Tom Shales's commentary on cable television {"The Great American Cable Tangle," Outlook, June 10} is generally correct in castigating an industry that has ignored its customers in favor of appearing as an attractive investment opportunity. But as a former executive in both cable television and the new "wireless cable" technology, I can tell you neither the cable industry nor the government is entirely at fault. Mr. Shales omits several other villains in the piece:

1) Municipal governments originally decided to grant "limited franchises" to cable operators. These franchises were then held for ransom in a bidding process, with many cities making exorbitant demands for services and fees to be paid by the highest bidder (Washington is a prime example). The cost for these services and fees is paid by the subscriber. Most cable operators pay municipalities, in addition to the usual business taxes and fees, a minimum of 3 percent and a maximum of 5 percent of their gross basic revenue for the privilege of operating their franchise.

2) Given the revenue crunches in which most municipalities find themselves, the search for new revenue has led to the cable operator. Sacramento and Norfolk are the first to have levied on cable operators "utility" taxes of 7.5 percent on gross basic revenues (never mind that for all its popularity, cable is by no stretch of the imagination a utility). These fees are also passed directly to the subscriber -- a disguised tax on cable television viewing by the municipality.

3) Around the same time the Cable Act of 1984 took effect, cable program services such as MTV and ESPN began charging operators subscriber fees, which now amount to a dollar or more per subscriber per channel. In the case of ESPN, the cable operator has also been charged an additional fee for National Football League and major league baseball contracts. Combined with heavy increases in copyright fees, these programming costs have been passed along to subscribers in the interest of keeping cable-operator profit margins at the same or higher levels.

There are other problems the cable operator faces as well, but all this notwithstanding, the primary fault is in fact the cable industry's, which has failed to properly position itself to survive in a competitive environment, preferring to believe its franchise status and the well-organized lobby to which Mr. Shales refers will save it.


Tom Shales's column is fraught with factual errors. I would like to restrict myself to setting the record straight on his comments regarding the Time Warner, Inc., cable operation in Rochester, N.Y.

My company, American Television and Communications Corp., which owns and operates Greater Rochester Cablevision, is an 82 percent subsidiary of Time Warner.

Error: "Last year, the Time Warner cable system in Rochester, N.Y., started its own TV station and gave it a choice location -- Channel 5 -- on the dial. The old Channel 5 was shunted off to Channel 31, a much less prominent location."

Fact: Before the cable system launched WGRC-TV, Channel 5 had been the system's "Flower City Network," a name given to its local organization channel. WGRC-TV was simply a new name for an older, established channel run by the cable system. Channel 31 on the cable system is and always has been assigned to CNN Headline News.

Error: "Preston Padden, president of the Independent Television Association, noted in an angry letter to the FCC and to House and Senate committees that as a major program supplier, Time Warner 'sold itself its best programs' for airing on its own new channel."

Fact: The syndicated programs sold to WGRC-TV by Time Warner were rejected a year earlier by Rochester's three commercial affiliates and an independent station. WGRC-TV purchased them at Time Warner's standard syndication rates. Mr. Shales also neglected to mention that the cable system also purchased programming from MCA, Viacom, Worldvision and Televentures.

Error: "He {Mr. Padden} also said that Time Warner had the technological capacity to program all the cable boxes in the system so that when they were turned on, Channel 5 would automatically pop up."

Fact: Of the 170,000 cable converter boxes in Rochester TV homes, about 15 percent of them have this capability. However, Channel 5 doesn't "pop up" on any of them now, and there never were any plans to have this happen at any time.

The scheme was a figment of Mr. Padden's imagination. These errors were rebutted vigorously by ATC in the press at the time, a fact that seems to have escaped Mr. Shales. Even so, an elementary respect for basic journalism should have led Mr. Shales to call us and check his "facts."

JAMES DUFFY Director, Corporate Public Affairs American Television & Communications Corp. Stamford, Conn.