Interview Date: February 11, 2001
Interviewer: Jim Keller
Abstract
Bob James discusses his law career representing various cable companies, including TelePrompTer, ATC, and Comcast. He reflects on the strictures placed on the industry during the FCC’s “freeze” on cable in the seventies; problems with copyright fees related to distant signal carriage; and the solution through new programming sources after satellite distribution began. He talks about the consent requirement for cable to carry broadcast products and the effect on small operators, microwave-served systems, and lists some of the more important cases, such as Carter Mountain and the Southwestern Case. He addresses the politics behind the protection of broadcast interests by the FCC, recalls the issues of translators and the failure of UHF, and explores the limits on First Amendment rights for cable. He notes the political challenges for C-SPAN, tax impositions on the industry, and names franchising as a major problem. He concludes with thoughts about continuing terrestrial operations and further issues with Congress.
Interview Transcript
JIM KELLER: This is the oral history of Robert L. James, partner in the Washington, DC communications law firm of Cole, Raywid & Braverman. Bob is also a cable pioneer and has represented many, many of the cable companies here in the northwest, as well as throughout the country. We are currently at the Sun Valley Lodge in Sun Valley, Idaho at the annual meeting of the Sawtooth Cable Television Professionals. The date is February 11, 2001. Your interviewer is Jim Keller.
This oral history is brought to you through a donation of the Gustav Hauser Foundation as part of the Oral History Program of the National Cable Television Center and Museum.
Bob, as we get started, tell us a little bit about your educational background, where you grew up, and what you did before you got into the law firm of Cole, Raywid & Braverman.
ROBERT JAMES: Well, I grew up moving around a great deal. I finally went to high school in Washington, DC, went away to college to Cornell University in New York State, but back to Washington for law school. I went to George Washington Law School and graduated in 1969. Prior to graduating, I started working at the firm and have been there ever since.
KELLER: You were very fortunate in getting involved with Jack Cole. He’s been a real pioneer in this business.
JAMES: I absolutely agree. It’s been a pleasure and a real privilege to …
KELLER: Can you tell us some of the clients you represent?
JAMES: In the early days, we represented TelePrompter and ATC even at one, and a lot of the companies off and on, and many smaller operators, many mid-sized operators and many larger operators. Now there are just fewer smaller and mid-sized operators, but we now represent AT&T, Charter, MediaOne – now part of AT&T.
KELLER: Charter is Paul Allen’s firm, is that right?
JAMES: Yes. We do work for most of the MSOs – Comcast, Adelphia, and a lot of smaller cable operators.
KELLER: As you were part of the panel discussion this morning with the smaller operators who were there at that time.
JAMES: Yes. Most of them have been clients before they got out of the business.
KELLER: Bob, let’s begin by talking about _____.
JAMES: It really started in the 1960s in a very restrictive way. The FCC decided that they had to freeze cable operators bringing in distant signals into local television markets, and it was done really to protect the broadcasters, as you know, and particularly the smaller broadcasters. The FCC had made it its mission to really protect them economically from what they saw as competition. So the initial freeze went in in the late 60s and it just virtually stopped the growth of cable television particularly in the larger cities where some systems had already started up. They then suddenly had nothing to sell to the consumers other than an improved signal which in a few areas was still effective. Gradually, the FCC adopted a set of rules that would permit cable to carry certain, very limited numbers of signals. That was in place for a long time from about 1972. They restricted carriage of these distant signals which was the real reason the consumers were buying cable in areas where they could get reception. Cable had developed obviously in places where it was needed for basic reception of television. The FCC restrictions stayed on until the early 1980s, and at that point, the FCC finally gave up on restricting distant signals but engaged in lots of other regulation of cable television.
KELLER: That’s when the copyright came in though, didn’t it?
JAMES: And copyright law was passed in 1976, and that really effectively established a regime, a copyright royalty tribunal, that limited importation of distant signals by pricing. So even though the FCC had rescinded its distant signal restrictions, the copyright tribunal pricing scheme, under the copyright law, prevented cable operators from carrying great many distant signals. So it really perpetuated the FCC rules that were in effect in 1976 right to the present day.
KELLER: As I remember, there was a basic fee of 3.75% or whatever it was, for a certain package of signals that you could carry. If you went over that, you had to pay more.
JAMES: It was very complicated formulas and meant a lot of work for all the lawyers because there was a lot of uncertainty and a lot of controversy over how to interpret the law. But basically the fees were fairly reasonable as long as you limited your signal carriage to television stations that were permitted under the FCC’s restrictive rules from 1976. If you carried any signals above those quotas, that’s when the 3.75% penalty fee went into effect. That was 3.75% of your gross revenues from any tier of service that had broadcast signals on it. This was really prohibitive, and very few cable operators were willing to pay that.
KELLER: So you’re saying that you could carry a certain number of signals without paying copyright. But if you carried any more than that, you triggered the 3.75%? Is that it?
JAMES: Well, you’d pay a reasonable copyright. Everyone paid some copyright. But you paid a few that was fairly reasonable until you went over those quotas. Then you got into the 3.75.
KELLER: That’s where the 3.75 came in.
JAMES: Right. And that was really so restrictive that it really perpetuated those old FCC rules that the FCC itself had decided were not in the public interest.
KELLER: Who oversees the copyright tribunal?
JAMES: The U.S. Copyright Office is the agency of the federal government that collects the money and distributes it, and interprets the rules. The tribunal was set up by Congress in the law, and there really isn’t a lot of oversight. It’s an independent agency and has very limited use right now because most of the time the copyright fees are, under the law, evaluated every five years, I think. At the time, they had a tremendous power when they made their first decisions because that’s when they were setting these rates. Since then, their role has been fairly limited as far as cable’s concerned.
KELLER: But almost the impact of all of those rules and regulations kind of went away with the advent of the satellite-distributed signals, is that right?
JAMES: Absolutely. So what happened was the satellite distribution came in and suddenly all the other programming sources were available and that replaced the need for distant signals because cable then had a great deal more product to sell in these major markets where they could really develop huge, huge systems and revenues from that.
KELLER: How about mandatory carriage of local signals. What was your reaction to that and how did that affect the industry?
JAMES: I would say it’s often been a thorn in the industry’s side because cable operators generally wanted to carry the local signals that the customers wanted. But it permitted broadcasters to build stations that were not in – really broadcast stations – they weren’t built to really reach the public over the air as much as to get on the cable system. So they’d be low budget stations with very poor programming. It was those kinds of stations that the cable operators did not want to have to carry and use up their scarce channel capacity. So I’d say it’s definitely been a thorn in the cable operator’s side, but I don’t think it retarded the growth of cable or the way the restrictions on signal carriage did.
KELLER: I think it was the ’92 Act when the implied consent requirement was placed over the broadcast stations and everybody was very, very much concerned about that – that all of a sudden all of the broadcast stations would require consent and would require payment. But it never affected us.
JAMES: It still concerns me.
KELLER: Okay, Go ahead.
JAMES: It was in the 1992 Cable Act. It said that no cable operator could carry a broadcast signal without the consent of the broadcaster. What that meant was the local ABC, NCB, whatever, could withhold its product from the cable systems. It particularly had potential to damage, and still does, to damage the smaller cable operator because a local broadcaster is not going to withhold his product a system that’s serving most of his market. But if it’s a small system, it’s serving only a small area that really isn’t going to impact the broadcaster’s audience numbers. They may just decide they’re going to hold him up for a lot of money.
KELLER: Have there ever been any major payments to broadcasters?
JAMES: Oh, yes. It’s often not been in terms of money. There have been some …
KELLER: Trade-outs, right?
JAMES: But huge trade-outs where – and it’s still going on now even with ABC and the recent …
KELLER: It applied to the network carriage too, didn’t it, not just the local station programming?
JAMES: Oh, yes. Absolutely. ABC and NBC, for example, were able to force the cable operators that if they wanted to carry the local NBC affiliate, the cable operator also had to carry CNBC and other cable programming services that the …
KELLER: I had forgotten that. That is the law.
JAMES: Yes. So it was a big tie-in. It was used, and still is being used, by the broadcasters, particularly the larger ones.
KELLER: Is ABC using it today to require their …?
JAMES: Oh, yes. And there have been very recent disputes with a number of the large cable operators over carrying, for example, different types of ABC’s affiliated cable programming, whether it’s ESPN2, the Disney products, and so forth.
KELLER: Have some ever been taken to court and adjudicated?
JAMES: It really has not because the law was passed as a political gift to the broadcast industry to say, “Well, okay, we’ll give you this right to collect money by cable operator’s carrying your signal in the market that you’re broadcasting over the air to.” So it’s never really been challenged in court as far as these tie-ins. There have been court cases, but it’s usually been settled.
KELLER: Oh, there have been court cases?
JAMES: Yes, I think there were some court cases when they were fight over whether they had to take a signal off. I know there were cases at the FCC, but I don’t even know that there were any decisions that came out of the cases. There was a lot of legal wrangling.
KELLER: When you say, “Today it still concerns you,” you were talking primarily about the small operators in distant markets from the major cities?
JAMES: Somewhat. But I still think there’s a lot of potential because the retransmission consent periods run every three years, and broadcasters can agree to make it a longer period than that. But most of them are running about every three years. So every three years, they have the opportunity to go to the cable operator and say, “Okay, I want payment for this.” And the cable operator is already being squeezed by different programming prices, so it’s a real potential problem.
KELLER: Do you represent any of the programming services?
JAMES: We do represent some of the programmers – Outdoor Life and some of the cable programming networks.
KELLER: At one time, especially during the freeze of cable television application …. Before, let’s go back to this. The FCC used their authority over the granting of microwave licenses to take their first attempt at regulating the cable industry, even after they had said that they had no jurisdiction. Is that correct?
JAMES: Right. In the Carter Mountain case and some of these early decisions the court basically said that the cable operator was operating an antenna service and did not owe copyright and therefore should be allowed to do it. But the FCC was very restrictive in granting microwave licenses – initially, initially – to cable. That was another way that they wanted to restrict the distant signals coming in. But they did grant licenses eventually.
KELLER: Common carrier first which meant they had to serve some outside customers to start with, right?
JAMES: Absolutely. They had to have 50% of the customers had to be … And that was not initially. Initially you could be a common carrier and you didn’t have to serve 50%. But they passed a rule saying, “Half your customers had to be unaffiliated with the carrier.”
KELLER: What gave them the impetus, then, to pass the CARS regulation – Cable Antenna Relay Services – that was microwave to specific systems owned by the cable operator?
JAMES: Mainly the common carrier frequencies were particularly good, and they were lower frequencies, and there was a real demand for them. It was the idea that they would give cable something but it wouldn’t be that good. So they all knew cable microwave systems had to be done in the CARS band, which is 11 – 12 Ghz and higher as opposed to the common carrier bands in 4 – 6 GHz.
KELLER: I don’t remember, but did they continue to allow cable systems to be served by common carrier microwave services?
JAMES: Yes. And there’s still some out there today, not many, but some.
KELLER: It’s like the networks carrying their programs across the country, microwaving it. I don’t think they do that anymore. It’s just a prohibitively expensive thing.
JAMES: These companies have to renew their, the common carrier companies, have to renew their licenses every ten years. A couple of weeks ago they had to file for the renewals. There were still some small companies out there that had to file.
KELLER: MCI originally was built on the basis of microwave distribution of all kinds of signals, especially phone service.
JAMES: Oh, yes. They built it. They built so much terrestrial microwave.
KELLER: It’s a shame that so much of that is being wasted. But I guess the railroads and other people are using it today, aren’t they?
JAMES: I’m not sure how much. I know a lot of that is still in use, and I’m not sure how much of it is being done on terrestrial microwave still. I know so much has witched to satellite or fiber-optic lines.
KELLER: Where did they make the great jump between regulating only microwave-served systems to regulating all of cable television systems?
JAMES: I’m trying to think back to that because that has been so long ago that I’ve come to accept their jurisdiction. They had decided that in the Southwestern Case, their jurisdiction over cable television was ancillary to their jurisdiction over broadcast.
KELLER: That was San Diego Southwestern Case, is that correct, where they were importing signals from Los Angeles into the market?
JAMES: Right. And the FCC asserted jurisdiction and the Supreme Court upheld the jurisdiction as ancillary to the FCC’s regulation of broadcasting.
KELLER: But the systems in San Diego were not using microwave to pick up the Los Angeles signals, were they?
JAMES: I doubt that they were, but I don’t know. I don’t recall.
KELLER: Do you think that was the first step where they went from just regulating microwave-served systems to regulating all of the cable operations?
JAMES: I’m not sure. I’m really not sure about that. I think that may have been, but I’m not positive that that was. I know they got away from using microwave or being restrictive with the microwave licenses, and they just asserted jurisdiction directly over cable.
KELLER: Was that in the First Report and Order?
JAMES: The First Report and Order was their first… well, they had a lot of different initial decisions and preliminary reports, but the First Report and Order … And there were a number of First Report and Orders in different proceedings. But really it was in 1972 that they really became very active in asserting and regulating cable. Prior to that, they asserted jurisdiction through the freeze which was really through the late 60s. But there, at that point, they froze the distant signal market, preventing cable operators from carrying any distant signals until the FCC could figure out what they were going to permit.
KELLER: Only in the top 100 markets, though – is that correct?
JAMES: Yes. Right.
KELLER: You could carry anything at that point, even leap-frogging in smaller markets.
JAMES: Yes. If you were outside the zones of the markets. And those zones kept changing with the different sets of rules.
KELLER: Define leap-frogging.
JAMES: Leap-frogging was a concept that if you wanted to carry, for example, an NBC station, you had to carry the closest one. You couldn’t carry one from perhaps a larger city (that your residents, your subscribers, would have a greater interest in) if it was farther away. You had to carry the closest signal of that type. You couldn’t leap-frog the more distant signal over the closer one – another protection …
KELLER: …of the broadcasters.
JAMES: Absolutely.
KELLER: Why do you think that there was such a demand on the commission and at the commission level to protect broadcasters?
JAMES: Number one, I think it was political. I also think that there were a number of people who genuinely felt that they had a duty and a public interest obligation to protect the broadcasters. I don’t think it was all a sinister thing. I think there are some people that actually believe that cable would hurt the smaller broadcasters. But it was largely political. It was the broadcast interests used the smaller broadcaster as an example of someone who would be hurt if cable developed in these various markets.
KELLER: Carter Mountain was a perfect example of that.
JAMES: Yes.
KELLER: …and Worland, Wyoming.
JAMES: …and picking a tiny little broadcaster to make an example of. Many of those broadcasters were marginal. The markets were so small they couldn’t really support a television station. So it really never was adequately proven that cable was a real threat, even to the smaller broadcasters. In many cases they helped the smaller broadcaster by carrying them and providing a good signal from a station that was not well-built or well-financed.
KELLER: Remember when we were very much concerned about translators and repeaters?
JAMES: Oh, yes.
KELLER: Do you want to explain a little bit about that and what they were? It’s almost something in the very distant past that doesn’t make any difference anymore, but it did at the time.
JAMES: When I first came to the law firm in 1969 and in the early 70s, the broadcasters in Albuquerque, New Mexico, for example, would build translator stations at the limits of the broadcast signal to extend that signal. And they still do, and they still use those translators.
KELLER: Especially in mountainous areas.
JAMES: Yes. And some cities actually, rural cities, built translators to bring signals in over the air to local residents. All they did was pick up the signal off the air, off a high tower, and rebroadcast the signal on a different frequency into the town. So they might be broadcasting on Channel 6, translator would pick up that signal and rebroadcast it – extent the range of it – on a different channel, Channel 32 or whatever.
KELLER: The advent of UHF allocations came during the freeze. Was there some idea in the mind of the commission that once there were these UHF stations assigned to virtually every market in the country, large or small, that there would no longer be any need for cable?
JAMES: Yes. I don’t know… It may have been, may well have been. I don’t know if most of the FCC got to that conclusion, but that certainly was their idea – that they would encourage the development of UHF stations everywhere and it was better to have this so-called free over-the-air television supported by advertising than it was to have a subscription service that people would actually pay for.
KELLER: It never worked.
JAMES: It never did. But I do think, in the end, that the cable industry helped even the smaller broadcasters. There may have been isolated cases where there was a competitive impact. But there were a lot of cases where the cable operator really helped the smaller UHF stations.
KELLER: I don’t think there’s any question about it. In San Francisco, there were a couple of new UHF stations that went on the air. Their signal couldn’t really reach all over San Francisco by coming off the air from wherever their antenna was located or transmitter was located. They came to us and asked for a direct studio-to-headend feed. It was the first time that I remember that occurring. It was a great benefit to that station. We had a clear signal all the way through.
JAMES: So then they were getting a good signal into the home in just a different way.
KELLER: I’ve often thought that perhaps the broadcasters never realized just exactly what business they were in. I’m convinced that they thought they were in the transmission business as opposed to the programming business. I also thought the same thing about newspapers – they were in the distribution system rather than the news gathering system. We just provided a new way for them to distribute their signal, and they didn’t have to pay you.
JAMES: Yes. There’s a lot of truth to that too.
KELLER: Some of the broadcasters will deny that vehemently. As a matter of fact, our friend Ed Hewson of King Broadcasting, denies that that was ever even thought of them – of them at least. But they were one of the better broadcasters throughout the country.
Let’s make a little segue here, Bob, and go into the First Amendment rights for cable television. Go back to the fact that there was a time when the industry said that they were just an antenna service and therefore didn’t have any First Amendment rights at all. Then how did that change over the years? How did it change and what was the impetus for the change?
JAMES: I think some of it was tied in to the federal regulation and also into the copyright issues. With the passage of the copyright law, cable paying copyright. The argument was that the cable operator was, in effect, like a newspaper. It was publishing information and distributing it to the home and the government shouldn’t be regulating a newspaper or the cable system. Through a series of court cases, the courts did support First Amendment rights for cable at some times more than others, some times more restrictive than others. But it was used to challenge many things that the regulators had done, particularly the distant signal restrictions. The whole idea that the government could tell people what they could publish on this electronic medium and what the viewers, the cable customers, could see in their homes, was being controlled by the government. There were a number of cases, back and forth, on the First Amendment protection of cable operators that we strongly felt that the government should not be in that kind of regulation.
KELLER: It seems like they applied the First Amendment rights in some cases and in some cases not. For example, newspapers obviously have First Amendment rights -–free speech. They can put their newspaper stands on any street corner and are not required to pay for that location to the city at all. Yet we, who are First Amendment speakers, have to pay the city for the right to use the public rights of way. What is the rationale behind that?
JAMES: It’s one of many things that have just grown up historically.
KELLER: The question, Bob, was that there are certain limitations to the cable’s First Amendment rights. I used the example of the newspaper who are First Amendment speakers who have the right to, under the First Amendment, put their kiosks or distribution boxes on any street corner, tie them to telephone poles, or light poles, or whatever it may be, without any… In fact, they’ve been told they didn’t have to pay anything by the courts because of the First Amendment rights. Yet we have to pay for the right to use the public rights of way. Is that a dichotomy?
JAMES: Yes. It’s just grown up historically that way, and because there were different political interests and financial interests at stake, is a lot of the reason for it. The most recent First Amendment cases have limited cable’s First Amendment rights in some circumstances.
KELLER: What would those be?
JAMES: For example, talking about the public rights of way – the cities have, under their police power, they have the power to regulate the rights of way for safety and other types of police powers. So you have these different rights all kind of coming together. I think there’s probably more challenges to be made by the cable operators in the First Amendment area. The First Amendment really has been helpful to the industry, but it didn’t solve all of the problems. But it really has been a very helpful tool in limiting the kind of government regulation that would just be completely impermissible to regulate a newspaper the way they’ve regulated cable. So much of this has grown up historically.
KELLER: My thought would be just the reverse. Why should they regulate cable when they didn’t regulate newspapers?
JAMES: Well, the point is that they shouldn’t. That’s been our position all along. But there have always been arguments to balance the public interest. Was, for example, protecting the broadcaster, was that the kind of limitation that the government could have on the First Amendment right because it had a duty to protect these broadcasters and extend the broadcast industry and coverage. So was there a governmental right that allowed it to, therefore, restrict cable’s First Amendment rights? There’s always this balancing. By developing the law through a series of cases, you come up with some very strange results.
KELLER: I’m surprised you didn’t put public interest in quotes.
JAMES: Everyone argues about the public interest. It’s amazing.
KELLER: They’re thwarting it.
JAMES: Yes, absolutely.
KELLER: When did the requirements for the cable systems to carry public educational and governmental access channels come in and what was the result of that?
JAMES: A lot of that came in the franchising. The FCC originally had some rules that impacted it somewhat. But mostly, this was done at the local level. It was done in the cable franchising process as part of the cities’ effort to have a government channel and an educational channel and a public access channel. It was encouraged by the FCC.
KELLER: Wasn’t that codified though?
JAMES: I don’t know that it was ever a requirement in any of the cable statutes that you had to have particular access channels. I’m not sure – I may be wrong about that – but I don’t think it was. I think it was done by the cities. They did it and the laws supported the cities’ doing it because they clearly required the cable operator to carry those channels on basic service and things like that.
KELLER: Wasn’t there a court case saying that it infringed the First Amendment rights to require the cable operators to provide those kinds of channels?
JAMES: I don’t recall. I just don’t recall if that issue got into the courts or not.
KELLER: I thought they did away with the requirement, but again I don’t remember that clearly either.
JAMES: That may be one of those many things that has drifted along …
KELLER: That’s probably true.
JAMES: …from my memory.
KELLER: Do you think that even after the passage of the ’94 Cable Act, that there’s going to be additional regulations to protect the broadcasters?
JAMES: Well, there are disputes going on right now at the FCC on what the cable operator would be required to carry when the broadcaster is transmitting more than one signal. In other words, the broadcasters, as you know, have gotten a great deal of additional spectrum, and they could simultaneously transmit several channels. Will the cable operator be required to carry all of these digital channels? So we’re back to the same argument about the broadcaster right now is a very active … If fact, the FCC just issued a decision about two weeks ago, tentatively concluding that you would not have to, the cable operator would not have to carry these ancillary channels that the broadcasters have. But they’re still a very effective and potent lobby, so I think they’ll still receive some protection – as much as the agency can give them. But I think cable, now, has really surpassed a lot of its …. It’s become an economic and political force in itself. I don’t think we’ll ever see it like we did where the government tries to stop the industry in its tracks – that’s really what had happened.
KELLER: Politicians have to get heir message out. There was a time there when one of the better ways of getting the message out was through television broadcasting.
JAMES: Absolutely.
KELLER: That’s where they got their power. Now that that’s been so diversified through the cable channels, I don’t think anymore, really that that’s the only voice that politicians have.
JAMES: You’re right about that. They still have a very strong political presence, though, because they still are … As a politician, getting on favorable terms from the broadcaster, good times, and so forth, to be on is still a very important constituent for you to have.
KELLER: You’re attuned to the scene in Washington, to a large extent. What kind of impact do you think that C-SPAN has made on the political process in this country?
JAMES: I think it’s been phenomenal. I know people that just sit and watch C-SPAN. They have C-SPAN going in their house all day. But it really has, I think, opened up the political process in Washington to the country and forced it to reform itself in some ways, limited ways, because some of the practices and things that were happening, were just wouldn’t look good if it was coming into your home. So I think it’s had a tremendous impact. I think the Congressmen and Senators use C-SPAN also to get their message out, to get themselves on television, even if it’s talking to a completely empty chamber. They’re up there talking because this is getting recorded for their district.
KELLER: As you probably know, if you use politics and C-SPAN in the same sentence, the president of C-SPAN, Brian Lamb, has a fit because he felt there was no political benefit to C-SPAN at all. Rather, it was not the purpose of C-SPAN to be politically effective.
JAMES: I think that’s true. He has been such a great leader. It’s such a hard job to make C-SPAN non-political.
KELLER: Apolitical, probably.
JAMES: Yes, strictly apolitical. By doing that, he’s made it a success because otherwise, it would become a political football and would have been, at some point, damaged and not been able to cover the House and Senate like they do. He has done a fabulous job of keeping it absolutely neutral.
KELLER: He sure has, and I’m amazed by the fact that he was able to do it.
JAMES: And that he had the foresight to realize that that’s how he had to make this a lasting institution. But I think it’s really opened up the political process to the country, to the scrutiny of the country. And that’s healthy.
KELLER: What are the major concerns of your clients today?
JAMES: There are a lot of concerns. I think a lot of them are economic and rebuilding their systems and getting the internet services up and going. The kind of things that I see an awful lot of are local franchising issues where the cities need money and they’re looking to businesses in their town that can somehow benefit the cities and provide funding to the cities. They don’t want to raise taxes so they look to other sources of revenue.
KELLER: Especially in California.
JAMES: California is notorious. I spend a good bit of my time dealing with issues dealing with cable franchising where cities are looking to get basically a piece of the business.
KELLER: That’s nothing new.
JAMES: It is nothing new.
KELLER: There were franchise requirements 20 years ago. If you would accept them at the time that the franchise ran out, you had to sell it back to the city at the depreciated value which was zip.
JAMES: Yes, yes. But now there’s a much… The consultants to the cities have developed to be a very well-informed, well-funded group that advocates the financial interests of the cities as well as other interests. They address issues that are certainly proper for the cities to address. I think if the cities want to use cable as a revenue source, they really ought to do it openly and let the residents know what they’re doing, that they’re imposing a tax on cable – on cable subscribers.
KELLER: It was the ’92 Act that permitted the cable television to itemize the various taxes and other fees that were charged on their subscribers bills, because there was a time that was prohibited.
JAMES: Right. I’m upset every time I pay my cable bill and I see how big that chunk is.
KELLER: Same thing with my telephone bill – the same way.
JAMES: I can’t even understand my telephone bill.
KELLER: I can’t either. I’m with you. I call them and ask them and they give me some explanation which I don’t understand either. It’s getting to be the same way with cable television. It’s just a hidden tax.
JAMES: Yes. And I think the idea of putting a line item showing these taxes is something that really needed to be there.
KELLER: I can remember when cities prohibited showing those line items.
JAMES: And cities still will ask the cable operator not to show this as a line item. An individual mayors or city council people may do that. This is not true of all cities. There are a lot of cities that are out there that are doing the minimum amount of regulation they need to regulate the public rights of way, are not looking to cable to raise revenue for the city beyond funding the city’s regulation of the wires. There are a lot of cities, in my view, regulating cable in a very proper way. But there are a lot of others that are just… They’re strapped for money so that’s what ….
KELLER: What are some of the very onerous provisions of these franchises that you currently object to, and what do we do about them?
JAMES: Well, there are so many. That’s the problem right now. Some of them are outright just payments of money to the city. If, for example, the cable system is sold within a certain period of time, some franchise provisions say that the city will receive a set amount of money, $250,000 is one example that I’m thinking of. Many other requirements that, for studios and facilities that, for local production, government channels, many of the cities want the cable operator to build the city’s own communication network so they can save money on their telephone bill is basically what it is. And they’ll demand that the cable operator build an institutional network or I-net and give it to the city.
KELLER: That’s a term I haven’t heard used in a long time, but there was a time that it was battered around all the time.
JAMES: It’s still out there, and many, many cities still demand that be part of the cable franchising process.
KELLER: How do you advise your clients to handle things like that?
JAMES: Well, it varies depending on the city and depending on the size of the system, of course, and what it can afford to do and where they can do things that … And in some cases it makes sense for the cable operator to, for example, build an institutional network and have the city as a customer of the cable system, in a way, in providing this kind of interconnection that the cities want. So it varies so much by each specific situation. I would say the biggest problem is the delimitations in the federal law on what cities can get in franchise fees are, once again, not absolutely clear. It’s a 5% limit, but what goes into the calculation of the basket that the 5% is applied to.
KELLER: It’s never been clarified, has it?
JAMES: Well, it’s been clarified, but it’s still not clear. So there are still arguments on both sides. What often happens is the cable operator, in order to get on with the business, makes compromises that they wouldn’t want to make, that don’t make sense, that the subscriber ends up paying for. The subscriber may be paying for studios, for example, that nobody is really going to use. So it’s a real difficult issue right now. There are an awfully lot of issues out there involving franchises.
KELLER: That’s interesting because you were part of a panel discussion this morning in which I asked the question, “What do you consider to be your major problems today?” I think, without exception, everyone said the franchising issues were their major problems right now.
JAMES: Yes. Some of that is that the federal government has been very reluctant to apply a rational scheme of oversight to the localities who are, in many cases, just really need money, and they’re looking to whatever businesses they can see in town to provide it for them.
KELLER: Bob, I think we’re getting pretty close to an hour right now. Is there anything further that you’d like to discuss or anything that we should be touching on that we haven’t up to this point?
JAMES: I think one of the things that I ended up working on in my career at the firm and that I think has made such a huge difference in the cable industry is the development of satellite and the regulation of receive-only earth stations. This was one of the more exciting things, I think, that I worked on at the time. None of us at the time …. I would say there were people that saw what a change this would bring. But I certainly was not one of them. I saw it was going to be quite good and we might have several channels getting up there. But I had no idea it would develop into the kind of distribution system it is today.
KELLER: It’s a universal distribution system now – almost everything.
JAMES: Yes.
KELLER: I just wonder when the satellites are going to start bumping into each other up there.
JAMES: Oh, yes. But even that was something that the FCC regulated very heavily at the time. It was really cable operators pushing the FCC time and again, over a period of 5 –7 years, to gradually deregulate the construction of these receive-only earth stations. I think that really opened the door in rural areas in the northwest, for example, but all over the country as well as in the big cities, so that these programming networks could develop and cable would become even more desirable where people were willing to pay subscription rates to receive that programming.
KELLER: The other topic of conversation this morning is what the future is going to be for the wired community as opposed to satellite delivering signals directly to the home. I think the general consensus was that as long as they’re going to be delivering other services, internet services and data services and so on, that there’s always going to be a need for a two-way line into and from the home. Even if they have to give up carrying all video signals, probably still the cable systems will survive. That seemed to be the general reaction this morning.
JAMES: That’s my view too, although it’s hard to know how these things are going to develop and whether some kind of wireless technology, some of the technology that’s out there now that they’re now using to bring high-speed internet into people’s homes, more of a terrestrial type wireless operation as opposed to the satellite. If you have a transmitter on someone’s house that’s got to get up to the satellite and back down, it’s very … I think that’s going to be prohibitively expensive.
KELLER: Direct line of sight now is a major concern now.
JAMES: And that’s also a very big point too.
KELLER: Tree branches getting in the way of the signal coming either way is going to affect the signal.
JAMES: And of course building and all of that. But I think that was the one area that I’ve just seen as changed the industry from not having a product to sell beyond improved reception of television, of existing television stations, to really be a force in programming and take the real monopoly away from the major networks from being the only thing people would watch.
KELLER: Do you see anything in the near future that you feel is going to require the industry to go back to Congress?
JAMES: Well, there are lots of ills that I would like to see cured. But I don’t know that the cable industry wants to go back to Congress to ask for any particular …. There a number of things out there in particular circumstances – the pole attachment, for example, where rates are, under the new Telecommunications-Comm. Act, with the new services is offering, the rates are going up. But I think there’s still the possibility that because the cable rates are such a political issue that the industry may be back in front of Congress fighting the rate issues again.
KELLER: Seems to me they’d be better off just leaving them alone – that Congress would be better off leaving them alone.
JAMES: The last effort at regulation was basically a disaster. It became so complicated that very few people in the world understood what the regulations meant. They were argued about back and forth.
KELLER: I confess to be one of them.
JAMES: And so do I.
KELLER: Bob, we’re going to probably wrap this up right now because I think we’ve covered the major issues that we wanted to cover. I very much appreciate it. Again, the oral history of Bob James was made possible by a grant from the Gustav Hauser Foundation as part of the Oral History Program of the National Cable Television Center and Museum. Bob, thank you very much.
JAMES: Thank you, Jim. I’ve enjoyed it.
