonable.
“Whenever someone would go to a cable company and say, ‘I’d like to do this real estate program’,” says Esposto, “the cable operators would say, ‘Sure. No problem. We’d love to have you do it. It’ll only cost you a million dollars a minute.’ There was no rate regulation and no one could get on.”
Videomakers could challenge the rates charged by cable system operators; but they had to do it in federal court. An expensive proposition, especially since they also bore the burden of producing clear and convincing evidence of unfair rates.
“The long and the short of it,” explains Karen Kosar, senior staff attorney with the Federal Communications Commission (FCC), “is that it took a lot to challenge the cable operators, so almost no one did. Congress recognized that the rules weren’t fair.”
The ’92 Act more clearly defines the concept of commercial leased access. Among other things, the new law charges the FCC with the task of establishing an equitable formula for lease rates, which it did last year.
“We established a fee formula, along with other regulations,” Kosar says. “We’ve provided rules, for instance, which require cable operators to provide billing and collection services for leased access programmers on their systems. That’s something they didn’t have before. But it’s certainly true that all of the bugs haven’t been worked out yet.”
The Silent Minority
The FCC didn’t get around to drafting its leased access regulations until last year. Prior to issuing its new rules, the agency called for public comment from interested parties. While the cable companies spoke up in a roar, there was nary a peep from videomakers.
“The record isn’t exactly rich with comments,” Kosar says. “That, coupled with the fact that we don’t have much experience regulating this area, makes it very difficult to know what’s going on out there in the real world.”
This lack of response, the cable companies argued, was proof that there was no interest in leased access. But the FCC believed otherwise and set about writing a new leased access rate formula, asking again for suggestions from interested parties.
The cable companies hurriedly sent in their plans; once again, there was virtually no input from the independent quarter. Consequently, the FCC’s current rate structure is reportedly a verbatim application of a formula submitted by Tele-Communications, Inc. (TCI is the largest cable company in the U.S.)
The Current Formula
Congress wants to ensure competition among cable programmers, and encourage diversity of information sources. But it wants to do so, remember, “… in a manner consistent with growth and development of cable systems.” In effect, Congress is saying, “Let’s make room for a variety of voices, but let’s not force the cable companies into bankruptcy while we’re doing it.”
In an effort to give unaffiliated programmers access to cable distribution without creating undue financial hardship on the system operators, the FCC created the highest-net-implicit-fee formula. In a nutshell, the formula takes the fees a system operator charges subscribers, subtracts that number from what it pays the vendor for that programming, then multiplies the result by the percentage of the audience that gets that kind of programming. According to FCC regs, it’s up to the system operator to do the math and come up with a rate card. This rate card must be available to the public on demand.
“We were trying to allow the operators to get back the value of their channel capacity,” says Kosar. “And we were hoping that they would negotiate with the programmers in good faith.”
Unfortunately, some cable companies seem to have missed the “good faith” part of the FCC’s plan. Take the case of Florida-based independent programmer TELEMIAMI. One of its carriers, TCI Miami, raised its leased access rates by more 750 percent. TELEMIAMI has presented 24 hours of Hispanic programming on local cable systems for about 10 years, including local news and events productions, Spanish-language CNN, children’s programming and first-run novelas (popular Venezuelan soap operas).
“Between the FCC’s screw up and TCI’s hard-nosed attitude,” says Maria Silveria, TELEMIAMI’s general manager, “we might not be on the air long.”
TCI rebuts the “hard-nosed” charge.
“All we have done,” says Tony Bello, state director of business development for TCI of Florida, “is follow the FCC’s formula to the letter. The rates we have quoted TELEMIAMI are based on that formula.”
Working Out the Bugs
The FCC’s new leased access regulations went into effect in September of last year. But because of situations like the one faced by TELEMIAMI, the commission is reconsidering them.
“We are currently reviewing leased access independently,” says the FCC’s Kosar. “But in general, we haven’t gotten many comments on leased access. We certainly didn’t have many comments at all in the first round back in 1993. In this reconsideration stage, I don’t think the record differs much. In other words, there’s not a whole heck of a lot of comment out there.”
Kosar says the FCC wants to hear from videomakers. The cable industry is growing and changing, she says. Leased access is essentially new territory for the FCC.
“The truth is, we haven’t had a whole lot of experience with leased access,” admits Kosar. “Cable operators were saying, ‘Hey, no one’s really interested in leased access, so we can’t really tell you much about it.’ But the leased access programmers we did hear from were saying, ‘Hey, it’s not that we’re not interested, it’s that we can’t afford to get on’.”
The FCC has made it much easier for independents to voice their complaints about mistreatment by cable companies. They can still go to court, of course, but they can also file complaints in Washington with the Cable Bureau.
“It’s cheaper than going to court,” Kosar says. “And we hope it’s going to be a streamlined process and that people will get results.”
See You In Court
Mike Conway is an independent commercial programmer who doesn’t mind the idea of taking a cable company to court. If he had been squeamish about such things, he says, he might not be on the air today.
“Initially,” says Conway, “the cable systems were very resistant. When the ’84 Act went into effect, we went to a cable company and they sold us a spot, but when they saw we were going to make too much money, they took us off the air. I don’t think they realized that we knew our way around the block.”
Enter Conway’s attorney, ex-chief justice “Mean Gene” Rassmussen. The cable operator reconsidered its position.
“But we were very close to going to federal court,” Conway says.
Conway and his wife Renee run Wilderness Productions, which airs programming on four leased access systems in the Lake Tahoe/Reno area. Between the four systems, Wilderness produces some 58 hours of programming a day. Their “call sign,” K-MTN (kay-mountain) is familiar to 185,000 viewers.
Conway says his relationship with the cable companies has changed considerably since the initial confrontation.
“Right now,” Conway says, “my cable bill is $50,000 a year. I mean, these guys take me to lunch.”
A self-confessed “toy junkie” and “self-taught, non-film-school guy who got into the industry at the right time,” Conway was born and raised in Hollywood. His extensive background in production management includes 75 feature films (including Total Recall and Die Hard II) and 700 network national commercials.
“I’ve had the chance to work with some of the best directors and producers in the business,” Conway says. “And I’ve made all the mistakes.”
Conway, who moved to Tahoe 25 years ago, produced a travel video in the late 70s when the technology was still relatively young. He distributed it utilizing one of the first TV satellites.
“We co-produced a show called Video Vacations,” he says, “which aired in about 27 million households across the country. It was the first show of its kind. We were also the originators of the home-shopping concept; we had our 800 number on the screen a long time before Home Shopping and QVC.”
Wilderness’s programming currently includes: a real estate show that lists almost 100 homes; a travel show; high school sports; and programming pulled down from satellites for re-broadcast. During the past summer, Wilderness began producing a program to promote tourism at Lake Tahoe. Break Away to Lake Tahoe is a half-hour infomercial Conway has sent out “to every cable company and over air broadcaster in California.”
“We’re not just putting on infomercials about the latest soda can crusher machine,” Conway says. “We’re providing quality alternative programming that the cable operators are happy to give to their subscribers free of charge. And we’re paying them to do it.”
According to Conway, the strong-arm tactics he employed during his early negotiations are not responsible for his success. Rather, Conway attributes his success to quality programming and public service.
“It was hard initially with TCI,” Conway says. “They had some real reservations. They thought we might undermine some of their profitability. So what we gave them was a 35-page, precisely written application that answered all of their questions. We told them exactly what we were going to do, and how we were going to do it. We created a package that was very attractive to them.”
Conway says he has actually become an asset to his carriers, by providing local programming that would not otherwise exist. Shows such as a recent city council candidate’s forum. The first four-camera live show ever produced from Lake Tahoe, it drew praise from all quarters.
“It was something I always thought the community needed,” Conway says. “We have a low voter turnout. And there are some important issues that need exposure. So we got the candidates together and did a two-hour program, with live telephone call-ins. The phones never quit ringing. Every time we do a show like that, it makes the cable company look good.”
Getting on the Air
As a leased access consultant, Conway cautions newcomers to avoid creating adversarial relationships with their cable landlords whenever possible.
“Don’t go in hostile,” Conway says. “Go in with a good package, answer all their questions and tell them how much money you are going to make them. Show them how you are going to elevate their position in the community by making community shows.”
Offering high-quality programming is also important because of what Conway calls a “weasel clause” in the Cable Act.
“If the cable company feels the leased access programming degrades the system,” Conway explains, “the clause lets them opt out. In other words, if someone comes in with a bunch of VHS programming and it looks like snot, the cable company can say it’s a degradation of the output of their system that could cost them advertisers. They can then kick that videomaker off the air.”
Leased Access Pays
Conway’s initial hardware investment was around $50,000; his company now commands about $2 million worth of equipment.
“We’ve set a very high standard,” Conway says. “It’s really paid off for us. We’re dealing with the world’s largest cable company in on a friendly basis. We’re into the year 2000 with our leases.”
Still, Conway stands ready to defend his right to produce and air leased access programming if necessary.
“We’re buddies, now,” says Conway. “But if that attitude every changes, I’ll just turn Mean Gene loose on TCI for $25 million. And say, call me in Bermuda if you want to negotiate.”
Words to live by–for all videomakers who want to get their programming on the air.
John K. Waters is a free-lance script writer and editor.
SPEAK OUT ON LEASED ACCESS
The FCC is waiting to hear from you
The opportunity to formally comment on the FCC regulations has passed. But staff attorney Karen Kosar says the commission still wants to hear from anyone concerned with leased access, especially videomakers.
“We are informally taking in information,” Kosar says. “If someone reads Videomaker magazine and wants to write a letter to the commission, our feeling is, please do. The commission is very interested in getting comments from the real world. But frankly, we’re not getting many.”
Your comments won’t be a part of the official record, but they will be considered.
“What the commission does in a rule-making proceeding,” Kosar explains, “isn’t just arbitrarily lay down the rules. We come out and say, ‘The legislation says this, and we’re thinking of maybe doing this. What do you think?’
“And we really want to get comments back. We then sort through the comments and make a reasoned decision on how to approach this thing.”
The commission has heard some complaints that the current rate formula doesn’t work; yet no solutions have been forthcoming.
“Basically,” Kosar says, “everybody’s saying, ‘Hey, it doesn’t work, FCC, go back to the drawing board.’ But nobody has come up with a better plan. I think experience will be the best teacher here. Whatever we do in the next couple of months, whether we retain our rules or change them, we’ll find out through the complaint process. That’s considered on a case-by-case basis. Whatever happens, we are going to learn by experience.”
The new rules aren’t set in stone; but once they pass in this round of consideration, they’ll be in place for awhile.
“The commission has other things to do,” Kosar says. “They’re not immutable, but they are going to be there for some time.”
Send your comments to: Karen Kosar, FCC, 2033 M Street SW #804J, Washington, D.C. 20554.