Page 178 - Communication Commerce and Power The Political Economy of America and the Direct Broadcast Satellite

168 Communication, Commerce and Power

programers such as Turner Broadcasting, ESPN, HBO, Playboy Enter-
tainment, the Disney Channel and others. Cable companies responded
by threatening 'to drop any programmer who went direct to the home'
rather than deliver their services through cable company 'middlemen.'
Recognizing the desire of cable companies to control programing,
Hughes then pursued 'a cable friendly approach' offering to provide
'programming services "complementary" to those offered by cable
systems.' Hughes executives also offered cable companies a financial
interest in DirecTV and guaranteed them a degree of exclusivity in the
distribution of programs in their established franchise areas. Recogniz-
ing the Hughes DBS system to be a competitive threat, in November
19&8 General Electric (a direct competitor to Hughes in satellite man-
ufacturing and the owner of its own broadcasting interests) offered the
cable companies its K-1 satellite as a cable-controlled alternative to a
prospective Hughes agreement. GE executives argued that through its
telesatellite, cable interests could tie up programing in order to make it
difficult for the Hughes DBS system to attract viewers.
In the context of these activities, Congress passed the Satellite Home
Viewer Act in October 1988. This legislation created a compulsory
copyright license authorizing the retransmission of broadcast signals -
including so-called superstations and network transmissions - to the
owners of home satellite reception equipment. ° For the first time in
3
the United States, a DBS venture theoretically could provide program-
ing without the consent of cable companies and other programers.
However, the compulsory license provision also enabled cable compa-
nies to distribute the same programing, thereby extending the scope
and attractiveness of their already established services. Nevertheless, in
May 1989, a preliminary agreement was signed between cable compa-
nies and GE for the use of the K-1 satellite. K-Prime/Primestar offi-
cials agreed to provide a national DBS service that would be tailored
to curtail the development of emerging DBS operators and, through
this service, provide a non-competitive programing package relative to
the cable interests represented in the partnership.
Related to these practices, in 1992 Congress countered the anti-
competitive behavior of cable operators. Due in part to the activism of
the National League of Cities and other 'citizen's groups,' vaguely
justified cable rate increases since the 1984 liberalisation, and mount-
ing complaints regarding poor or inadequate service, Congress was
co~pelled to re-regulate 'free market' activities. As a result of the
1992 Cable Regulation Act, the FCC has imposed 'reasonable access'
rules on cable operators requiring cable-controlled programing to be