In Arlington, the first major Washington suburb to join the cable TV era, the county and its cable operator have just ended a bruising battle over county regulation of cable television. Both the company and its critics seem relieved the showdown is over.
"ARTEC didn't run away with the candy store," says Marianne Karydes, an outspoken member of the county's cable advisory committee.
Alexandria, the second major suburb to be wired for cable, quickly backed away from actively regulating the prices its viewers have to pay. Yet there's been little dissent. "Most people are quite satisfied with the service," says Vice Mayor Robert L. Calhoun, terming rate regulation "nothing but trouble."
In Northern Virginia and across the country, what to regulate and what not to regulate in the booming cable television field is stirring widespread controversy. The results so far appear mixed. And there's considerable disagreement about how effectively local governments can regulate cable.
Alexandria Cablevision Co. surprised the City Council there last week by announcing that it is seriously considering selling or otherwise transferring control of the franchise to a larger, outside cable firm, one with more money to sink into the capital-intensive business of setting up a cable franchise. But Vice Mayor Calhoun doubts that the council's decision to stay out of rate regulation had anything to do with Alexandria Cablevision's woes.
"Actually, that's been a plus in their favor," Calhoun says, helping the company avoid what would have been a "contentious and expensive" series of meetings.
Calhoun says that while Alexandria shied away from rate regulation, the city does regulate other aspects of the franchise. "We keep track of their accounting, wherever we can, and their services tariff, so they are not able to discriminate in their rate structure."
Massachusetts and California have acted aggressively to lift the lid on cable rates. But the viewers don't seem to be getting gouged. Instead, the company that won Boston's new franchise is promising the unusually low price of $2 a month for 52-channel service.
Congress is considering a new cable regulation measure. An important cable deregulation case awaits a Federal Communications Commission ruling. National Cable Television Association, an industry group, and the National League of Cities are lobbying strenuously for conflicting regulatory goals.
In the Washington area, Prince George's, Fairfax and Montgomery counties, along with the District of Columbia, are debating the regulatory issues as they prepare for the start of cable service. As communities here and elsewhere struggle to draft cable ordinances and franchise agreements, public officials and television viewers alike at times appear baffled by the jargon and electronic intricacies of cable.
"Cable television is still a mysterious kind of a thing to a lot of people," says Wayne D. Wedin, city manager of Brea, Calif., and no newcomer to cable controversy. As chairman of the cable advisory committee of the League of California Cities, Wedin opposed the state deregulation bill. The public is also confused, he says, by the "almost circus-like atmosphere" in which franchises are often awarded.
Cable regulation is far from a clear-cut issue. The industry, for example, wants to do away with one form of regulation, local control of rates. But it hopes to preserve another regulatory mechanism, federal limits on how much money a cable system may have to pay to a local government for its franchise. (FCC rules currently set this ceiling at 3 percent of a company's annual gross revenue, but it may rise to 5 percent with a special FCC waiver.)
Moreover, municipal and county governments only have limited regulatory power. They may control "basic" cable rates. But they are denied the right to oversee prices charged to cable viewers for more lucrative "pay" services, like Home Box Office and other movie and entertainment packages.
Nor have the nation's cautious moves toward deregulation of basic rates removed the fears of local government leaders.
Officials in Arlington and Alexandria oppose any federal move to bar them from regulating rates, even though both communities have opted to leave pricing largely to the marketplace. "It's a way of keeping them honest, so to speak," says Arlington's acting county manager, Anthony H. Griffin, who favors at least limited rate controls as "a moral persuasion, leverage kind of thing."
Boston's cable specialist, Richard Borten, says that the city, although pleased by the $2-a-month charge promised by its franchise winner, remains unhappy about state deregulation, which he contends has led to "a regulatory climate that favors the industry."
Arlington's example, though unique in some respects, offers insights into the economic, social and technological forces helping to shape municipal and county attempts to regulate cable.
Neither of two hotly contested financial matters -- franchise fees and basic cable rates -- was at issue in the recent conflict. Arlington's franchise fee, 4 percent of revenue, has long been pegged to the FCC ceiling. Arlington's basic cable rates have increased only once, from $7.95 monthly when service began in 1978 to $9.95 about a year ago.
"Had we kept pace with inflation since 1975, the rates would be over $13.50," says John D. Evans, executive vice president and chief operating officer of Arlington Telecommunications Corp. (ARTEC). There are additional charges for "pay" cable, such as $9.95 for Home Box Office and $8.95 for Cinemax, and ARTEC may soon propose an increase -- $1 or less, according to Evans -- in the basic rate.
Instead, the sometimes strident debate in Arlington centered on how much money ARTEC would spend for equipment, training and other services for educational and other community programming -- an issue that even advocates acknowledge matters mainly to a minority of the cable audience.
"They call us the vocal minority," remarks Marjorie Mayer, president of a community group called PAC/TV (Programming for Arlington Cable Television). "We agree we're a minority. We just think we're a larger minority than they think."
Though disagreements simmered for some time, the harsh inflationary economics of the 1980s finally brought the conflict to a head. Faced with soaring interest charges on its bank loans, ARTEC concluded it could not continue simultaneously to pay off its debts and also to finance the community programming it had promised. ARTEC's solution was to seek a franchise extension -- a procedure that gave the county an unexpected mechanism for settling the brewing complaints.
The upshot was a compromise, reached Sept. 12. It appears to have ended much of the controversy, though not everyone is pleased. ARTEC got a 14-year franchise extension under terms that apparently will restore its financial health. The county tightened its controls on ARTEC's service, through new penalties and scheduled franchise reviews. ARTEC will help finance a special nonprofit corporation to aid in community programming. The school system will get new cable equipment, though less than it sought. Cable activists will have access to a new studio, probably at George Mason University's law school there.
To some extent, the agreement illustrates the strengths, the difficulties and the novelty of local regulation of cable.
"It is extraordinarily difficult because very few people have awareness of the technical area or the concepts behind programming. It's all new," says PAC/TV's Mayer.
"We hear a lot of flak," says ARTEC's Evans. But he adds, "We view what we have here in Arlington to be a partnership."
Efforts by cities and counties to regulate cable face uncertain prospects, however, for several reasons. The FCC, in a pending case, is considering abolishing its ceiling on franchise fees. The Senate is weighing an industry-backed measure intended to retain such a fee limitation, but bar most local governments from regulating basic rates. Sen. Barry Goldwater (R-Ariz.), communications subcommittee chairman, plans to try to delete these provisions on the Senate floor soon to permit further study.
More significant than the changing federal role in cable, some officials believe, are uncertainties caused by advancing technology and inflationary economics. Municipal and county officials fear that the regulations they set today may be made obsolete by future telecommunications techniques. Both the industry and its critics say that cheap basic cable pricing in cities like Boston and Denver may reflect a trend toward "loss leaders," unprofitable rates designed to expand business. Such prices may not last long amid continuing inflation, some officials argue.
California offers an illustration of the unpredictable consequences of rate deregulation. Irked by several local rejections of proposed rate increases, the cable industry sought deregulation from the state legislature, winning a compromise decontrol measure in 1979. Yet only 19 of California's approximately 300 cable systems have deregulated under the state plan so far.
Monroe E. Price, a Los Angeles law professor and president of a state-established cable foundation, attributes the slow pace of deregulation partly to cable operators' fears of irritating the communities that grant and renew their franchises. "It may adversely affect their relationship with the franchising communities," he says.
According to the National Cable Television Association, 410 U.S. communities now exercise no control over cable rates. There are 4,360 cable systems currently operating in 10,000 communities, the association says.
From the industry's viewpoint, perhaps the greatest worry about local government control stems from the possibility that the FCC ceiling on franchise fees may be lifted. Cable lobbyists contend the result may be gouging by money-hungry counties and municipalities.
Local government officials, like Montgomery County cable specialists John A. Hansman, disagree. Although Montgomery does not have a cable system yet, the county plans to seek a 5 percent franchise fee when it solicits bids on its prospective cable franchise, possibly later this year. In Hansman's view, any subsequent move to boost the franchise fee likely would face opposition from cable viewers, who might regard it as a tax leading to higher cable rates.
"If we were to raise the franchise fee, that is not a painless process," Hansman says.