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DOCUMENT RESUME

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Cable Television in Detroit; A Study in UrbanCommunications.Detroit Cable T. V. Study Committee, Mich.United Methodist Church, New York, N.Y.May 72170p.City Clerk's Office, 1304 City-County Building,Detroit, Michigan 48226 ($5.00)

MF-$0.65 HC-$6.58*Cable Television; *City Planning; *CommunityAntennas; Community Control; *Specifications;TelevisionCATV; *Detroit; Michigan

The Cable TV Study Committee of the Common Council ofDetroit, Michigan studied in depth the possibilities, requirements,and implications of cable television for Detroit. Their detailedrecommendations are presented, covering financing and construction,the need for engineering and financial projections, organization foroperation, channel allocation, access, revenue, regulation,additional services, and technical standards. (RH)

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a study in urban communications

it rep prepared by thecable tv study committeefor common council,City of detroitthat 1912.

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Copies may be obtained fromCity Clerk's Office1304 City-County BuildingDetroit, Michigan 48226$5.00 per copy

Cover and Illustrationsby Patricia Artz

OFFICERS

REV. JAMES W. BRISTAHChairman

OLA NONENVice - Chairman

DAVID HARPERTreasurer

DWIGHT HAVENSSecretary

MEMBERS

REV. WILLIAM ARDREY

AVERN COHN

JAMES CURRAN

HENRY DODGE

ESTHER G. EDWARDS

DAVID HARPER

EDNA HENDERSON

ERMA HENDERSON

OTTO J. HETZEL

MELVIN JEFFERSON

MILDRED JEFFREY

EDWARD KOCH

STANLEY KRAJEWSKI

ISRAEL LAYTON

REGINALD McGHEE

MORTON MILLER

PRINCE MOON

CORNELIUS PITTS

HAZEN SCHUMACHER

MANATEE SMITH

TOM TURNER

RALPH VIGLIOTTI

REV. EDWARD WILLINGHAM

JACK WOOD

LOIS P. PINCUSProject Director

Cad le (7.9.1. Study CommitteeCreated by Common Council, City of Detroit

LETTER OF TRANSMITTAL

Dear Council Members:

U.S. DEPARTMENT OF HEALTH.EDUCATION & WELFAREOFFICE OF EDUCATION

THIS DOCUMENT HAS BEEN REPRO-DUCED EXACTLY AS RECEIVED FROMTHE PERSON OR ORGANIZATION ORIG-INATING IT. POINTS OF VIEW OR OPIN-IONS STATED DO NOT NECESSARILYREPRESENT OFFICIAL OFFICE OF EDU-CATION POSITION OR POLICY.

May 12, 1972

When a little over a year ago we were asked by theCommon Council to study and advise them on bringing CableTV to Detroit, few of us either understood or appreciatedwhat we were being asked to do. It has been an enrichingexperience as we became aware of both the promise and theproblems that relate to Cable TV. The unforeseen complexitiesand the almost unbelievable potential has caused us to workharder and longer than any one of us dreamed.

The Committee began its work by becoming informedabout the dimensions of cable. Over a series of meetingsvarious consultants with different expertise were brought into discuss the parameters of the problems. One of thesesessions was video taped by channel 56 and televised toDetroit viewers over a two-week period. Then a series ofpublic meetings was held. At these, citizens and repre-sentatives of any group who wished to appear were givenopportunity to share with the Committee their viewpointsabout Detroit developing a cable system. These meetingswere held in several different geographic areas and atdifferent times of the day to provide greater opportunity forpersons to testify.

The Committee divided itself into three sub-committees,to explore and develop position papers and recommendations.From these a drafting sub-committee began to prepare drafts.Then the full Committee over a series of many and lengthysessions hammered out the final recommendations. Oncethese were approved, a drafting sub-committee prepared thefinal draft of the Report. During this period the work wasreviewed by outside consultants for their advice and com-ments. We now submit the final Report and recommendationsto you.

Mailing Address5229 Cass Avenue, Detroit, Michigan 48202

(Area Code 313) 577-2190 or 577-2210

In my experience, I have not seen a group of volunteerswho has been more willing to give of themselves in time,thought, and effort. The Committee as a whole has met atotal of 18 times, with many of these for extended sessions. Thesub-committees met often in late spring and early summer.The drafting sub-committee's time must be measured in daysrather than hours.

We know this Report is not the final word on Cable TV.Some of the decisions which must be made are beyond thepurview of a lay committee. However, we are not merelyproud of what we are submitting to you, we believe thatour recommendations deal with fundamental questions theCommon Council must consider if the public's interest is tobe paramount in deciding about the coming of Cable TVto Detroit.

We strongly urge you to give this Report your mostserious reading and discussion. We stand ready to helpinterpret it and assist the Common Council as it makes theimportant decisions it will be making about this crucialmatter of urban communications.

We thank you for giving us the opportunity of becomingpublic servants for a while and hope our contribution to youmerits the trust you placed in us.

Sincerely,

/s/ James W. Bristah, Chairman

ACKNOWLEDGEMENTS

The Committee wishes to express its appreciation for the supportand assistance of a number of persons and institutions who have assistedin the Committee's work and the preparation of this Report.

The Committee' wishes to acknowledge the assistance and supportprovided by Wayne State University, Center for Urban Studies, for itsadministrative and research support, the provision of meeting facilitiesat the McGregor Center and for making available staff, in particularProfessor Hetzel, for extensive work in drafting recommendations andtext for the Report. Similarly, the Committee is indebted to New Detroit,Inc. for its financial support in the form of a grant for the continuationof the Committee's work and to assist in publication of the Report aswell as for making available one of its staff, Mr. Koch, to work over aconsiderable period of time in the drafting of recommendations and textfor the Report. The Committee also wishes to express its appreciationto the United Methodist Church for providing additional funds to assistin the printing and dissemination of the Report.

The Committee is especially indebted to the many consultants whocontributed their time and energy to meeting with the Committee andreviewing its work and to its Project Director, Mrs. Lois Pincus, for herconsiderable efforts and continued devotion to the work of the Committee.

TABLE OF CONTENTSPage

CABLE TV STUDY COMMITTEE V

GLOSSARY 1

PREFACE 5

SUMMARY 7

RECOMMENDATIONS 12

INTRODUCTION 20

1. General Recommendation A New Telecommunications Medium for Detroit 20

2. What is Cable Television? How Does It Work? 22

3. Growth of Cable Television 25

4. Potential of Cable Television Political, Social, Cultural, and Educational 26

CABLE TELEVISION IN DETROIT

I. NEED FOR ENGINEERING AND FINANCIAL PROJECTIONS 28

1. The Elementary Economics of Cable 28

2. Present Lack of Needed Information 30

3. Decision Regarding Public Ownership Requires Projection 30

4. Decision Regarding Private Franchising Requires Projection 30a. Projections Necessary to Negotiate with Franchiseeb. Holding Franchisee to Requirements

5. Projections Must Determine 31a. Feasibility of Supporting Public Servicesb. Feasibility of Public Financing via General Obligation or Revenue Bondsc. Feasibility of Private Franchise Without Loss of Public Servicesd. Is an Area Wide System Necessary to Achieve Financial Feasibility?

6. Projections Must Consider 32a. Competing Cable Technologiesb. Demand for Benefits and Cost of Supplying Recommended Public Servicesc. Cost of Commercial Programming Necessary to Attract Subscriber Revenuesd. Subscriber Penetration and Revenuese. Non-Subscriber Revenuesf. Benefits and Cost Savings to Municipality Through Use of Cableg. Supporting Programming Cost on Non-Commercial Channels Through Advertising

7. Cost of Recommended Projections 34a. Installation Feasibility and Costsb. Market Analysisc. Overall Feasibility Analysis

8. Projections Must Be Performed to Determine Level of ServicesUnder Alternate Modes of Ownership 35

TABLE OF CONTENTS continuedPage

II. FINANCING AND CONSTRUCTION OF THE DISTRIBUTION SYSTEM 36

1. One Entity Responsible for Construction of the System 362. Construction of the System by a Special Public Authority 393. Public Ownership Alternatives 40

a. Municipal Ownershipb. Special Public Authorityc. Non-Profit Corporationd. Recommended Alternative Special Public Authority

4. Construction Schedule 445. Provision of Service on an Equal Basis 44

HI. ORGANIZATION FOR OPERATION OF THE SYSTEM 46

1. Centralized and Decentralized Operations 46

Centralized Functions:2. Operation and Management of the System by Special Public Authority 47

a. Consideration Relevant to Public Operationb. Organization Under Private Franchise

3. Single Entity for all System Operations Except Programming 53

4. Responsibilities of Special Public Authority 55

5. Appropriate Management Structure for Operations to beDetermined by Special Public Authority 55

6. Administration and Operation of Educational, Municipal, Public Access Channels 56

Decentralized Functions:7. Decentralization of Programming Control 57

Organization and Operation of Community Channels:8. Creation of Community Cable Districts 599. Establishing Cable District Administrations and Community Cable Board 61

10. Composition of Cable District Administrations and Community Cable Board 62

11. Operation of Community Channels 62

12. Allocation of Funds to Community Cable Board 63

13. Restrictions Re: Community Cable Board's Control Over Program Content 6414. Review of Community Cable Board and Cable District Administration Decisions 64

IV. CHANNEL ALLOCATION 65

1. Channel Capacity 65

2. FCC Channel Requirements 653. Allocation of Channels 66

a. Community Channelsb. Public Access Channelsc. Municipal Channelsd. Educational Channelse. Local Television Broadcast Signalsf. Distant Television Broadcast Signalsg. Commercial Channelsh. Program Guidei. FM Stations

4. Common Carrier Status 73

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V. ACCESS 74

1. Programming Access 74

A. What is Programming Access? 74

B. Significance of Programming Access 74

C. Support for Local Programming 75(1) Allocation of Funds 76

(2) Facilities for Community Channels 77

(3) Facilities for Public Access Channels 77

(4) Provisions of Drops to Educational and Municipal Institutions 79

2. Viewer Access 80

1. Ability to View All Channels 80

2. Access to System for Subscribers on Equitable Basis 80

3. Access to System for Low Income Families 81

4. Provision of Drops to Educational and Social Institutions 82

VI. REVENUE 83

1. Sources of Revenue 83A. Gross RevenueB. Operating ExpensesC. Interest ExpensesD. DepreciationE. Funds CommittedF. Capital Asset CostsG. Working Capital

2. Revenue Distribution 84

1. Programming Support from Gross Revenues2. Regulatory Support from System Revenues3. Allocation of Revenues Remaining After Expenses

3. Advertising 861. Permitted on Community Channels2. As Support for Community Programming3. Establishing Advertising Rates4. Political Issues and Candidates

VII. REGULATION 88

1. Federal Regulation 88

2. State Regulation 93A. In GeneralB. Michigan

3. Local Regulation 95A. In GeneralB. Detroit

(1) Powers to Franchise and Regulate(2) Powers to Own(3) Powers to Regulate Pole Attachment and Conditions

III


4. Recommended Regulation System 101

1. Regulation by Council2. Regulatory Structure Under Council3. Conflict of Interest Ordinance4. Annual Review by Council

(1) Special Public Authority Model(2) Non-Profit Corporation Model (Private)

5. Interconnectability 103

1. Request for State Legislation2. City Leadership for Regional and State Interconnection

VIII. ADDITIONAL SERVICES FUTURE IMPLICATIONS 104

1. Separate Consideration for Pay TV 104

2. Separate Consideration for Non-Television Uses of the System 106

IX. TECHNICAL STANDARDS 108

1. Insuring Highest Quality 108

2. Standards for Initial Installation 109

3. Ecological and Aesthetic Considerations 110

4. Existing Channel Numbers to be Preserved on Cable 110

5. System Operator Must Keep Up With Technological Improvements 110

X, EMPLOYMENT AND ECONOMIC DEVELOPMENT 111

1. Employment to Reflect Composition of Detroit's Population 111

2. Non-Discrimination Requirements 111

3. Affirmative Action Program 112

4. Training Program for Career Opportunities 113

XL PRIVACY 114

1. Civil and Criminal Guarantees Against Invasion of Privacy 114

2. Safeguards Against Duplex Returns Without Subscriber's Permission 114

3. Prescriptions Against Monitoring Cable Viewing Habits 115

XII. BIBLIOGRAPHY 116

XIII. APPENDIX 119

1. Mayor Maier's Letter 119

2. Cable TV Authority Enabling Act 122

3. Letters from Educational Institutions 125

4. Financial Charts 135

XIV. SEPARATE VIEWS 153

XV. CONSULTANTS 162

IV

CABLE TV STUDY COMMITTEE MEMBERS

Rev. James W. Bristah, ChairmanSuperintendent, United Methodist Church,

Detroit, East District

Ola Nonen, Vice-Chairman

David Harper, TreasurerPresident, First Independence National Bank

Dwight Havens, SecretaryPresident, Greater Detroit Chamber of Commerce

Rev. William ArdreySt. Paul A.M.E. Zion ChurchAlternate: Arabella Byrd

Avern CohnAttorney-at-Law

James CurranDetroit-Wayne County Health Department

Merger Committee

Alternate: Donn Shelton, Vice President for CitizenInformation, Metropolitan Fund, Inc.

Henry DodgeNorthwest Detroit Council of Civic Associations

Esther G. EdwardsSenior Vice-President, Motown Record Corporation

Edna HendersonProject BAIT

Erma HendersonExecutive Director, Equal Justice Council

Otto J. HetzelAssociate Director, Center for Urban Studies,

Wayne State University

Melvin JeffersonSuperior Beauty and Barber Supply Company

Alternate: Conrad Ma llett; Office of NeighborhoodRelations, Wayne State University

Mildred JeffreyCoordinator, Consumer Affairs, UAW

Edward R. KochNew Detroit, Inc.

Stanley KrajewskiEditor, Polish Daily News

Israel LaytonDirector, Latin-American Archdiocese of Detroit

Reginald McGheeCitizen of Detroit

Morton MillerDirector of TV Services, Wayne State University

Prince MoonEducational Director, UAW Region 1A

Cornelius PittsAttorney-at-Law

Hazen SchumacherDirector of Television, University of Michigan

Manatee SmithChairman, Citizens Governing Board,

Model Neighborhood

Tom TurnerPresident, Metropolitan Detroit AFL-CIOAlternate: Norman Mackay, Administrative

Assistant, Metropolitan Detroit AFL-CIO

Ralph VigliottiRealtor

Rev. Ed B. Willingham, Jr.Director, Radio-TV, Metropolitan Detroit

Council of Churches

Jack WoodSecretary-Manager, Detroit Building Trades Council

Lois P. Pincus, Project Director

GLOSSARY OF TERMS

ACCESS: The ability to use a cable system.Applications of access in cable television refer tothe following:

1. Programming access the ability to trans-mit programming or offer services over thecable.

2. Viewer access the ability to view whatis transmitted over the cable.

3. Economic access the ability to partici-in the revenues generated by the system.

ANTENNA: A device which receives over-the-airsignals; in cable the antenna rather than on anindividual's home is usually centrally located andquite high to collect over-the-air signals includingmicro-wave transmitted distant signals for re-transmission on the cable system. (See TOWERor COMMUNITY ANTENNA.)

AMPLIFIER: A device which increases thestrength of the signal. This is required becausesignals lose strength as they move through thecable. Amplifiers are generally placed every 1500to 2000 feet along the cable.AREA OPERATOR: An entity which might actas a SYSTEM OPERATOR for a specified geo-graphicai area.AUDIO: The sound portion of a television signal,with "video" designating the picture of the totalsignal.

AUDIO RETURN: Capacity to return audiosignal from individual user to central distributionpoints or to other users.BROAD BAND: Capacity of coaxial cable tocarry frequencies up to 300,000,000 cycles persecond of communication (300 MHz) as opposedto narrow band, for example telephone net-work which handles 3,500 cycles per second(3.5 MHz).

BROADCAST SPECTRUM: All waves of theelectromagnetic spectrum having frequencies thatcan be received by radio and television equipment.

CABLE ANTENNA TELEVISION SYSTEM:This term or "community antenna television

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system" (CATV) means any facility which, inwhole or in part, receives directly or indirectlyover the air and amplifies or otherwise modifiesthe signals transmitting programs broadcast byone of more television stations and distributessuch signals by wire or cable to subscribingmembers of the public who pay for such service.CABLECASTING: Refers to programming dis-tributed on a cable system which has beenoriginated by the cable operator or by anotherentity, exclusive of broadcast signals, and carriedon the system.CABLE DISTRICT: A geographic segment of thecity created for the purpose of establishing acommunity-level of programming control andorigination. Each such district would be allocateda specific number of programming channels forprogram origination, with an administrativestructure for supervising the community channels.(See CABLE DISTRICT ADMINISTRATIONand COMMUNITY CABLE BOARD.)

CABLE DISTRICT ADMINISTRATION: Certainchannels would be designated as "communitychannels" and would be operated by a citizenstructure, with the city divided into geographicalsegments called "districts" for the purpose ofprogram origination and control. Each such cabledistrict would have an operational structuredirected by a Cable District Administration, whosemembers would be elected from among the sub-scribers to the system within that district. TheCable District Administration would operate thecommunity channels and facilities within thatdistrict. In turn, a number of the members ofthat CDA would be elected to the CommunityCable Board, which would oversee operations ofthe city-wide aspects of the community channels.CABLE SYSTEM: The physical facilities fortransmitting electronic signals via cable, ratherthan through the air. Such signals are most com-monly standard television picture signals, but mayalso include voice communications, digital andfacsimile signals. The phrase "cable system" isused to describe the entire physical facility, in-

eluding all program origination equipment (the"head end"), transmission equipment and indi-vidual hook-ups (called "drops").CHANNEL: Except where otherwise specified, asegment of spectrum which is of sufficient mega-hertz in width to accommodate one video and onecoordinated audio signal, each at the highest qual-ity the state of the art can produce. There shallalso be channels of sufficient width to carrysimilarly high quality data communications andother channels of sufficient width to carry simi-larly high quality voice communications.CHANNEL CAPACITY: The number of videosignals which can be transmitted simultaneously,e.g., the number of television channels.

COAXIAL CABLE: A coaxial cable consists ofthree elements: a copper wire, surrounded by aninsulating layer of polyethylene foam, all of whichis surrounded by a tubular shield of braided copperwire or a seamless aluminum sheath. This ar-rangement has special electronic characteristicsthat allow for the transmission of many electro-magnetic signals with very high fidelity.COMMERCIAL CHANNEL: A channel on thecable system which is used for the transmissionof commercially sponsored or supported program-ming or which is leased out for a fee . . . asopposed to the over-the-air stations carried onthe system and the non-commercial channels foreducational, municipal, public and community use.

COMMON CARRIEA: Traditionally, a manner ofoperation which functions on a first-come, first-served, non-discriminatory basis without controlover content by system operator, as with: theU. S. Mails, the telephone system, railroads, etc.For cable television purposes, refers to "commoncarrier" access, that is a frame work by whichpersons desiring to transmit programs would beable to do so on a system of first-come, first-served,or by reserving specified time periods. The latterwould properly be described as "limited commoncarrier status" in respect to operations of a city-wide cable television system.COMMUNITY CABLE BOARD: All designated"community channels" will be operated and gov-erned by an elected citizen body which is separatefrom the overall system operator. Each of thecable districts will have its own Cable DistrictAdministration (CDA) to supervise operationswithin that district. A specific number of the CDAmembers from each district will be elected to serveon the Community Cable Board (CCB), whichwill supervise those city-wide aspects of com-

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munity channel programming and operation. TheCCB would be created by act of the CommonCouncil and would operate with complete auton-omy from the system operator, in whatever formthe latter exists.COMMUNITY CHANNELS: Those channelswhich are dedicated to and controlled by a com-munity structure (Community Cable Boards orCable District Administration) created for pur-poses of original community programming.CONVERTER: The device attached to the indi-vidual TV set, which selects the signal carried onthe coaxial cable and converts it to a signal whichcan be transmitted through the TV tube.DISTRIBUTION CABLE: Coaxial cable used totransmit the signals received from the head-endequipment. The transmission flow is: antenna tohead-end to input to trunk cable to feeder cableto drop wire to inside wire to TV set.

DROP: (See HOUSEDROP)DUAL CABLE: Two cables joined (and usuallyinstalled) together. This increases the channelcapacity of the system.EDUCATIONAL CHANNELS: All designated"educational channels" will be operated and gov-erned by a structure developed by the participat-ing educational installation and which is separatefrom the overall system operator.ELECTROMAGNETIC SPECTRUM: All possibleelectromagnetic waves. Just like ocean wavesdescribed by the number of peaks and valleys thatpass a given point.ELECTROMAGNETIC WAVE: Signals or energywhich travel through the air. Like an oceanwave traveling from Europe to America, electro-magnetic waves travel from originating points toreceiving points.

EMPTY CHANNEL: A channel which has beenassigned by the FCC for television but is notactually in use.FCC (FEDERAL COMMUNICATIONS COM-MISSION). The governing body having regula-tory responsibility over interstate and foreigncommunications by means of electrical energy,including radio, television and wire services.FEEDER LINES (LINE EXTENDERS): Coaxialcables which branch off the trunk lines and runpast the locations (residential units) of individualreceivers.

FILTERING DEVICE: A device which "cleansup" the signal by filtering out outside interference.

The device can also be used, in the case of pay TV,to block out whole channels.FM (FREQUENCY MODULATION): A methodof modulation in which the frequency of thecarrier wave is varied according to the signaltransmitted. FM signals can be picked up "off-the-air" and transmitted, in the same manner asTV signals are received, on the cable. Some cableoperators provide FM "background music" as anadded feature.

FRANCHISE: A legal contract between a govern-mental unit and any entity granting authority tocarry on a specified activity which requires use ofpublic facilities or rights of way for its operationand under certain terms and conditions. In thisinstance, for the construction and operation of acable facility in a specific political subdivision overpublic streets.

FREQUENCY: The number of peaks of a par-ticular wave that pass a point in a second.

GROSS REVENUE: All revenue accruing to thesystem owner or operator directly or indirectlyfrom or in connection with the operation of acable system, including installation fees, subscrip-tion fees, advertising revenues and other com-mercial fees (from pay TV, data transmission).

HARDWARE: All the physical equipment thatmakes up a cable system (e.g., cables, amplifiers,switching devices, converters, cameras, lights,video tape machines, etc.).HEADEND: An electronic control center wheresignals are received by an antenna or from atransmitter for distribution into the cable system.They may also be processed and amplified.

HIGH CAPACITY SYSTEM: System that cancarry 24 or more channels.HOUSEDROPS (DROPS: TAP-OFF): Smallercoaxial cables which branch off the feeder linesand connect the system to converters attached toindividual receivers.

IMPORTATION OF DISTANT SIGNALS: Im-porting signals to a cable system that cannot bereceived over-the-air because the point of trans-mission is too far away. This is sometimes accom-plished through microwave relays. The FCC con-trols the number of such signals allowed on acable system.

LOCAL ORIGINATION: See CABLECASTING;PROGRAM ORIGINATION.

LOW CAPACITY SYSTEM: Method of trans-mitting signals from one point to another through

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the air. This can be used as a part of the cablenetwork where laying of cable is not feasible.Today microwave relays can only work whenthere is no physical obstruction in the line of sightbetween two points.

MUNICIPAL CHANNELS: Those channels des-ignated for use by various municipal institutions.They would be programmed by those institutionsover facilities contributed by the cable systemoperator, with all operational control vested in anadministrative structure representing the variousmunicipal institutions.

NETWORK PROGRAMMING: The program-ming supplied by a national television networkorganization.

NETWORKING: The process of linking stationsor cable systems for the purposes of programmingorigination and/or transmission. May refer totwo or more stations or systems in a region, astate or the nation.OFF-THE-AIR TRANSMISSIONS: Electromag-netic signals sent through a closed communicationsystem; i.e., the telephone system or a cablesystem. Only those linked to the system canreceive messages.

ORDINANCE: An authoritative decree, law, ordirection set forth by local governmental body;a municipal regulation.

OVER-THE-AIR SIGNALS: Electronic signalstransmitted through the air, from transmittertower to home receiver or via microwave frompoint to point by broadcast stations.

PAY TELEVISION: The delivery over a cablesystem of signals which are intelligible only tothose subscribers who pay an extra fee, in addi-tion to the ordinary periodic fee for use of thecables, on a per program or per channel or othersubscription basis. Non-subscribers to Pay Tele-vision may receive a scrambled signal on thechannels assigned to Pay Television material.

POLE ATTACHMENT: Connection of cable toa utility pole.POLE ATTACHMENT AGREEMENT: Contractauthorizing connection of cable to utility poles.

PROGRAM ORIGINATION: Also called "cable-casting." All programming which originates ona cable system, as opposed to the re-transmissionof either local or distant over-the-air stationsignals. May take the form of "live" programproduction or transmission of film or tapematerials previously recorded.

PUBLIC ACCESS CHANNELS: Those channelsdesignated for use by the public-at-large on alimited common carrier basis. There would beno content control of the public channels by thesystem operator. Public access channels could beutilized for such purposes as presentation bycitizens wishing to express opinions or to providesuch services as ombudsman, and/or legal orpreventative health programming.

SCRAMBLED SIGNAL: A signal which is in allrespects like all other signals on a cable systemexcept that it is carried on the system in such aform that only users who have paid for the signalwill be able to obtain it.

SIGNAL: An electromagnetic wave which carriesinformation. It may be a television picture, soundor digital information.

SOFTWARE: That part of the cable system oper-ation concerned with programming content that isnot physical hardware, i.e., graphic materials, setsand backdrops, costumes, scripts, motion pictureequipment, portable videotape equipment.

STATE OF THE ART: The most advanced tech-nology commercially available.

SUBSCRIBER /USER: An individual or organiza-tion subscribing to the output of a cable televisionsystem.

SWITCHING DEVICE: A device which guidesthe signal through a particular cable or cables.When a number of paths are available, the deviceallows signals to be sent to a specific part of thesystem.

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SYSTEM DESIGN: The overall characteristicslines, capacity, switching of a particular cablesystem.SYSTEM OPERATOR: One who manages andoperates the cable system but without control ofprogramming or its contents on all but the com-mercial channels.TOWER OR COMMUNITY ANTENNA: An an-tenna or cluster of antennae which receive signalsover-the-air to be distributed throughout the cableTV system.

TUNER: A device attached to the converter whichallows a TV set to be tuned to the signals sentthrough the cable system. More complex tunersare required for high channel capacity systems.TRANSMITTER: A device that can send signalsover-the-air or along cables.

TRUNK LINE: In a cable system those coaxialcables which run from the head end and form themajor arteries of the system.TWO-WAY OR DUPLEX SYSTEMS (TWO-WAYCAPACITY): A cable system in which messagescan go not only from a central distribution pointbut possibly to other users.USER/SUBSCRIBER: An individual or organiza-tion subscribing to the output of a cable televisionsystem.VIDEO: The picture portion of a television signal,with "audio" designating the sound portion of thetotal signal.VISUAL RETURN: Capacity to return picturesignal from individual user to central distributionpoint or other users.

PREFACE

Cable television is a reality there is no question that almost all American cities will have acable system within the next ten years. It has become only a question of when cable will come andhow it will be fashioned. The task which the Cable TV Study Committee undertook when it was askedby Common Council to "investigate all aspects and ramifications of cable tv" has not been an easy one.The subject is extremely complex and involves rapidly changing technology.

The Report, which we have entitled CABLE TELEVISION IN DETROIT; A STUDY IN URBANCOMMUNICATIONS, constitutes, we believe, an innovative and comprehensive approach for the use ofcable television as a communications medium. It ,calls for a sophisticated system and a diversifiedstructure with a high level of commitment to local origination, maximum access, and a wide range ofmunicipal and educational services. The Committee feels it has presented to the Common Council guide-lines for the development of this new technology which will best serve the public interest. The Committeeis fully aware that implementation of its proposals is a departure from traditional concepts. This fact,as well as the necessity for additional technical information, has prompted us to request that there be amoratorium on the granting of any franchise for a year or until such times as the Committee's recom-mended engineering and financial projections can be completed.

The Committee recognizes that its recommendations, being innovative, are also controversial. Ithas adopted this position, however, because it believes that the most important issue is to provide aa public interest perspective to the potential communications benefits from cable. The Committee hasdone so despite knowledge that outside commercial and political interests may bring great pressures tobear on the Council, as has been the case in many cities. And finally, the Committee firmly believesthat Detroit has a unique opportunity to take a national leadership role in the development of cable asthe basis for a communications revolution the full scope of which can only be imagined.

The task which now falls to the Common Council of the City of Detroit is even more difficult.Had the Committee proceeded along more traditional lines and recommended private ownership withminimum guarantees for public access through use of one of two such channels for the entire city, itwould admittedly have been a simpler task. The Committee chose instead to put aside the traditionalapproach in favor of creating an experimental model which will maximize the communications potentialof the medium. This Report is the result of those labors. The complex issues and the call for publiccontrol of the system will involve the Council in difficult decisions. It is the hope of the Committeethat upon a full reading of the Report, the Council will make the fundamental determination thatprecipitous action on these basic issues may effectively deny the citizens of Detroit the full benefits ofcable television and that a cable system in Detroit must provide the public services called for in theReport.

While the Report is the work of twenty-seven lay people, with minimum staff and budget, theCommittee is confident that its product compares favorably with any on this subject produced to date,and will provide Common Council with the basic framework necessary for consideration of cable TVin Detroit.

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CABLE TELEVISION IN DETROIT;A STUDY IN URBAN COMMUNICATIONS

SUMMARY*

The evolution of cable television from amethod of improving off-the-air reception oftelevision broadcast signals to an independentlyrecognized broadband communications mediumis underscored by a footnote to the FCC's recentdecision promulgating rules for cable televisionservice. There, the Commission took the troubleto note that it would no longer, as a general rule,refer to cable as Community Antenna Televisionor CATV "[b)ecause of the broader functions tobe served by such facilities in the future."

Cable television, to be sure, has not aban-doned the role that called it into being. Indeed,one of its chief attractions remains the ability toprovide subscribers with a more complete, diverseselection of over-the-air television broadcast sig-nals. And this selection is no longer limited bythose signals capable of reception by an optimumantenna in the cable system's community. Rather,by microwave relay, cable systems can "import"over-the-air broadcast signals from anywhere in thecountry (or the world). Moreover, cable's abilityto provide strong, clear signals in the subscriber'shome has enhanced its broadcast signal retrans-mission role irr this era of color programming.

Cable's commercial functions go well beyondcarriage of over-the-air television broadcast sig-nals. A cable system can also provide the sub-scriber with a great variety of local and distantAM and FM radio signals. The cable system can,itself, originate programming, either commerciallysponsored or supported by subscriber revenues.Other channels may be leased to independentprogrammers on either a long term or short termbasis, making possible a variety of specialized en-tertainment and even purely commercial fare.The non-broadcast commercial potential of cableis similarly vast. Cable can provide new networksfor data transmission and access to data process-ing services. Facsimile reproduction of news-papers, magazines and documents is within thegrasp of present technology.

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But cable television is much more than greaterdiversity of entertainment and commercial pro-gramming and other commercial services. Rather,it is a medium offering a wide range of publictelecommunication services urgently needed inurban areas. The public service and communityinvolvement possible through the use of cable isthe prime purpose for establishing a cable systemin Detroit. Cable's channel capacity and low pro-duction cost make it ideal for communicationswithin and between communities of interest. Forexample, community groups might program com-munity news reports, courses in home manage-ment and child care, job training, discussions ofcommunity problems, and community bulletinboards. Arts and crafts and hobby programs areother possibilities. Cable can also offer publicaccess: a "soap box" forum where individualcitizens, including poltical candidates, can presenttheir views on any subject. Such programmingmight also include city-wide dissemination of legaland and social service information.

Cable can also serve a variety of govern-mental needs, enabling agencies to collect, processand transfer information rapidly and efficientlyamong themselves and between government andcitizen. Health care delivery, employment in-formation and referral, traffic control, inter-agency communications and library services areonly a few of the many possibilities.

The educational uses of cable are also numer-ous. Cablecasts of educational programming cangreatly expand the reach of existing institutions.Resources such as course offerings and specialspeakers could be shared between institutions. Inthe area of adult education, for example, mini-campuses in branch libraries, storefronts, unionhalls and churches could be linked via cable to acentral educational cablecasting facility. Or thosewho have left the educational process because ofage, ill health, or lack of interest or success andwho are reluctant to attend an educational facility,

might be induced to attend classes in the privacyof their homes. In short, cable television canobviate many space, transportation and schedulinglimitations of the present educational system.

Faced with the vast potential of cable tele-vision both for commercial and public serv-ices the task facing Detroit is ensuring theseservices for the citizens of Detroit. The task wasmade particularly difficult by several factors.First, the construction and start-up of a cablesystem in Detroit will require a large invest-ment anywhere from $30 to $120 million de-pending on the sophistication of the system.Second, the system will no doubt operate at a lossfor the first few years due to the time requiredto achieve subscriber penetration and developprogramming attractive to both subscribers andadvertisers. The non-television commercial usesof the system will also be slow to develop. Third,in the Committee's judgment, any cable systemfor the City ought to provide public as well ascommercial services at its inception; and thepublic services ought to be supported in large partby revenue from commercial operations.

From a consideration of the foregoing andrelated factors, the Committee adopted its majorrecommendation (and major qualification) : Thata cable television system for Detroit be publicly(rather than privately) owned; and that theCommon Council defer any action until engineer-ing and financial projections can be made toestablish the practicability of such a system.

There are several bases for the choice of publicownership. First, a fully developed urban cablesystem can appropriately be viewed as a publicutility. Second, construction of the system willentail a large investment and significant risk,particularly in the early years of development.These two factors suggest both the need for andappropriateness of public investment.

Third, if the system were to be privatelydeveloped, the Committee would anticipate signifi-cant competition between legitimate needs forprofit and support for the system's public services.This need for profit and resultant reduction ofpublic services would be eliminated with thesystem in public hands. Moreover, public financingoffers the advantage of reduced debt service re-quirements because earnings on public bonds aretax exempt. These factors combine both to protectthe system's public service components and toinsure that the system is developed as rapidly aspossible. And when the system has matured andis providing a balance of commercial and publicservices, public ownership will mean that the

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demand for profits will not compete for excessrevenues which would be used for lower subscriberfees or technological improvements in the system.

The Committee's recommendation that a cablesystem for Detroit be publicly owned must bejoined with a major qualification: The economicpracticability of any form of ownership cannotbe established without detailed engineering andfinancial projections beyond the Committee's re-sources. Thus, the Committee's second majorrecommendation is that Common Council declarea moratorium on all cable television decisions untilit is able to secure the needed projections.

The recommended projections would cover allaspects of cable television in Detroit necessary toestablish economic feasibility for any form ofownership. These would include: a market analy-sis to determine the revenue-raising potential ofvarious commercial services; an engineering andcost analysis of a cable system installation, in-cluding an evaluation of competing technologies;and analysis of the cost of providing recom-mended public services and supporting thoseservices in large part from commercial servicerevenues. Finally, the projections must addressthe feasibility of financing construction and start-up of the system.

The Committee has not formally recommendeda private ownership alternative. However, recog-nizing that this alternative may be advocated byothers to the Common Council, the Committeehas recommended that engineering and financialprojections be performed regardless of the owner-ship form selected. In short, the Committee hasrecommended a level of commercial and publicservices which it believes any cable system inDetroit should provide. And the Committeefurther believes that this level of service cannotresponsibly be set unless the Common Councilsecures its own, independent projections of costsand revenues. Only then could the Council realis-tically bargain with a prospective franchisee overcritical franchise terms which will predeterminecommunications se vices in the city for yearsto come.

Therefore, the ..'ommittee recommends thatCommon Council not proceed without the inde-pendent projections so necessary to an informeddecision. To do otherwise could be disastrous forthe interests of the City and the needs of itscitizens.

The public ownership form recommended isa special public authority chartered by the Cityof Detroit. This recommendation, which wouldrequire enabling legislation similar to that for

building and stadium authorities, no doubt reflectsmany of the advantage, often cited for creatingspecial purpose, quasi-governmental entities toperform entrepreneurial functions. For example,authorities can concentrate on a single function,while municipal governments have diverse re-sponsibilities; authorities generally have no tax-levying power and are self-regulating to theextent that they must strike a balance betweenrevenues and the costs of services and debt repay-ment; finally, authorities are somewhat inde-pendent of the political process and the govern-mental entity which charters them, thus makingpossible quicker, more businesslike, more im-partial decisions.

Under the Committee's recommendations, theCommon Council would adopt articles of incorpo-ration defining the powers of the authority andthe form of cable service to be provided. Theauthority would be governed by a nine-memberboard appointed by the Mayor and subject toconfirmation by the Council. The Common Councilwould retain control over subscriber rates andwould annually review system operations. Councilwould also reserve the power to amend the author-ity's charter so long as outstanding bond obliga-tions were not thereby impaired. The authority,however, would adopt its own budget, decide itsown priorities and its contracts would not besubject to Council approval.

The public authority model recommended bythe Committee would give the authority the powerto establish its internal structure so as to bestprovide the cable television services called for bythis report. It is anticipated, however, that thestructure adopted would provide significant oppor-tunities for small business and minority entre-preneurs through contracts for regional or system-wide construction, maintenance and sales. More-over, the authority would be required to make anumber of channels available for commercial useon a lease basis. Thus, commercial access to atelecommunications medium would be made avail-able to many who could not afford the substantialinvestment required to establish a broadcaststation or even a cable system covering only apart of the City.

The Committee's recommendations on channelallocation recognize one very important aspect ofcable: Ownership of the distribution system andcontrol over programming do not have to be andshould not be in the same body (entity). Indeed,the potential of cable for both commercial andpublic access cannot, in the Committee's judgment,be realized unless ownership of the distribution

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system is divorced, in part, from control overprogramming.

To make access possible, the Committee firstrecommends a minimum system capacity of 36channels. This is more than the FCC's requiredminimum of 20 and less than the capacity ofsystems now being installed in some other cities(e.g., 42 in San Jose, California; 64 in Akron,Ohio). To make access a reality, the Committeehas gone further and recommended minimumchannel allocations for various commercial andpublic services. These allocations and relatedrecommendations are as follows:

COMMERCIAL SERVICESFirst, the program operator (a public author-

ity under the Committee's recommendations)would be allocated eight (8) channels for carriageof existing or licensed over-the-air local broadcastsignals. As a practical matter, this is an FCCrequirement. Second, the operator would beallocated two (2) channels for importation ofdistant broadcast signals. In effect, the operatorwould be the programmer of these channels. Thatis, he would have the choice of distant signals,subject to FCC restrictions. These restrictions, itshould be noted, would limit the operator to thetwo closest of the 25 largest television marketsunless he chose to import signals from smallermarkets. (The two closest of the top 25 areapparently Cleveland and Pittsburgh.) Third, thesystem operator would be allocated one additionalchannel for automated services, e.g., time andweather. Finally, the FCC will require that theoperator set aside at least one channel for "localorigination." This would be the operator's ownchannel to program in the purest sense of theword. That is, he could present any locallyoriginated programming, sponsored or unspon-sored. With respect to this channel, the operatorwould assume a role analogous to a local over-the-air broadcaster, except that he would be limitedto locally originated programming.

To provide commercial access, the Committeerecommends that the operator be required toallocate three (3) channels for commercial lease.The lessees of these channels could use their leasedtime for any form of programming, sponsOred orunsponsored. Two of the channels would be un-restricted as to the term of lease. For example,a lessee might secure exclusive rights to programone of these channels for a year or even longer. Inthis instance, the lessee would function much asa licensee of a television broadcast station, butwithout the large investment required to establish

an over-the-air station. The Committee recom-mends, however, that one of the three channelsbe made available for lease on a common carrier,first-come, first-served basis. This would provideaccess to the smallest of commercial users oradvertisers. In this connection, the Committeerecommends that steps be taken to preclude anyusers from monopolizing this channel.

PUBLIC SERVICETo insure that the public service components

do not become neglected step-children of the cablesystem, the Committee recommends a number ofminimum channel allocations for public purposes.Most important among these, in the Committee'sjudgment, is an allocation of 10 channels forcommunity use. This importance is underscoredby the Committee's further recommendations thatCommon Council create, by ordinance, a com-munity based structure to administer the pro-gramming of these channels.

The purpose of allocating channels for com-munity use is to encourage community-originatedprogramming reflecting the needs and interests ofthe community. To this end, the Committeerecommends the creation of not less than five (5)Communty Cable Districts in the City. Twochannels would be allocated to each of the fivedistricts. One of these channels would be reservedfor groups or organizations located within thedistrict and programming would be the responsi-bility of a nine-member Cable District Adminis-tration elected by subscribers living in the district.Programming on the second channel would be theresponsibility of a 15-member Community CableBoard made up of three members elected fromeach Cable District Administration. In general,access on this second channel would be limited tospecial interest groups not geographically defined.The Board would also have responsibility for prob-lems concerning community channels generally.

In addition to the channels allocated forcommunity-based programming, the Committeerecommends that a minimum of two channels beallocated for public access. These channels wouldbe the "soap box" forum, available to the publicgenerally, without broad-based community direc-tion. One of these two channels would be avail-able on a non-reserved, common-carrier, first-come, first-served basis. The second channel wouldbe available on a reserved common-carrier basis.The responsibility for administering use of thesechannels could be left with the system operatoror assigned to an independent agency.

The Committee recommends that use of com-

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munity and public access channels be free ofcharge. That is, the revenue-generating servicesof the cable system would be required to supportcommunity and public access programming. Here,the Committee departs from FCC requirementsthat only the first five minutes of live presenta-tions be without charge. In this connection, theCity could be required to petition for a waiver ofthe FCC's rules.

The Committee also recommends that chan-nels be allocated for educational and governmentaluses. Three (3) channels would be assigned formunicipal uses and seven (7) for educational. TheCommittee recommends no specific structure foradministering the use of these channels. Rather,the municipal channels might be administered byan existing or newly-created agency within Citygovernment reporting to the Mayor; or the func-tion might be contracted out. The educationalprogramming might be the responsibility of acouncil or consortium of educational institutionsrepresenting all levels or might be divided betweenagencies representing higher and elementary-secondary education. The division of these sevenchannels between the three levels of educationalinstitutions would similarly be left to the adminis-tering agency. Consistent with the FCC's require-ments, the use of these channels would be withoutcharge.

The Committee's allocation of channels forpublic services exceeds that imposed by the FCC(one [1] for community and public access; one[1] for governmental use; and one [1] for educa-tional use). However, the Committee believes thatits allocations are necessary if cable is to achieveits public service as well as commercial potential.Thus, an FCC waiver should be sought to allowthe City to impose these additional channel alloca-tion requirements. Since the Committee couldhave recommended that the City be divided intoseparate franchise areas which would have re-sulted in about this many community channels,the fact that a centralized system is recommendedshould not reduce the number of communitychannels.

Three other recommendations of the Com-mittee should be noted. The Committee hasrecommended that Common Council consider PayTV and non-television uses of the system apartfrom its initial grant of authority to establish acable system. This is particularly important be-cause the potential of profits for these uses is sogreat and the financial impact on subscribers sosignificant. Moreover, the terms of service andsubscriber rates could be materially influenced by

the revenue-generating capacity of these non-television uses.

The Committee has also made extensiverecommendations relating to employment andeconomic development. Cable can mean a majornew industry for the City one that cannotmove to the suburbs. The Committee thereforeurges that Common Council fully consider theeconomic and employment opportunities whichwill flow from a grant of authority to operate acable system and take all necessary steps to insurethat these benefits accrue to those who willultimately support the system the citizens ofDetroit.

Finally, cable's potential for two-way trans-mission presents a danger of invasion of sub-scribers' rights to privacy. Thus, the Committeerecommends that the City seek legislation to grantsubscribers a right of action for invasion of theirprivacy involving the cable system and to make

such invasions a criminal offense. Additionally,it is recommended that the system be designedto prevent return transmission from the sub-scriber's home or business terminal without asubscriber's express permission and that designand operational safeguards be incorporated toprevent third parties from invading a subscriber'sprivacy by tapping into the system.

Whatever the ownership mode ultimatelyselected by the Common Council, the Committee'srecommendations define the basic requirementsfor a cable system which it believes best matchesthe potential of cable with the communicationsneeds of the citizens of Detroit. These require-ments should not be compromised rather, theyshould be elements of any system authorized.

*Separate views expressed by Committee members areto be found in full Report.

RECOMMENDATIONS

A NEW TELECOMMUNICATIONS MEDIUM FOR DETROIT

CABLE TELEVISION GIVES THE COMMON COUNCIL THE UNIQUE OPPORTUNITY, WITHFORETHOUGHT AND PLANNING, TO PROVIDE THE CITIZENS OF DETROIT, PEOPLE, BUSI-NESS AND INDUSTRY, A WIDER AND BETTER MEANS OF COMMUNICATION IN ITS BROAD-EST FORM, ALLOWING ACCESS TO TELECOMMUNICATIONS TO MANY INDIVIDUALS,ORGANIZATIONS AND INSTITUTIONS PREVIOUSLY DENIED ALL BUT TOKEN ACCESS.

I. NEED FOR ENGINEERING AND FINANCIAL PROJECTIONS

1. THAT THE CITY DECLARE A MORATORIUM ON ALL CABLE TELEVISION DECISIONSFOR THE PURPOSE OF SECURING ITS OWN FINANCIAL AND ENGINEERING PROJEC-TIONS: SUCH ENGINEERING AND FINANCIAL PROJECTIONS SHOULD DETERMINE INGREATER DEPTH THOSE QUESTIONS BEYOND THE CAPACITY OF THIS LAY COMMI'1TEEINCLUDING, BUT NOT LIMITED TO:(a) FEASIBILITY OF PUBLIC FINANCING VIA GENERAL OBLIGATION BONDS AND/OR

REVENUE BONDS.(b) SOFTWARE OR PROGAMMING COSTS REQUIRED INITIALLY IN ORDER TO PROVIDE

THE FULL RANGE OF SERVICES RECOMMENDED BY REPORT.(c) MARKET ANALYSES TO DETERMINE TIME-FRAME FOR SUBSCRIBER PENETRA-

TION.(d) POTENTIAL REVENUES FROM PAY T.V. AND NON-TELEVISION USES OF SYSTEMS,

E.G., DATA TRANSMISSION, FACSIMILE REPRODUCTION, ALARM SYSTEMS.(e) BENEFITS, INCLUDING COST SAVINGS, TO MUNICIPALITY THROUGH APPLICATION

OF CABLE TO MUNICIPAL SERVICES SUCH AS POLICE AND FIRE PROTECTION.(f) EVALUATION OF COMPETING CABLE TECHNOLOGIES (E.G., DIAL VERSUS CONVEN-

TIONAL SYSTEMS) AND COMPLEXITIES OF INSTALLATION.(g) THE POSSIBILITY OF PARTIALLY SUPORTING PROGRAMMING COSTS FOR THE

NON-COMMERCIAL T.V. ASPECTS OF THE CABLE SYSTEM THROUGH THE ALLOCA-TION OF FUNDS FROM GROSS REVENUES OR FROM REVENUES FROM ADVERTIS-ING.

(h) THE DEMAND, COST AND BENEFITS FROM COMMUNITY, PUBLIC ACCESS, MUNICI-PAL AND EDUCATIONAL INVOLVEMENTS AND USES.

2. THAT SUCH ENGINEERING AND FINANCIAL PROJECTIONS BE PERFORMED NOT ONLYTO DETERMINE THE VIABILITY OF PUBLIC FINANCING AND OPERATIONS, BUT INORDER TO RESPONSIBLY DETERMINE WHETHER AN ACCEPTABLE LEVEL OF SERV-ICES (AS RECOMMENDED IN THIS REPORT) CAN BE PROVIDED UNDER ALTERNATIVEMODES OF OWNERSHIP.

II. FINANCING AND CONSTRUCTION OF THE DISTRIBUTION SYSTEM

1. THAT THERE BE ONLY ONE ENTITY RESPONSIBLE FOR THE CONSTRUCTION OF THECABLE SYSTEM IN DETROIT IN ORDER TO MAXIMIZE ECONOMIES OF SCALE ANDINTER-CONNECTABILITY NECESSARY FOR AN ADVANCED AND SOPHISTICATED CABLESYSTEM.

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2. THAT THE CABLE SYSTEM BE CONSTRUCTED BY A SPECIAL PUBLIC AUTHORITY ORNON-PROFIT CORPORATION, USING TAX EXEMPT BONDING CAPACITY FOR FINANC-ING THE CAPITAL COST OF THE SYSTEM.

3. THAT CONSTRUCTION OF THE CABLE SYSTEM BE COMPLETED WITHIN FIVE YEARSFROM DATE OF GRANT OF AUTHORITY.

4. THAT CONSTRUCTION OF THE CABLE SYSTEM BE PERFORMED IN SUCH A WAY THATALL AREAS OF THE CITY WILL BE PROVIDED SERVICE EQUALLY, ON A PHASEDCONSTRUCTION SCHEDULE, WITH NO AREA FAVORED OVER ANOTHER.

III. ORGANIZATION FOR OPERATION OF THE SYSTEM

1. THAT CITY-WIDE SYSTEM MANAGEMENT AND OPERATIONS, AND DECENTRALIZEDCONTROL OF ACCESS AND PROGRAMMING, ARE NOT MUTUALLY EXCLUSIVE CON-CEPTS IN STRUCTURING A CABLE TELEVISION SYSTEM. THEREFORE, CERTAIN SYS-TEM FUNCTIONS MAY BE ESTABLISHED ON A CENTRALIZED BASIS WHILE OTHERSMAY BE ESTABLISHED ON A DECENTRALIZED BASIS.

CENTRALIZED FUNCTIONS

2. THAT A SPECIAL PUBLIC AUTHORITY, OR NON-PROFIT CORPORATION CREATED FORCONSTRUCTION OF THE SYSTEM (SEE RECOMMENDATION 2 UNDER FINANCING ANDCONSTRUCTION AND CHARTS A AND B), BE RESPONSIBLE FOR OPERATION ANDMANAGEMENT OF THE CABLE SYSTEM: AND THAT THE DIRECTORS (NOT LESS THAN9 MEMBERS) BE APPOINTED BY THE MAYOR WITH ADVICE AND CONSENT OF COMMONCOUNCIL, AND THAT SUCH DIRECTORS SHALL BE RESIDENTS OF THE CITY OF DETROITAND REFLECT THE MINORITY GROUP COMPOSITION OF THE POPULATION OF THECITY OF DETROIT.

3. THAT ALL SYSTEM OPERATIONS, EXCEPT FOR PROGRAMMING, BE HANDLED ON ASYSTEM-WIDE BASIS: THAT THE CITY NOT BE DIVIDED UP INTO FRANCHISE AREAS.

4. THAT SYSTEM WIDE FUNCTIONS OTHER THAN PROGRAMMING, E.G., PROMOTION,MAINTENANCE, ADVERTISING, SALES, COLLECTION OF SUBSCRIBER FEES, SYSTEMMANAGEMENT, BE HANDLED BY A CENTRALIZED AUTHORITY, AND THAT ANYPERSONS EMPLOYED FOR THESE PURPOSES BE RESIDENTS OF DETROIT. (SEE EM-PLOYMENT)

5. THAT THE SPECIAL PUBLIC AUTHORITY DETERMINE THE MOST APPROPRIATE MAN-AGEMENT STRUCTURE FOR ITS OPERATIONS. IT COULD PERFORM MANAGEMENTFUNCTIONS ITSELF OR CONTRACT OUT TO A MANAGEMENT CORPORATION.

6. THAT APPROPRIATE ORGANIZATIONS BE CREATED FOR ADMINISTRATION AND OPER-ATION OF (1) MUNICIPAL, (2) EDUCATIONAL AND (3) PUBLIC ACCESS CHANNELS.

DECENTRALIZED FUNCTIONS

7. THAT CONTROL OVER PROGRAMMING, AS CONTRASTED WITH CONSTRUCTION ANDMAINTENANCE OF THE SYSTEM, BE DECENTRALIZED SO THAT THERE IS AUTONOMYOF PROGRAM DIRECTION AND OPERATION WITH RESPECT TO COMMUNITY, EDUCA-TION, MUNICIPAL, AND PUBLIC ACCESS CHANNELS.

8. THAT NOT LESS THAN FIVE CABLE DISTRICTS BE CREATED TO IMPLEMENT RECOM-MENDATIONS RELATIVE TO COMMUNITY CABLE OPERATIONS: THAT IN FORMINGCABLE DISTRICTS, CONSIDERATION BE GIVEN TO SUCH FACTORS AS POPULATIONDENSITY, ETHNIC GROUPS, GEOGRAPHIC BOUNDARIES, SPECIAL INTEREST GROUPSAND LOCATION OF DECENTRALIZED PRODUCTION FACILITIES (ORIGINATION POINTS).

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9. THAT FOR EACH CABLE DISTRICT THERE BE A CABLE DISTRICT ADMINISTRATIONCOMPOSED OF NINE MEMBERS ELECTED BY SUBSCRIBERS LIVING WITHIN THE DIS-TRICT; THE CABLE DISTRICT ADMINISTRATION SHALL HAVE RESPSONSIBILITY FORDETERMINING CRITERIA FOR SELECTION OF GROUPS AND ORGANIZATIONS TO BERESPONSIBLE FOR PROGRAMMING ONE OF THE TWO COMMUNITY CHANNELS IN EACHCABLE DISTRICT: THAT EACH CABLE DISTRICT ELECT THREE OF ITS NINE MEMBERSTO THE COMMUNITY CABLE BOARD WHOSE RESPONSIBILITIES WILL BE DIRECTIONAND OPERATION OF PROGRAMMING FOR THE SECOND COMMUNITY CHANNEL IN EACHOF FIVE CABLE DISTRICTS. THE COMMUNITY CABLE BOARD WILL HAVE A TOTAL OF15 MEMBERS. ONE OF THE TWO COMMUNITY CHANNELS IN EACH CABLE DISTRICTWILL BE PROGRAMMED BY THOSE GROUPS AND/OR ORGANIZATIONS RESIDING WITHINTHE GEOGRAPHICAL BOUNDARIES OF THE CABLE DISTRICT. A DESIGNATED PER-CENTAGE OF TIME ON THE SECOND COMMUNITY CHANNEL WITHIN EACH CABLEDISTRICT SHALL BE ALLOCATED TO SPECIAL INTEREST GROUPS NOT GEOGRAPHI-CALLY DEFINED, E.G., ETHNIC, RELIGIOUS, VOCATIONAL AND LABOR GROUPS. THECOMMUNITY CABLE BOARD SHALL ESTABLISH A PROCEDURE FOR ALLOCATION, ONA COMMON CARRIER BASIS, OF TIME NOT PREVIOUSLY RESERVED ON COMMUNITYCHANNELS.

10. THAT THOSE WHO REPRESENT THE CABLE DISTRICT BE ELECTED ON A STAGGEREDBASIS FOR THE FIRST TERM AND THEN ONE-THIRD BE ELECTED EVERY YEAR FORTERMS OF 3 YEARS, BY SUBSCRIBERS OF THE CABLE SYSTEM.

11. THAT IN OPERATION OF COMMUNITY CHANNELS:(a) GRANTS OF TIME FOR PROGRAMMING BE GIVEN BY BOTH THE COMMUNITY CABLE

BOARD AND CABLE DISTRICT ADMINISTRATION FOR A PERIOD OF NOT MORE THANONE YEAR, SUBJECT TO REVIEW FOR POSSIBLE RENEWAL AT THE END OF THATPERIOD.

(b) GRANTS OF TIME BE GIVEN FOR A REGULARLY SCHEDULED PERIOD OF TINE,E.G., ONE-HALF HOUR EVERY WEEK, SEVERAL HOURS EVERY DAY, OR ONE WHOLEDAY EACH WEEK. THE CABLE DISTRICT ADMINISTRATION AND COMMUNITYCABLE BOARD SHALL ASSURE FAIR AND EQUITABLE DISTRIBUTION OF PROGRAM-MING RESPONSIBILITY FOR PRIME TIME VIEWING.

(c) TIME NOT SCHEDULED A REASONABLE PERIOD BEFORE CABLECAST REVERTS TOCOMMON CARRIER STATUS AND THAT SUCH AVAILABILITY BE PUBLICIZED VIATHE CABLE SYSTEM.

(d) SHOULD A GRANTEE FAIL TO USE ALLOCATED PROGRAM TIME WITHIN PUBLISHEDDEADLINES, HIS GRANT WOULD BE SUBJECT TO REVOCATION.

12. THAT THE COMMUNITY CABLE BOARD ALLOCATE PROGRAMMING FUNDS TO GRANTEESFOR LOCAL PROGRAMMING.

13. (a) THAT THE CABLE DISTRICT ADMINISTRATION AND COMMUNITY CABLE BOARDSHALL HAVE NO CONTROL OVER CONTENT OF PROGRAMS.

(b) THAT THE COMMUNITY CABLE BOARD AND CABLE DISTRICT ADMINISTRATIONBE REQUIRED TO PUBLICLY EXPLAIN THEIR RATIONALE FOR REJECTION OF AGIVEN GRANTEE IF THE GRANTEE SO REQUESTS.

14. THAT THE COMMUNITY CABLE BOARD AND THE CABLE DISTRICT ADMINISTRATIONPROVIDE PROCEDURES FOR A REVIEW OF THEIR ADMINISTRATIVE DECISIONS ANDCITIZEN COMPLAINTS.

IV. CHANNEL ALLOCATION

1. THAT THE CABLE SYSTEM HAVE A MINIMUM OF 36 CHANNELS AVAILABLE FOR.IMMEDIATE AND INITIAL OPERATION: THAT ALLOCATION OF SUCH CHANNELS IN-CLUDE APPROPRIATE DIVISION BETWEEN EXISTING OVER-THE-AIR CHANNELS, DIS-

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TANT SIGNALS, PUBLIC ACCESS, 10 COMMUNITY (DIVIDED BETWEEN CITY-WIDE ANDCABLE DISTRICT), COMMERCIAL (ON A COMMON CARRIER BASIS), EDUCATIONAL(DIVIDED BETWEEN ELEMENTARY, SECONDARY AND HIGHER EDUCATIONAL INSTITU-TIONS), MUNICIPAL, PROGRAM GUIDE, AND THE LIKE, WITH SUCH RESERVED CHAN-NELS AS MAY BE APPROPRIATE. THAT ALLOCATION OF CHANNELS BE DETERMINEDAT THE TIME THE COMMON COUNCIL APPROVES INSTALLATION OF A CABLE SYSTEMIN DETROIT.

2. THAT A MINIMUM OF 10 OUT OF THE FIRST 36, AND APPROXIMATELY 15% OFADDITIONAL CHANNELS, BE ALLOCATED FOR COMMUNITY OPERATION AND DIREC-TION: EACH CABLE DISTRICT (ASSUMING FIVE) WOULD HAVE A MINIMUM OF TWOCHANNELS.

3. THAT A MINIMUM OF ONE PUBLIC ACCESS CHANNEL BE AVAILABLE ON A NON-RESERVED, COMMON CARRIER BASIS FOR NON-COMMERCIAL APPLICATION: REASON-ABLE LIMITS ON REPETITIVE USE BY INDIVIDUALS OR GROUPS SHOULD BE IMPOSED:THAT A MINIMUM OF ONE ADDITIONAL PUBLIC ACCESS CHANNEL BE AVAILABLE ONA. RESERVED COMMON CARRIER BASIS.

4. THAT A MINIMUM OF THREE CHANNELS BE DESIGNATED FOR MUNICIPAL USE.

5. THAT A MINIMUM OF SEVEN CHANNELS BE DESIGNATED AS EDUCATIONAL CHAN-NELS: THAT 20% OF FUTURE CHANNEL ALLOCATION BE DESIGNATED AS EDUCA-TIONAL CHANNELS.

6. THAT A MINIMUM OF ONE CHANNEL BE AVAILABLE FOR COMMERCIAL APPLICATIONON A COMMON CARRIER BASIS: REASONABLE LIMITS ON REPETITIVE USE BY INDI-VIDUALS OR GROUPS SHOULD BE IMPOSED: THAT TWO ADDITIONAL CHANNELSBE MADE AVAILABLE TO SYSTEM OPERATOR.

7. THAT ONE CHANNEL BE UTILIZED FOR PROVIDING A SYSTEM-WIDE PROGRAM GUIDE,AUTOMATED TIME, NEWS AND WEATHER.

8. THAT SYSTEM OPERATOR BE AUTHORIZED TO CARRY EXISTING OVER-THE-AIR F.M.BROADCAST STATIONS ON THE CABLE SYSTEM.

9. THAT COMMON CARRIER STATUS BE APPLIED TO ALL TIME NOT REASONABLY RE-SERVED IN ADVANCE ON COMMUNITY, PUBLIC ACCESS, MUNICIPAL, AND EDUCA-TIONAL CHANNELS.

V. ACCESSPROGRAMMING ACCESS

1. THAT FUNDS BE ALLOCATED FROM GROSS REVENUES TO SUPPORT PROGRAMMINGON EDUCATIONAL, MUNICIPAL, COMMUNITY, AND PUBLIC ACCESS CHANNELS.

2. THAT THE OPERATOR OF THE CABLE SYSTEM BE REQUIRED TO PROVIDE AND MAIN-TAIN IN EACH CABLE DISTRICT, WITHOUT CHARGE, ADEQUATE FACILITIES ANDEQUIPMENT IN PROPER OPERATING CONDITION (INCLUDING MOBILE EQUIPMENT)FOR PROGRAM PRODUCTION ON COMMUNITY CHANNELS.

3. THAT THE OPERATOR OF THE CABLE SYSTEM BE REQUIRED TO MAKE PRODUCTIONFACILITIES AVAILABLE IN EACH CABLE DISTRICT, AT NO COST TO THOSE INDI-VIDUALS AND GROUPS WHO WISH TO PRESENT THEIR OWN PROGRAMS ON PUBLICACCESS CHANNELS. THAT THESE FACILITIES BE MAINTAINED AND STAFFED BY THESYSTEM OPERATOR AT NO COST.

4. THAT THE OPERATOR OF THE CABLE SYSTEM PROVIDE, WITHOUT CHARGE, LINKAGE(DROPS) FROM THE PRODUCTION FACILITIES OF EDUCATIONAL AND MUNICIPALINSTITUTIONS TO THE TRANSMISSION FACILITIES OF THE CABLE SYSTEM.

15#4.°4 1.

VIEWER ACCESS

5. THAT SUBSCRIBERS IN ANY CABLE DISTRICT BE ABLE TO VIEW PROGRAMMING ONALL CHANNELS WITHIN THE CITY'S CABLE SYSTEM EXCEPT FOR CERTAIN SPECIFIEDPURPOSES AS MAY BE AUTHORIZED BY THE CABLE SYSTEM AUTHORITY. SUCH PUR-POSES COULD INCLUDE TRAFFIC SURVEILLANCE, FIRE PROTECTION AND PROFES-SIONAL, TECHNICAL AND COMMERCIAL CONFERENCES.

6. THAT ACCESS TO THE CABLE SYSTEM BE AVAILABLE TO EVERY PERSON IN THE CITYWISHING TO SUBSCRIBE, ON A NON-DISCRIMINATORY BASIS, AND WITHIN A REASON-ABLE AND SPECIFIED PERIOD OF TIME.

7. THAT THE CABLE SYSTEM AUTHORITY DEVELOP AN APPROPRIATE MECHANISM TOPERMIT ACCESS TO VIEWING FOR LOW-INCOME FAMILIES.

8. THAT THE OPERATOR OF THE CABLE SYSTEM PROVIDE, WITHOUT CHARGE, DROPS TOHOSPITALS, SCHOOLS (PUBLIC AND PRIVATE), PUBLIC HOUSING, PRISONS, JAILS,MENTAL INSTITUTIONS, REFORM SCHOOLS, POLICE AND FIRE STATIONS, AND SIMILARPUBLIC AND PRIVATE INSTITUTIONS; THAT DROPS BE LOCATED AS PER SPECIFICA-TION BY SUCH INSTITUTIONS.

VI. REVENUEREVENUE DISTRIBUTION

1. THAT PROGRAMMING COSTS FOR EDUCATIONAL, MUNICIPAL, COMMUNITY, PUBLICACCESS CHANNELS BE AT LEAST PARTIALLY SUPPORTED THROUGH ALLOCATION OFFUNDS FOR GROSS REVENUES BASED UPON A FORMULA TO BE DEVELOPED BY THECOUNCIL.

2. THAT CABLE REGULATORY ACTIVITIES BE SUPPORTED ENTIRELY BY THE CABLESYSTEM THROUGH ALLOCATION OF A SUFFICIENT PORTION OF SYSTEM REVENUES.

3. THAT REVENUES REMAINING AFTER EXPENSES BE ALLOCATED BY THE SPECIALPUBLIC AUTHORITY OR CABLE AUTHORITY TO A FUND FOR REDUCING SUB-SCRIBER COSTS, IMPROVING SYSTEM CAPABILITY, SUPPORTING ADDITIONAL COMMU-NITY, MUNICIPAL, EDUCATIONAL AND PUBLIC PROGRAMMING COSTS. THAT IFFURTHER REVENUES REMAIN, SUCH REVENUES SHALL BE GIVEN TO THE CITY Al4 1ERSUFFICIENT RESERVES ARE ESTABLISHED FOR CAPITAL IMPROVEMENTS.

ADVERTISING

4. THAT IN ORDER TO INCREASE FINANCIAL SUPPORT FOR LOCAL PROGRAMMING, AD-VERTISING BE PERMITTED ON COMMUNITY CHANNELS: THAT ADVERTISING BEDIVORCED FROM PROGRAM CONTENT AND PRODUCTION ON COMMUNITY CHANNELS.

5. THAT REVENUES FROM ALL ADVERTISING ON COMMUNITY CHANNELS GO TO SUP-PORT PROGRAMMING COSTS FOR COMMUNITY CHANNELS: THESE REVENUES TO BEDEPOSITED WITH THE COMMUNITY CABLE BOARD FOR ALLOCATION ON A FAIR ANDEQUITABLE BASIS. (THESE FUNDS WILL SUPPLEMENT ANY REVENUES FROM THETOTAL SYSTEM WHICH ARE TO BE ALLOCATED TO COMMUNITY CHANNELS FOR PUR-POSES OF FINANCING LOCAL PRODUCTION COSTS.)

6. THAT THE COMMUNITY CABLE BOARD ESTABLISH A SCHEDULE OF ADVERTISINGRATES AS WELL AS A PROCEDURE FOR ALLOCATION OF ADVERTISING TIME ON COM-MUNITY CHANNELS TO GUARANTEE MAXIMUM ACCESS TO SUCH TIME FOR BOTHSMALL AND LARGE ADVERTISERS.

7. THAT ADEQUATE FREE PUBLIC SERVICE TIME BE SET ASIDE FOR POLITICAL ISSUESAND CANDIDATES ON COMMUNITY AND PUBLIC ACCESS CHANNELS: NO PAID POLITI-CAL ADVERTISING SHALL BE PERMIITED ON THESE CHANNELS. THE USE OF COM-MUNITY CHANNELS FOR SUCH PURPOSES SHALL BE LEFT TO THE DISCRETION OFCABLE DISTRICT ADMINISTRATIONS.

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VIII. REGULATION

1. THAT THE COMMON COUNCIL GRANT AUTHORITY FOR CONSTRUCTION, OPERATIONAND PROGRAMMING OF THE CABLE SYSTEM, AND APPROVE SUBSCRIBER RATES.

2. THAT OVERALL REGULATORY RESPSONSIBILITY, EXCEPT FOR PROGRAMMING COM-MUNITY, EDUCATIONAL, MUNICIPAL, AND PUBLIC ACCESS CHANNELS, BE DELEGATEDTO THE SPECIAL PUBLIC AUTHORTITY. HOWEVER, IF THE OPERATING ENTITY ISNOT A SPECIAL PUBLIC AUTHORITY, THEN THE COMMON COUNCIL SHALL CREATEA CABLE AUTHORITY, OPERATING WITH REGULATORY RESPSONSIBILITY, MEMBERSOF WHICH SHOULD BE CHOSEN BY THE MAYOR WITH ADVICE AND CONSENT OFCOMMON COUNCIL: ALL SUCH MEMBERS SHALL BE RESIDENTS OF THE CITY OFDETROIT AND REFLECT THE MINORITY GROUP COMPOSITION OF THE POPULATIONOF THE CITY.

3. THAT COMMON COUNCIL SHOULD CREATE AN APPROPRIATE CONFLICT OF INTERESTORDINANCE REGARDING THE CABLE SYSTEM.

4. THAT THE CABLE SYSTEM AUTHORITY WILL HOLD AN ANNUAL REVIEW OF SYSTEMOPERATIONS, ESTABLISH A SYSTEM FOR HEARING GRIEVANCES CONCERNINGTHE OPERATION OF THE SYSTEM AND RENDER AN ANNUAL REPORT TO COMMONCOUNCIL.

5. THAT THE COMMON COUNCIL REQUEST STATE LEGISLATION TO ASSURE COMPATI-BILITY AND INTERCONNECTION OF ALL SYSTEMS IN EXISTING REGIONAL PLANNINGDISTRICTS.

6. THAT THE CITY TAKE THE LEADERSHIP IN DEVELOPING THE INTERCONNECTABILITYOF ITS SYSTEM WITH OTHERS IN THE REGION AND IN THE STATE.

VIII. ADDITIONAL SERVICES FUTURE IMPLICATIONS

1. THAT GIVEN THE SERIOUS ECONOMIC IMPACT OF PAY T.V. ON CABLE SYSTEM SUB-SCRIBERS, PAY T.V. NOT BE APPROVED AT THIS TIME: THAT SUCH DECISION AWAITTHE ENGINEERING AND FINANCIAL PROJECTIONS WHICH WILL SPECIFICALLYADDRESS THE ISSUE AS TO WHETHER PAY T.V. IS NEEDED TO MAKE THE CABLESYSTEM ECONOMICALLY VIABLE: THAT IF PAY T.V. IS REQUIRED FOR THIS PURPOSE,THEN SUCH USES OF THE SYSTEM SHOULD BE LIMITED TO THE MINIMUM NECESSARYTO INSURE FINANCIAL VIABILITY. SIPHONING OF PROGRAMMING WHICH WOULDOTHERWISE BE AVAILABLE TO ALL SUBSCRIBERS (PARTICULARLY LOW - INCOME)SHOULD BE MINIMIZED.

2. THAT NON-TELEVISION USES OF THE CABLE SYSTEM, E.G., DATA TRANSMISSION,FACSIMILE REPRODUCTION, SHALL BE CONSIDERED BY THE COMMON COUNCIL SEPA-RATELY FROM ITS CONSIDERATION OF THE GRANT OF AUTHORITY TO ESTABLISHTHE CABLE SYSTEM.

IX. TECHNICAL STANDARDS

1. THAT THE CITY SET THE TECHNICAL STANDARDS FOR THE CABLE SYSTEM TO INSURETHE HIGHEST POSSIBLE QUALITY OF PERFORMANCE REGARDING THE PICTURE ANDSOUND TO BE DELIVERED TO SUBSCRIBERS.

2. THAT THE INITIAL INSTALLATION OF EQUIPMENT PROVIDES THE GREATEST POTEN-TIAL FOR MAXIMUM NUMBER OF CHANNELS AND OFFER THE GREATEST FLEXIBIL-ITY: AND THAT EQUIPMENT INITIALLY INSTALLED HAVE DUPLEX, I.E., TWO-WAY,CAPABILITY.

3. THAT ALL CONSTRUCTION RELATED TO CABLE INSTALLATION BE DONE IN A MANNERCONSISTENT WITH SOUND ECOLOGICAL AND AESTHETIC CONSIDERATIONS.

17

4. THAT EXISTING OVER-THE-AIR CHANNELS SHALL HAVE THE SAME CHANNEL NUMBERON THE CABLE SYSTEM.

5. THAT THE SYSTEM OPERATOR BE REQUIRED TO CONSTANTLY UPGRADE TECHNICALFACILITIES, EQUIPMENT AND SERVICES SO THAT THE SYSTEM IS AS ADVANCED ASTHE CURRENT STATE OF TECHNOLOGY WILL ALLOW.

X. EMPLOYMENT

1. THAT ALL PERSONS EMPLOYED IN CONNECTION WITH THE CONSTRUCTION, OPER-ATION AND MAINTENANCE OF THE SYSTEM BE RESIDENTS OF THE CITY OF DETROIT,AND THAT THOSE PERSONS ENGAGED IN THE CONSTRUCTION, OPERATION OR MAIN-TENANCE OF THE SYSTEM PROPORTIONATELY REFLECT THE RACIAL AND MINORITYGROUP COMPOSITION OF THE POPULATION OF DETROIT. THAT THOSE CONNECTEDWITH THE CONSTRUCTION, OPERATION AND MAINTENANCE OF THE SYSTEM BE RE-QUIRED TO FULFILL AFFIRMATIVELY THE EQUAL EMPLOYMENT PROVISIONS OF THECITY, STATE AND FEDERAL LAW AND THAT THE WORK FORCE OF THE SYSTEM RE-FLECT THE RACIAL, SEXUAL AND ETHNIC GROUP COMPOSITION OF THE POPULATIONOF DETROIT: THAT PERSONS NOT BE ARBITRARILY ELIMINATED FROM CONSIDERA-TION BECAUSE OF AGE.

2. THAT IN THE CARRYING OUT OF THE CONSTRUCTION, MAINTENANCE AND OPER-ATION OF THE CABLE SYSTEM, SYSTEM OPERATOR WILL NOT DISCRIMINATEAGAINST ANY EMPLOYEE OR APPLICANT FOR EMPLOYMENT BECAUSE OF RACE,CREED, COLOR, SEX OR NATIONAL ORIGIN. THE SYSTEM OPERATOR WILL TAKEAFFIRMATIVE ACTION TO INSURE THAT APPLICANTS ARE EMPLOYED, AND THAT EM-PLOYEES ARE TREATED DURING EMPLOYMENT, WITHOUT REGARD TO THEIR RACE,CREED, COLOR, SEX, OR NATIONAL ORIGIN. SUCH ACTION SHALL INCLUDE, BUT NOTBE LIMITED TO, THE FOLLOWING: EMPLOYMENT UPGRADING, DEMOTION OR TRANS-FER, RECRUITMENT OR RECRUITMENT ADVERTISING, LAYOFF OR TERMINATION,RATES OF PAY OR OTHER FORMS OF COMPENSATION, AND SELECTION FOR TRAIN-ING, INCLUDING APPRENTICESHIP. THE SYSTEM OPERATOR SHALL POST IN CON-SPICUOUS PLACES, AVAILABLE TO EMPLOYEES AND APPLICANTS FOR EMPLOYMENT,NOTICES SETTING FORTH THE PROVISIONS OF THIS NON-DISCRIMINATION CLAUSE.THE SYSTEM OPERATOR SHALL, IN ALL SOLICITATIONS OR ADVERTISEMENTS FOREMPLOYEES PLACED BY OR ON BEHALF OF THE SYSTEM OPERATOR STATE THAT ALLQUALIFIED APPLICANTS WILL RECEIVE CONSIDERATION FOR EMPLOYMENT WITHOUTREGARD TO RACE, CREED, COLOR, SEX, OR NATIONAL ORIGIN. THE SYSTEM OPERATORWILL INCORPORATE THE FOREGOING REQUIREMENTS OF THIS PARAGRAPH IN ALLOF ITS CONTRACTS FOR WORK RELATIVE TO CONSTRUCTION, MAINTENANCE ANDOPERATION OF THE CABLE SYSTEM AND WILL REQUIRE ALL OF ITS CONTRACTORSFOR SUCH WORK TO INCORPORATE SUCH REQUIREMENTS IN ALL SUBCONTRACTS FORSUCH WORK.

3. IN ORDER TO HELP REDUCE THE LEVEL OF UNEMPLOYMENT AND UNDEREMPLOY-MENT IN THE CITY, THE SYSTEM OPERATOR WILL, WITHIN THREE MONTHS AFTERGRANT OF AUTHORITY FOR SYSTEM INSTALLATION, PREPARE A GENERAL OUTLINEOF AN AFFIRMATIVE ACTION PLAN DESIGNED TO TRAIN AND PROVIDE EMPLOYMENTTO QUALIFIED UNEMPLOYED AND UNDEREMPLOYED RESIDENTS OF THE CITY ATEVERY OPERATIONAL LEVEL INVOLVED IN THE CONSTRUCTION, OPERATION ANDMAINTENANCE OF THE CABLE SYSTEM. THE GENERAL OUTLINE SHALL BE DRAWNUP AFTER CONSULTATION WITH ADMINISTRATORS OF THE PRINCIPAL MANPOWERPROGRAMS OF CITY AND STATE AGENCIES, AS WELL AS WITH THE SYSTEM OPER-TOR'S PRINCIPAL CONTRACTORS AND SUBCONTRACTORS, AND REPRESENTATIVESOF APPROPRIATE UNION ORGANIZATIONS.

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27

THE GENERAL OUTLINE OF THE AFFIRMATIVE ACTION PLAN SHALL BE SUBJECT TOTHE APPROVAL OF THE COMMON COUNCIL AND, WITHIN THREE MONTHS AFTER SUCHAPPROVAL, THE SYSTEM OPERATOR SHALL PREPARE A FINAL AND DETAILED PLANWHICH SHALL ALSO BE SUBMITTED TO THE COMMON COUNCIL FOR ITS APPROVAL.ANNUALLY, THE SYSTEM OPERATOR SHALL FILE REPORTS WITH THE COUNCIL SET-TING FORTH ITS ACTIVITIES UNDER THE AFFIRMATIVE ACTION PLAN AND STATINGIN DETAIL ANY FAILURES TO COMPLY WITH THE PROVISIONS OF THE PLAN. THEPROVISIONS OF THE PLAN, AS APPROVED BY THE COMMON COUNCIL, WILL CONSTI-TUTE MATERIAL TERMS AND CONDITIONS OF ANY GRANT OF AUTHORITY TO OPERATETHE CABLE SYSTEM.

(a) THAT A SEMI-ANNUAL EMPLOYMENT CENSUS APPROPRIATE TO THE FOREGOINGRECOMMENDATION SHALL BE PROVIDED TO THE MEMBERS OF THE COMMONCOUNCIL SO THAT IT CAN BE DETERMINED WHETHER THEIR STANDARDS AREBEING COMPLIED WITH.

(b) THE COMMON COUNCIL SHALL PROVIDE BY ORDINANCE FOR ENFORCEMENT OFTHE REQUIREMENTS OF THE FOREGOING RECOMMENDATIONS AND PENALTIESFOR THE VIOLATION THEREOF.

4. THAT IMMEDIATELY UPON THE INITIATION OF WORK FOR INSTALLATION OF THECABLE SYSTEM, A TRAINING PROGRAM FOR THE DEVELOPMENT OF CAREER OPPOR-TUNITIES FOR ALL EMPLOYEES OF THE SYSTEM OPERATOR BE ESTABLISHED BYTHE SYSTEM OPERATOR. IN ADDITION, THE SYSTEM OPERATOR SHALL DEVELOP ATRAINING PROGRAM FOR THOSE PERSONS NOT EMPLOYED BY THE SYSTEM OPER-ATOR BUT WHO ARE INVOLVED IN PRODUCTION AND PROGRAMMING OF COMMUNITY,EDUCATIONAL, MUNICIPAL, AND PUBLIC ACCESS CHANNELS.

XI. PRIVACY

1. THAT CABLE SYSTEM SUBSCRIBERS BE GRANTED, BY LAW, A RIGHT OF ACTION FORINVASIONS OF THEIR PRIVACY INVOLVING THE CABLE SYSTEM; AND THAT SUCHINVASIONS OF PRIVACY ALSO BE MADE A CRIMINAL OFFENSE WITH VIOLATORS SUB-JECT TO FINE AND/OR IMPRISONMENT.

2. THAT THE CABLE SYSTEM BE DESIGNED TO PREVENT ANY DUPLEX RETURNS WITH-OUT A SUBSCRIBER'S SPECIFIC PERMISSION: THAT THE SYSTEM DESIGN AND OPER-ATION INCORPORATE SAFEGUARDS TO PREVENT THIRD PARTIES FROM TAPPING INTOTHE SYSTEM AND THEREBY INVADING A SUBSCRIBER'S PRIVACY.

3. THAT MONITORING OF A CABLE SYSTEM SUBSCRIBER'S VIEWING HABITS WITHOUTHIS EXPRESS PERMISSION BE PRECLUDED, IF POSSIBLE, BY SYSTEM DESIGN ANDPROHIBITED BY LAW. SUCH PROHIBITIONS SHALL NOT PREVENT CUMULATIVE VIEW-ING ANALYSES AND RESEARCH SAMPLING.

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INTRODUCTION

1. GENERAL RECOMMENDATION A NEW TELECOMMUNICATIONS MEDIUMFOR DETROIT

RECOMMENDATION:

CABLE TELEVISION GIVES THE COMMON COUNCIL THE UNIQUE OPPORTUNITY, WITHFORETHOUGHT AND PLANNING, TO PROVIDE THE CITIZENS OF DETROIT, PEOPLE, BUSI-NESS AND INDUSTRY, A WIDER AND BETTER MEANS OF COMMUNICATIONS IN ITSBROADEST FORM, ALLOWING ACCESS TO TELECOMMUNICATIONS TO MANY INDIVIDUALS,ORGANIZATIONS AND INSTITUTIONS PREVIOUSLY DENIED ALL BUT TOKEN ACCESS.

Cable television is too important to Detroit,and its impact on the daily lives of Detroitcitizens will be too dramatic and pervasive, forcable system operators to be regarded as anythingless than gatekeepers to the mind.

If the Common Council were to relinquish thisgatekeeping function without full investigation ofownership alternatives, it would be defaulting onresponsibilities to the City of Detroit and to thefuture generations of Detroit residents. This isespecially true since the system operator willcharge a toll, or monthly fee for access to thesystem. Further, ten to twenty years or moreinto the future, cable television in Detroit willprobably generate an income of millions of dollarsannually. If the City of Detroit is to fully reapthe potential social and economic benefits of acable television system, the system must, fromits inception, be directed towards meeting thepublic needs of our City.

Accordingly, the Cable TV Study Committeestrongly recommends that there be no cable tele-vision in Detroit until and unless a system isdevised that will protect the public interest inthis new telecommunications medium and guar-antee that public needs will be met. The matteris too vital to be left to promises and good inten-tions. Those who control cable systems will, inthe future, control the flow of information, enter-tainment, news, social and commercial servicesto the public. As Marshall McLuhan warns: "Oncewe have surrendered our senses and nervoussystems to the private manipulations of those whowould try to benefit from taking a lease on oureyes and ears, we don't really have any rightsleft."

200,9

If the insistence upon guarantees of publicprotection delays the advent of cable televisionin Detroit, the delay must be endured. The guar-antees are essential, and they must be incorpo-rated into a master plan before any system isallowed to begin. To do otherwise is to repeatthe errors of the past: the errors of first allowingtrees to be felled without restrictions, then won-dering why Michigan has no forest; the errors offirst condemning buildings, then worrying aboutrelocating the people in them; the errors of firstbuilding freeways, then dealing with the exodusof the more mobile families from the city.

Detroit is one of the first major metropolitanareas to make a study of the promise and theproblems of cable television before granting anycable franchise. It is one of the first to formulatea vision of what cable systems can and should dofor the city before that vision is limited by whata cable system has already done. The decisionin Detroit, says Ralph Lee Smith, author of "TheWired Nation" and a national cable expert, willbe important as a pattern for cable developmentin the rest of the country. Unless city councilsplan wisely, Smith says, "Citizens of some citiesare going to be miserably shortchanged." Cablesystems, he added, stand "At a junction betweenthe old," privately oriented, "and the new,"publicly oriented, "and if they [the CommonCouncil] franchise the old it will be a majordisaster."

The importance of the decision facing theCouncil is underscored by the words of Henry W.Maier, Mayor of Milwaukee who vetoed a pro-posed cable franchise in that city because of thenumber of unanswered questions in the applicant's

proposal. He said: "In the absence of any nationalor state regulatory agency willing or able to pro-tect the public interest, we certainly owe it toourselves, our children, and our children's childrento try to act in our own interest and the interestof the future."* Cable television, Maier said, "ifits full potential is realized [will] revolutionize oursociety, and a city without a full communicationssystem will find its quality of life second class."

To illustrate what can happen when adequateconsideration does not take place, the experienceof one large metropolitan area may be useful.There, two franchises were granted before theappointment of a task force on the future of tele-communications in the city. Even after the taskforce's recommendations came in, the city feltconstrained by steps previously taken: it wantedto take competitive bids for the franchises, butdecided it could not, in view of the $30 millionalready invested by the two franchises; it wantedto limit the franchises to ten years, but decidedit should not, since the franchisees claimed atwenty-year term was necessary to justify theirlarge capital investments.1

It is equally important to guarantee that therecommendations of the city's master plan areadhered to in a number of small cities therecipients of cable franchises have left the citizenswith inferior equipment, faulty service and brokenpromises of meeting public needs because the citiesfailed to protect against this possibility.

There is time yet to assure that the develop-ment of cable television will best serve the Cityof Detroit. The cable industry is not yet totallycontrolled by a concentration of national powerthat has made substantive change in over-the-airbroadcasting so difficult.

The validity of cable television for Detroitlies not in its potential for a profitable privatebusiness but in this City's need to overcomediscrimination in access to communications.Compared to other areas of the country, televisionreception in Detroit is fairly good and the choiceof channels fairly extensive; the need for cabletelevision on these grounds alone is marginal. ButDetroit does need cable television if its cablesystem will, as it is capable of doing: (1) facilitatecommunity involvement and heighten communityconsciousness; (2) aid in the delivery of municipal

*See Appendix, Mayor Maier's letter.

1. Sucherman, Stuart P., "Cable TV. The EndangeredRevolution," Columbia Journalism Review, May/June1971, p. 18.

21

and social services; (3) enlarge educational facili-ties by extending them to individual homes; (4)improve the quality and quantity of receptionof regular television programming; (5) providedifferential, localized programming; (6) helporder and deliver commercial services; and (7)become, ultimately, the basis for a new communi-cations system of the 21st century.

It could be easy in considering implementationof cable systems to wonder whether there is needfor considerable deliberation and discussion. Afterall, cities like Jackson and Lansing, Michiganalready have cable systems and there have beenno grand sweeping changes in the social, cultural,political or educational textures in these com-munities. The changes, though, are in the future,especially if the publicly oriented system hererecommended is adopted. It must be rememberedthat the first users of the telephone at the Phila-delphia Exposition may well have doubted theneed for such an invention; surely they did notimagine the possibility of worldwide interconnec-tions and telephone calls to the moon. All indica-tions are that cable television will be a similarcommunications marvel, with much of its applica-tions and possibilities not yet foreseeable.

One of the fundamental challenges of ourmodern technological society is whether the fruitsof man's inventive genius will be utilized to enrichthe life of all persons or to benefit a select few.Related to this is the question of humanization.Will the marvels of technology be used in such away that persons feel further dehumanized andalienated, or will they be used in ways by whichall persons believe and feel that they are acceptedas human beings and that the society really caresand wants them to be full participants in oururbanized community? This is the basic questionthat confronts the Common Council when it makesits decision as to when and how cable televisionwill be introduced into Detroit. Here is anotherexample of modern man's technological genius.How will it be used? Will it be used to build acommunity in which all persons have a voice, orwill it benefit only those who already can beheard? Will it be developed in ways that furtheralienate persons and groups or will it be developedin ways by which all person can have their dignityenhanced because they have access to be heard?As a new communication system will it help tohumanize the City, or will it further depersonalizethe people of the community?

The Cable TV Study Committee, early in its de-liberations concluded that the primary purposefor the Common Council to consider as it ap-

proaches decisions about introducing cable tele-vision to Detroit is that this could become a newsystem of communication for all the citizens ofDetroit to use and have access to in new andcreative ways. Our concern is the public andcitizen interest, and we believe this should beparamount.

Cable television can become a system of com-munication which gives new opportunity for allpersons to be heard and participate in the life ofthe city, especially those who, up to now, havenot had adequate access to any current communi-cation system.

2. WHAT IS CABLE TELEVISION?HOW DOES IT WORK?

Cable television is a system by which setowners receive their television signals by coaxialcable rather than through the air. It was de-veloped in 1949 to capture the television signalsthat were blocked by the hills of Oregon andeastern Pennsylvania.

Cable systems were developing simultaneouslyand independently in Oregon and the hills ofeastern Pennsylvania, most often at the instiga-tion of an enterprising television dealer. In thebeginning, cable systems were called CommunityAntenna Television (hence the acronym, CATV),an apt description, for what was involved was theestablishment of one central antenna to serve acommunity that otherwise would have no or littletelevision reception. The principle is the sameas a master antenna in the high-rise apartmentbuilding.

The technologigy of 1949 is basically that usedtoday: A receiving antenna, or a set of antennas,one for each station to be received, is placed ona high point where reception of television signalsis best. The signals are sent from there to a"headend," a master control station, a buildingthat houses signal processing and other equip-ment. Here the signals are filtered, amplified ifnecessary, and sometimes changed in frequency.From there the signals are sent over a coaxialcable, through the main trunk lines (with a di-ameter of about 3/4 inch) that go along the majordistribution routes; through the smaller feederlines (less than 1/2 inch in diameter) which servicegroups of buildings; and through the even smallerdroplines (about 1/4 inch in diameter), which runinto the subscriber's home and connect to theback of the television set. The cables commonlyshare telephone or electric power poles, or lieburied in some cases along with telephone or elec-

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31

tric wires in underground conduits. Amplifiersplaced about every one-third mile along the cablekeep the signal strong. The charge to subscriberstypically runs about $15.00 to $20.00 for installa-tion of the cable, and about $5.00 a month for theactual service. Extension connections are avail-able to service additional sets of subscribers foran extra fee.

The potential of a cable system is defined byits technology; cable television is a system forbringing television pictures directly to the tele-vision set (or radio signals to a receiver) over ashielded wire (coaxial cable) instead of throughthe air via an antenna. A high antenna, especiallywhen coupled with relay of television signals bymicrowave, enables a cable system to offer pro-grams from a considerable distance; not only canthe subscriber receive stations that normally areblocked by mountains or tall buildings, but alsostations that, even under perfect conditions, wouldbe too far away to be picked up. To do this, thecable operator places an antenna close to thestation he wants, and directs that signal to anantenna in the area he is serving. It is technicallypossible, for example, for a Detroit cable systemto transmit a Chicago, New York or Bostonstation. No longer need a person's televisionchoice be limited by the area in which he lives.(Recently promulgated FCC rules, however, willeffectively limit these possibilities for the top 50TV markets, which includes Detroit.)

In addition to transmitting over-the-air signalsfrom existing television stations operating in thevicinity and picking up distant signals via mico-wave or cable link, cable television is capble ofproducing local programming which can be origi-nated for each cable system over unused channels.Locally developed programming can be producedin a studio or on feeder lines and sent to individualhomes. Programs can range from additionalentertainment to cultural, commercial and publicservice programming. Finally the existence ofcable lines connecting houses to headend facilitiesmeans that many non-television services can beprovided through two-way use of cable suchas business computer access, banking services,market surveys and gas meter reading.

Transmission to the set of television signals bycoaxial cable, free from the interference of aircurrents, winds, static, airplanes flying overhead,lightning, nearby electrical appliances and thelike, guarantees the subscriber a clear, unob-structed picture, in much the same way that tele-phone calls, which also depend on wire, can bemade without distortion in any weather, at any

time of day. This protection from outside inter-ference is especially important for the 20 millionU. S. households which have color television, forcolor signals, which require a wider bandwidththan black-and-white signals, are more easilyimpaired by the echoes and reflections of urbanliving.

But it is the number of signals that the coaxial

cable can carry that marks the difference betweencable and the broadcast system. The cable is athin copper wire surrounded by a layer of poly-ethylene foam and sheathed in copper and alumi-num. Equipping the cable with reversing ampli-fiers will make it possible for the subscriberto talk back by sending messages to a centralreceiver point.

LOAD-BEARING WIRE

PLASTIC JACKET

COPPER OR ALUMINUM SHEATH

FOAM SEALANT

COPPER INNER CONDUCTOR

COAXIAL CABLE used in cable television system typically has four layers. The maincables are about three-quarters of an inch in diameter; the cables into the home,less than half an inch. In most systems the cable is suspended in utility conduitsor on utility poles.

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32 t

RADIO-FREQUENCY SPECTRUM

RADIO-FREQUENCY SPECTRUM extends

from three million megahertz, or threemillion cycles per second, to 890 mega-hertz and is used for a number ofpurposes. The upper and lower operat-ing limits of cable television transmis-sion are respectively 300 megahertzand three megahertz.

33

4......0890

800

700

UHF TELEVISION(CHANNELS 14 TO 80)

600

500

470

400

AERONAUTICAL

AND MOBILECOMMUNICATIONS

300

VHF TELEVISION 216(CHANNELS 7 TO 13) 200

174AERONAUTICALAND MOBILECOMMUNICATIONS

FM RADIO 108100

88VHF TELEVISION(CHANNELS 2 TO 6) 54MOBILE

COMMUNICATIONS 30

3

24

Normal VHF television, which uses the airwave frequencies of 54 to 88 megacycles persecond and of 174 to 216 megacycles per second,can only provide 12 channels within that range.Telephone service, which has a frequency band-width of 3500 cycles per second (narrow band)can carry thousands of two-way connectionssimultaneously. Cable television, on the otherhand, has a frequency bandwidth of 300 millioncycles per second (broad band) and it obviouslyhas an even greater potential capacity; as FederalCommunications Commission Nicholas Johnsonemphasizes, "Coaxial cable is to telephone wirewhat Niagara Falls is to the garden hose."

The technology has already been developed forcarrying up to 80 black-and-white channels simul-taneously over a cable. However, it is not yeteconomically feasible. Present reception is limitedbecause the standard home television set cannotreceive more than twelve channels without addedelectronic equipment; this problem can be metthrough use of a set top converter or installationof dual cables with a switching device. TheFederal Communications Commission will requirethat cable systems, in the top 100 markets, havea capacity of at least 20 channels. San Jose,California, and Dayton, Ohio are planning a 42channel system, and 64 channels are being in-stalled for cable television in Akron, Ohio.

Transmitting television signals by cable re-moves the problems of channel scarcity that hasshaped today's broadcasting. In its place will bewhat the Sloan Commission on Cable Communi-cations calls the "television of abundance." Theneed for stations to support programming whichappeals to the lowest common denominator ofmass audiences will be lessened. Stuart P.Sucherman, a program officer of the Ford Founda-tion, predicts: "From a system that dictates pro-gramming on a national or at best regional level,broadcasting can be transformed into a mediumby which even the smallest community can effec-tively communicate with itself. In an increasinglyimpersonal society where governmental, economicand social structures are so large, the ability toreverse the process of bigness, to redirect energiesto local problems and to establish local communi-cations can have enormous value. "2 The mediabottleneck will be alleviated by widening the neck.What's more, even after local programming hasbeen added to national and regional programming,there will still be room on a cable system for a

2. Sucherman, op cit., p. 14.

3425

range of other electronic services commercial,educational, social and municipal that willreplace the need for physical travel with anelectronic impulse.

3. GROWTH OF CABLE TELEVISIONThe public appetite for television, as indicated

by the fact that more than 95% of all Americanhomes have at least one television set, has con-tributed to a steady growth of cable systems. Itwas in response to communities which were un-able to receive television signals that cable tele-vision, known as Community Antenna Television(CATV) service began. Most cable services weresmall enterprises known as "mom and pop" oper-ations and were conducted locally offering a purelylocal service. They provided television wherethere otherwise would have been none, or at besta few poorly received signals. CATV servicesadded to the audiences of the television stationsthey imported, without threatening in any waythose stations or any others. By 1952, the firstyear that statistics on the new system were com-piled, there were 70 cable systems serving anestimated 14,000 subscribers. Ten years later,1962, there were 700 operating systems with725,000 total subscribers; and by 1971 there were2,570 systems with 5,300,000 total subscribersabout 9 percent of American homes with in-dustry revenues of approximately $300 million.3

The FCC's concern for the needs and interestof both UHF and VHF stations was reflected intheir rulings handed down in 1968 which effec-tively froze cable television expansion in the largecities by ruling that cable operators could notimport distant broadcast signals into any of thenation's top 100 markets. These markets embraceapproximately 90 percent of the nation's televisionhomes. And to date, only 1.9 percent of TV homesin major cities are currently on the cable.4

The average cable system has 2,000 subscrib-ers. In Michigan, as of January, 1970, there arereported to be 36 cities with operable cable sys-tems and eleven in the developmental stage.5 Mostof the systems are of relatively low capacity andexist primarily to supply the viewer with clear andstrong signals which he would otherwise be unableto receive.

3. Cable growth figures from TV Factbook, ServicesVolume, 1971-72 edition, p. 81 -a.

4, Cable Television in the Cities, Charles Tate, Editor,1971,

5. Michigan Municipal League, CATV in Michigan Munici-palities, No. 119.

By the end of the 60's, the FCC began toreflect a new attitude. The broadcast industrywas not united in its opposition to cable, for somebroadcast interests were beginning to venture intocable. As cable spread, its public constituencygrew, and frustration with stringent rules onimportation of distant signals was widely known.

On March 31, 1972 the latest FCC rulesregulating cable went into effect. While therules regarding the importation of distant broad-cast signals are not as liberal as cable advocateswould have wished, all expectations are that theywill encourage unprecedented growth and expan-sion of cable in major cities in the next decade."Within the next ten years, cable penetration isexpected to reach 70 percent of the total TVhomes and to produce industry revenues of $4.4billion. One reason for these optimistic projec-tions is that in addition to the more than 2,500operating systems, another 2,300 cable franchiseshave been granted by local communities and anadditional 2,600 applications are pending."6

4. POTENTIAL OF CABLE TELEVISIONThe extent of the uses to be made of cable

television will depend upon the channel capacityand the technical standards that the CommonCouncil insists upon for cable development inDetroit. A cable system can provide high qualitycolor reception; import additional broadcastingsignals from other parts of the country; providecontinuous stockmarket reports and notices ofcommunity events; make it possible to see newmovies or special sports programs at home;originate special interest programs such as chil-dren's shows, hobby exhibits and demonstrationsor sports shows; originate community program-ming by community groups for the community;offer pre-school, adult education, open universityand foreign language courses; provide socialservice information such as job opportunities,welfare requirements and procedures, transporta-tion schedules, drug rehabilitation, legal informa-tion and programs on nutrition and disease recog-nition; and enable the continuing education ofprofessionals through special conferences.

When two-way cable is implemented, thepotential uses will be expanded. The viewer canrespond to a message on his set through pushinga button or operating a small keyboard on hishome terminal. With this "talk-back" ability the

6. Cable Television in the Cities, Charles Tate, Editor,1971.

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viewer could participate in panel discussions orgame shows from home, answer questions inregard to educational programs, participate inmarket or opinion surveys or even cast a ballot,order goods from a store or make his own planereservations, request special social service infor-mation or do his banking. His home electricity,gas or water meter can talk back to a centralcomputer so that meter reading and billing areautomatic. The viewer can request special in-formation from a library, or request the days'newspaper or the week's magazine. The informa-tion could be displayed on the screen or recordedon a facsimile device; billing, if any, would beautomatic. Mail could be delivered the same way.

Expanded two-way communications withthe transmission of pictures and voice instead ofjust digital responses makes possible central-ized traffic control, comprehensive instructionaltelevision in the schools, flexible training coursesfor police, firemen and other city employees,crime surveillance, sharing of instructors betweensuch institutions as Wayne State University andthe University of Detroit, records transmission,expert testimony in court cases, communicationsbetween health clinics and Detroit GeneralHospital.

The possibilities for the use of cable aremyriad, and they will significantly alter the waylife is lived. A large proportion of any given dayis spent in pursuit of information meetings,shopping, trips to the library, banking, trips to agovernment office are all essentially problems ofcommunication. With a cable system, most ofthe communicating can be done from home. It iseven feasible for a large amount of office workto be done from home; instead of punching atimeclock at 9, a clerk could punch his homekeyboard, and the day's paperwork would bedelivered to him by facsimile. Instead of offices,banks, libraries and schools needing to expandtheir physical capacity, they may need only toexpand their electronic capacity.

Full use of the potential of cable television inDetroit would have a substantial effect on thecity's political, social, cultural and educationalsystems.

Political. A serious question confronting ourdemocratic society is whether it can give itscitizens a meadingful sense of participation in theeveryday affairs which affect their lives. Ourdemocracy had its origins in the town meeting,where people had a chance to hear and be heard,a chance to feel they belonged. But there is doubt

whether the values of democratic participationcan meaningfully be experienced in a large, highlycomplex, mass-oriented urban culture, a culturewhich by its very nature demands remote institu-tions. The Committee believes that new andmeaningful potential for a sense of political par-ticipation can be provided through a cable systemdesigned so that individuals and groups have notonly the right but the opportunity to be seen andheard. A cable system which guarantees suchopen access can become a forum where voter andcandidate, citizen and government, can expressviewpoints freely and openly without unduedifficulty and expense.

Social. Continuing questions face Detroitabout how to develop a sense of community, howto counter the alienation of the generation gap,the racial gap, the ethnic gap, the economic gap.In an earlier day, it was thought that a sense ofcommunity would grow out of a sense of uni-formity. In more recent years we have becomeaware that a new sense of community will growout of a greater appreciation of our diversities.A properly designed cable system will help usenrich our sense of community in this way, forit will enable citizens of many different back-grounds to have access to the communicationsnetwork of the city. They will be putting messagesinto as well as receiving messages from the com-munications medium; such interchange gives acitizen a stake in his community.

Cultural. Estimates are that there are over60 identifiable ethnic groups within the City ofDetroit. We are becoming increasingly awarethat our lives are enriched as we have opportunityto experience the rich cultural backgrounds thatthese many ethnic groups still treasure. Theirmusic, their dances, their festivals all are a partof our pluralistic culture. But too seldom do theseethnic groups have the opportunity to share theircultural heritage. A cable system with open accesswould give such groups wide opportunity to puton their own programs.

There are other dimensions to cultural enrich-ment that broad access to cable can serve. Weare moving into a time of increased leisure, ofthe four-day week, of increased discretionary use

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of time. A growing number of persons are turningto the arts music, drama, poetry, dance, paint-ing, sculpturing as ways to find meaningfulexpression. What better way for these valuablecultural pursuits to be displayed than through thenew medium of cable television.

Educational. The general dissatisfaction withpublic and higher educational facilities indicatesa need for a thorough renovation of program andpresentation. In an increasingly electronic age,expanded use of television seems a natural wayfor educational content to be presented to thestudent. Cable television will enable the lessonsto reach the student be he preschooler, elemen-tary or secondary age, dropout, college student,or adult in his home. Yet, with two-way capa-bility on the set, the student will never be isolatedfrom his instructor, in fact, the instructor will beable to keep watch of individual progress. Cabletelevision offers a means of relieving the class-room crowding that has forced districts to half-days or crowded rooms. It also has great potentialfor broadening the educational opportunities andtheir availability for the residents of Detroit.

Obviously, cable television will not directlyreduce the rate of unemployment in Detroit, orthe rate of infant mortality, or the rate of politicaldissatisfaction or citizen alienation. But theeffect, though indirect, will be significant. Tele-vision today is the most popular, most believed,most powerful form of the media. It reaches allages, economic and racial groups. Minoritygroups, especially blacks, the young and the poor,all watch and believe television more than theirwhite and middle-income counterparts do. Manysocial problems can be traced to a lack of in-formation knowledge of where jobs are avail-able, knowledge of proper prenatal care, knowl-edge of how city government operates anduntil now it has been the burden of the personwho needs the knowledge to somehow go get it,or else do without. Cable television offers a wayto reverse the procedure: the information isbrought to the home where the citizen can useit, in comfort, privacy and anonymity. The Com-mon Council, in its decision in cable television,will be able to work a dramatic, effective changein the urban lifestyle.

I. NEED FOR ENGINEERING ANDFINANCIAL PROJECTIONS

RECOMMENDATIONS:

1. THAT THE CITY DECLARE A MORATORIUM ON ALL CABLE TELEVISION DECISIONSFOR THE PURPOSE OF SECURING ITS OWN FINANCIAL AND ENGINEERING PROJEC-TIONS: SUCH ENGINEERING AND FINANCIAL PROJECTIONS SHOULD DETERMINE INGREATER DEPTH THOSE QUESTIONS BEYOND THE CAPACITY OF THIS LAY COMMIT-TEE, INCLUDING, BUT NOT LIMITED TO:(a) FEASIBILITY OF PUBLIC FINANCING VIA GENERAL OBLIGATION BONDS AND/OR

REVENUE BONDS.(b) SOFTWARE OR PROGRAMMING COSTS REQUIRED INITIALLY IN ORDER TO PRO-

VIDE THE FULL RANGE OF SERVICES RECOMMENDED BY REPORT.(c) MARKET ANALYSES TO DETERMINE TIME-FRAME FOR SUBSCRIBER PENETRATION.(d) POTENTIAL REVENUES FROM PAY T.V. AND NON-TELEVISION USES OF SYSTEM,

E.G., DATA TRANSMISSION, FACSIMILE REPRODUCTION, ALARM SYSTEMS.(e) BENEFITS, INCLUDING COST SAVINGS, TO MUNICIPALITY THROUGH APPLICATION

OF CABLE TO MUNICIPAL SERVICES SUCH AS POLICE AND FIRE PROTECTION.(f) EVALUATION OF COMPETING CABLE TECHNOLOGIES (E.G., DIAL VERSUS CONVEN-

TIONAL SYSTEMS) AND COMPLEXITIES OF INSTALLATION.(g) THE POSSIBILITY OF PARTIALLY SUPPORTING PROGRAMMING COSTS FOR THE

NON-COMMERCIAL T.V. ASPECTS OF THE CABLE SYSTEM THROUGH THE ALLOCA-TION OF FUNDS FROM GROSS REVENUES OR REVENUES FROM ADVERTISING.

(h) THE DEMAND, COST AND BENEFITS FROM COMMUNITY, PUBLIC ACCESS, MUNICI-PAL AND EDUCATIONAL INOLVEMENTS AND USES.

2. THAT SUCH ENGINEERING AND FINANCIAL PROJECTIONS BE PERFORMED NOT ONLYTO DETERMINE THE VIABILITY OF PUBLIC FINANCING AND OPERATIONS, BUT INORDER TO RESPONSIBLY DETERMINE WHETHER AN ACCEPTABLE LEVEL OF SERV-ICES (AS RECOMMENDED IN THIS REPORT) CAN BE PROVIDED UNDER ALTERNATIVEMODES OF OWNERSHIP.

1. THE ELEMENTARY ECONOMICSOF CABLEThe economics of cable relate primarily to the

need to provide revenues to offset the cost of thedistribution system (hardware) and of the pro-gramming (software). The distribution systemwill require extensive capital investment for con-struction and installation. Initial estimates placethese costs at from $30 million to $120 million,depending upon the system contemplated. In-volved are construction of a central headendfacility as well as satellite production centers, thetrunk lines between headends and satellite centersand the massive system of feeder lines that willin five years (as called for in this Report) pass by

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every residential unit in the city. In addition,there are costs of required "drops," the connectinglines to each subscriber, as well as costs of set-top converters for utilization of a high-channelcapacity system.

At the same time that there are heavy costsincurred for distribution, the system must pro-vide sufficient income to pay off long term debtsand operating expenses and produce additionalrevenues for programming that will attract sub-scribers. Monthly subscriber fees provide theessential initial source of revenue to finance thesystem. There are also revenues from second setssomewhat analogous to the cost for extensiontelephones. Further, there are fees collected for

installation charges although these have oftenbeen waived as a promotion gesture to increasethe number of subscribers.

Much has been made of importation of distantsignals to augment the network programs, butwhere reception i3 good such as in the Detroitarea and where there are a number of existingchannels, the significance of distant signals isminimal. Essentially, what will be required toattract subscribers is a high volume of local in-terest programming as well as selective, highquality, special interest programming, particularlyin the area of sports packages, new motion pic-tures and cultural events. Although there is adeveloping industry involved in packaging pro-gram materials, much of the work to develop pro-gramming must be performed locally. Program-ming can be extremely expensive both in terms ofnecessary staff and payment of royalties. Thistype programming is essential, nevertheless, ifthe system is going to be attractive to subscribersin the area.

A cable system involves several specific costfactors which are generally considered part ofthe basic economics of cable. One is the numberof miles for which cable must be laid, multipliedby the per mile costs applicable to the terrainand other conditions involved. These apparentlycan vary from $4,000, for over-ground installa-tion, to over $50,000 per mile for under-groundinstallation. There are advantages to higherdensity of dwelling units, so that more units willbe accessible per cable mile. There are also costsof set-top converters which can run installationcosts as high as $100 per connection. Other costsare for head-end equipment and antennas, about$50,000 to $100,000, and for program originationfacilities and equipment.

The great advantage of cable over conventionalbroadcasting systems is that there is a signifi-cantly expanded channel capacity and the incre-mental cost for adding of operational channels isminimal generally restricted to fairly inexpen-sive origination equipment and staff to operateit. A full color studio may cost $100,000. Evena number of such studios would not constitutea very large percentage of the costs for a system,particularly as measured against distributioncosts. Estimates for programming costs rangearound $50 per hour for cablecast time.

The percentage of subscribers per cable mileor "penetration" or "saturation" rate is a criticalmeasurement for system success. Generally speak-ing, at least a 35% rate is usually necessary to

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pay off basic system costs.? The subscriber feesrepresent the basic income source for a cablesystem and the fees have generally been in the$5-$6 a month category, with additional chargesfor hook-up of a second set and for costs of in-stallation, the "drops" between feeder line andset (sometimes waived in promotional campaigns).These average $15-$20 per unit. Costs of set-topconverters, about $80, would presumably simplybe amortized without attempting to make anyprofit.

Another revenue source is advertising. To thedegree that special interest programming becomesoperative it provides a lucrative basis for advertis-ing directed at those with such interests. Theanalogy is between current "shotgun" advertisingapproaches and the more direct rifle approach.The profitability of special interest car and cameramagazines is a case in point. Although the re-sponse may initially be slow, local advertisingshould become a useful source of revenues. How-ever, to the extent that it is carried on the "com-munity" portion of the channel spectrum it willnot provide revenues for the system operator. Itmay in such cases, nevertheless, reduce the oper-ator's need to support programming on such chan-nels. And, of course, the operator will be able toget revenues from advertising on channels heoperates himself.

These channels allocated to the operator alsopresent a source of revenues, if properly handled,when used for merchandising purposes. Storesmay wish to display wares and take sales ordersby telephone. Subsequently, two-way cable wouldallow for orders through the system. The operatormay desire to put on his own programming andcarry advertising like existing broadcast channelsor to simply rent out the channels for the use ofothers.

There are other ways to generate revenues.Portions of the spectrum can be used for carryingcomputer services for business and governmentalpurposes. Then, there are the potential revenuesfrom Pay TV. Although some have tried to labelcable itself as Pay TV, the term as used hererefers to a separate charge for certain programs

7. There are approximately 500,000 dwelling units in theCity of Detroit. Assuming that 80% of such house-holds have television sets, this means a potentialresidential market of 400,000 subscribers. There willalso be business subscriptions, but these are too hardfor the Committee to estimate at present. In anyevent, at $60 per year per subscriber, 100% subscrip-tion would generate $24 million in revenues annually.At a subscription rate of 35% this would still generaterevenues of $8.4 million once the system is operative.

over and above the basic monthly charge. Ineffect, the user of that particular program footsthe bill rather than imposing higher general sub-scriber fees on all system users. However, theeconomic implications from Pay TV are so signifi-cant that it should be approached separately andonly after full understanding is gained of itspotential financial impact on its users (see SectionIX, ADDITIONAL SERVICES). In the farfuture, cable may also be used for facsimile re-production, replacing current distribution modesfor newspapers, magazines and mail. It is neces-sary to have figures as accurate as possible inorder to determine the financial necessity forthese extra sources of revenues. Such figures arecritical in determining the effect that reservationof cable spectrum for such uses will have on publicservices.

2. PRESENT LACK OF NEEDEDINFORMATION

Although there is some rough informationavailable to provide rule-of-thumb figures forinstallation and programming costs, there havebeen no systems installed in the country compara-ble to Detroit in size. In New York the systemscover relatively compact areas. There, betweenthe two operative franchises there are only 70-80,000 subscribers, about one-fifth of the potentialsubscribers in Detroit. Moreover, each city hasits own individualistic engineering and construc-tion problems because of local ordinances, streetdesign, density of buildings, etc. The cost implica-tions of such variations mean that no financing ispossible unless accurate figures are offered.

The telephone company has some basic in-formation relative to the extent of cable requiredfor a system in Detroit; but a specific analysis ofDetroit's conditions and establishment of costs ofmaterials and construction is necessary to deter-mine the realistic cost for installation of the sys-tem in the City. Rule-of-thumb figures are justnot sufficient for purposes of obtaining capitalfunds for installation of a system. Further, fairlyexact costs of program packaging must be ob-tained and costs of obtaining sport packages andmovies must be explored to determine what kindof programming realistically will be available inthe system. Thus, program packagers and knowl-edgeable production directors must be consultedto start assembly of information and data onprogramming costs. Moreover, owners of sportpackages must be contacted for initial discussionsabout the cost of obtaining rights to such events.

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None of this information is available at the presenttime and must be specifically determined to assessthe feasibility of financing any system for the Cityof Detroit regardless of ownership. Presumablysuch information could be gathered or developedwithin a six-month period after necessary fundsfor the analysis were obtained.

3. DECISION REGARDING PUBLICOWNERSHIP REQUIRES PROJECTIONS

An essential element of the decision whethera cable system for Detroit could be owned andoperated in large part by a public authority (asrecommended herein) will depend upon the feasi-bility of financing for such an entity. Approvalsby the Municipal Financing Commission and thefeasibility of state legislation to authorize a publicauthority to proceed on this proposal would haveto be based upon realistic figures concerning costsof the system and its potential financing.

Although there are several revenue sourcesto pay for such a system, they will depend uponthe efficacy of the programming and the level orsaturation or percentage of subscribers per resi-dence passed. Therefore, once the costs of thesystem are determined, it is still necessary todetermine what type of revenues can be expectedbased upon the anticipated programming. Theserevenues must be sufficient to cover repaymentson the bonds obtained as well as to provide fornecessary operating expenses including program-ming costs.

It is not anticipated that the City of Detroit,the County or the State will be directly responsibleas guarantor of the bonds. However, whethergeneral obligation or revenue bonds are used itis necessary that there be properly justified ex-pectations of revenues to offset financing costs.

4. DECISION REGARDING PRIVATEFRANCHISING REQUIRES PROJECTION

a. CITY WILL BE UNABLE TORESPONSIBLY BARGAIN WITHPROSPECTIVE FRANCHISEEWITHOUT ITS OWN PROJECTIONS

If it is determined that public authority owner-ship of the system is not feasible under the cir-cumstances it would still be necessary for theCity to have comprehensive estimates of costsfor the system, the necessary programming activi-ties and other related expenses. These are re-quired to determine what kind of revenue andservice returns to the City are reasonable if aprivate franchise is granted. It would be quite

akin to a gift of public monies if the City wereto negotiate for a system that might have signifi-cant profits yet fail to obtain for itself eitherappropriate financial returns or contribution ofservices to itself and its citizens. And withoutnecessary information and projections concerningthe system, the City would be in no position tobargain or disagree with the projections providedby the franchisee. The City needs the projectionsto determine what should be required for the Cityas well as the level of financial returns permitteda franchisee.

b. CITY WILL BE ABLE TO HOLDFRANCHISEE TO FRANCHISEREQUIREMENTS

Although the franchise ordinance can setsystem requirements and particularly require-ments for public services to be provided by thesystem, enforcement of these provisions may re-quire resort to cancellation of the franchise agree-ment. In most circumstances that will not bereally feasible. Arguments will be made that thefranchisee has run into unanticipated problemsand less revenues are coming in than expected.If a franchise has been granted requiring highpublic services the operator may plead "costsqueeze" and obtain permission to reduce suchpublic service requirements based upon his later"discovered" fiscal realities. It is essential thatthe City know from its own financial projectionsthe reasonable extent of services that it can re-quire and expect of the franchisee. Once it isdetermined realistically what the system shouldprovide in terms of City services and in terms offinancial returns to the City, it will be possiblefor the City to hold fast to its requirements forthe franchisee and, if necessary, to revoke thefranchise.

5. PROJECTIONS MUST DETERMINE:a. FEASIBILITY OF SUPPORTING

PUBLIC SERVICES INCLUDINGPROGRAMMING THROUGHALLOCATIONS FROM GROSSREVENUES

We have previously noted that one of theessential elements of an operating cable systemwill be the provision of a variety of public servicesboth to the City itself and to the public throughsupport for channel facilities, staffing and pro-gramming costs. Only with a clear idea of theextent of revenues that can be expected from thesystem can one determine what these allocations

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should be. Without such projections the City willbe totally dependent upon the projections providedby the system operator and will have to enterblindly into an agreement which may not be fairto either the City or the system operator. Ifrevenues are available, the City then will haveto make its financial analysis as one would witha public utility to determine what proportion ofrevenues should be allocated to these other serv-ices. Only by making such an analysis beforehandcan the City be assured that it is not giving awaypotential City revenues.

b. FEASIBILITY OF PUBLIC FINANCINGVIA GENERAL OBLIGATION ORREVENUE BONDS

Public financing has some significant tax ad-vantages over private financing for purposes ofobtaining funds to construct and provide initialoperating expenses for the system. Privatesources of financing do not have these tax ad-vantages and therefore must charge higherinterest for loans. Neither a public or privatelender, however, would provide funds in theamount necessary without sufficient informationconcerning the financial feasibility of the cablesystem. Regardless of the type of financing in-volved, accurate cost and revenue estimates mustbe available.

e. FEASIBILITY OF PRIVATEFRANCHISE WITHOUT LOSS OFPUBLIC SERVICES

All of the various services called for in thisReport to make cable a meaningful communica-tions medium for the City and its residents willcost money. The allocation of channels for"public" uses, the necessary equipment, connec-tions and required staff, all have specific costs.The allocation of channel capacity to educational,municipal, public access and community channelsmeans that these channels are unavailable toprovide revenues to the system operator. Train-ing programs, cost reductions for certain usersor such items as funding of programming costsalso involves real financial outlays. In the eventthat public ownership is not feasible, the deter-mination of the cost of such services is essentialin setting the requirements which must be metby the private franchise holder.

The Committee feels that these public servicesare essential elements of any cable system adoptedfor the City of Detroit. Without the necessaryprojections, the City will not be in position todetermine, when confronted by cost figures of

any private franchising applicant, the reasonable-ness of requiring these public services. The onlyway to protect against erosion of these publicservices is for the City to be fully prepared withits own projections.

d. 'WHETHER AN AREA-WIDE SYSTEMIS NECESSARY TO ACHIEVEFINANCIAL FEASIBILITY

There may be certain cost savings in develop-ment of an area-wide or metropolitan system asopposed to a city-wide one. A recent study of theDayton, Ohio region concluded that the systemcould be developed at less expense to those in theregion if a larger metropolitan area was the basisfor the system. Without the inclusion of the Cityof Dayton in a larger metropolitan area, financialprojections indicated the regional system wouldnot be feasible at all. For the City of Dayton,however, the higher density of dwelling unitsmade construction of the system there financiallyviable. Outlying townships, however, would notbe able to support it by themselves.

The costs which are affected primarily mayinvolve reduced cable installation costs for outly-ing areas. Thus, in Detroit, contrary to Dayton,there may be significant cost savings per sub-scriber obtained in extension of the system beyondthe City's boundaries. It may develop that it ishighly advantageous financially to the City ofDetroit to have its system service a wider area.Also, the costs applicable to the City's system(and possibly the subscribers within the City)might be reduced because of higher levels of sub-scription out of the City as well as cheaper in-stallation costs for the cable.

A cable system which extended to the metro-politan or even regional area, whether or not therewere significant financial cost savings, has a greatpotential for building bridges across the existingbarriers. Such an expanded system might providefor the exchange of ideas, enhance understandingbetween diverse interest groups and build higherlevels of trust between peoples within and withoutthe City. This potential may have enough far-reaching benefits for the City to recommend anarea-wide system even without associated reducedcosts. Nevertheless, before any decision can betaken one should determine what the cost impli-cations are from a metropolitan area system ascontrasted to a system solely for Detroit.

6. PROJECTIONS MUST CONSIDER:a. COMPETING CABLE TECHNOLOGIESAt the present time there are two basic dis-

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tribution technologies available for a cable system.The first involves conventional cable which pres-ently has a capacity of approximately 12 channelsand with a small set top switch can be increasedto 24 channel capacity. Laying of a second cable,particularly at the same time as the first (becauseof related cost reductions), can permit the systemto expand to 48 channel capacity. If two-waycable becomes a reality, it would require thatsome of the outgoing channel spectrum must beutilized for incoming signals and therefore twocables seem a minimum requirement for a highchannel capacity system.

The cost of a two cable system also involvesa set top converter to select among the variouschannels. This adds about $80 a household toinstallation costs. For the two-way aspect, addi-tional amplifiers to feed signals back to the pro-duction centers must be inserted along the cablefeeder system to make it operationally two-way.Cost estimates must be obtained for two-wayequipment. As demand increases, to enlarge thechannel capacity of a system will involve addi-tional costs in terms of equipment to amplifysignals and extend the channel capacity. Techni-cally, up to 80 channels could be carried on onecable and conceivably 160 channels, minus thosenecessary to provide two-way return communica-tions, are technically feasible within the not toodistant future. The ultimate cost of the systemneeded for Detroit in the next ten years must bedetermined before embarking upon any system.Projections must be based on a 10 year modelsince future expansion may be inordinately ex-pensive if provisions for it are not built into thesystem now.

The need for a 10 year projection is furthermandated by the comparison of such a conven-tional system's projected costs against costs of a"dial" system such as Re-diffusion and Discade.These "dial" system are quite similar to that ofthe telephone system where a small capacity wiregoes into the home which permits the subscriberto dial any one of a number of channels fromlocal distribution centers.

There are, however, initial cost implicationsfor a dial system. This occurs because the majorinitial installation is for a rather advanced sys-tem, for instance, with almost immediate two-waycapacity. This is in contrast with installation ofa more simplified conventional system whichwould be upgraded later. The item in a dialsystem of considerable expense is the switchingmechanism. Thus, the necessary cost projectionsmust determine in terms of a ten year period the

needs and services that should be provided by acable system and then measure which of thesetwo technologies (or additional ones as they comealong) should be selected for Detroit. Each typecarries significant cost considerations and ismutually exclusive of the other from a technicalstandpoint. To some degree it may be possibleto obtain such projection figures by permittingthe suppliers of the hardware to present the costeffectiveness picture for each of their systems.In any event, these systems must be examinedand costs obtained so that an intelligent decisioncan be made as to which technology should beadopted for Detroit.

b. DEMAND FOR, BENEFITS AND COSTOF SUPPLYING RECOMMENDEDPUBLIC SERVICES

The various public services specified in thisreport which constitute in the Committee'sopinion the basic justification for implementationof a cable system in Detroit should be anintegral part of the financial projections calledfor here. These projections should assess theconsumer demand for the various services. Itmust be understood, however, that additionalknowledge by the public is necessary before therewill be a significant citizen demand for them.

Similarly, the benefits that may be derivedboth financially and in terms of service to boththe City itself and to its residents should beassessed. It may be appropriate for the Cityitself, through its departments, to organize a taskforce to analyze and project potential benefits ofsuch a system. The educational establishmentsin the area should do likewise. As these addi-tional uses are fed into the projections they canform the basis for making some cost predictionsconcerning the services. Again, it must be under-stood that the newness of cable, particularly re-specting its application to these kind of services,may restrict the extent of analysis possible.

c. COSTS OF COMMERCIAL PROGRAM-MING NECESSARY TO ATTRACTNEEDED SUBSCRIBER REVENUES

Channels allocated to the system operator forpurposes of generating revenues can be appliedto commercial uses. This will involve cost ofsoliciting and developing commercial televisionusage of the channels, such as merchandisingshows, as well as costs associated with develop-ment of commercial non-television uses such asfacsimile reproduction and various computer link-ages. Also, the expenses involved in obtaining

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specialty packages such as movies, sports andcultural events should be carefully explored todetermine the feasibility of such uses.

Generally speaking, these costs will be incurredin two categories. One will be for personnel tosolicit advertising or sell programming time, tooperate equipment, and to originate local pro-gramming. A second will be the cost of purchas-ing program packages and specialty events.

d. SUBSCRIBER PENETRATIONAND REVENUES

Although there are general rule-of-thumbfigures available for subscriber penetration, thevarious factors which go into such a computationmust be established with more accuracy thanavailable at present. The factors are basic sub-scriber fees, secondary household hookups, in-stallation charges and the cost of additional in-home equipment such as set-top converters. Eachof these represents a source of revenues but hasassociated costs. Generally speaking, subscriberfees on a monthly basis plus secondary hook-upsare the major sources of revenues. These canthen be multiplied against the potential numberof television households per cable mile. The morehouseholds per mile the greater the potentialreturn. Based on the projected costs for thesystem, the necessary penetration levels can beascertained.

There are, of course, interactive aspects ofthis projection. The services offered will to a largedegree determine subscriber penetration and theseservices to a major extent will depend on theirfinancial feasibility as related to the system con-structed and the revenues that may be generated.The Committee made a preliminary analysis ofthe financial considerations. Certain assumptionswere made and will have to be made for purposesof the recommended projections. The marketanalysis will have to be based in part on hypothe-sized services. These will be critical factors, more-over, no matter what form of ownership is in-volved. It should be understood, however, thatas services grow so too should revenues, bothfrom the increase in subscribers responding to theservices as well as from revenues from sale ofcommercial services. Thus, it is only the initialstages of the development of the system whichwould seem to require total reliancc on subscriberfees.

e. NON-SUBSCRIBER COMMERCIALREVENUES

Additional market survey and analysis is re-quired to determine the commercial potential of

the system. How much interest is there for localfirms to advertise or to market their goods bymeans of a cable system? What is the market forutilization of the cable system as a computernetwork? Will the system be attractive to localadvertisers? All of this kind of information mustbe gathered to the extent available or forecastwhere it is unavailable. Again, this makes up avery critical element in determining the feasibilityof the cable system.

f. BENEFITS AND COSTS SAVINGS TOMUNICIPALITIES THROUGH USE OFCABLE IN PROVIDING MUNICIPALSERVICES

There are a variety of potential uses thatmunicipalities can make of cable, such as educa-tional programs, vocational rehabilitation, job in-formation and police recruitment. Inspectors maybe able to monitor construction work throughmobile cameras. Fire and police monitoring ofbusinesses and traffic conditions may be anotheruseful function for cable. The potential is almosttotally untapped and in large part unexamined.Benefits must be assessed and the possibility ofcosts savings to the City through the use of cableanalyzed. Admittedly, there will also be costs forpersonnel and equipment in municipal use of thecable system. How much of these costs shouldbe passed on to the system itself and how muchshould be paid for by the City is one of the issuesthat the projection should examine. By creativethinking it may be possible to provide a varietyof presently costly public services at less expensethrough the cable. The knowledge of these costssavings should be a factor in the City's deter-mination as to both its interest in and its require-ments for a cable system.

g. DESIRABILITY OF ALLOWINGADVERTISING ON COMMUNITYCHANNELS

Many critics warn that advertising has createda low level of program content on existing broad-cast channels. A similar danger is possible forcable if advertising needs dictate programmingdecisions. To some degree, permitting advertisingon community channels could influence the con-tent and usefulness of these channels as vari-ous organizations or the operators of these chan-nels vie for the advertising dollar. Nevertheless,advertising on such channels may be a signifi-cant source of funds to pay for their program-ming. It may be that high quality, special interestprogramming is possible only with significant

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support. Such programs, in turn, will have amajor impact on the system's total saleabilityand, therefore, subscriber penetration. Advertis-ing, thus, may represent a necessary element ifsuch programming is to get off the ground. Howsuch advertising will be handled, when it will bepermitted and what charges will be imposed arethree important issues. Further, the impact ofloss of advertising on the commercial segments tocommunity channels will have to be assessed.(See REVENUE, Section VI.)

7. COST OF RECOMMENDEDPROJECTIONS:

a. INSTALLATION FEASIBILITY ANDCOSTS, INCLUDING EVALUATIONOF COMPETING TECHNOLOGIES

It is difficult at this point to determine thecosts that will be involved with making the pro-jections which are so vigorously recommended bythe Committee. Rough estimates by some ofthose knowledgeable in the industry have beenabout $100,000 for these projections. Finan-cial support for the projections may be avail-able from private foundations or the government.The Ford Foundation has funded through theUrban Institute in Washington, D.C., a centerto provide just these kinds of services; they areto develop just the sort of information which theCommittee is calling for. Similarly, both theNational Science Foundation and the Departmentof Housing and Urban Development have stronginterest in developing models to determine thisinformation for other urban areas. Additionallocal soure,.s of funding the projections should beexamined as well.

In developing the projections, it is importantthat disinterested parties perform the necessaryexaminations and analysis and develop these pro-jections for the City. A great deal of money mayrest upon the validity of the projections. The Cityneeds impartial advice. The one possible exceptionwould be for equipment manufacturers to providethe City with an evaluation of their competingtechnologies.

b. MARKET ANALYSISThis essentially involves the area of opinion

research, and firms involved in opinion researchmay be the most appropriate sources of informa-tion on costs and techniques for the survey andanalysis required. This effort would follow thedevelopment of certain initial assumptions on typeof system and identified services to be provided.

This data then could be utilized as the basis forthe determination of subscriber interest andpenetration. There is also additional informationwhich must be obtained from possible commercialusers of the system as well as packagers of pro-gramming material which will involve potentialcosts and revenues for the system operator.

c. OVERALL FINANCIALFEASIBILITY ANALYSIS:

Once the technology which should be installedin Detroit is identified, taking due regard for the

needs of the system over a ten year period, andadding to this the data from the market analysis,some forecast for the overall financial feasibilityof the system in Detroit can be made. In essence,this analysis must determine the feasibility ofpublic financing and the form that it should take,the scope of the system necessary, the need andsources for financial support of local publicservices including programming and staffing,and, if there is resort to a private franchisee, thelevel of public services that should realisticallybe required.

2. RECOMMENDATION:

THAT SUCH ENGINEERING AND FINANCIAL PROJECTIONS BE PERFORMED NOT ONLYTO DETERMINE THE VIABILITY OF PUBLIC FINANCING AND OPERATIONS, BUT IN ORDERTO RESPONSIBLY DETERMINE WHETHER AN ACCEPTABLE LEVEL OF SERVICES (ASRECOMMENDED IN THE REPORT) CAN BE PROVIDED UNDER ALTERNATIVE MODES OFOWNERSHIP.

The Committee strongly urges that thefinancial and engineering projections as outlinedin this section be performed, regardless of themode of ownership. If the Common Council isto negotiate responsibly with any group, private,non-profit or public, it must have definitive dataas outlined in the previous recommendation.Without necessary information and projectionsconcerning the system, the City would be in noposition to bargain or disagree with any projec-tions provided by a prospective franchisee.

In sum, this analysis will determine the im-mediate feasibility of cable television in Detroit.It will also determine the basic requirements thatmust be incorporated in the system and establisha level of quality services and costs against whichto measure any proposal for development of thesystem. The Committee is not unmindful thata realistic analysis of the feasibility of Cable TVfor Detroit at this time may be negative. How-ever, the justification for a cable system, in theCommittee's opinion, lies in cable's development

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as a new communications system which canhumanize, not further depersonalize, the residentsof this City. If it cannot be built to assure thesefunctions, it seems preferable to wait.

The Committee is further aware that the costsof making the projections and analysis called forhere are not insubstantial, particularly in view ofthe financial plight which presently confronts thisCity. But to embark upon a venture in cable tele-vision without these projections could be dis-astrous for the City's own interest and particu-larly the interests and needs of its citizens. Infact, if it is necessary to delay action on theseprojections until funds are obtained for them, theCommittee feels that such delay is justified andgiven the rapid technological and political develop-ments concerning cable television, in the long runmay assist the City to obtain a better system. TheCity Council must be armed with the necessaryfinancial and technical information before it canor should move forward on a cable system forDetroit.

II. FINANCING AND CONSTRUCTIONOF THE DISRIBUTION SYSTEM

RECOMMENDATION:

1. THAT THERE BE ONLY ONE ENTITY RESPONSIBLE FOR THE CONSTRUCTION OF THECABLE SYSTEM IN DETROIT IN ORDER TO MAXIMIZE ECONOMIES OF SCALE AND IN-TERCONNECTABILITY NECESSARY FOR AN ADVANCED AND SOPHISTICATED CABLESYSTEM.

Presently there is no city which has a cablesystem that would be comparable to Detroit's.Since Detroit's geographic size is considerablylarger than that for which there is any existingcable system, the Committee had to consider whatdifferences there would be between having a singleentity responsible for the entire system and givingresponsibility for geographical districts to differ-ent entities.

Before analyzing that question, however, theCommittee examined the whole structure of acable system and decided to consider separatelythe responsibilities for constructing the distribu-tion system itself and for programming on thatsystem. This would be somewhat analogous tothe telephone company which provides a distribu-tion system and, in effect, makes it available(usually by lease) to others with no control overprogram content.

There are two aspects of the distributionsystem: its initial construction and its subsequentoperation and maintenance. Operation and main-tenance are dealt with later, where decentralizedprogramming responsibility is recommended. Forpurpose of construction, the factors considered bythe Committee dictated the superiority of a singleentity.

InterconnectabilityOf major importance is the need for inter-

connectability between all portions of the cablesystem in Detroit. Without it, the City wouldbecome even further fractionalized. With it, thereare major opportunities for enhancing communi-cation between the City's residents. Given thevariety of technology available for a cable system,systems developed separately might be incom-patible and could not be reconciled with differ-ences in the number of channels, the choice ofconverters or the general technology used. One

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45

system operator might prefer to install a singlecable with more limited capacity, such as twenty-four channels, while another might wish to providedual cable with far increased capacity, up to forty-eight channels at the start; still a third mightprefer to go with some kind of a "dial" system.Under such circumstances, the systems could notbe made compatible and interconnectability wouldbe limited. Where there are multiple entities de-veloping their own systems of cable, inter-con-nectability has not been too effective. For in-stance, the Committee understands that the twosystems now operating in New York City havenot yet provided for adequate interconnection,despite franchise requirements to do so.

Admittedly, it might be possible through eithervoluntary agreement or technical standards in afranchise to require consistency in all systems, butthe outcome then would be the same as requiringconstruction under common direction. As a prac-tical matter, it does not seem feasible to enforcecommon standards against a number of separatecable operators, particularly if they representdifferent forms of ownership. Different entitiesmight have different requirements for the rate ofcapital expenditures,' have different financingavailable, and have different timetables for de-velopment of facilities and distribution network.

Economies of ScaleAnother advantage for centralized construction

responsibility is avoidance of the possibility thatheadend facilities might be unnecessarily dupli-cated or inappropriately located as each fran-chisee considers cost and service factors for onlyits area. A single entity could avoid this problem.

One of the advantages of a single entity liesin its potential (and perhaps substantial) econ-omies of scale, particularly in terms of centralizedcomputers, local origination facilities, micro-wave

connections, and similar aspects of the distributionsystem. For example, the different programmingdistricts might share several complete and rathersophisticated local origination points, and supple-ment them with more limited facilities availablein the satellite origination points.

Phased Construction ScheduleIt is apparent that having one entity responsi-

ble for construction would allow for constructionon a phased basis, so as to assure that the develop.ment timetable did not discriminate against anyparticular portion of the City. With multipleentities, this would not be likely to occur. Again,each franchisee might have different schedulesand funds available to finance the necessary work.

Difficulty in Equitable Division of the CityFinally, the Committee recognized the diffi-

culty in trying to divide the City on any equitablebasis into franchise districts. For purposes ofallocating responsibility for community channelsand in locating satellite production facilities theCommittee has recommended that there be fiveor more districts. It will be hard enough to de-velop geographical lines for these purposes. Thatdecision, however, does not necessarily requiredevelopment of equivalent districts. It will bemuch more difficult to divide the City equitablyinto districts for allocation between differentfranchise holders.

There are, for instance, many issues whichwould be extraordinarily difficult to balance fairly.For example, it seems necessary to assure thateach franchise should have equal costs of installa-tion in its area. This would mean that each mighthave to share the higher costs of installation inthe downtown areas or along major thoroughfareswhich require the cable to be underground. More-over, housing unit density relative to cable mileswould have to be balanced to make the districtsequal in installation costs per potential subscriber.It would be equally difficult to draw up districtswith a balance of lower income and higher incomeresidents. This can be important, since higherincome families generally can be expected to havea higher initial rate of subscription. Add to theseconsiderations those of equalizing racial and ethnicdistribution in the City where the distributiondoes not follow easily defined patterns. To sepa-rate the franchises, de facto, by race seems im-proper, particularly since increased communica-tions within the City is seen as a major potentialof cable. All these considerations led us to con-

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dude that the clear advantage lies with a singleentity.

Multiple Franchise AdvantagesThere are several arguments usually advanced

for dividing a large city into multiple franchisedistricts: (1) It might make it possible to comparethe effectiveness of the various entities over aperiod of time, to develop some "yardstick" withrespect to the kind of service and effectivenessof each entity. (2) Multiple district ownership hassome potential to make the ownership entity ineach district more responsive to local conditions.(3) It would reduce the initial capitalization re-quired for any one entity. (4) It might be possibleto develop different modes of ownership for eachof the cable systems, including private, public andnon-profit.

ConclusionThe Committee feels that the advantages for

a single franchise far outweigh the arguments formultiple districts. Given the variations bound tooccur between districts, "yardstick" comparisonsof service in various districts would likely be in-valid. The districts will not be comparable interms of geography, household density, racial andethnic constituency, etc. The individual financialposition of various entities can be expected tocause variations in performance unrelated tomanagement capabilities. In all, it is difficult tocompare a number of monopolies against eachother, where each is responsible for a distinct area.

The Committee was most concerned about theissue of local control. A significant objective of acable system as envisioned by the Committee isto permit diversity of expression and viewpoint.It is our belief that community involvement canmore properly be provided through allocation ofthe significant portion of cable time to the com-munity, through Cable District Associations andthe Community Cable Board. (See discussion,Section III.) This is, we believe, preferable toattempting to provide local control of the distribu-tion system itself. Local influence of programmingthrough specific administrations seems to us farsuperior to having a franchise allocated a geo-graphic area in the City where those in the areamay have some role in decisions.

While it is true that capital requirementswould be lower for each of several franchisees,the funds necessary would still be significant. Theability to raise $6 to $20 million for one areamay be just as difficult as raising a greateramount for the entire system. Further, fran-

SATELLITE

ORIGINATIONPOINTS

HYPOTHETICAL SCHEMATIC OFDISTRIBUTION NETWORK

CENTRAL HEADS AND

ANTENNAS, MAIN STUDIO,INTERCONNECTION

TRUNK LINESFACILITin(3 CABLES)

FEEDER LINES

(2 CABLES)

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DROPS TO

INDIVIDUAL HOMES

(2 CABLES)

chisees would need to compete for much of thesame loan funds and from many of the samesources. If there are entities which can raise themoney and obtain the necessary managementtalent, there is still the question of whether allcould do so and perhaps most important, whathappens to those citizens in the franchise areawhich is unsuccessful? Thus, although there arepossibly some advantages for multiple franchisesin reducing entry barriers for firms, this factordoes not seem to outweigh the other considerationsin favor a single entity.

In order to create opportunities for localbusiness, management contracts or even franchisesfor operation of the system should be awardedeither by function or by geographic districts there-

by creating more opportunities for local firms.In that event, there is no responsibility for financ-ing the construction of the system. The need toraise substantial capital is eliminated but thereis still a greater number of opportunities, par-ticularly for minority-owned firms.

The final argument involving diversity ofmodes of ownership may be sociologically interest-ing, but setting up such variations does not seemjustified simply for the sake of having suchdifferent entities attempt to show the relativemerits of each approach. It would be appropriate,however, not to limit the type of enterprise whichwould be given responsibility for various functions,either for management or construction of thesystem.

RECOMMENDATION:

2. THAT THE CABLE SYSTEM BE CONSTRUCTED BY A SPECIAL PUBLIC AUTHORITY ORNON-PROFIT CORPORATION, USING TAX-EXEMPT BONDING CAPACITY FOR FINANC-ING THE CAPITAL COSTS OF THE SYSTEM.

In considering who should construct the cablesystem in Detroit, the Committee was particularlyconcerned with the cable system's potential forbecoming the pervasive communications mediumfor Detroit and its residents.

The Committee confidently predicts, for thisreason, that cable systems in areas such as Detroitwill ultimately be viewed as public utilities,whether called so or not. This is an outlookdifferent from that taken during earlier stagesof development of cable. The role of any cabledeveloper or operator must therefore be highlyregulated. Such regulation can be achievedthrough the franchising ordinance, through stateor local regulatory agencies, through the FCC,or through a grant of authority to a public bodyas the operator. Strong regulation and limitationsof profits through rate controls and service re-quirements would diminish the distinctions be-tween private and public responsibility for thecable system.

The Committee has carefully explored thepotential and appropriateness of public develop-ment of the cable system in Detroit. It is ap-parent that an extremely large investment wouldbe required to build the system in Detroit. Thisis an area where there are both a high numberof existing channels and relatively good televisionreception. Until its potential is understood anddeveloped, there may be a small market demandfor cable services. Because of these factors aninvestment in cable, here, may be quite specula-

39

tive and risky. Traditionally, private enterprisehas assumed such risks under the attraction ofthe potential for significant long-range profits.At times, however, government itself has under-taken the effort particularly where there wereimportant public services to be provided. Munici-pal transportation systems, power plants andwater companies are examples of this. Govern-ment grants or financing have reduced the riskto private enterprise so that it would undertakethe effort, such as with railroads or low income.housing producers as well as recent efforts onbehalf of Lockheed Aircraft.

The Committee suggests no action be takenuntil adequate information on the realistic poten-tial for cable in Detroit is available, in view ofthese risks. Further, the Committee suggests thata new approach should be taken to finance anddevelop services which function for public ratherthan private purposes. We anticipate that privateenteprise is not as likely to attempt to developcable in Detroit unless there is a substantial likeli-hood of profit. Commentators have advanced thetheory that at such time as profits seem probablethe rationale for involvement of the private sectorhas disappeared. If substantial profits are pos-sible, in services of a public utility, why shouldthe public not construct the system and use reve-nues in excess of costs to improve the system?There would still be a role for private enterprisein operating the system, as will be discussed later.

There are also some significant advantages to

public development of the system principally re-lated to the current tax laws. Private borrowingis more expensive than that available to a publicauthority which can take advantage of lowerinterest costs since returns on public bonds areexempt from taxes.

Also of primary significance, is the Commit-tee's concern over the conflict between the legiti-mate needs for profit for private enterprise andthe public service nature of the system. Wherethere are significant public services involved, how-ever, the Committee was concerned that the needfor profit would jeopardize the level of serviceswhich would be forthcoming from a cable system.The ability to plow back excess revenues forimproved technology and services would also beincreased with public or non-profit developmentand operation.8 This method of development pre-vents the franchise from being used for specula-tive purposes by vesting the franchise in apublic entity increase in value belong to thepublic.

If a combination of public development andprivate operation is found desirable, public financ-ing will enable private firms that do not neces-sarily have large amounts of investment capitalto participate.

A further criterion for selecting the publicform is that it is the mode which promotes maxi-mum system quality. This ownership form shouldnot only provide the best immediate services, butalso produce a system capable of providing futureservices such as two-way communication andactivation of additional channels. The system'sstructure should be one that will incorporatetechnological advances as they occur.

8. The Ford Foundation supported the idea of nonprofitownership in comments submitted to the FCC in De-cember 1970 on the FCC's proposed rule-making forcable television:

A significant number of nonprofit systems oper-ating throughout the country would provide a benchmark against which to measure commercial sys-tems, much as TVA has provided a bench mark inits industry. We do not minimize the profit incentiveas a vehicle for creative application of technology,but we assume that diversity of ownership willincrease competition and that this in turn willnourish the development of CATV.

The basic difference between nonprofit and com-mercial franchises is that the nonprofit franchiseswill not be required to return a profit to stock-holders. Revenues in excess of operating expenses,amortization, and interest can be funnelled intoadditional community programs and services. Freeof the commercial imperative to invest in servicesthat provide the quickest return on capital, the non-profit owner should be more willing to experimentwith new technology, to provide services of untestedor marginal profitability, and to serve low-incomeareas where potential subscriber interest may beless certain.

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Finally, the ownership form should insure thelowest rate to subscribers consistent with qualityservices. Low rates will increase the number ofsubscribers and enhance development of the cablesystem as a communications medium.

Analysis of the foregoing factors led the Com-mittee to conclude that, for Detroit, the mostappropriate method of development is a publicbody rather than a private franchisee. The vari-ous alternatives for public ownership follow.

3. PUBLIC OWNERSHIP ALTERNATIVESA decision that a cable television system in

Detroit ought to be publicly developed leads to aconsideration of various alternatives. In general,these are: (1) direct municipal ownership; (2)development by a special public authority; and(3) development by a non-profit corporationqualifying for tax-exempt bonding status. Eachform has characteristics which must be consideredin determining its attractiveness for purposes offinancing, constructing, or operating a cable tele-vision system. This section will discuss thesecharacteristics and the reasons for the Commit-tee's recommendation that Detroit's cable systembe developed by a special public authority. Thenecessity for new state legislation for severalalternatives, will also be discussed.

a. MUNICIPAL OWNERSHIPMunicipal ownership means by the City proper

as a department of City government. Examplesare the Department of Street Railways and theMunicipal Parking Authority.

A later section of this report (Section VIII,REGULATION), concludes that the City has thepower under the Charter, Home Rule Act and theMichigan Constitution to own and operate a cabletelevision system. In essence, the City was foundto have broad powers relating to "municipal con-cerns" and cable was found a proper municipalconcern because of its public service aspects andnatural monopoly characteristics. This, however,does not answer the question of whether or notthe City has the powers and capacity to financeconstruction of a system.

The Michigan Constitution, article V, section21 empowers the Legislature to restrict the powersof cities to borrow money and contract debts. TheLegislature, in turn, has provided in the HomeRule and Revenue Bond Acts for certain formsof borrowing and related restrictions.

Section 4a of the Home Rule Act permits acity to provide in its charter "for the borrowing

of money on the credit of the city and issuingbonds therefor, for any purpose within the scopeof its powers." Title VI, chapter 5, sections 1 and2 of the Charter seem to embrace this broadgrant of powers by providing that the CommonCouncil may issue bonds secured by the faith andcredit of the City for the purpose of financing"public improvements," "public utilities of thecity as it is or may be authorized by law to ownand operate," and "for all other lawful purposes."General obligation bonds, secured by the City'spledge of its taxing powers, are, however, subjectto certain important restrictions.

First, the Home Rule Act, section 5e, asamended, generally prohibits an issue of generalobligation bonds "unless approved by a majorityof the electors voting thereon at any general orspecial election." Second, pursuant to sections 4aand 35a of the Act, the Charter, title VI, chapter5, section 2, limits bonded indebtedness to ninepercent of state equalized assessed valuation. Intheory, this presents no problem in that, evenconsidering bonds approved but not issued, theCity is still approximately $180 million under itsdebt limit. Third, the Municipal Finance Act,section 7, prohibits a general obligation bond issuewithout approval of the Michigan MunicipalFinance Commission.

An issue of general obligation bonds is not, ofcourse, rendered impossible by the foregoing re-strictions. However, these and other factors makeit an unrealistic alternative. Securing voter ap-proval of a pledge of the City's taxing powers tofinance a cable television system at this point inthe City's history is unlikely at best. And giventhe City's fiscal plight, the Municipal FinanceCommission could be expected to look unfavorablyat any such proposal.

The Revenue Bond Act empowers publiccorporations to finance "public improvements"through issues of bonds secured only by a pledgeof the revenues derived from operation of the"public improvement." Such issues do not requirevoter approval, but are subject to initiatory refer-enda; and while the debt limit provisions of theHome Rule Act do not apply, approval by theMunicipal Finance Commission is required. TheRevenue Bond Act, however, permits bond issuesonly for "public improvements" a defined termunder the Act which seems not to include a cabletelevision system. Thus, the Act would have to beamended before the City of Detroit could issuerevenue bonds to finance a cable system.

Revenue bonding is probably the most realistic

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alternative for direct municipal financing of acable television system, the need for State legisla-tion notwithstanding. However, it should be notedthat both Municipal Finance Commission approvaland saleability of the bonds will depend largelyon a demonstrated probability that revenues fromthe system will be sufficient to pay the principaland interest on the bonds. And should the Cityattempt to make the bonds more attractive byeffectively backing up the issue with a pledge ofits taxing powers through a lease arrangement,the Commission could be expected to consider theimpact on the City's fiscal integrity.

Before discussing other aspects of directmunicipal ownership one further financing cautionshould be sounded. In the early and middle sixties,local governments and states became engaged inheavy competition to attract industrial develop-ment. A common device was for states to em-power local governments to finance industrialfacilities through issues of tax-exempt "industrialdevelopment bonds." These facilities would, inturn, be leased to private parties or corporations.Because the net effect was a federal subsidyencouraging industrial relocation, Congress in1968 revised the Internal Revenue Code to limitthe practice. The substance of the restriction isthat tax exempt status is denied to bonds where"a major portion of the proceeds" are used in atrade or business and repayment is secured eitherby property acquired with the proceeds or byrentals for its use. This restriction does not apply,however, where the user of the proceeds is a tax-exempt municipality or charitable organization,where the proceeds are used for certain specifiedpurposes (does not include construction of a cabletelevision system) or where the total amount ofthe issue is less than $5 million. The lesson herefor municipal financing of a cable television systemis simply that a bond issue could lose its tax-exempt status if the system, when built, was tobe leased to a private operator. Indeed, the tax-exempt status could be jeopardized where evena part of a system was to be leased, if that partcould be attributed to a "major portion of theproceeds" of the bond issue.

Although it is not totally clear how a specificgrant of authority for programming education,municipal, community, and public access channelswould be treated, it would not seem to be withinthe scope of the restriction since operators forthese channels would not be "private."

As noted above, direct municipal ownership ofa cable system would mean that the system would

be developed and operate as a department of Citygovernment. Under such an arrangement, mostmajor and some not-so-major decision-makingwould be subject to review by the Common Councilthrough its responsibility for approving budgetsand contracts. Moreover, the system would comeunder Civil Service, necessitating the developmentand approval of new job classifications and hiringthrough Civil Service procedures. Finally, de-cisions as to revenues in excess of those earmarkedto meet bond requirements would be made by theCouncil; to this extent, the demand for lowersubscriber rates or system improvements mighthave to compete with the City's other needs forrevenues.

b. SPECIAL PUBLIC AUTHORITYA public authority might be described as a

quasi-governmental entity engaged in an entre-preneurial activity. Such authorities differ frommunicipalities in several respects. First, they areusually created to perform a single, entrepreneurialfunction while municipalities have many, diverseresponsibilities. Second, an authority typicallymust finance its capital programs through bondsales at least initially and must rely oncharges for its services to meet operating costsand debt repayment. That is, authorities usuallyhave no tax levying power. Third, authoritiesare free of budget and personnel restraints gen-erally imposed on municipalities. And finally,authorities are relatively far removed from thenormal political process and independent of thegeneral purpose governmental entities whichcreate them.

As with direct municipal ownership, a laterpart of this report (Section VIII, REGULATION)gives detailed consideration to the City ofDetroit's powers to create a special public author-ity to finance, construct and operate a cable tele-vision system. There, it is noted that the Citypresently lacks such powers and that new stateenabling legislation would be necessary. However,there is ample legislative precedent in that a 1948Act empowers cities and other levels of govern-ment to individually or jointly charter authoritiesfor purposes of financing, owning and operatingbuildings and parking facilities for the use of theincorporating entity.

Authorities chartered under the 1948 Act areempowered to issue bonds under the RevenueBond Act, and enabling legislation with respecttc, cable television systems would logically takethe same tack. Thus, the limitations on the use

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of revenue bonds discussed above for direct mu-nicipal ownership would be applicable here. How-ever, it may be well to underscore one point. Anyeffort to effectively secure a bond issue by in-directly pledging a municipality's taxing powers,such as by a lease arrangement, will make Munici-pal Finance Commission approval dependent, inpart, on the lessee municipality's fiscal integrity.

The special public authority envisioned herewould operate largely independent of City govern-ment. The Common Council would intially adoptarticles of incorporation defining the powers ofthe authority and the form of cable service to beprovided. Under this Report's recommendations,the Council would retain powers only to approvethe Mayor's appointments to the authority, setsubscriber rates and annually review system oper-ations. The Council would, however, have powersto amend the authority's charter so long as bondobligations were not thereby impaired. An inde-pendent authority would thus adopt its ownbudget, decide on its own priorities and its con-tracts would be subject to no further review.Moreover, its employees would not be subject tothe City's Civil Service system.

c. NON-PROFIT CORPORATION

Ownership by a non-profit corporation is a"public" alternative for development primarilybecause of Internal Revenue Service Rulings tothe effect that non-profit corporations may, incertain circumstances, issue tax-exempt bonds.Under these rulings, the bonds are said to beissued "on behalf of" a political subdivision of astate. The requirements for tax-exempt status,set forth in Revenue Ruling 63-20, are:(1) the corporation must engage in activities

which are essentially public in nature;(2) the corporation must be one which is not

organized for profit (except to the extentof retiring indebtedness) ;

(3) the corporate income must not inure to anyprivate person;

(4) the state or a political subdivision thereofmust have a beneficial interest in the corpo-ration while the indebtedness remains out-standing and it must obtain full legal titleto the property of the corporation with re-spect to which the indebtedness was incurredupon the retirement of such indebtedness;and

(5) the corporation must have been approved bythe state or a political subdivision thereof,

either of which must also have approved thespecific obligations issued by the corporation.

The first requirement is met when the non-profit corporation engages in something whichthe City itself would have powers to undertake.And since the conclusion has been reached else-where that the City has the power to develop andoperate a cable television system, this requirementcould be satisfied.

The second and third requirements wouldpresumably be met by qualifying under State lawfor a non-profit corporation charter. This wouldrequire that no gains, profits or dividends be dis-tributed to any members of the corporation andthat no part of the corporation's net earnings,funds or assets inure to the benefit of any partyexcept the City. The use of excess revenues forimprovements to the system would probably bepermissible so long as the City's rights in theimprovements were the same as those in propertyacquired with proceeds of the orginal bond issue.

The part of the fourth requirement relating tobeneficial interest can apparently be satisfied inseveral ways. For example, the City might begiven the right to purchase the cable system atany time for an amount equal to the indebtednessthen outstanding. Or all shares of the corpora-tion's capital stock or its membership certificatesmight be held in trust for the City. The require-ment that the City obtain title to the propertyupon retirement of the indebtedness can be satis-fied by terms in the articles of incorporationand/or trust instrument to this effect.

The final requirement, relating to City ap-proval, can be met by Common Council resolutionapproving the articles of incorporation and agree-ing to accept all property rights which the corpo-ration proposes to bestow on the City.

The non-profit corporation would operatesomething like a public authority and somewhatlike a private franchise. The City could, by thearticles of incorporation, be given powers toappoint the directors of the corporation. Andpresumably the articles of incorporation could bestructured very much like the charter of a publicauthority. However, such a course would appearto raise questions of the legality of the City creat-ing a public authority under another name. Thus,the better course would probably be to franchisethe corporation and create a separate City regula-tory agency as recommended elsewhere in thisreport (Section VIII, REGULATION). The cor-poration would then operate independent of the

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City, but services would be governed by the termsof the franchise. However, franchise terms, in-cluding rates, would be subject to renegotiationbetween the corporation and the City regulatoryagency. And should the corporation propose toissue new bonds to finance improvements, tax-exempt status would depend on City approval.

Although there is some local precedent (theDetroit Harbor Terminal) for the form of non-profit corporation financing and development dis-cussed herein, it may no longer be an availablealternative in Michigan. Informal discussionswith the Municipal Finance Section of the Michi-gan Attorney General's Office indicate that Stateapproval of a non-profit corporation charter maynot be forthcoming where arrangements permit-ting tax-exempt bonding are proposed. While theAttorney General's Office's objections were notaltogether clear, they seemed to hinge on the con-tention that such a form of financing circumventsState laws relating to municipal finance. In anyevent, the City should resolve this question beforethis option is chosen.

d. RECOMMENDED ALTERNATIVE:SPECIAL PUBLIC AUTHORITY

The Committee's choice of the special publicauthority model reflects many of the argumentsmost often advanced for creating authorities.These, generally speaking, fall into four cate-gories: financial, managerial, control and "non-political character."

Many of the usual financial reasons are in-applicable in Michigan since municipalities mayissue revenue bonds on saleable terms and statu-tory debt limits do not apply to bonds repayablesolely with revenues from projects financed withthe proceeds. However, one reason is particularlyapplicable: An authority whose financing powersare limited to issuing revenue bonds must alwaysstrike a balance between services provided andrevenues which those services will generate; with-out this balance, the authority will be unable tomarket its bonds. This means that the authority'sservices will not be subsidized out of general taxrevenues.

The managerial reasons advanced for authori-ties have several aspects. First, the separation ofresponsibility for a single entrepreneurial functionfrom that for government generally is said to freeauthorities to make quicker, more imaginative,more businesslike decisions. Second, reliance onrevenue bonds for financing necessitates a favor-able balance sheet which provides an incentive for

efficiency. Third, authorities historically have hadgreater continuity of management than govern-mental agencies. Fourth, the relative insulationof authorities from political control is said to makefor more far-sighted decisions. Finally, it isclaimed that authorities attract higher qualitymanagerial and technical personnel who wouldbe reluctant to submit to Civil Service Systemrequirements.

The "control" and "non-political character"reasons advanced for authorities are closely re-lated. Control is said to be inherent because ofthe authority's need for fiscal soundness to sup-port bond sales, while the authority's non-politicalcharacter is said to make for more objectivedecision-making. However, authorities often, aswould be the case for cable television, operate asa monopoly. Thus, this inherent control is noguarantee of efficiency. Moreover, this Reportrecommends that the authority be required tofurnish a number of non-revenue generatingservices. Therefore, certain additional controls,both non-political and political must be provided.

The non-political forms of control are exercisedvia the authority's City-enacted charter whichdefines the services to be provided must as afranchise would do; the City would also reservethe power to set subscriber fees. The politicalcontrol would be provided by the Mayor's powerto appoint, with Common Council's advice andconsent, the members of the authority. Use ofstaggered rather than concurrent terms wouldtend to balance independence and responsivenessto public opinion. This seems a necessary measureto guard against what has been termed forsome authorities a tendency "towards bureau-cratic over-commitment to [their] particular pro-grams accompanied by relative obliviousness tocompeting public and private interests."

To summarize, the Committee's recommenda-tion that a cable television system in Detroitbe developed by a special public authority seeksto balance the need for inherent fiscal controlsand efficiency with a certain measure of respon-siveness to the electorate in order to best providea full range of urban telecommunications services.

REOMMENDATION:

4. THAT CONSTRUCTION OF THE CABLE SYSTEM BE COMPLETED WITHIN FIVE YEARS OFTHE DATE OF GRANT OF AUTHORITY.

Franchises have been obtained for cable sys-tems in a number of instances where no systemhas yet been constructed. The franchisee simplyobtained the right to construct a system when itseemed profitable to him. When and if anothercable firm wishes to buy his franchise rights hisfranchise will have turned a profit without anycable having been installed. This situation hasoccurred in a number of municipalities, where thecity failed to impose requirements for a timelyconstruction schedule or else failed to providesanctions necessary to enforce such provisions.

The Committee feels that the franchise orother grant of authority for development of cableshould not be given unless the Council is satisfiedthat construction of the entire system can reason-ably be completed within five years from the date

of such grant. The FCC will leave the constructiontimetable to local authorities, but suggests a rateof 20 percent per year, beginning one year afterfederal approval.

Although the Detroit system would be one ofthe largest constructed, such a timetable is notunrealistic. Installation can and should proceedin a number of sections of the City at the sametime. Rapid extension of feeder lines throughoutthe City is to the advantage of all. The Committeealso suggests that appropriate performance bondsbe required to assure conformance with thisprovision.

From an economic standpoint the short con-struction period is both feasible and necessary,assuming appropriate financing, to assure that thesystem quickly reaches its potential.

RECOMMENDATION:

5. THAT CONSTRUCTION OF THE CABLE SYSTEM BE PERFORMED IN SUCH A WAY THATALL AREAS OF THE CITY WILL BE PROVIDED SERVICES EQUALLY, ON A PHASEDCONSTRUCTION SCHEDULE, WITH NO AREA FAVORED OVER ANOTHER.

There has been some tendency with develop- to start construction in areas with higher densityment of cable systems in the past for the developer of potential subscribers or those with higher

53 44

incomes. Often this occurs because of insufficientfinancing. Many systems tend to take a smallarea in the City and build up from that point asthey obtain additional financing. The Committeeis concerned about the inequities suffered by thoseliving in areas not selected as an initial develop-ment area. It is also a concern of the Committeethat those "passed over" in early stages of con-sruction may be poorer neighborhoods unless theCity requires otherwise. What the Committee isrecommending is that an overall plan for pro-vision of service be developed. It should be on aphased basis to insure that the construction willprogress evenly and be designed so that variousareas will not be discriminated against in terms

45

54

of timely access to service.

Headend facilities and satellite originationpoints will be constructed and connected by trunklines. These headends and origination points canprovide the focus for each area in which con-struction of feeder lines is started. The Committeeis not recommending a hard and fast design, onlythat the Council impose an appropriate plan whichdoes not discriminate in favor of one area of theCity over another. It should also be noted thatthe FCC's new rules for cable television will re-quire that local authorities insure that service isextended equitably and reasombly to all parts ofthe community.

III. ORGANIZATION FOR THE OPERATIONOF THE SYSTEM

RECOMMENDATION:

1. THAT CITY-WIDE MANAGEMENT AND OPERATIONS, AND DECENTRALIZED CONTROLOF ACCESS AND PROGRAMMING, ARE NOT MUTUALLY EXCLUSIVE CONCEPTS IN STRUC-TURING A CABLE SYSTEM. THEREFORE, CERTAIN SYSTEM FUNCTIONS MAY BE ESTAB-LISHED ON A CENTRALIZED BASIS WHILE OTHERS MAY BE ESTABLISHED ON A DE-CENTRALIZED BASIS.

Previously the Committee set forth its recom-mendations concerning the construction andinitial development of the cable system. It specifi-cally viewed the system as having the potential fordivision into distribution responsibilities and pro-gramming responsibilities. This meant that asingle entity (a public body is recommended)should be responsible for the construction of thesystem. The Committee then considered whatkind and how many organizations should be in-volved in management and operation of the systemas well as for its programming.

A number of issues were considered: (1) whattype of entity might provide the most appropriateand effective administration of a system; (2)whether there should be one or several systemsand systems operators; (3) how to minimize thepotential for abuse of control of access to thesystem as well as the potential for ideologicalcontrol of program content; (4) how to enhancethe public services the system can provide; (5)how to provide opportunities for local, and par-ticularly minority firms, to play a major role andeconomically benefit from the cable system; (6)how to assure community access to programmingon the system as well as increase opportunitiesfor public and educational programming; and (7)what type of entity would be sensitive to theinterest of all citizens.

These considerations resolved themselves toan analysis of two basic points. One, central-ized versus decentralized control and two, publicor non - profit administration versus privateadministration.

The Committee was guided primarily by thejudgment that the system operator's administra-tive responsibility and the programming responsi-bility could be separated without endangering ordiminishing the feasibility of the system. The

5546

only qualification was whether the novelty of sucha separation would create problems for issuanceof bonds. Presumably, however, any concernabout the ability of the programming to attractsubscribers should be overcome if the program-ming on the commercial channels was sufficientlyappealing. The effect of allowing the additionalorganizations and individuals to program the re-mainder of the channels should be a positive factorin attracting subscribers: diversified programmingappealing to many different persons should occur;this would be their primary concern; and, theirinvolvement makes them salesmen for the system.

The Committee attempted to determine thebest way to safeguard against placing the controlof communication functions in one organization'shands. At the same time consideration was givento assuring the most efficient and economical wayto provide the services which a cable system makespossible. The distribution-programming divisionof responsibilities provides an opportunity to ac-complish both of these purposes. Programmingresponsibility divided among different organiza-tions seemed to us to assure the optimal protec-tions for diversified and independent program-ming. Moreover, operation of the distributionsystem was the only instance in which the re-quired efficiency indicated the need to providesystem-wide responsibilities.

The questions raised here were considered inthe making of recommendations which follow.The Committee does not claim to have developedthe perfect model but it has considered the possi-bilities without being bound by the preconceptionsof others. New ground is being broken and criticalissues of freedom of information are at stake. Theapproaches indicated are what seem to be the bestalternatives to bring about the kind of systemneeded for the City of Detroit.

CENTRALIZYM FUNCTIONS

RECOMMENDATION:

2. THAT A SPECIAL PUBLIC AUTHORITY, OR NON-PROFIT CORPORATION, CREATED FORCONSTRUCTION OF THE SYSTEM (RECOMMENDATION 2 UNDER FINANCING AND CON-STRUCTION AND CHARTS A AND B), BE RESPONSIBLE FOR OPERATION AND MANAGE-MENT OF THE CABLE SYSTEM; AND THAT THE DIRECTORS (NOT LESS THAN 9 MEM-BERL) BE APPOINTED BY THE MAYOR WITH ADVICE AND CONSENT OF THE COMMONCOUNCIL, THAT SUCH DIRECTORS BE RESIDENTS OF THE CITY OF DETROIT, AND RE-FLECT THE MINORITY GROUP COMPOSITION OF THE POPULATION OF THE CITY OFDETROIT.

a. CONSIDERATIONS RELEVANT TO dealt with in the discussion under the nextPUBLIC OPERATION

Previously, this Report has discussed the Corn-mitte's recommendation that the cable system beconstructed by a special public authority or non-profit corporation. That determination was, inpart, based upon a view of the cable system whichpermitted division of responsibilities in the systembetween distribution (hardware) and program-ming (software) /activities. The Committee be-lieves a public entity would be most appropriatefor construction purposes. It was then necessaryto decide who should operate and manage thecable system after the initial development phase.

There are a number of possible organizationalarrangements for handling the responsibility fel'operation and management of the cable system.Essentially, there are two issues: public or private;single and multiple. For each alternative thereare a number of factors that can be considered.These include:

sensitivity to the interests of all citizens;

effective management and administration;

maximum incentive for creating and main-taining the highest level of services to theCity and its residents;

the public utility nature of the services per-formed;

ability to financially withstand initial periodsof low revenues; and

responsiveness to public concerns.

The considerations between a public or aprivate system operator are discussed below.The issue of single versus multiple operators is

47

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recommendation.

Sensitivity to the Interests of All Citizens

The question is whether a publicly appointedboard or private entrepreneur would be mostanxious to provide attractive and diversified pro-gramming, maximize public services and attractsubscribers. There is little to recommend a privateoperator based on the performance of existingover-the-air broadcast stations. Few would quarrelwith the fact that maximizing the profit of thenetworks or individual stations has led the in-dustry to cater to the majority; rarely has it beensensitive to the concerns of special interest groups.Whether that situation would change with theavailability of more channels is unclear but doubt-ful. The performance of the private cable industryin local programming also gives little comfort.Almost no systems provide or support suchactivities.

As previously noted there is no system inexistence with the high capacity called for here(however, many are or will be planning to imple-ment systems of that capacity). We believe thata system operator who is supportive of diverseprogramming activities and who is devoted to theinterests of the City is far more likely to assurethe requisite responsiveness to the variety ofinterests of Detroit. And we believe a public bodyis more likely than a private owner to be directedby local persons or concerned about the locality.

Effective Management and Administration

Effective management and administration isprimarily a question of the caliber of individualswho will be brought to manage the system andthe concerns and interests of the organization's

directors. The Committee has recommended thatDetroit residency and ethnic diversity be charac-teristic of the public entity directors. Such ar-rangements could also be implemented by privatemanagement, but, in most cities this has not beenthe case. At best "front" organizers, set up as asubsidiary of a major corporation have been pre-sented as the Mayor of Milwaukee indicatedas local window dressing. If a public entity is freeeither through management contract or inde-pendent hiring to obtain staff capabilities (withoutCivil Service limitations) its management andadministrative capabilities should be equivalent tothat of any private concern.

There is little expertise in operating a systemof the size contemplated here. Admittedly, certainsystems have developed some of the services andfunctions that the system proposed for Detroitshould provide, but few have really provided localorigination or implemented a high capacity sys-tem. Thus, there is no significant advantage foran existing firm based on experience. Personnelwith applicable experience, of course, can be hiredregardless of who operates the system.

Maximum Incentive for Creating and Maintainingthe Highest Level of Services for the City and ItsResidents

In the Committee's view, it is unrealistic toexpect a private entrepreneur to be willing todefer profits and immediately implement thevariety of services recommended. A public entityhaving long-term public financing can do so, with-out experiencing the same pressures to returnsome profits at the early stages. The questions willbe: Would a private entrepreneur be likely to pur-chase and maintain studio equipment for the use ofcommunity programming? What willingness wouldthere be to turn over portions of gross revenues,say 2 to 5%, to help defray direct expenses in-curred for these programs? If the cable is oper-ated on a non-profit basis, it is clear that thereis more assurance of available funds to providegreater services, funds that would otherwise bediverted to the private entrepreneur. Past experi-ence cannot provide any other lesson than thatcable operators, as with other business, will oper-ate primarily in their own economic self-interest.This legitimate need to develop profits for stock-holders will generally overcome the public spirited-ness of the firm. When this need to pay dividendsconflicts with socially beneficial uses of the systemthe latter will suffer.

48

The Public Utility Nature of theServices Performed

The public service nature of the cable systemenvisioned by the Committee indicates it shouldbe considered as if it were a "public utility." Oncethe system is broader than a particular station orprovides services beyond simply carrying existingor bringing in more distant over-the-air stations,the cable system tends to become a "public utility."At that point, public interest in provision of serv-ices is paramount to private rate of return. That'sthe clear lesson from all existing utilities. In somecases utilities have been owned by municipalitiesand in other cases, such as with the telephone,there has been a fairly consistent pattern of pri-vate ownership. Even in the case of private owner-ship, however, there has been a close regulationof rates of return and services rendered. Profithas been severely limited to "a fair return." TheCommittee did not wish to address itself to thequestion of whether or not cable systems shouldbe considered public utilities per se, but onlywished to raise the question in the context of itsanalysis of the advantages of a public or privateentity for system operation and management. Inthe view of the Committee the nature of cable asa public utility tends to support the appropriate-ness of public ownership.

There has been considerable resistance totreatment of cable systems as a public utility bythe owners of cable systems. In some cases thestates have now moved to provide the necessaryregulations. The argument of the owners is thatthey require high profit from their systems andthat limited returns will prevent them from ob-taining the necessary financing. To the extentthat there are significant risks in undertakingmajor cable systems, the "private money" will beunavailable except at either high interest rates oronly if an equity interest is given.

Actually, the issue is not particularly complex.If someone wishes to borrow money it will beloaned to him at an interest cost that reflectscompetition among money lenders as well as anassessment of the risk. The franchise will oftenbe retained as security, providing for assignmentof the system to the lender if the system operatorgoes bankrupt. The system operator must putmore of his own capital into the investment thanwould be required under a public authority, whichmay essentially finance the entire cost. A privateentrepreneur must provide enough money tohandle initial operating expenses prior to receipt

of revenues. To off-set the alternative uses thathis own funds might be put to, the private systemoperator must anticipate significant profits atsome future stage to justify his investment. Thus,it can be seen that the realities of the moneymarket will dictate a private entrepreneur's needto obtain substantial returns to off -set the riskhe has taken. In the case of a public authorityor non-profit corporation, however, all that isrequired is simply to break even.

As related to the public utility nature of thecable system, the financial analysis means thateither initially or within a short time there areprobable limitations on the kind of profits thatcan be realized from a cable system. Also, whereit is a publicly controlled activity, there is morereason to look to a public operator instead of aprivate entrepreneur.

Ability to Financially Withstand InitialPeriods of Low Revenues

The operator must be financially able to deferprofits, to have the ability to withstand unantici-pated low revenues or the limited revenues thatwill be encountered during the early stages of thedevelopment of the system. Subscriptions to thesystem will not be instantaneous and there is astart-up period. Funds will be required to payexpenses for system operation during such aperiod. In fact, it seems almost unfair to ask aprivate entrepreneur to defer profits and in addi-tion provide high service during such periods.Simply stated, it will not be possible for an entityto do both unless it is able to obtain extremelylong-term financing.

Responsiveness to Public Concerns

A major consideration of the Committee wasthe caliber and quality of the programming whichmight be provided on the cable. Programming oncommercial channels would be the responsibilityof the entity providing management for oper-

49

ations. Existing privately owned city-wide sys-tems, although most are small in number of sub-scribers, have done little from a service stand-point but relay over-the-air signals. There isalmost no local origination experience. From thisstandpoint there is little to suggest the superiorityof the private entrepreneur over the public. TheBBC and the CBC represent the potential ofhigher quality standards of programming whichmight come from public entities. While the neces-sity for the private entrepreneur to obtainprofits from his operation of the system is rela-tively clear, a special public authority or non-profit corporation would have far greater free-dom to use revenues to improve services andprogramming.

Although much is said of freedom of thepress and news media and conversely the potentialfor abuse when information is provided by the gov-ernment itself, the detached public role of a specialpublic authority or non-profit corporation seems toprovide adequate safeguards against governmentalabuses. A public authority would be freer of regu-lation, although no entity would be totally inde-pendent. Those appointed in the public interestand sensitive to the needs of the City of Detroitshould provide this kind of impetus.

It is for that reason that a minimum of a nine-member board of directors is recommended by theCommittee. The number gives adequate oppor-tunity for representation of all segments of thecommunity. Appointment by the Mayor subject tothe advice and consent of the Common Council isseen as providing a check and balance procedurewhich insures safeguards for the freedom of thedirectors from out-right governmental control ortotal insensitivity to resident needs. Further, it ispreferable that the directors should be residentsof the City if they will truly be sensitive to theneeds of persons who live within the City. More-over, the Committee has recommended that thedirectors should adequately reflect the minoritygroup composition of the residents of the City,for the same reason.

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b. ORGANIZATION UNDER APRIVATE FRANCHISE

The Committee has not formally recommendedthat there be consideration given to a privateentrepreneur for responsibility either for thedevelopment or the operation and management ofthe system. The Committee is aware, however,that the engineering and financial projections willto a large degree determine the feasibility of publicfinancing of the system. In the event that suchprojections should determine that public owner-ship is not feasible, the Committee wishes to setforth a suggested organization of the system if,in fact, there is a private franchisee.

In such a case, there should be a regulatoryauthority created, as in the case of a non-profitcorporation (see Chart B) . Moreover, the ordi-nance granting the franchise must be very specificwith respect to a number of items, including: theterm of the franchise, the specific public servicesto be provided, the restrictions on transfer orassignability of the franchise, the necessary per-formance bonds, the requirements for upgradingthe system, the employment and training require-ments, the protections necessary against invasionof privacy, the complaint procedures which shouldbe available, the technical specifications, the con-ditions for repurchase by the City, the disclosureof financial records and the restrictions on addi-tional, non-TV services without Council approval.

Several of these considerations deserve somespecific attention. If a private entrepreneur is thefranchisee, a performance schedule is critical toinsure that the entrepreneur is not a speculatorholding the franchise as an investment for quickresale. To prevent this, the ordinance should re-quire a specific construction schedule and assessmonetary penalties for failure to meet the sched-ule. Thus an energized trunk cable (onto whichsubscribers may be connected and on which thereare transmissions) should be completed withinone year. (See Section II.) This is consistent withthe FCC rules which require "significant construc-tion" within one year after the commission grantsits "certificate of compliance." The FCC furthersuggests a 20% per year figure as its generallyapplicable standards for construction progress. Ifit is desired to implement the system more quickly,a 25% or 33% construction schedule could beimposed. This would certainly prevent any fran-chisee from simply sitting on the franchise andusing it as a saleable investment within a shorttime.

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Assignability of the franchise should also belimited. Assignability is necessary for the purposeof assuring that the franchisee can obtain a loan,since the franchise would in most cases be re-quired as a form of security for major financing.However, there is nothing inappropriate in pre-venting transfer of the franchise except for pur-poses of a defaulted loan used in debt financingof the system.

With a private entrepreneur, there would bea stronger incentive for the City to require sub-stantial franchise fees; in some areas these haverun up to 6 or 7% of the gross, although the FCChas set a maximum of 5%, including lump sumpayments. These have sometimes been the basisof a competitive bidding process. However, theCommittee has elsewhere indicated the cablesystem should not be viewed as a municipal moneymaker. The cable does not offer much of a finan-cial return to the City, nor should it be so viewed.What is required is sufficient funds to provide forits regulation and especially to monitor for con-tinual upgrading of the technical capacity of thesystem so it can deliver better services to thecitizens of Detroit.

The FCC has said that the ultimate effect ofany revenue raising fee is to levy an indirect andregressive tax on cable subscribers. It has there-fore required that if the cable fee is in excess of3%, including all forms of considerations such asinitial lump sum payments, the FCC shall onlyapprove it where the franchising authority sub-mits a showing of the appropriateness of the feespecified, particularly in the light of the plannedlocal regulatory program.

It should be understood that franchise fees areessentially a tax on subscribers, since under mostcircumstances the operator will include such a feein determining the subscriber rates. There is somelimitation on this, in that subscribers may beexpected to drop service if fees are raised toohigh. The question of rate making and thosedeterminations by the Council will depend uponthe knowledge the Council has of the exact profitand loss position of any potential cable operator.This means that the information must be avail-able, and franchisee reports should be publiclyfiled. This also is another of the reasons whyauthoritative engineering and financial projectionsmust be obtained for the City.

To assure implementation of the kinds of serv-ices called for in this Report and the upgradingof services as additional technological improve-ments occur, detail specifications of these service

requirements are needed in the ordinance. So toothere is need for appropriate enforcement pro-visions. The obligation to provide such servicescould be appropriately related to gross revenuesso there would be greater assurance that revenueswould not be siphoned off into less socially bene-cial uses. This seems to the Committee, moreimportant than using cable to generate revenuefor the City's general public purposes.

It is important that the City not be trappedinto a scheme where rates and returns involvecomplicated rate setting procedures, as has oftenoccurred with other public utilities. It is difficultto establish adequate criteria for assessing allow-able costs (in computation of profits or regulatedreturns). Moreover, determination of what con-stitutes investment or operating expenses forpurposes of establishing the rate base is equallydifficult. Under such circumstances it is extremelyhard to fairly determine what is a reasonable rateof return and extensive hearings and examinationsoften are required. The problem can best beexemplified by the recent FCC declaration thatit is totally unable to determine the reasonablenessor appropriateness of rates charged by AT&T be-cause of the enormous expense and time involvedin making a full and accurate examination of thatissue.

The issue of what type of regulatory approachmight be appropriate for the City of Detroit isalso raised. Although the Committee is recom-mending a central regulatory body, it May be thatthe regulatory functions would best be transferredin the future to a statewide operation which hada larger staff and could develop the expertise

necessary. On the other hand, there is strongresistance to using state public service commis-sions as currently constituted to regulate cable.

The specific provisions that can be includedin a franchise ordinance are not self-executing andin many cases will involve the City in a disputewith the franchisee over the feasibility of doingthings that are not in the operator's own economicself-interest. (These were some of the reasonsthat led the Committee to recommend that apublic entity be responsible for these functions.)Thus, specific sanctions must be provided in afranchise which can be imposed if necessary.

To provide for some flexibility in dealing witha private entrepreneur, it is important that thefranchise permit the City to buy out the system(perhaps upon some fair market value determinedby an arbitration board without consideration of"good will"). If the entrepreneur had not per-formed effectively, of course, the City could exer-cise this option. It is more likely that revocationwould occur if the franchisee were only the oper-ator of the system and had not provided the financ-ing, since his investment would be less.

As discussed under Section VIII, control of aprivate franchisee may be difficult unless extremecare is taken in drafting the franchise, since itcast as a contract defining the obligations of thefranchisee. Hopefully, the projections which wehave urged will reflect the feasibility of publicownership and the Committe's recommendationscan be implemented. In the Committee's opinionthis will provide for Detroit the most responsivecable system.

RECOMMENDATION:

3. THAT ALL SYSTEM OPERATIONS, EXCEPT FOR PROGRAMMING, BE HANDLED ONA SYSTEM-WIDE BASIS: THAT THE CITY NOT BE DIVIDED UP INTO FRANCHISE AREAS.

The appropriateness of a single operationalservice area for the Detroit system as contrastedto the City's division into a number of geographi-cal areas led the Committee to review a numberof factors. These included: (1) the difficulty ofcoordinating management of distinct areas fora cohesive system; (2) the feasibility of makingdivisions which were equitable in nature so thatincome, ethnicity, developmental costs, etc., wereequalized; and (3) the relative merits of system-wide service contracts to perform certain func-tions versus independent service area operatorsparticularly from the standpoint of providing localbusiness opportunities.

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Arguments for Division by AreasTo properly consider these issues it is useful to

review what it is that an area operator would do.Of course, construction responsibilities and financ-ing for that purpose would be handled by theentity responsible for the distribution system. Theother functions related to the programming onthe system performed by an area operator are thesame as those an over-all system operator wouldperform, except these activities would be limitedto that particular service area. These activitieswould presumably include: maintenance, providingfor technological improvements, solicitation ofadvertising, obtaining programming for the com-

mercial channels, operating the commercial chan-nels, developing local programming for the com-mercial channels and soliciting subscribers. Thearrangement between an area operator and anyentity which developed the system would probablybe one of lease, contract or license. Fees wouldhave to be set which would be sufficient to amor-tize the pro-rata share of development costs forthat area. Profit incentives could be built in.However, area operators must have sufficientventure capital to meet operational costs intheir area. Given these arrangements, then,how does area division compare to system-widemanagement?

Of the factors considered, by far the mostpersuasive is the difficulty anticipated in co-ordinating the operations of different area oper-ators. The Committee felt that maintenance,technological improvements, subscriber solicita-tion, engineering responsibility for programmingand such matters would be inefficient or ineffectiveif not under single direction; and, in the end wouldincrease subscriber fees because of increased costs.Admittedly, some informal system of division ofthe city into service areas might be undertakenby the system operator for various purpose;however, responsibility and authority still wouldbe centralized to insure necessary coordination.

Equitable division of the City into separategeographical areas to equalize economic factorssuch as subscriber and developmental conditionswill be very difficult as previously discussed in thecontext of financing and construction (see SectionII, Recommendation 1). Although some arbitrarydivisions could be developed, some of the areaoperators would have more difficult districts tohandle. This issue, moreover, involves fairness forsubscribers as well as operators.

The most appealing of the arguments forseparate service areas relates to providing entre-preneurial opportunities to local firms. Forexample, giving a firm the responsibility for pro-ducing commercial programming on its portion ofthe system is somewhat like leasing it a TV stationor channel of its own. This raises several difficultproblems, however.

The role of the system operator is entrepre-neurial, but limited in the sense that he wouldprogram the commercial channels, provide certainservices such as maintenance and proper oper-ation of the distribution system, and collect sub-scriber fees. If the City is divided into serviceareas, each should have a channel to programcommercially, since this is the primary oppor-

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tunity for profit to meet his lease fees which mustbe paid to the entity which has financed and con-structed the system. With five service areas, forexample, five of the system's channels would haveto be made available for commercial program-ming, one each to the area operators. Admittedly,there could be a time-sharing arrangement, butthis means that identification of the operator byhis channel would be lost. Other uses for thosechannels would be precluded. There is no otherarrangement possible if the system is to requiretotal interconnection of channels. There is analternative to separate areas, however, which maybe even more appropriate for involvement of localprivate firms.

System-wide Operations

If the system operator were to contract outcertain functions on a system-wide basis, therewould be no need to set up separate operationalor service areas. It would still be possible, forinstance, for an entrepreneur to lease the oper-ation of one of the commercial channels and per-form all of the relevant programming functionsfor that channel. Also, there could be a contractfor over-all system maintenance, advertising, etc.In the Committee's opinion, this was preferableto attempting to equitably divide the City intodistricts and avoided the fractionalizing that wouldinevitably result from that course of action. Interms of economic opportunities for local firms,functional division would reduce the need to investsignificant capital resources to finance operationsin a service area, thereby making entry into thismarket far easier for minority firms. Thus, re-quiring that the system operator contract outthese functions, rather than performing them him-self, opens the door to a number of entrepreneurialfirms.

There is, moreover, another distinct advantage.Division into service areas would create significantrisks for firms undertaking such a responsibilityduring the early stages of development of cablein this City at least until numbers of subscriberswere sufficient to provide a constant source ofoperating capital. If subscription were lagging inone area, which could happen because of the con-ditions in that area (and which might not be thefault of that operator) there could be significantdrain on the capital of that area operator. Fewsmall firms would be likely to have the capitalassets to survive during a period of such adversity.Equally important, subscribers in that area wouldsuffer disproportionately to those in other areas.

Finally, loss of one segment of income could affectthe financial feasibility of the whole system. Oneof the major advantages to a comprehensive city-

RECOMMENDATION:

wide operation is that good and bad subscriberareas would even out over the whole City, makingfor a firmer economic base.

4. THAT SYSTEM-WIDE FUNCTIONS OTHER THAN PROGRAMMING, E.G., PROMOTION, MAIN-TENANCE, ADVERTISING, SALES, COLLECTION OF SUBSCRIBER FEES, SYSTEM MANAGE-MENT, BE THE RESPONSIBILITY OF THE SPECIAL PUBLIC AUTHORITY, AND THAT ANYPERSONS EMPLOYED FOR THESE PURPOSES BE RESIDENTS OF DETROIT. (See Section XEMPLOYMENT.)

These are functions which, in the Committee'sopinion, should be handled on a centralized basisfor the sake of economy and efficiency. Other-wise, unnecessary duplication of activities andpersonnel can be expected. In many cases suchfunctions are interdependent and need centraldirection. Each of these functions applies to theentire system. On the other hand, it is not neces-sary that the same organization perform all ofthese system-wide, centralized functions. It wouldbe appropriate to contract or subcontract particu-lar functions. There was a strong desire on thepart of the Committee, however, that regardlessof who performed such functions, that the personsemployed be residents of Detroit.

As a communications medium of primary

RECOMMENDATION:

benefit to the citizens of Detroit it was felt to becritical that those with operative responsibilitiesbe residents of the City. To those who mightsuggest that some skills might be lacking in thosepresently in the City, the Committee would re-spond that the necessary individuals can take upresidence in the City. But, there is much talenthere and the need for such persons to relocatewould be rare. Although the cable system is notcapable of solving society's ills it can provide amajor unifying and cohesive force for the City.It is important, therefore, that those who areoperating it, and are engaged in its administrationand activities, have a strong commitment to theCity. That, it is felt, can be best provided bythose who live here.

5. THAT THE SPECIAL PUBLIC AUTHORITY DETERMINE THE MOST APPROPRIATE MAN-AGEMENT STRUCTURE FOR ITS OPERATIONS. IT COULD PERFORM MANAGEMENTFUNCTIONS ITSELF OR CONTRACT OUT TO A MANAGEMENT CORPORATION.

The analysis of the most appropriate manage-ment structure for the operations of the cablesystem should reflect the alternative opportuni-ties available. Thus, a special public authoritycould solely concern itself with the constructionand development of the system and contract outthe continuing management functions itself, byhiring its own staff. If such management func-tions were contracted out to another organization,an excellent opportunity is provided for local, andparticularly minority, firms to participate in oper-ation of the system without large amounts ofinvestment capital. It should be remembered thatin the decentralized structure recommended be-

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low, most of the programming on the system(i.e., all but a few commercial channels) will behandled by the community, educational, munici-pal, and public access structures to be created.Thus, from a functional standpoint, managementresponsibilities for the special public authority(or other system operator) would include: main-tenance; technological improvements, solicitationof advertising; obtaining programming for thecommercial channels; operating the commercialchannels; developing local programming for thecommercial channels; and soliciting subscribersfor the system.

,

RECOMMENDATION:

6. THAT APPROPRIATE ORGANIZATIONS BE CREATED FOR ADMINISTRATION AND OPER-ATION OF (1) MUNICIPAL, (2) EDUCATIONAL, AND (3) PUBLIC ACCESS CHANNELS.

The Committee feels strongly that responsi-bility for programming, administration and oper-ation of municipal, community, educational andpublic access channels should be separated fromthat of the system's operation. This creates themost effective means to decentralize program-ming and therefore control of program content.Further, such separation creates incentives forthe local programming which should be an essen-tial part of the system. The Committee did notfeel it appropriate to try to predict the exact struc-ture for carrying on these functions for the mu-nicipal, educational and public access channels.Because there are not existing organizations tolook to, the organizational structure for the com-munity channels is set forth in the followingrecommendations. For the others there are anumber of options available. The municipal chan-nels could be administered and operated by anexisting or newly created department within theCity government reporting to the mayor or theresponsibility could be contracted out. The edu-cational programming could be handled by a con-sortium of higher educational institutions andpublic and parochial schools or could be dividedinto two systems, one dealing with higher educa-tion and one with elementary and secondary edu-cation; alternatively, one educational institution

6556

or system could be given major responsibility foradministration of the system or a separate bodycould be created for these purposes. The Com-mittee felt that the questions were more appropri-ately left to the discretion of those more immedi-ately involved.

The public access channel, providing essentiallyopen access to individuals and groups on a city-wide basis has minimal directional responsibilities.Perhaps the system operator itself could handlethe administrative duties. Another possibilitywould be to give this administrative responsibiltyto the institution which would provide training forthose who would operate equipment and createprogramming on this and perhaps the other publicfunction channels.

The Committee's primary concern is that therebe independent organizations for the administra-tion and operation for these channels (with thepossible exception of the Public Access channels)to assure that control of access be kept withbodies which are independent of the systemoperator. This decentralization and independencefor the "gate keeper" function, which has powerover access to the system, is a very critical elementin the Committee's proposal for separation ofprogramming functions from distribution.

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DECENTRALIZED FUNCTIONS

RECOMMENDATION:

7. THAT CONTROL OVER PROGRAMMING, AS CONTRASTED WITH CONSTRUCTION ANDMAINTENANCE OF THE SYSTEM, BE DECENTRALIZED SO THAT THERE IS AUTONOMYOF PROGRAM DIRECTION AND OPERATION WITH RESPECT TO COMMUNITY, EDUCA-TIONAL, MUNICIPAL, AND PUBLIC ACCESS CHANNELS.

The division of responsibility for managementand operation of the distribution system and re-sponsibility for programming is critical to preventexcessive power over dissemination of informationand access to this communication media. Thereis also a further question of whether such pro-gramming responsibility should be left with anyone entity. Therefore, the Committee addresseditself to whether program direction and operationof the community, educational, municipal andpublic access channels was to be separated fromthat entity with control over operational manage-ment for the system, i.e., the "system operator."There seemed to be little question that the bestway to insure open access to the system and toencourage diversity of programming was forseveral organizations to have independent author-ity over different channels or groups of channels.To do otherwise would transfer the worst aspectof network controls in the broadcast industry tocable.

There will be some necessary relationshipbetween the system operator and those responsiblefor programming these other channels, since theyare dependent upon the effective working of thedistribution network. If equipment and productionfacilities as well as staff must be made availableby the system operator, such services must bemade available as needed by the programmers.So, too, there is a dependency on the effectivenessof the programming from the standpoint of thesystem operator who will be assisted if the pro-gramming provides more interest and increasesthe number of subscribers. In fact, the program-ming on these channels provides some competitionto the commercial channels which may be thebest way to assure that programming on com-mercial channels is of high quality.

58

To assure that there is decentralized controlover access to programming, the Common Coun-cil in addition to granting authority for theconstruction, development and operation of thedistribution system should make a separategrant of authority for programming of thesespecified channels. Each of the identified organiza-tions who will administer these channels wouldbe given a separate grant of authority by theCouncil.

This is the approach that the White HouseCabinet Committee on Cable Television reportedlydetermined most appropriate for developmentof the cable industry. It has suggested that therebe specific separation of responsibilities betweendistribution of programming and production ofthe programs. Thus, no one will be given controlof the entire system. As with the telephone com-pany, the system operator would not have theright to prevent any message from going out overits lines except those matters which were in viola-tion of criminal law (even then probably withoutany prior censorship). As with telephone lines,cable lines would be the responsibility of the sys-tem operator while programming of each of thesechannels would be the responsibility of the specificadministration set up for each category of channel.This decentralization is the best protection forfreedom of access to the system and freedom ofinformation flow from the system. Responsibilityfor and regulations dealing with libel and obscen-ity would be that of the administrators of eachchannel. On public access and community chan-nels, in fact, the operator, under FCC regulations,would have no control over program content andpresumably no liability for that content. Thus,the organizations or individuals who obtainedprogram time would themselves be held liable forany questions of libel or other criminal acts.

ORGANIZATION AND OPERATION OFCOMMUNITY CHANNELS

RECOMMENDATION:

8. THAT NOT LESS THAN FIVE CABLE DISTRICTS BE CREATED TO IMPLEMENT RECOM-MENDATIONS RELATIVE TO COMMUNITY CABLE OPERATIONS: THAT IN FORMINGCABLE DISTRICTS, CONSIDERATION BE GIVEN TO SUCH FACTORS AS POPULATIONDENSITY, ETHNIC GROUPS, GEOGRAPHIC BOUNDARIES, SPECIAL INTEREST GROUPSAND LOCATION OF DECENTRALIZED PRODUCTION FACILITIES (ORIGINATION POINTS).

To provide the most effective implementationof "community" cable operations some division ofthe City into communities of interest must beattempted. As previously indicated the divisioninto franchise areas with all of its economic con-siderations would be most difficult. It is suffi-ciently complex to attempt to divide a city suchas Detroit into five communities of about 300,000each. The Committee did not feel that it hadeither the time, resources or information on whichit could make specific recommendation as to theexact number of divisions (which the Committeehas called cable districts), or their boundaries. Itfelt, however, that in making the divisions thefactors that should be considered are: populationdensity, existing ethnic groups and their locations,general geographic boundaries of the city and ofnatural areas within the city, location of specialinterest groups and the location of the productionfacilities of the cable system. Hopefully, decen-tralized production facilities or satellite centers

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where programs could be locally originated shouldcoincide with the convenience of those personswithin particular cable districts. To the extentpossible, the cable district should provide theopportunity for formal organizations or for groupswith similar interests to have access to the systemthrough community channels. Secondly, areaswhere there are certain shared community in-terests might benefit by the opportunity to or-ganize around the development of programmingand thereby to enhance their sense of community.At the same time the Committee was concernedthat the programming on such cable districts notset up additional barriers to understanding be-tween people in the City. Thus, despite the or-ganization of cable districts, all programs shouldbe available to anyone within the city. Althoughsome local event may not be of interest to others,there still should be the opportunity for all to viewit. To do otherwise will tend to further fragmentthe city.

SATELLITE ORIGINATION

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HYPOTHETICAL DIVISION INTO FIVECABLE DISTRICTS FOR

COMMUNITY PROGRAMMING PURPOSES

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6960

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Each CDA operates channel to originate in its CableDistrict. The second channel to originate from thatDistrict would be operated by the CCB.

Each CDA elects representatives (3) to the CCB whichthen constitute the members of the CCB.

RECOMMENDATION:

9. THAT FOR EACH CABLE DISTRICT THERE BE A CABLE DISTRICT ADMINISTRATIONCOMPOSED OF NINE MEMBERS ELECTED BY SUBSCRIBERS LIVING WITHIN THE DIS-TRICT; THE CABLE DISTRICT ADMINISTRATION SHALL HAVE RESPONSIBILITY FORDETERMINING CRITERIA FOR SELECTION OF GROUPS AND ORGANIZATIONS TO BE RE-SPONSIBLE FOR PROGRAMMING ONE OF THE COMMUNITY CHANNELS IN EACH CABLEDISTRICT; THAT EACH CABLE DISTRICT ELECT THREE OF ITS NINE MEMBERS TO THECOMMUNITY CABLE BOARD WHOSE RESPONSIBILITIES WILL BE DIRECTION AND OPER-ATION OF PROGRAMMING FOR THE SECOND COMMUNITY CHANNEL IN EACH OF FIVECABLE DISTRICTS. THE COMMUNITY CABLE BOARD WILL HAVE A TOTAL OF 15 MEM-BERS. ONE OF THE TWO COMMUNITY CHANNELS IN EACH CABLE DISTRICT WILL BEPROGRAMMED BY THOSE GROUPS AND/OR ORGANIZATIONS RESIDING WITHIN THEGEOGRAPHICAL BOUNDARIES OF THE CABLE DISTRICT. A DESIGNATED PERCENTAGEOF TIME ON THE SECOND COMMUNITY CHANNEL WITHIN EACH CABLE DISTRICT SHALLBE ALLOCATED TO SPECIAL INTEREST GROUPS NOT GEOGRAPHICALLY DEFINED,E.G., ETHNIC, RELIGIOUS, VOCATIONAL AND LABOR GROUPS. THE COMMUNITY CABLEBOARD SHALL ESTABLISH A PROCEDURE FOR ALLOCATION, ON A COMMON CARRIERBASIS, OF TIME NOT PREVIOUSLY RESERVED ON COMMUNITY CHANNELS.

To provide for over-all administration of thecommunity channels some sort of structure mustbe developed. Although there are many differentapproaches to this problem, the Committee feltthat it was important that a specific structure berecommended for serious consideration by theCouncil. Without development of such a struc-ture, we believed that operation and use of com-munity channels would not occur as rapidly. Itis the community origination of programs whichmay prulde the most important communicationsaspect of the cable system for Detroit. The Com-mittee's concern is to propose a structure that issufficiently organized to provide leadership whilestill having the necessary flexibility for such anew venture as cable. The structure would haveto provide local direction but also administer acity-wide "community" system.

The distinction between the community andpublic access channels is important here. Publicaccess channels are made available to the publicgenerally, usually without reservations of timeand without broad-based community direction.The Committee determined that something morewas needed. The community channels recom-mended here provide opportunities for develop-ment of community organizations and individualsin special interest groups to communicate amongthemselves and to others. It must provide asufficient segment of the cable spectrum that allsuch needs can be accommodated. Most existingpublic access channels, as they are generally desig-nated, are on a first-come, first-served basis. Al-though community channels will have such timeavailable, most would be reserved on a leased

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grant of time. Also, of prime significance is theseparation of the responsibility for communitychannels from the system operator's control andequally important, the responsibility of localcommunities to program channels themselves.This entire effort, it should be noted, is onlyfeasible where there is a high capacity system.

In each cable district there would be a CableDistrict Administration which would have directresponsibility of one community channel from thatDistrict. This administration would be composedof nine members to be elected by the subscribersin that District. Although it is possible to havethe members appointed, it was felt that an elec-tion was the most effective manner of representa-tion. To the extent that two-way communicationbecomes possible, the elections by subscriberswould be a fairly fast and easy process carriedout by the system itself. Mailing, with certificationby the existing subscriber, should be sufficient toprovide a feasible election mechanism until suchtime as two-way communication becomes possible.

From each Cable District Administration threeof the nine members would be elected to serveon a Community Cable Board making a total of15 members (assuming five cable districts). TheCable Board would have direct responsibility foradministration of one-half of the communitychannels as well as for problems of over-all con-cern to community channels generally.

In developing the community channel oper-ations the Committee was cognizant of the factthat community organizations, ethnic groups, andthose with special interests would not necessarilyhave one specific geographical location but often

might be in several different cable districts. Forthis reason the Community Cable Board shouldhave over-all responsibility for community chan-nels. In effect, the Committee recommends a two-tiered system with five of the recommendedchannels, one per cable district, to be programmedby those organizations and groups residing withinthe geographical boundaries of that cable district.

The second channel assigned to that cabledistrict under the direction of the Cable Boardwould be programmed by special interest groupsnot geographically definable.

Since channel time can be subdivided in anumber of ways it was felt that a designatedpercentage but not all of the time on thesecond community channel should be available togeographically dispersed special interest groups.If sufficient activity and interest in programmingby groups within a cable district overlaps, theirprogramming on the second channel in theirdistrict could be permitted to the extent that itwas not reserved for city-wide organizations andgroups.

Clearly, not all of the problems that mightarise in such an allocation of time nor in therange of responsibilities can be P!iticipated. Itmay be necessary to draw the cable districts andhave interim committees appointed prigr to thetime that the cable system actually becomes avail-able in a district. Representatives must be sentto the Community Cable Board and proceduresfor programming within that district must bedeveloped in advance of subscriber hook-up.

To guard against the non-utilization of pro-gramming time because of lack of expertise andpreparation in initial stages of development theCommittee recommends that all time come undera procedure established by the Community CableBoard so that time, not programmed by a certaindate before cable-casting, be made available on acommon carrier basis to anyone requesting it.It could then be used for commercial purposes,for entertainment programming or for generalpublic access purposes.

The FCC has adopted an allocation formula ofN plus 1 for developing use of cable for com-munity or other public (and commercially leased)purposes. As existing channels are in use during80% of the time, a new channel must be addedwithin another six months. It was the Commit-tee's feeling, however, that unless there is aspecified channel available to be programmed, thedesire and activity to develop programming willnot occur, or, at best, will occur quite slowly.Simply, as long as there is programming timeavailable there will be efforts made to get on thecable. If there is no time which can be reservedthe effort will not be forthcoming. The Committeefelt that it has provided proper protections againstabuse by making any unused time available on acommon carrier basis, to any and all who wishaccess.

A diagram of the organization for the com-munity channels is shown on Charts A and B setforth earlier in this section.

RECOMMENDATION:

10. THAT THOSE WHO REPRESENT THE CABLE DISTRICT BE ELECTED ON A STAGGEREDBASIS FOR THE FIRST TERM, AND THEN ONE-THIRD BE ELECTED EVERY YEAR FORTERMS OF THREE YEARS BY SUBSCRIBERS OF THE CABLE SYSTEM.

Although there may be a variety of approachespossible, the Committee decided that it shouldpresent a specific proposal relative to the pro-cedures by which the Community Cable Boardand Cable District Administrations were to becreated. A major question is who shall determinethe utilization of community channels. Becausethese are channels representative of community

interests and they should be generally responsiveto persons receiving cablecasts in a district, anelection based upon subscribers seemed the mostappropriate method of selection. Initially, thiswould require that the first term of office bestaggered so that one-third of the directors of theCable District Administrations be elected there-after every three years.

RECOMMENDATION:

11. THAT IN OPERATION OF COMMUNITY CHANNELS:a. GRANTS OF TIME FOR PROGRAMMING BE GIVEN BY BOTH THE COMMUNITY CABLE

BOARD AND CABLE DISTRICT ADMINISTRATIONS FOR A PERIOD OF NOT MORE THANONE YEAR, SUBJECT TO REVIEW FOR POSSIBLE RENEWAL AT THE END OF THATPERIOD.

7162

b. GRANTS OF TIME BE GIVEN FOR A REGULARLY SCHEDULED PERIOD OF TIME, E.G.,ONE-HALF HOUR EVERY WEEK, SEVERAL HOURS EVERY DAY, OR ONE WHOLE DAYEACH WEEK. THE CABLE DISTRICT ADMINISTRATIONS AND COMMUNITY CABLEBOARD SHALL ASSURE FAIR AND EQUITABLE DISTRIBUTION OF PROGRAMMINGRESPONSIBILITIES FOR PRIME TIME VIEWING.

c. TIME NOT SCHEDULED A REASONABLE PERIOD BEFORE CABLECAST REVERT TOCOMMON CARRIER STATUS AND SUCH AVAILABILITY BE PUBLICIZED VIA THECABLE SYSTEM.

d. SHOULD A GRANTEE FAIL TO USE ALLOCATED PROGRAM TIME WITHIN PUBLISHEDDEADLINES, HIS GRANT WOULD BE SUBJECT TO REVOCATION.

In conformance with the idea that there mustbe specific opportunity for organizations andgroups to program before the interest in pro-gramming is generated, the Committee felt thatspecific grants of time for programming, by lease,would be an appropriate method of allocation ofprogramming time. Non-geographic channel leaseswould be granted by the Community Cable Board,district channel leases by the Cable District Ad-ministration; criteria must be developed to deter-mine what organization, group or individual iseligible to obtain such leases.

The period of the lease should not exceed oneyear, when it would be subject to review andpossible renewal. This should give sufficient timeto determine how effectively the programmingresponsibility had been used. In effect, this ap-proach relies upon a competition for the availabletime and the commitment from a group ororganization that it will develop programs for aspecified time period. Thus, a consistent timepattern is envisioned regularly scheduledperiods of time on a weekly basis whether theybe for half hour, hour, several hours a day, or awhole day.

To assure that there is fair and equitabledistribution of "prime time," the Cable DistrictAdministrations and Community Cable Board

should develop appropriate procedures to assurethat such times are not allocated only to oneorganization.

The critical aspect is that there be a specifiedgroup or person responsible for a specific timeperiod. Hopefully, this will be the catalyst toassure effective development of capacity to pro-gram and interest by organizations and groups.Without such an arrangement the developmentof local programming might be quite slow. Withit, there is a significant incentive to develop pro-gram packages.* At the same time, this approachshould generate the necessary focus to make anyorganizations much more active.

To guard against improper use of the lease,i.e., the failure to program the scheduled timeslot, failure to have a program developed a reason-able period before the scheduled time, the timebeing made available would revert to commoncarrier time available to anybody. The specificavailability of such common carrier time wouldbe an appropriate subject for publication throughthe system itself. Consistent failure to use allo-cated time, after a reasonable start-up period,should subject the lease to revocation.

*See similar recommendation, Sloan Report, On the Cable,The Television of Abundance, Public Access, Appendix C.

RECOMMENDATION:

12. THAT THE COMMUNITY CABLE BOARD ALLOCATE PROGRAMMING FUNDS TOGRANTEES FOR LOCAL PROGRAMMING.

If funds are generated from outside sources,through advertising or through allocation of somepercentage of system revenues, there is a necessityfor some entity to administer and allocate thefunds to the programming uses on communitychannels. Since it has both a representative basis

63

from the Cable District Administration and over-all responsibilities it seems more appropriate forthe Community Cable Board to have this function.Such authority will require that an appropriateset of criterio be developed to allocate suchrevenues.

RECOMMENDATION:

13. a. THAT THE COMMUNITY CABLE BOARD AND CABLE DISTRICT ADMINISTRATIONSSHALL HAVE NO CONTROL OVER CONTENT OF PROGRAMS.

b. THAT THE COMMUNITY CABLE BOARD AND CABLE DISTRICT ADMINISTRATIONS BEREQUIRED TO PUBLICLY EXPLAIN THEIR RATIONALE FOR REJECTION OF A GIVENGRANTEE IF THE GRANTEE SO REQUESTS.

The rights of any groups, organizations orindividuals programming on the community chan-nels should include freedom from interference bythe Cable District Administrations or CommunityCable Board over program content. Althoughthe Administrations or Board have general re-sponsibility to set terms and perform certainresponsibilities related to the community channels,it was felt that they should not control the pro-gram content. This is the same concept as anindividual subscriber to the telephone systemexercising the right to broadcast his own messagesover the telephone. That is not to say that therecould not be protections developed against obscenematter going over cable or the prevention of libel.Clearly, however, there should be no prior censor-

RECOMMENDATION:

ship. Adequate protections can be provided afterviolations occur by failure to renew leases or byrestricting future access to the system to suchpersons. Although some persons or groups maybe "judgment proof," there are civil sanctions thatcan be imposed on programming abuses. With de-nial of future access (after appropriate hearingsand determinations) or civil liability these abusesshould be reasonably controlled.

If an organization or persons are denied accessthere should be a requirement that a publicexplanation of the reasons for rejection be madeif the party so requests. It was felt, however, thatit was not proper to make these reasons publicunless the party wished them made public.

14. THAT THE COMMUNITY CABLE BOARD AND THE CABLE DISTRICT ADMINISTRATIONSPROVIDE PROCEDURES FOR A REVIEW OF THEIR ADMINISTRATIVE DECISIONS ANDCITIZENS' COMPLAINTS.

There may be a number of complaints as theorganization for community channels is workedout. Therefore, specific procedures should bedeveloped by the Community Cable Board andCable District Administrations to handle thesematters. The Committee did not wish to provide

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detailed procedures, but felt that the Board andAdministrations should develop the appropriateprocedures. Obviously, in the end, anyone canhave access to the City Council for appropriatehearing on such complaints and there is alsoaccess to the courts if desired.

IV. CHANNEL ALLOCATION

RECOMMENDATION:

1. THAT THE CABLE SYSTEM HAVE A MINIMUM OF 36 CHANNELS AVAILABLE FOR IM-MEDIATE AND INITIAL OPERATION.

I. CHANNEL CAPACITYChannel capacity refers to the number of

channels available for use on a cable system. Un-limited by dependency upon one of the nation'sscarcest resources, spectrum space, independentof the enormous expenses incurred by over-the-airtransmission of programs and relieved of theburden of appealing to vast audiences for support,cable television is a medium uniquely able toprovide a greatly increased number of channelsat a relatively low cost. The ability of the systemto provide a multiplicity of channels is the basisfor increased services and access to the media.All channels are delivered by the same system andsupported by revenues from the system as a whole.Channels may be activiated at little incrementalcost.

Cable systems vary considerably in capacity,ranging anywhere from basic low capacity sys-tems of 12 channels to 42 in San Jose, Californiaand 64 in Akron, Ohio.° The earliest systems in-stalled primarily improved television reception,were of low capacity, and provided minimalservices. Those systems currently being con-sidered or installed in major urban areas are ofgreatly increased scope and capacity.

It is difficult to determine an absolute numberof channels necessary for an advanced cablesystem that will be financially feasible and yetoffer an optimal number of services. While tech-nology is not a limitation the current state ofthe art is sufficiently advanced to allow for asystem of eighty or more channels considera-tion must be given to a balance between cost andservice. Obviously, a high-capacity system wouldbe more costly than a low-capacity (12 channel)system. A low-capacity system, however, will notmeet the communications needs of the citizens ofthe City of Detroit.

9. Common Carrier Access to Cable Communications:Regulatory and Economic Issues, Lionel Kestenbaum,Sloan Commission on Cable Communications.

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Thirty-six channels is, in the consideration ofthe Committee, the very least needed by the cityto effectively utilize the cable system and maxi-mize its potential, both in terms of financial via-bility and services offered. The number thirty-sixreflects the technical components existing in differ-ing systems, i.e., thirty-six to forty channels wouldbe available with a conventional system using twocables, or thirty-six channels would be availableas the basic module in the dial cable system.

The Committee recognizes that not all chan-nels may be used in the early stages of the system.As subscribers increase, however, services uniqueto cable will begin to develop and demand forchannels will increase. It will be far more eco-nomical to create a system of high-capacity at thetime of initial installation than to upgrade at alater date. The Committee's data indicates thatif streets and building conduits have to be re-opened to add capacity later, costs would be almostdoubled.

If cable television is to effectively provide afull range of services, if it is to open opportunitiesfor diversity and creativity in information, enter-tainment and instructional programming, it musthave sufficient capacity. Program variation andprovision of services will vary directly with thenumber of channels available on the system; thelarger the number of channels, the wider thediversity which will result. To install less thana 36 channel system would be to severely limitboth now and in the future the scope of servicesprovided.

2. FCC CHANNEL REQUIREMENTS

The Federal Communications Commission, inrecognition of the expanded use of cable systemsrequires basic minimum channel allocations inits Rules which were announced February 3,1972. These minimums are designed to encouragecable expansion in major urban areas where over-

the-air broadcasters feel threatened by cabletelevision.

THE FCC REQUIRES:1. All cable systems in major urban markets

must install cable systems having a minimumof a twenty-channel capacity.

2. All systems must have two-way, non-voicecapacity.

3. All systems must have at least one publicchannel which will be available on a commoncarrier basis, first-come, first-served and non-discriminatory access. No charge will be madefor use which is no longer than five minutes.

4. All systems must provide at least one channelwhich will be used by local governmentalagencies, at no cost to user for first five years.

5. All systems must provide at least one channelfor use by educational institutions at no costfor first five years.

RECOMMENDATION:

6. All systems must carry the signals of allstations within 35 mile radius.

7. All systems within top 50 markets may importtwo distant signals, subject to certain specifiedlimitations. (See Section VII, REGULATION)

8. All systems must lease "excess" channels topotential users.

9. One channel must be exclusively devoted tolocal origination programming.

While in general agreement with the FCC'sintent the Committee considers the above require-ments as basic minimums only, and has requestedthat these minimums be increased to adequatelyservice the communications needs of the City ofDetroit. This is with recognition that before itcan enlarge the number of channels devoted toeducational, municipal, community and publicaccess uses, the City must submit a petition to theFCC and obtain approval of the proposed systemfor Detroit since channel allocations would exceedthe FCC minimums.

2. THAT ALLOCATION OF SUCH CHANNELS INCLUDE APPROPRIATE DIVISION BETWEENEXISTING OVER-THE-AIR CHANNELS, DISTANT SIGNALS, PUBLIC ACCESS, 10 COMMU-NITY (DIVIDED BETWEEN CITY-WIDE AND CABLE DISTRICT), COMMERCIAL (ON ACOMMON CARRIER BASIS), EDUCATIONAL (DIVIDED BETWEEN ELEMENTARY, SEC-ONDARY, AND HIGHER EDUCATIONAL INSTITUTIONS), MUNICIPAL, PROGRAM GUIDEAND THE LIKE, WITH SUCH RESERVED CHANNELS AS MAY BE APPROPRIATE. THATALLOCATION OF CHANNELS BE DETERMINED AT THE TIME THAT COMMON COUNCILAPPROVES INSTALLATION OF A CABLE SYSTEM IN DETROIT.

3. ALLOCATION OF CHANNELSThe Committee recognizes that it cannot

specify in full detail the channel allocations for asystem not yet designed and built; nonetheless,it felt it must make every effort to insure fulldevelopment of the public service component ofthe system. There is little evidence in the briefhistory of cable television to suggest that suchuses will automatically be included in any cablesystem. Therefore, while not endorsing absolutenumbers, the report recommends basic minimumrequirements for allocations in those areas itconsiders integral to a cable system which is tofunction as a communications medium in thepublic interest.

The Committee recognizes that the designationof specific numbers is to some extent arbitraryand may be subject to adjustment at the time

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of installation. However, these allocations are thecollective judgment of the Committee and reflectits concern that the public interest services listedbelow must be accommodated on the cable systemat the time of initial installation in the city.

a.b.c.d.e.f.

g.

h.i.

Community (10)Public Access (2)Municipal (3)Educational (7)Local Television Broadcast Signals (8)Distant Television Broadcast Signals* (2)Commercial (Entertainment and Business)(3)Program Guide (1)FM Signals

*If feasible under the current FCC requirements.

a. COMMUNITY CHANNELS

RECOMMENDATION:

3. THAT A MINIMUM OF 10 OUT OF THE FIRST 36 CHANNELS AND APPROXIMATELY 159OF ADDITIONAL CHANNELS BE ALLOCATED FOR COMMUNITY OPERATION AND DIREC-TION; EACH CABLE DISTRICT (ASSUMING FIVE) WOULD HAVE A MINIMUM OF TWOCHANNELS.

Community channels are those controlled bya community structure to provide original com-munity programming. The purpose of communitychannels is to encourage programming that accu-rately reflects the needs and interests of the com-munity. Such programming can provide thebasis for heightened community consciousness,increased communication, strengthened ethnicidentity, and improved community problem solv-ing. It will facilitate the flow of information ofparticular interest to the community, encouragedevelopment and exposure of local talent, andstimulate much needed intra- and inter-communitycommunications. Because community channelswill be able to be seen city-wide by any systemsubscriber, community programming may helpcitizens develop an increased awareness andunderstanding of communities other than theirown.

Access to the medium through communityprogramming is a major justification for theinstallation of a cable system in the City ofDetroit. Community channels are uniquely ableto perform a communication function on a local-ized level. Only if a sizable portion of channelson the system are dedicated to local, communityprogramming, the Committee feels, will the systemadequately respond to the needs and interest ofthe public.

To implement community programming, theCommittee would create five (5) separate CableDistricts with each district having at least twochannels. These channels will be operated anddirected by the Cable District Administration andthe Community Cable Board, members of whichare to be elected by subscribers in each commu-nity. The Cable District Administration will beresponsible for programming by groups and/ororganizations living within the geographic boun-daries of the Cable District; the Community CableBoard will be responsible for programming bygroups and organizations not geographically de-fined, e.g., ethnic, religious, vocational, labor.(See Section III, ORGANIZATION FOR OPER-

ATION OF THE SYSTEM.)

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While we have recommended that communitychannels be viewable city-wide by anyone sub-scribing to the cable system, community program-ming would be uniquely identified and structuredby each individual community or Cable District.

The establishment of community channels pro-vides a mechanism for community control of themedium and community access to the mediumwithout sacrificing the compatibility and inter-connectability of one system-wide hardware in-stallation. In effect, each Cable District operatesand is responsible for a "mini-system" within thelarger system. With such autonomy, free fromprogramming control by an overall system oper-ator, all communities can be assured that thepromise of local programming will be realized andaccurately reflect their concerns.

Programming can be expected to vary widelyfrom community to community as it functions toreflect the unique needs and desires of differinggroups. Telecommunications needs in essentiallyblack urban areas may not be the same as thoseof predominantly white working class communi-ties. "Cable systems servicing each communityshould evolve quite differently each withappropriate patterns of use, community and indi-vidual services and cultural programming. Theeconomics of cable make it virtually a newmedium, demanding new, inexpensive productiontechniques and new previously uneconomic subjectmatter. Different communities, then, should de-velop different kinds of services."10

Some of the uses to which community channelscould be put include reporting of community news,health delivery programs, use of community re-sources, courses in home management and childcare, job training and job availability, reportingdiscussion of community problems, cablecasting ofblock-club meetings, airing of views of localcandidates for public office, creative entertain-ment programming, hobby shows, religious activi-

10. The Electronic Grapevine (Cable and the Commu-nity), Cunniff, Lois, New York University, 1970.

ties, and a community bulletin board. The possi-bilities are endless. Because the concept of in-expensive, readily available localized programmingis in its infancy state, its limits cannot be fore-seen. We assume, however, that such access to

b. PUBLIC ACCESS CHANNELS

RECOMMENDATION:

the medium will encourage experimental andcreative uses of cable if there are sufficient re-sources available to equip local production facili-ties and train community people to staff andoperate such facilities.

4. THAT A MINIMUM OF ONE PUBLIC ACCESS CHANNEL BE AVAILABLE ON A NON-RESERVED, COMMON CARRIER BASIS FOR NON-COMMERCIAL APPLICATION; REASON-ABLE LIMITS ON REPETITIVE USE BY INDIVIDUALS SHOULD BE IMPOSED; THAT AMINIMUM OF ONE ADDITIONAL PUBLIC ACCESS CHANNEL BE AVAILABLE ON A RE-SERVED COMMON CARRIER BASIS.

Public Access Channels are those channelsdesignated for use by the public on a commoncarrier basis first - come, first - served. Amechanism on one of those channels for reserv-ing time in advance should be established. Anyperson desiring to transmit programs or offerservices would have a chance to do so on a fairand non-discriminatory basis. There should be nointerference or control other than libel andobscenity restrictions. (See Section III, OR-GANIZATION.) Like community channels, publicaccess channels provide a mechanism for expand-ing access to the medium, encouraging free ex-pression of ideas and opinions and precludingcontrol by the system operator.

Whereas Community Channels will programfor a geographic community or a community ofinterest, Public Access Channels are designed toallow an expression of views that may be un-related to any specific area. The primary dis-tinction is that the administration of these PublicAccess Channels differs from the Cable Districtroots of the Community Channels. The formerare entirely open to the expression of all viewsand opinions and provide a forum for the freeflow of information and viewing by the citizensat large. Both Community and Public AccessChannels serve similar but yet distinguishableneeds. The first assures community based controland direction with specific reference to geo-graphical area. The latter is based on system wideinterests to assure open access to the system.

The programming on the non-reserved PublicAccess Channel may take the form of the "soapbox" forum with citizens presenting views on avariety of subjects with varying degrees ofexpertise, each speaking for a predeterminedamount of time. In this way, Public Access Chan-

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nels will provide a platform for political candi-dates. The second Public Access Channel wouldbe structured so that some segments of time maybe reserved in advance, so that organizations,individuals or groups could present regularlyscheduled programming. Programming on thereserved Public Access Channel might include acity-wide, regularly scheduled ombudsman service,legal aid information, information about socialservice resources, or in-depth discussion of urbanissues. Time not reserved in advance would bemade available on a common carrier basis.

Consistent with the function of the PublicAccess Channels as an open forum, the Committeerecommends that these channels be used for non-commercial purposes, and that the use of timeof the channels be structured so as to precludemonopolization by any user.

Public Access Channels are non-commercial inthe sense that they are non-revenue producingchannels, their primary purpose being that ofproducing public service programming. Commer-cial messages might be allowed* on a limited basisat natural breaks, for purposes of supporting inpart, cost of such programming. While the FCCrequires that the system operator provide use ofthe Public Access Channel free of charge to eachuser for the first five minutes, the Committeerecommends that there be no charge for channeluse no matter what the period of time. Revenuesto support these programming costs may begarnered from advertising revenues and fromallocation of funds from gross revenues. (SeeSection V, ACCESS.)

*Subject to FCC waiver of its newly issued rules whichstate to the contrary, upon petition for special relief.

c. MUNICIPAL CHANNELS

RECOMMENDATION:

5. THAT A MINIMUM OF THREE CHANNELS BE DESIGNATED FOR MUNICIPAL USE.

Municipal channels are those designated foruse by the municipality itself, and will be pro-grammed by it. The facilities, contributed by thecable system operator, should be operationallycontrolled by an administrative structure desig-nated by the City.

Cable television has major, but as yet un-tapped, contributions to make toward increasingthe impact of municipal services. Telecommuni-cations is the tool by which municipal institutionscan assess, process, and transfer informationefficiently and effectively both within govern-mental agencies and between government and thecitizenry.

As urban problems and their solutions havebecome increasingly complex, the need to com-municate with the citizenry has taken on newdimensions. Citizens must have access to large

d. EDUCATIONAL CHANNELS

RECOMMENDATION:

6. THAT A MINIMUM OF SEVEN CHANNELSNELS; THAT 20% OF FUTURE CHANNELTIONAL CHANNELS.

These are channels devoted to educationalpurposes and programmed by an appropriatestructure to be determined by the participatingeducational institutions, public and private.

It is the view of the Committee that one ofthe most significant possibilities for use of cabletelevision is for instructional purposes. Effectiveuse of cable technology may prove to amelioratethe educational crises facing most urban areastoday. Educational programming on cable can beapplied to cut costs, to increase the awareness ofeducational opportunity, to reduce the naturalreluctance of prospective participants to attendacademic facilities and to eliminate many of thetransportation and scheduling limitations of thepresent educational system.

Educational cable services can support pro-grams in existing school situations, and can, inaddition, provide educational opportunity forthose who have left the educative process becauseof age, illness, lack of interest or lack of success.Given the availability of many low-cost communi-

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amounts of information rapidly and reliably. Thetechnology of cable offers the opportunity formunicipalities to creatively address the problemsof communications needs, provision of services,increased governmental efficiency. The advent ofeven limited two-way capability, will create thevehicle for participatory democracy permittingsubscribers to participate in public preferencepolling, Common Council, and special interestmeetings.

The services which municipal channels couldprovide are virtually limitless: traffic surveillance,inter-governmental communications, citizen in-formation and referral programs, library serices,human service "outreach" programs, publicopinion polling, job availability; reports, pollutionsensors, discussion of city problems and healthdelivery programs to name but a few.

BE DESIGNATED AS EDUCATIONAL CHAN-ALLOCATION BE DESIGNATED AS EDUCA-

cation channels and the provision for student inter-action or feed back of a system with two-waycapability, cable television promises to add a newdimension to urban education. It will, for example,be possible for a student to attend at least someof his classes in his home.

Without attempting to commit the educationalinstitutions of Detroit to any specific action, wecan only sketch some of the possible opportunitiesfor education that would be provided by a cablesystem. The first changes most likely to be intro-duced within one to five years of the installationof cable, would involve expanded audio-visualdistribution and shared resources. With a cablesystem, current audio-visual resources movies,video tapes and special programs could be madeavailable more frequently and to wider audiences,since the materials themselves would not have tobe physically transported. Course offerings andspecial speakers could also be shared; a lecture onthe History of Asian Peoples at Cass TechnicalHigh School, for example, could be viewed simul-

taneously over the cable by students in everyother high school in the city. And a universitycourse with restricted enrollment because of class-room size could easily be transmitted to branchfacilities.

Educational programs in this sense would notbe limited to those conducted by schools, butmight also span the vast number of organizededucational programs carried on by agricultural,business, labor, governmental, religious, profes-sional, political, social service or industrial or-ganizations. It has been estimated that one-fourthto one-third of the adult population has takenadvantage of such programs and that the totalnumber participating almost equals the numberof students enrolled in regular schools. Theseperipheral educational programs will probablytake even greater advantage of the opportuni-ties provided by cable television, since they areless encumbered by institutional resistance andhave more flexible resources at their disposal.The Wayne State University Center for AdultEducation, for example, using existing branchlibraries, storefronts, schools, union halls andchurches, could establish 175 mini-branch cam-puses linked to a central broadcasting facilitylocated on the Wayne Campus. Using video tapesof regular lectures and generating special adulteducation materials, they will be able to offer fivetimes as many courses at one-half the unit cost.Federal Model Cities or Poverty Programs coulddevelop programs to assist in the early learningexperiences of disadvantaged children. One mightbe designed for children who speak Spanish athome, another might teach beginning color con-cepts. Private facilities such as General Motorsor public facilities such as a police departmentmight want to use cable television for job up-grading programs. The training could be done atthe employee's job location without the loss of

e. LOCAL TELEVISION BROADCAST SIGNALS

time involved if the program were conducted ata centralized facility.

Over the long run, cable educational channelsmay serve as a mechanism to bring about funda-mental changes in the entire education system.The Committee sees the educational systemmoving in the following direction:

1) Decentralization of facilities to enableexpansion of services without major increases incapital costs.

2) Increased cooperation between previouslyautonomous units of the education system, suchas the University of Detroit and Wayne StateUniversity or the Detroit Public Library and theWayne County Library, with concurrent cost re-ductions and avoidance of duplication.

3) Expansion of the range of services.4) Individual attention to the student a

student who receives his course instruction viacable will respond immediately, via a push-buttonresponse terminal, to the questions posed by theinstructor. Responses go to a computer and aprintout is available to the instructor, who im-mediately knows the progress, has understandingof each student and can advise further study orremedial techniques necessary.

Obviously, the success of a cable system edu-cationally and its ability to encourage educationalinnovation and encompass the learning needs ofa diverse society, is at least in part a functionof the availability of channels for such use. Tothis end, the Committee recommends that a mini-mum of seven of the system's channels be desig-nated for public and private educational use.Division of these channels between primary,secondary, higher education is to be left tothe structure created to administer educationalchannels.

RECOMMENDATION:

7. THAT ALLOCATION OF SUCH CHANNELS INCLUDE EXISTING OVER-THE-AIR CHANNELS.

Over-the-air channels are those channels trans-mitted through the air now available to homereceivers. In the City of Detroit, these are VHFchannels designated 2, 4, 7, 9, and UHF designatedas 50, 56 and 62. (Channel 20 has been licensedby the FCC but has not yet broadcast on a regularbasis.)

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The Federal Communications Commission hasbeen intensively engaged in the process of review-ing its cable policies since 1968, when the SupremeCourt affirmed the Commission's authority toregulate the industry. In its most recent rulings,promulgated in February, 1972 the Commissionestablished mandatory carriage rules, thus assur-

ing cable viewers that they will receive all tele-vision signals that are significantly viewed in theircommunity. The Federal Communications Com-mission rules state that all cable systems may(or must, upon request) carry the signals of all

stations licensed to communities within 35 milesof the cable system's community and all stations"significantly viewed" in the community. All butchannel 62 (and 20) meet these requirements andmust be carried as part of any cable system here.

f. DISTANT TELEVISION BROADCAST SIGNALS

RECOMMENDATION:

8. THAT ALLOCATION OF SUCH CHANNELS

"Distant signals" are those broadcast signalsoriginating in an area outside a 35-mile radiusfrom or not "significantly viewed" in the commu-nity. The cable industry and the broadcast in-dustry have a long history of disagreement aboutthe right of system operators to import distantsignals to be placed on the cable system. Cableoperators view distant signals as a valuableservice because such signals would provide addi-tional programming and would heighten interestin subscribing to the system. Broadcasters, onthe other hand, view the importation of thesesignals as direct competition with their markets.

The FCC in February of 1972 ruled that cablesystems in the top 50 markets (Detroit is rankedas fifth) would be permitted to carry two distantsignals but could not duplicate programs carriedby local stations. These signals, if they originatefrom one of the top 25 TV markets, must be theclosest available signals for Detroit this prob-ably means Cleveland and Pittsburgh; otherwise

g. COMMERCIAL CHANNELS

INCLUDE DISTANT SIGNALS.

they could be imported from anywhere in thecountry, thus allowing the system operator tochoose from a wide range of the country's inde-pendent stations. The most attractive, however,tend to be in the top 25 markets.

The Commission's rationale for allowing onlytwo distant signals was that such importationwould open the way for cable development inmajor markets, while not making an undueimpact on the broadcast industry. At the sametime protection of copyrights to specific programswas made almost absolute. The effect of thiscompromise will apparently be to prevent anysignificant importation of programs from stationsoutside this area. Some programs can be importedwhere they have not been broadcast by localstations.*

*There are also more liberal importation rules for foreignbroadcasts, possibly allowing cable to show CBC pro-grams not aired by Channel 9.

RECOMMENDATION:

9. THAT A MINIMUM OF ONE CHANNEL BE AVAILABLE FOR COMMERCIAL APPLICATIONON A COMMON CARRIER BASIS; REASONABLE LIMITS ON REPETITIVE USE BY INDI-VIDUALS OR GROUPS SHOULD BE IMPOSED; THAT TWO ADDITIONAL COMMERCIALCHANNELS BE MADE AVAILABLE TO SYSTEM OPERATOR.

Commercial channels can be used for com-mercially sponsored programming or other com-mercial purpose, such as cable-cast entertainment(movie packages, sporting events) and to serveas Pay TV (if approved by the Common Council).Also, these channels can provide businesses withsuch services as data transmission, facsimile re-production and professional conference lines.They are "commercial" in the sense that allservices provided on them, whether of an enter-tainment or business nature will be revenue pro-ducing for the system operator. Advertising will

71

be sold or time will be leased on these channels.Use of these channels will, in addition to sub-scriber rates, become the major source of revenuefor the system. It may be fairly stated that welloperated and directed commercial channels willincrease both the subscription level and revenuesto the system, creating the base from which thesystem operator can provide the high level ofpublic services recommended in this Report. Inother words, they are critical sources of supportto finance the construction and operation of thistotal system.

Applications for commercial uses of cablesystem are many. Major retail establishmentsmay wish to purchase time on these channels inorder to advertise merchandise and/or produceinstitutional programming. With the advent oftwo-way capability, these channels will becomethe vehicle for at-home shopping. Businesses ofall kinds wishing to reach a large local audiencecould purchase a movie or sports package whichwould be programmed on these channels. Inreturn these businesses pay an advertising fee tothe system operator. Real estate firms might findthe use of such channels invaluable for area-wideviewing of homes for sale. Cultural institutionssuch as the Detroit Symphony and local theatersmay wish to lease time on the commercial channelto encourage citizens to purchase tickets to per-formances. Businesses and industries may seek torecruit personnel or inform the public of itsnewest products via cable.

Banks, airlines, bus lines, brokerage housesand businessmen in general may wish to utilizethe cable for such data transmission services asrecording of transactions, making reservations,bill paying, inventory control, general record keep-

ing and professional conferences. Further businessapplications are monitoring services such asburglar and fire alarms, water and electrical meterreading.

Attractive and useful commercial applicationsof cable will continue to develop, as the mediummatures. It is in recognition of both the serviceswhich can be made available to business, laborand industry through the cable and the diversityof entertainment programming which will be pro-vided on these channels that the Committeerecommends that there be a minimum of threecommercial channels on any cable system installedin the City of Detroit.

In addition to the basic role of commercialchannels in the economic viability of the system,the Committee recommends that there be one ofthese channels operated on a common carrier,first-come, first-served basis so as not to precludeavailability of time to the smallest of commercialusers or advertisers. Otherwise, small businessesmight have difficulty in obtaining access to thismedium. Adequate protection also must be takento preclude one or more users from monopolizingeven this one channel.

h. PROGRAM GUIDE

RECOMMENDATION:

10. THAT ONE CHANNEL BE UTILIZED FOR PROVIDING A SYSTEM-WIDE PROGRAM GUIDE,AUTOMATED TIME, NEWS AND WEATHER.

With the many channels envisioned, a method spersed with the repeated showings of the pro-whereby program information can be easily gram guide could be news, time and weatherobtained would seem to be essential. One channel reports. This service has been extensively useddedicated to displaying what is appearing on the in most cable systems and is relatively simplesystem seems the most immediate and efficient to provide.way of publicizing the current programming.Such program guide would be created by the Further, the program guide channel might besystem operator each day and would appear on used to publicize time which is available on hthe channel on a constantly rotating basis. Inter- common carrier basis.

i. FM SIGNALS

RECOMMENDATION:

11. THAT THE SYSTEM OPERATOR BE AUTHORIZED TO CARRY EXISTING OVER-THE-AIRFM BROADCAST STATIONS ON THE CABLE SYSTEM.

FM or frequency modulation signals occur atat a different frequency than that used by tele-vision audio and visual signals, therefore makingit possible for the cable system to carry both FMand TV signals without interference from oneanother. The FM signal, like the TV signal, isobtained from the system's main antenna andtransmitted with faithful reproduction to the user.

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In effect, the cable can also act an antenna foran FM radio, providing improved reception andobviating the need for an outside antenna.

Availability of FM signals on the cable systemis a simple and inexpensive service for the systemoperator to provide and will be an additionalattraction for potential subscribers.

4. COMMON CARRIER STATUS

RECOMMENDATION:

12. THAT COMMON CARRIER STATUS BE APPLIED TO ALL TIME NOT REASONABLY PRO-GRAMMED IN ADVANCE ON PUBLIC ACCESS, MUNICIPAL, EDUCATIONAL AND COM-MUNITY CHANNELS.

"Common carrier" operation of cable systemshas become almost synonymous with freedom ofthe electronic medium from the constraints of thepresent broadcasting structure. Strictly speaking,common carrier refers to common carrier access;that is, anyone who wants to transmit programsor offer services over a cable systsem can do soon a fair and non-discriminatory basis, withoutinterference or control by the system operator.Common carrier access on cable systems is desir-able because it provides a means for fullyutilizing the low-cost multi-channel capacity ofcable systems to achieve important goals ofcommunication.

All channels allocated in this Report, if notused for the designated purpose, with the excep-tion of those which are a retransmission of over-the- air signals (UHF, VHF, and Distant Signals),will revert to common carrier status. To sum-marize, common carrier status will apply asfollows:

Community Channels Programming onthese channels will be a function of elected boardswho will grant leases of time to community or-ganzations and/or groups. All time not reservedin advance will revert to common carrier status,available on a first-come, first-served basis.

Public Access Channels Of the two suchchannels recommended in this Report, one chan-nel will operate solely as a common carrier, first-come, first-served. The second public access chan-nel will allow blocks of time to be reserved, withthe provision that all time not programmedreasonably in advance will revert t i commoncarrier status, available on a first-come, first-served basis.

Educational and Municipal Channels Thesechannels function with reserved blocks of timeand all time not reserved in advance will revertto common carrier status, available on a first-come, first-served basis.

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Commercial Channels One of the threecommercial channels recommended would be ona common carrier basis, first-come, first-served.

Four additional characteristics are identifiedwith common carrier status: (1) availability oftime, (2) notification of availability of time, (3)uniform rates, and (4) no control of content bysystem operator.

(1) Use of a channel on a common carrierbasis requires the creation of safeguards againstrepetitive use by individual and/or groups. Toallow anyone to dominate the medium would becontrary to the intent of the common carrierstatus. This Committee urges that all structuresinvolved in the operation and direction of thesystem's channels regulate the use of the commoncarrier channels to avoid dominance by individualsand/or groups.

(2) If common carrier usage is to operatesuccessfully, availability of time must be madeknown to the general public. Otherwise thesechannels will be greatly underused. Availabilitycould be publicized either on the system itself,other advertising media, or through regular mail-ings to subscribers. The Committee urges thatthe best method of publicizing the availability befully developed and implemented.

(3) The Committee has recommended thatusage of public access, municipal, and educationalchannels be at no charge to the user. If anycharges are made for use of channel space, how-ever, the FCC requires such charges to be "reason-able" and "non-discriminatory." This implies thatrates be pursuant to reasonable classifications(e.g., between times of day, types of use) andthat the same rates apply to all users.

(4) Implicit in the term "common carrierstatus" is that there is no interference or controlby the system operator over the content of anyprogram on any common carrier channel.

V. ACCESS

1. PROGRAMMING ACCESS

A. WHAT IS PROGRAMMING ACCESS?

Programming access means the opportunityfor persons who want to transmit programs oroffer services over cable systems to do so. Cable'sability to provide large numbers of channels alongwith relatively low production costs for program-ming will allow access to a degree never beforeavailable. Indeed, open access and diversity ofprogramming are the hallmarks of cable tele-vision. Expanding access will allow programmingto be developed to fulfill the entertainment, social,educational and political needs of the City. It willoffer the opportunity for programs of interest tominority audiences whether they be cultural,intellectual, or economically disadvantaged.

B. SIGNIFICANCE OF PROGRAMMINGACCESS

The significance of programming access is thatit provides a vehicle for individual, group, institu-tional and community self-expression. This willmean an opportunity to express cultural diversityand individualism rather than mass tastes. Suchaccess will encourage a free flow of informa-tion; innovative, diversified and specialized pro-gramming; educational, business and entertain-ment offerings. In short, access to this mediacan and should become an opportunity for all toparticipate.

Such access to broadcast (over-the-air) tele-vision is extremely limited. Because broadcastrevenues are dependent upon the selling of prod-ucts to viewers, television fare is geared to thewidest possible consumer audience and often thelowest common denominator. Specialized pro-

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gramming appealing to less than maximum num-bers is not economically feasible on broadcasttelevision. Viewers have little direct effect onwhat programming is produced, nor can they gainaccess to the media to deliver their own messages.Because a half hour of network television timecan cost over $50,000, programs of a purely localnature with limited audience appeal would requirethat the broadcast stations forego the high profitsof mass audience programming. In contrast, pro-gramming costs on cable range from a few dollarsto several hundred, depending on the nature ofprogram design.

Communications media have become increas-ingly necessary and valuable tools in the modernurban environment. The ability to communicatewidely in the urban setting is a source of vastpower. Open access to the media will materiallyaffect our ability to solve urban problems; it willenable more of us to become involved in thepolitical process. It will allow the natural expres-sion inherent in a pluralistic society. The com-munications media will no longer be controlledby a small obligarchy of commercial interests,but will truly belong to the people.

Television is a medium singularly able to com-municate with Americans. Approximately 95%of all Americans watch television and it has beenestimated that by the age of 18, most youths haveviewed 75,000 hours of television, including350,000 commercials. A survey conducted byRoper Research Associates as reported in Tele-vision and the Wired City, supported the theory(see following Table) that there is an increasingreliance upon the television medium as opposedto the written word.

TABLE 1. THE MOST BELIEVABLE MEDIUM, 1960-1967

The following responses were obtained to the question: "If you got con-flicting or different reports of the same news story from radio, television,the magazines, and the newspapers, which of the four versions would yoube most inclined to believe?"

TelevisionNegro White

% %

NewspaperNegro White

% %

RadioNegro White

% %

MagazinesNegro White

% %1960 31 29 30 32 22 11 2 111961 42 38 23 25 16 11 5 111963 43 37 30 24 13 12 6 101964 53 40 17 24 9 8 8 111967 61 39 15 26 6 7 3 9

Percentages do not add to one hundred since some responses fell into the"don't know/no answer" category.

Source: Roper Research Associates, 1968, as reported inTelevision and the Wired City, p. 26.

The poor, the young, and minority groups,especially blacks, view more than the generalpopulation estimates of viewing time vary from30 to 60 hours a week. The National Commissionon Violence found:

II.. . poor and black use the media for

socialization as a means of contact with andinformation about the world outside his en-vironment; believes its messages more read-ily; emulates role models he sees becauseoften they are missing in his home. It fills avacuum."

Television, especially for those outside of themainstream of American life, plays a pervasiverole. It has a significant influence on values, goals,and actions. Dr. Maddox in his Summary of View-ing Habits and Audience Characteristics, statesthat while "70% of Americans use TV as aprimary news source, 84% of blacks use TV asa primary news source, most as the only newssource. The use of written material by the pooris so marginal as to be a non-useful means ofreaching them."11

In addition to its role as the major source ofnews and information mass television by its verynature tends to portray mass images which areoften not reflective of the needs or interests ofthe minority viewer. Although some efforts havebeen made to correct the portrayal of minority

11. Dr. Gilbert A. Maddox, Summary of Viewing Habitsand Audience Characteristics, University of Michigan,1970.

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groups as stereotypes, significant minority pro-gramming is still non - existent. Situation comedies,drama, and even commercials reflect a picture ofAmerican society that is largely white, middleclass, and portrays a similar value system. Toan extent, open access to the media, particularlythrough cable, can correct this narrow view ofour society.

It is essential that such access not be used toduplicate mass media. It should be sufficient if itprovidr:s, initially, for internal communicationswithin groups and neighborhoods. This meansthat cost barriers to this media must be minimal.Finally, there must be efforts to reduce priorrestraints on program content. In all likelihoodFederal legislation is needed dealing with re-sponsibility for libel and obscenity; taking awaythe need for pre-screening for content.

The paramount goals of a telecommunicationpolicy for the City of Detroit should be to providepublic services, to satisfy long submerged ethnicand minority interests and to guarantee theavailability of individual expression. Such is thepromise of a cable television system if it un-qualifiedly guarantees open access.

C. SUPPORT FOR LOCAL PROGRAMMING

Often referred to as local origination orcablecasting, it is programming which isoriginated on the local cable system. Suchorigination is characterized by its concern withlocal issues, events and people. Programming

produced in Detroit may range from school plays,athletic events, health care programs, gardeningand sewing techniques to educational courses,neighborhood news and Common Council sessions.The many channels available will allow a varietyof programs tailored to specialized needs, muchas trade publications cater to relatively small,specialized audiences. Local programming may bemost useful in inner-city areas as a problem solv-ing mechanism, dealing with the problems ofwelfare, job placement and health services. Randstudies state that "Local origination in the ghettocan perhaps be used to interest local residentsin solving their own problems rather than beingtotally independent on outside help. Local origina-tion channels (with feedback response fromviewers) can be used to gather data about prob-lems, to build leadership within the community,and to create the sense of participation essentialfor the success of almost any program or service.

Ghetto programs often fail for much the samereason that foreign aid programs fail; to theextent that they appear imposed from the out-side, they stifle local initiative, responsibility, anddedication."

The Rand studies further considered the bar-riers to successful local programming. Theyfound: "The major problems of successful origina-tion are frequently inadequate budgets, poor andunsuitable equipment, and difficulties in inform-ing subscribers in a timely fashion of exactlywhat is to be presented."12 It is in recognitionof the critical need for support of local program-ming that the Committee adopted its recom-mendations regarding the provision of funds andfacilities for such purposes.

12. Cable Television: Opportunities and Problems inLocal Program Origination, N. E. Feldman. A reportprepared for the Ford Foundation by the Rand Corp.,1970.

RECOMMENDATION:

1. THAT FUNDS BE ALLOCATED FROM GROSS REVENUES TO SUPPORT PROGRAMMINGON EDUCATIONAL, MUNICIPAL, COMMUNITY AND PUBLIC ACCESS CHANNELS.

To fulfill its promise of meeting communityneeds, local programming must be promoted,encouraged and supported. The cable system willbe utilized only to the extent that adequatefinancial support is available. Provision of fundsfor local programming is somewhat of a circularproblem: a high level of local programming willincrease the subscription penetration rate, whichin turn can be a source for necessary funds tosupport such programming. Conversely, withoutthe high level of local programming, the sub-scription penetration rate may be less, thus reduc-ing the base of support for the funding of suchprogramming.

While funds needed to produce local programsare only a small fraction of those needed fornetwork television, which cost in excess of$50,000 per half hour,13 it is clear that program-ming cannot be produced for the cable system inDetroit without financial support. Experience inother cities indicates that local programming costsvary considerably. The cost for a talk show maybe no more than the price of video tape, whereasmore ambitious efforts can, of course, costhundreds of dollars. The quality and scope of

local programming may be said to be to someextent a function of the availability of funds.While the Committee did not specify the per-centage of gross revenues to be allocated for suchpurposes, our research indicates that five percentof gross revenues would be appropriate.14 Basedupon the Report's revenue projections of sub-scriber rates of $5.00 per month, a penetrationrate of 35 percent will realize gross subscriberrevenues of approximately $9 million a year.(See Section VI.) This level of penetration willprobably not be reached until the third year ofoperation. If five percent of that gross revenuewere allocated for purposes of local programming,the amount of money available would be approxi-mately $450,000 a year. It is appropriate torealistically assess what this figure would meanto the recipients of such funds.

Assuming such funds were allocated to theten community channels, each channel wouldreceive $45,000 a year. If a community channelwished to program twelve hours a day, seven daysa week, 52 weeks a year, this would mean 4,380hours of programming. Stated differently, $10would be available for each hour of community

13. On the Cable, The Television of Abundance, Sloan 14. Cable Television and the Question of Protecting LocalBroadcasting, Leland L. Johnson, Rand, October, 1970.Commission, McGraw-Hill, 1971.

85 76

programming. This figure represents program-ming or production costs, not the cost for cabletime or studio facilities which are to be providedby the system operator. Such funds would beused for personnel, sets, talent, tape and a myriadof other components needed to produce local pro-gramming. If such funds are to be used for pro-gramming on public access, municipal and educa-tional channels, then obviously, the amount ofmoney for each would be diminished. If dividedbetween educational, municipal, public access andcommunity channels, each would receive approxi-mately $2,000 per year for program costs.

It is apparent that these revenues alone willnot be sufficient. Other sources such as founda-tion grants and public and private donations willhave to be tapped to support programming costs.This is especially true before the system is ableto generate any revenues. And yet, as minimalas such allocations of gross revenues will be,without them the promise of local programmingwill go unrealized to the detriment of citizensand the cable system itself. Because the Com-mittee feels that local programming must be aninherent part of the cable system, it urges thatconsideration of the overall cost of installing acable system in Detroit include programming

RECOMMENDATION:

(software) costs as well as technical (hardware)costs, and that the Common Council stipulate inits grant of authority that a certain percentageof the gross revenues of the cable system be allo-cated for programming expenses.

The Committee recognizes that this stipulationmeans, in effect, that all subscribers, through aportion of their monthly fees, will be helping topay for the educational, municipal, community andpublic access programming. (See Section VII,REVENUE, Recommendation 1.) Presumably,however, such programming will be for thebenefit of all. Surely the educational services, byimproving the functioning of government, willserve the public good. Community and publicaccess programming will benefit some subscribersless directly, although it may well be possible thatsome programs will be of interest beyond theirneighborhood or intended audience. Further, thebenefits of a heightened community consciousnessand community spirit should serve all subscribers.

There are other possible sources of fundingfor local programming, such as (1) commercialadvertising, (2) Pay-TV revenues, and (3) publicor non-profit support. These sources must beexamined and utilized whenever possible.

2. THAT THE OPERATOR OF THE CABLE SYSTEM BE REQUIRED TO PROVIDE AND MAIN-TAIN IN EACH CABLE DISTRICT, WITHOUT CHARGE, ADEQUATE FACILITIES ANDEQUIPMENT IN PROPER CONDITION (INCLUDING MOBILE EQUIPMENT) FOR PROGRAMPRODUCTION ON COMMUNITY CHANNELS.

3. THAT THE OPERATOR OF THE CABLE SYSTEM BE REQUIRED TO MAKE PRODUCTIONFACILITIES AVAILABLE IN EACH CABLE DISTRICT, AT NO COST, TO THOSE INDIVIDU-ALS AND GROUPS WHO WISH TO PRESENT THEIR OWN PROGRAMS ON PUBLIC ACCESSCHANNELS, THAT THESE FACILITIES BE MAINTAINED AND STAFFED BY THE SYSTEMOPERATOR AT NO COST.

Local origination requires a studio, cameraequipment and technicians. The equipment andfacilities necessary for cablecasting are consider-ably less costly, and far less complicated, thanthose needed for broadcast television. Accordingto a paper prepared by Theodore S. Ledbetter,Jr., for the publication Cable Television in theCities, "Cablecasting can provide an influentialvoice and generate long-term, stable communitydevelopment through low cost, locally producedprogramming by minority groups and for minor-ity groups."

66 77

Mr. Ledbetter outlined basic studio facilitiesfor cablecasting. They consist of a sound-proof,air-conditioned room with a good supply of elec-trical outlets. Although everything can be donein a single room, he suggests that it is helpful ifa small separate room is available as a controlroom. Good lighting is one of the most importantconsiderations for good video pictures. At mini-mum, floodlamps purchased at a hardware storecan be suspended from overhead pipes. Basicstudio equipment for videotaping for cablecastingconsists of two TV cameras, a switcher, a TV

monitor, videotape recorder, lights, microphonesand audio mixer. The switcher is used to switchfrom one camera to another. The monitor showswhat is being recorded on tape, and the audiomixer controls the inputs from the microphone.Both the video and the audio are recorded on thesame tape at the same time by the videotape

recorder. More elaborate studios would containmore and better cameras and recorders (e.g.,color), a monitor for each camera and a filmchain that would allow movies and 35mm slidesto be part of the program. Several types of equip-ment are listed below:

BASIC EQUIPMENT FOR CABLECASTING*

Black and White (B/W)Equipment Basic

Figure

Cameras 2tripodsdollieszoom lensheadsets

Controlswitcher(control changed from one camera to another)special effects

Film Chainaudiotape player

AverageII

2

BasicIII

2

ColorAverage

IV

2

FullV, VI

3

Monitors, Video 1 4(to view what is being recorded)

3 4 5

Waveform MonitorMicrophones 2 3 2 3 4

Mixer, Audio(to control sound levels being recorded)

Audio Monitor(to hear what is being recorded)

Video Recorders 1 1 1 2 2tape size 1" 1" 1" 1"

LightsApproximate Cost $1b,000 $20,000 $35,000 $50,000 $80,000

*Cable Television in the Cities, Charles Tate, Editor.

In addition to studio and operating equipment,personnel to operate the equipment and producethe programming is required. The minimum re-quirement for any studio is a crew of threepersons one for each of two cameras and oneto operate the control room equipment. Otherpeople may function as producers, directors, andtechnicians. Local origination facilities will createexciting and challenging job opportunities. Be-cause the success of local origination will rest inlarge measure upon adequate trained personnel,the Committee has recommended that such per-sonnel be trained by the system operator. (SeeSection X, EMPLOYMENT.)

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If local origination is to satisfactorily reflectthe needs of the people of the City of Detroit,there must be an adequate number of originatingfacilities. The experience of New York City whichat present has only three (3) outlets, mostly inupper income areas, has demonstrated that ifstudios are not numerous and located close tothe community, use of the facilities is limited."The poor and the unorganized are reluctantto travel to unfamiliar areas, discouraging fullutilization."15

15. New York Times, Public Access TV Here UndergoingGrowing Pains, October 26, 1971.

By requiring the system operator to maintain,in each cable district, the facilities and equipmentnecessary for programming, the Committee isseeking to guarantee that the promise of thecommunity and public access channels is fulfilled.Obviously, no group, organization or individualshould be expected to provide these facilitieshimself. If there were to be more than a nominal

charge for such services, the Council would justbe erecting economic barriers to replace thecurrent barrier of limited and costly channel avail-ability. The Committee strongly believes thatwithout this requirement for provision of facilities,all of the hopeful statements about open access toprogramming will become a farce.

RECOMMENDATION:

4. THAT THE OPERATOR OF THE CABLE SYSTEM PROVIDE, WITHOUT CHARGE, LINKAGEFROM THE PRODUCTION FACILITIES OF EDUCATIONAL AND MUNICIPAL INSTITUTIONSTO THE TRANSMISSION FACILITIES OF THE CABLE SYSTEM.

The Committee envisions that the educationalinstitutions, under their administrative structure,and the municipal institutions, through a specialcity department or another administrative body,may develop their own production facilities. Thismay be necessary because each of these groups isresponsible for programming of separate channelswhereas other groups and organizations in thecommunity will be sharing time on the communityor public access channels.

Our educational and municipal institutions are

GROUP OR ORGANIZATIONREQUESTS PROGRAMTIME SLOT ONREGULAR BASIS

agencies that serve the public. The city shouldinsure that their programming have access to thesystem through appropriate linkages withoutadditional financial burden on these institutions.The extent that they are involved in programmingwill increase to the subscriber the services, in-formation, and value of cable as a communicationsystem. The operator of the cable system shouldprovide the links from the production facilitiesto the cable system.

PROGRAMMING ACCESS

CDA APPROVESAPPLICATIONAND ALLOCATESTIME PERIOD

SIMILAR PROCEDURES ARE APPLICABLEFOR CHANNELS OPERATED BY CCB, PA ADM, ORFOR THAT MATTER, FOR CHANNELSLEASED BY SYSTEM OPERATORTO OTHERS.

CDA CABLE DISTRICT ADMINISTRATIONCCB COMMUNITY CABLE BOARDPA ADM PUBLIC ACCESS (CHANNELS)

ADMINISTRATION

88

GROUP DESIGNS ANDPRODUCES ITSPROGRAMS (WITH TRAININGASSISTANCE IF REQUESTED)

79

PROGRAM AVAILABLETO ANY VIEWER IN CITYAS CHANNEL 21

PROGRAMMING ON MUNICIPAL ANDEDUCATIONAL CHANNELS WILL BEORIGINATED BY ADMINISTRATIONSOPERATING THOSE CHANNELS, USUALLYBY PARTICIPATING CITY OR EDUCATIONALINSTITUTIONS, RESPECTIVELY.

2. VIEWER ACCESS

RECOMMENDATION:

1. THAT SUBSCRIBERS IN ANY CABLE DISTRICT BE ABLE TO VIEW ALL CHANNELS WITHINTHE CITY'S CABLE SYSTEM, EXCEPT FOR CERTAIN SPECIFIED PURPOSES WHICH MAYBE AUTHORIZED BY THE CABLE SYSTEM AUTHORITY. SUCH PURPOSES SHOULD IN-CLUDE TRAFFIC SURVEILLANCE, FIRE PROTECTION, AND PROFESSIONAL, TECHNICALAND COMMERCIAL CONFERENCES.

If Detroit's cable system is to serve to heightencommunity consciousness and to lead to an inter-change of information, ideas, and creativityamong the various groups of Detroit, it is essentialthat all cable channels be available to all viewers,no matter in what portion of the City or cabledistrict they reside. In making this recommenda-tion, the Committee recognizes there is a costinvolved. It is possible, technically, to set upmultiple uses of the same channel in differentareas through separate "hub" systems for eacharea. Thus, a particular channel could be pro-grammed at the same time with different pro-grams in different areas of the city. If receptionof a particular channel were limited to thosesubscribers in that cable district, the channelwould be free for other programming, in the otherdistricts. Quite possibly this alternative program-ming on community and public access channelswould be more relevant, for example, to thecitizens of southwest Detroit than the program-ming produced by a cable district in northeastDetroit. Yet, it is the fervent hope of this Com-mittee that cable television will become a meansfor the various communities in Detroit to talk toeach other and more importantly to startto listen to one another. Limiting the receptionof community or public access channels in accord-ance with cable districts would instead tend tofurther fragment our city.

No longer do racial or ethnic groups liveconfined in a small area. No longer do peoplewith like interests necessarily live in proximity.A high school basketball game, on the east side,for example, would be of interest not only to those

people who live near the high school, but also torelatives of players who live on the west side, tothe southside high school which is going to playthe team next week, and to other people, scatteredaround the city, who simply enjoy basketball asentertainment. Similarly, it is hoped that theexperience and exposure on community channelswill enable some groups to develop a professional-ism and expertise that will attract community-wide viewers: a well-done play, puppet show orconcert could easily draw attention purely on thebasis of merit, not geography.

We think it apparent, therefore, that city-wide access to viewing more channels must beavailable to all districts. The Committee, how-ever, does recognize that there might well becertain instances where privacy among cable usersmust be assured. A channel devoted to supervis-ing traffic flow or monitoring an area for firesshould logically be restricted to the governmentagency involved. If a business firm leases timeon a channel for a sales conference with areamanagers, it will want to be assured its competi-tors are not listening. If a group of physiciansis using cable time for continuing education innew techniques of medicine, their messages canproperly be limited to other doctors.

The Committee recommends, however, thateach exception to the rule of system-wide vieweraccess must be authorized specifically by the cablesystem authority. The exceptions should be keptto a minimum. For the sake of improved intra-city communications, open access to any channelon the system must be the norm.

RECOMMENDATION:

2. THAT ACCESS TO THE CABLE SYSTEM BE AVAILABLE TO EVERY PERSON IN THE CITYWISHING TO SUBSCRIBE, ON A NON-DISCRIMINATORY BASIS, AND WITHIN A REASON-ABLE AND SPECIFIED PERIOD OF TIME.

Because a cable system will provide a varietyof services in addition to better reception andincreased entertainment, the Committee is con-cerned that such services be offered to the widest

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number of households at the earliest possible time.Clearly, anyone wishing to subscribe must bepermitted to do so. Concerns over equal treat-ment of all areas of the City with regard to rapid

construction of the system were dealt with earlier.(See Section II, CONSTRUCTION.) Naturally,viewer access requires installation of feeder cablesfrom which house drops may be made. This alsomeans a specified construction schedule backedup with performance bonds.

Any system operator will obviously seek toinstall that system which will provide the greatestimmediate return. In attempting to determinehow that return can be generated, the choice maybe between affluent sections of the city, wherethe modest monthly subscriber fee will not repre-sent a burden to the household and a highinitial rate of penetration can be expected andthe less affluent areas, where the cost may wellbe a financial burden to the subscriber. But, ex-perience demonstrates a higher and more denselyconcentrated number of households will eventuallysubscribe because of limited leisure/recreationalchoices. Regardless of such economic considera-tions, no section of the city should receive prefer-ence in the cable system's construction schedule.A construction schedule should be required thatdelineates the system's installation in a numberof areas simultaneously and full installation in theshortest feasible time. It is not assumed that thesystem will wish to deny any potential subscriberaccess to the system, since obviously, the highestnumber of subscribers is desirable. Nevertheless,it should be explicit that the system operator offerservice to any potential subscriber requesting it,as the construction schedule approved by theCouncil makes such service available. Such aposition does not prohibit the operator from dis-

RECOMMENDATION:

continuing service for non-payment of subscriberfees or other legitimate considerations.

In some cities there has been a reluctance onthe part of multiple dwelling landlords to allowthe installation of cable unless the operator paysan added fee to the property owner. The effectof this action has been the denial or at least delayof service for those tenants.

One of the New York franchise holders hastwo methods of dealing with this problem:

A. If the property owner retains the rightto withdraw his approval of the cable installationat any time, the cable operator will remove allequipment when requested to do so. The landlorddoes not receive any fee from the system operator.

B. If the property owner will allow the cableoperator three years of operation in his building,he will receive five percent of the gross revenuegenerated within that building. In New York, thecity government, through the franchise, cannotgrant a right-of-way onto private property. Itbecomes necessary, therefore, for the cableoperator to negotiate separately with each prop-erty owner. If a special public authority is thesystem operator in Detroit it could be grantedcondemnation power for the necessary ease-ments. Implementation might be cumbersome orinordinately expensive, however. Fortunately,multiple unit housing and high rise buildings arescarcer in Detroit. Whether there is a sufficientlegal basis for preventing this "toll" by landlordsthrough lawsuits or through Council action shouldalso be explored.

3. THAT THE CABLE SYSTEM AUTHORITY DEVELOP AN APPROPRIATE MECHANISM TOPERMIT ACCESS TO VIEWING FOR LOW-INCOME FAMILIES.

The regulation of installation and subscriberrates is an important factor in any system. It isnot only of concern to the operator who seeks tomaximize his return, but is equally important tothe subscriber who seeks the most service at theleast cost. Of particular concern to the Committeehas been consideration for those to whom evena $5 per month subscriber fee would be burden-some. This group includes the low income family,the public assistance recipient and the seniorcitizen, all of whom are perhaps most dependentupon television as a source of information and

8190

entertainment. The public service, educationaland community services anticipated as part of thesystem will be extremely important to suchpotential viewers. If they are to avail themselvesof cable services, some adjustment in the ratestructure will be needed. Whether such an adjust-ment should involve a flat:rate reduction or apercentage reduction based on household incomewas a determination the Committee was unableto make at this time. To provide for them shouldbe a matter high on the agenda of the cable systemauthority.

RECOMMENDATION:

4. THAT THE OPERATOR OF THE CABLE SYSTEM PROVIDE, WITHOUT CHARGE, DROPS TOHOSPITALS, SCHOOLS (PUBLIC AND PRIVATE), PUBLIC HOUSING, PRISONS, JAILS,MENTAL INSTITUTIONS, REFORM SCHOOLS, POLICE AND FIRE STATIONS, AND SIMILARPUBLIC AND PRIVATE INSTITUTIONS; THAT DROPS BE LOCATED AS PER SPECIFICATIONBY SUCH INSTITUTIONS.

In keeping with the Committee's definition ofcable as a valuable communications medium, it isimportant to maximize the system's service out-lets at the time of initial installation. There arecertain types of institutions which should be"hooked-up" to the system without charge. Sincethe cable system is designed to serve the publicinterest, institutions such as police and fire sta-tions, mental institutions, jails, etc., should have"drops" which would allow residents of theseinstitutions to view what is on the cable system.Schools, both public and private, will be suchintegral users of cable that it is mandatory that

82

they be provided drops in order that they haveaccess to the system. In the long run, provisionof such access will expand the use of and theinterest in the cable system.

It has been the experience of other cities thatthe requirement of a drop to a public institutiondoes not guarantee the installation of that con-nection at a convenient, or even useful, location.The Committee, therefore, recommends that theinstitution being served be given the option ofdesignating the location of its connection to thesystem.

VI. REVENUE

1. SOURCES OF REVENUEThis section will attempt to put in broad

outline the economic and financial variables re-lated to a cable system for the City of Detroit.

These rough projections were developed assum-ing a dual or two-cable system with channelcapacity of about 40 and possessing 13 localantenna and broadcasting facilities. They applyto Detroit the per unit costs of more thoroughstudies in other cities.

This section is based on eight separate seven-year projections of profit and loss and cash flowstatements. (See Appendix for Charts.) Thereare four different subscription saturation percent-ages assumed for two different construction costsper cable mile, a higher one (High $10,000 percable mile) and a lower one (Low $8,000 percable mile). The first is an extremely conservativefigure and the latter about what other cities'studies have used for urban areas. Thus, forinstance, 40%-High refers to the seven-year pro-jection of revenues and costs of a cable systemcosting $10,000 per cable mile and have an even-tual subscription rate of 40%.

The large number of projections is due to theuncertainty of crystal ball gazing, both in termsof costs and revenues, and reflects the basis forthe Committee's urging for detailed and moreprecise projections. For the same reason, thereis a pessimistic bias in many of the assumptionsmade. For instance, the necessary number ofcable miles is estimated at 2,790, which is thenumber of paved street miles in the City ofDetroit. This can be taken as an upper limit asit is quite possible that certain streets can be by-passed in a cable system. Also, in terms of thecost per cable mile, conservative estimates wereused. Cost figures as low as $6,500 per mile havebeen used for analogous areas elsewhere but thefigure of $8,000 as a lower limit was felt to bemore realistic for Detroit.

Also, with each profit and loss, cash flow pro-jection, more detailed cost and revenue break-down are given for the eight models.

The projections are in the Appendix. A de-scription of each item and the assumptions maderegarding it follow here.

83

A. GROSS REVENUEThere are two kinds of revenue which will

accrue to a cable system. The first is a one-timerevenue which is the amount paid for a housingunit to be hooked-up to the cable feeder line. Thiswas estimated at $10.00 per subscriber. Thesecond and primary source of revenue is the rentalcharge for the cable system which is estimated at$5.00 per month or $60.00 per year per subscriber.

Assumptions made in the projections are (1)there are 190 households per cable mile. This wasarrived at by dividing the total number of housingunits in Detroit according to the 1970 UnitedStates Census (530,100) by the number of pro-jected cable miles (2,790). (2) A household canbegin subscribing to a cable system the year afterconstruction is completed in the area. (3) Thefirst year after cable is available, households willsubscribe at such a rate that by the end of theyear the projected saturation level is reached.For example, if the projected saturation level is30%, on January 1 no one will be subscribing, onJuly 1, 15% will be subscribing, and on December31, 30% will be subscribing. (4) Once a house-hold is signed up, it will not drop the system.

With these assumptions, maximum revenuewill be reached in the seventh year. The analysisdoes not allow for business hook-ups which couldaccount for a significant source of subscriberrevenues.

B. OPERATING EXPENSESThis is the projected cost of maintenance and

administration. This was assumed to be 15% ofthe existing capital so that this reaches its maxi-mum by the fifth year. Significantly, no estimateof programming costs are included, nor arecosts of obtaining programming, advertising orsubscriptions.

C. INTEREST EXPENSESIt was assumed that the whole of the capital

costs would be financed by bonding at a 5%interest rate. This is the rate which could beexpected on a 15-year, non-taxable, municipalbond.

92

D. DEPRECIATIONIt was assumed that the capital would be

depreciated over 15 years, straight line.

E. FUNDS COMMITTEDIt was assumed that the money needed for

building the system for any given year would beborrowed at the beginning of that year. Theseare the funds received from the selling of bonds.

F. CAPITAL ASSET COSTS1. Cable Feeder Lines

This is the cost of the coaxial cable itself,amplifiers which are needed periodically alongthe lines in order to maintain signal strength, andtheir placement along the streets. As was statedpreviously, there are two estimates, one of $8,000per cable mile and the second of $10,000 per cablemile. A 5% rate of inflation was also assumed.Thus, what in the first year cost $8,000, in thefifth year cost $9,724. For the $10,000 estimatecosts rose to $12,155 in the fifth year. The numberof necessary cable miles was estimated at 2,8002,680 above ground and 120 underground. Theunderground lines were estimated at $11,000 permile and we assumed that they would be laidentirely in the first year.

For the aerial cable it was assumed the con-struction would occur over five years so that 534miles would be laid each year.

A third type of cable, trunk cable, is thatconnecting the local antenna and broadcastingfacilities with the master control facility. Thiswould be triple cable capable of return transmis-sion and it was assumed that 100 miles would benecessary or an average of 7.7 miles for eachof the 13 local facilities. The cost of this typewas estimated at $13,000 per mile with the infla-tion factor raising the cost to $15,801 in the fifthyear.

2. Master Antenna and Control FacilityThis is the main antenna and switching station.

It is here that programs originating in one of thelocal broadcast centers would be sent to other

2. REVENUE DISTRIBUTION

local systems, either selectively or collectively.The estimated cost is $100,000.

3. Local AntennasBecause of the inevitable deterioration of

signals as they are amplified over the line, morethan one antenna will be necessary to provide theentire city with clear reception. Thirteen suchantennas are assumed to be necessary. The costof each antenna is estimated at $40,000 withinflation raising the cost to $48,620 in five years.Also assumed is that three such facilities will bebuilt each of the first four years with the lastbuilt the fifth year.

4. Local BroadcastingThese are studio facilities for local orientation

production. This includes such equipment ascameras, lights, and lens but does not includebuilding nor land costs. Estimated cost is $220,-000 each with the inflation factor raising the costto $267,411 after five years.

5. Subscriber CapitalThis is what may be called variable capital.

It is the capital expenditures which will vary withthe degree of subscription. There are two types.The first is the cost of the hook-up of the housefrom the cable trunk line. This is estimated at$25 per subscriber. The second is the cost of thesignal converters which will be necessary for anordinary television to pick up the proposed 40stations. This is estimated at $30 per unit.

6. Working CapitalWorking capital is best described as cash-on-

hand at the end of the year. Negative figuresappear quite frequently in the tables which inreality would mean the firm must go out of busi-ness. The negative figures can be interpreted asthe amount of subsidy or extra borrowing whichwould be needed. As can be seen, some estimatesresult in this deficit eventually being paid off,some result in an ever-expanding deficit.

One final note is necessary. None of ourestimates include the fees for bond retirement.It is an unavoidable and large expense but nocompatible nor obvious method of handling thisitem was devised and it was not included.

RECOMMENDATION:

1. THAT PROGRAMMING COSTS FOR EDUCATIONAL, MUNICIPAL, COMMUNITY AND PUBLICACCESS CHANNELS BE AT LEAST PARTIALLY SUPPORTED THROUGH ALLOCATION OFFUNDS FROM GROSS REVENUES BASED UPON A FORMULA TO BE DEVELOPED BY THECOUNCIL OR REGULATORY AGENCY.

840.3

Speculation about the enormous revenue tobe generated by a Detroit cable TV system hasranged from zero profit for the first ten years toan almost immediate $8 to $15 million annually.While it is true that the cash flow for the oper-ation will be relatively large, it is also true thatthe initial capital investment will create a heavyburden of debt repayment and servicing. Further,there will be significant programming and oper-ational costs. Clearly, the system must attemptto meet all expenses and investment costs at theearliest moment. In projecting the income of thesystem, the Committee in a preliminary (andadmittedly very rough) analysis was unable toforesee a break-even situation earlier than sevenyears after initial installation and then only ifthe system is able to achieve over 45 percentpenetration rate.

Nonetheless, even before the cable systembegins to make a profit, there are certain publicservices that the Committee believes must beestablished at the inception of the system. Whilewe recognize that the system operators will seekto minimize costs to accord with available reve-nues, we believe that the importance of insuringthese public services requires treating these costsduring the start up period as if they were capitalcosts. For, in effect, they are. Community pro-gramming, for example, may be very significantin providing a subscriber base. Secondly, suchprogramming reflects the essential communica-tions function the system can perform and whichjustifies the public involvement in the system'sdevelopment.

Providing facilities for community originatedprogramming must be recognized as an initialcost of operating in the City of Detroit. On theday that the first section of Cable system is capableof providing service to any subscriber, it wouldbe highly important that the community pro-gramming capacity should be a part of thatservice. Likewise, public access channels must bemade available at the outset. It is expected thatnot only will such community programmingattract subscribers, but also these programs willserve the interests of the subscribers. It will givethem both variety and diversification of program-ming that otherwise would not be available. Thus,such programming costs, at least in part, arevalid expenses to be paid for out of subscriberfees and other revenues from the system.

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Although we are equally concerned with theinclusion of the capacity for educational andmunicipal channels in the system, we are lessconcerned that these channels initially be utilized.The educational community is already heavilyinvolved in television programming and relatedactivities. While it is well known that both themunicipality and the various educational institu-tions need additional funds, the Committee doesnot believe that either are so totally withoutresources as to necessitate further burdening afledgling cable system with the obligation to pro-vide totally free service including programmingcosts on these channels. (The Federal Communi-cations Commission, however, does require thatone free governmental and one free educationalchannel be provided for the first five years of acable system's operations.) On the other hand,the system operator should be required to provideat least a minimal amount of technical and finan-cial assistance for the operation of such channels.

As reflected above, there are many variablesrelating to the costs of community programming.It was beyond the competence of the Committeeto make even calculated estimates of such costs.The early part of this section dealt with sourcesof revenue, and it indicated the difficulty in secur-ing firm data as to amounts of income availablefor community programming. We are convincedthat such community programming costs shouldbe heavily underwritten out of system revenues.Experience in other communities where onlymeager efforts at community programming havebeen attempted, discloses that both for quantityand quality of such programming, an adequaterevenue base from the system is indispensible forthis to happen. To afford the opportunity forcommunity programming without providing somefinancial base for it, is tantamount to insuring itwill not happen.

For these reasons the formula for allocatingfunds from the revenues to be used for suchpurposes needs to be developed by either theCommon Council or the proposed cable authority.It is important that funds come from gross ratherthan net revenues, whatever percentage is deter-mined, since otherwise there may be a temptationfor the system operator to limit the allocation bymanipulation of expenses. In fact, other thansetting a flat amount for programming supporton these channels, a percentage of gross seemsbest adapted to assure a financial base is available.

RECOMMENDATION:2. THAT CABLE REGULATORY ACTIVITIES BE SUPPORTED BY THE CABLE SYSTEM

THROUGH ALLOCATION OF A SUFFICIENT PORTION OF SYSTEM REVENUES.

It is appropriate that any costs which the Citymay incur for regulation of the cable systemshould be paid for by the system. The financialplight of the municipal government should notbe additionally burdened by the introduction ofcable television. Should any operator other than

the recommended public authority be granted afranchise, a franchise fee, payable at the time ofthe grant of authority to operate, as well as aportion of the revenues, would be an appropriatemeans of funding the regulatory activities by theCity.

RECOMMENDATION:3. THAT REVENUES REMAINING AFTER EXPENSES BE ALLOCATED BY THE SPECIAL

PUBLIC AUTHORITY OR CABLE AUTHORITY TO A FUND FOR REDUCING SUBSCRIBERCOSTS, IMPROVING SYSTEM CAPABILITY, SUPPORTING ADDITIONAL COMMUNITY,MUNICIPAL, EDUCATIONAL AND PUBLIC PROGRAMMING COSTS. THAT IF FURTHERREVENUES REMAIN, SUCH REVENUES SHALL BE GIVEN TO THE CITY AFTER SUleFICI-ENT RESERVES ARE ESTABLISHED FOR CAPITAL IMPROVEMENTS.

The Committee believes that some time in thefuture, perhaps as soon as five years after theinstallation of a cable system, significant revenuewill be generated by non-video and subsidiaryuses of the system, uses such as data and facsimiletransmission and closed circuit programming. Asthis revenue develops, the primary concerns ofthe Committee are:

1. That subscriber rates be kept extremelylow;

2. That the system itself be continuously

improved to incorporate the most advanced tech-nological features practicable;

3. That additional funds be devoted to theprogramming which can never be expected tobecome fully self-supporting, i.e., community,public, municipal and educational programming.

It would be only after these primary andfundamental needs that directly relate to anefficient and adequate development of cable as acommunication system are met, that then anyadditional revenues should inure to the city.

3. ADVERTISING

RECOMMENDATION:1. THAT IN ORDER TO INCREASE FINANCIAL SUPPORT' FOR LOCAL PROGRAMMING, AD-

VERTISING BE PERM:WEED ON COML.,.,14ITY CHANNELS: THAT ADVERTISING BEDIVORCED FROM PROGRAM CONTENT AND PRODUCTION ON COMMUNITY CHANNELS.

2. THAT REVENUES FROM ALL ADVERTISNG ON COMMUNITY CHANNELS GO TO SUP-PORT PROGRAMMING COSTS FOR COMMUNITY CHANNELS: THESE REVENUES TO BEDEPOSITED WITH THE COMMUNITY CABLE BOARD FOR ALLOCATION ON A FAIR ANDEQUITABLE BASIS. (THESE FUNDS WILL SUPPLEMENT ANY REVENUES FROM THETOTAL SYSTEM WHICH ARE TO BE ALLOCATED TO COMMUNITY CHANNELS FOR PUR-POSES OF FINANCING LOCAL PRODUCTION COSTS.)

Except on those channels which are commer-cially oriented over-the-air broadcast and com-mercial cable channels the Committee wouldhave preferred to eliminate advertising. Werecognize, however, the need for considerablefunds to provide quality community programmingAnd the potential for community groups andother to raise funds by permitting limited ad-vertising, divorced from program content. Also,the potential exists for small advertisers to haveaccess to the medium on channels identified withand primarily viewed by the area they serve.

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The bulk of advertising revenue generated bythese channels should be pooled to provide fundsfor allocation to community groups to cover theirproduction costs. If a community group wouldwish to to provide programming that costs morethan the funds allocated through the CableDistrict Administration, it too should be entitledto solicit limited advertising. We anticipate thatthrough these additional revenue sources thequality and production values on communitychannels will be enhanced.

RECOMMENDATION:

3. THAT THE COMMUNITY CABLE BOARD ESTABLISH A SCHEDULE OF ADVERTISINGRATES AS WELL AS A PROCEDURE FOR ALLOCATION OF ADVERTISING TIME ON COM-MUNITY CHANNELS TO GUARANTEE MAXIMUM ACCESS TO SUCH TIME FOR BOTHSMALL AND LARGE ADVERTISERS.

To equitably handle the problem of rates andtime allocations for the advertising to be per-mitted, we strongly recommend that standardsbe developed by the Community Cable Board.These standards would include the rates to be

charged the advertisers, the times at whichadvertising can appear and the total amount ofprogramming time which can be devoted toadvertising.

RECOMMENDATION:

4. THAT ADEQUATE FREE PUBLIC SERVICE TIME BE SET ASIDE FOR POLITICAL ISSUESAND CANDIDATES ON PUBLIC ACCESS CHANNELS; NO PAID POLITICAL ADVERTISINGSHALL BE PERMITTED ON THESE CHANNELS. THE USE OF COMMUNITY CHANNELSFOR SUCH PURPOSES SHALL BE LEFT TO THE DISCRETION OF CABLE DISTRICTADMINISTRATIONS.

Political advertising for various candidatesrarely informs the electorate or illuminates theissues. The FCC requires and the Committeerecommends that such advertising not be allowedon public access channels. On the other hand,free exchange and full debate between compet-ing candidates and relating to issues whichthe electorate must decide are of great service.Sufficient time for such discussion has rarely beenavailable to well qualified but poorly financedcandidates. Therefore, we have recommended thatadequate free time be made available to all quali-fied candidates. In addition, as a part of servingcommunity interest and need, adequate oppor-

tunity should be available and free time affordedfor adequate presentation of political and com-munity issues. The format for the presentationof such issues can be varied. The public accesschannels with city-wide responsibilities, are theunique forum for this community service. Thedetermination of what constitutes adequate freetime and when it shall be made available arematters which can be decided by those boardswhich will administer the community and publicaccess channels. We have elsewhere recommendedthat administrative review procedures be estab-lished to assure that such decisions are not madein a capricious or arbitrary manner.

VII. REGULATION

In the broadest sense, this entire report dealswith the regulation of cable television. That is,nearly all the recommendations are concernedwith how government, particularly the City ofDetroit, can shape the new medium in the publicinterest. This section of the report, however, willbe limited primarily to a discussion of the regula-tory background for the City's efforts. This willinclude a survey of existing powers, regulatoryprograms and intentions at both the federal andstate levels and the City's powers and limitationsunder existing law. A final part of this section willaddress the issue of inter-connectability of cablesystems in the State of Michigan.

1. FEDERAL REGULATIONHistorically, federal regulation of cable tele-

vision defies generalization. In the industry'sinfancy, the FCC took the position that it lackedjurisdiction over the new medium. However, ascable grew and broadcast television interestsperceived threats to their well-being, the Commis-sion found ways to regulate cable even thoughthere was no new grant of powers from Congress.At first, this regulation took the form of restric-tions on cable's use of microwave to import distantsignals. Soon, jurisdiction was extended to alluse of broadcast signals, whether imported viamicrowave or not. Still later, the Commissionbegan to indirectly regulate cable through itscontrol over telephone companies seeking to pro-vide cable distribution facilities. More recentexercises of control, relying less obviously on theFCC's jurisdiction over related communicationsforms, have encountered difficulties in the lowerfederal courts.

The focus of the FCC's regulation of cable hasalso shifted over the years. Until recently, mostregulations were clearly designed to protect exist-ing broadcast interests. This was particularlyapparent with respect to rules adopted after a1968 Supreme Court ruling that a cable system'sretransmission of broadcast signals was notcovered by existing copyright laws. However, asthe cable television industry grew and the poten-

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tial of cable became more widely known, the Com-mission's emphasis began shifting toward accom-modation between competing interests. As re-cently stated by FCC Chairman Dean Burch, theobjective has become "to find a way of openingup cable's potential to serve the public withoutat the same time undermining the foundation ofthe existing over-the-air broadcast structure."

The FCC's basic grant of powers is the Com-munications Act of 1934, and the Act has neverbeen amended expressly to cover cable television.Moreover, the Act specifies detailed regulatorypowers only for "common carriers" and radio.However, the Act charges the FCC with the broadresponsibility

of regulating interstate and foreign commerce incommunication by wire and radio so as to makeavailable, so far as possible, to all the people of theUnited States a rapid, efficient nationwide, andworld wide wire and radio communication servicewith adequate facilities at reasonable charges . . .

Furthermore, the Act applies "to all interstateand foreign communications by wire or radio."

In spite of the FCC's seeming broad grant ofpowers under the 1934 Act, a 1959 Commissionreport took the position that the FCC's jurisdic-tion over cable was questionable. However, in1962 the FCC refused to license a microwavecommon carrier's construction of a system torelay distant signals to a cable system operatorunless the operator would agree to carry localbroadcast programs and not duplicate programscarried by the local station. The Commission'srefusal was upheld in the lower federal courtsand the same conditions were later imposed byadministrative rule on all cable systems importingdistant signals via microwave.

In 1966, the FCC extended its asserted juris-diction to all cable systems, whether or not theywere served by microwave radio. In addition toimposing carriage and non-duplication rules simi-lar to those adopted earlier for microwave-servedsystems, the FCC moved directly to stem theimportation of distant signals: no distant signalscould be imported without an FCC waiver or anFCC hearing and a determination that importa-tion would be in the public interest. And virtually

no waivers or favorable public hearing decisionswere made for cable systems in the major tele-vision markets. The FCC's assertion of jurisdic-tion over cable systems to the extent of this 1966rule-making was upheld by the Supreme Courtin 1968.

Following another 1968 Supreme Court de-cision, holding that a cable system's retransmis-sion of broadcast material was not covered bycopyright laws, the Commission "liberalized" itsrules relating to importation of distant signals.The new rules required cable systems operatingin an area served by a broadcast station to secureprogram - by - program "retransmission consent"from distant stations. Moreover, under a laterFCC interpretation, a valid consent required thatthe station have full authority to convey the copy-right owner's interest in the program, an author-ity broadcasters generally do not acquire. Asmight have been expected, few transmission con-sents have been obtained.

The Commission also moved in 1968 to regu-late cable indirectly through its control overtelephone companies. An FCC decision held thata certificate of public convenience and necessitypursuant to section 214 of the CommunicationsAct must be obtained by a telephone companybefore constructing or operating cable systemdistribution facilities. This decision was laterupheld in the lower federal courts.

Prior to 1969, federal regulation of cable hadbeen primarily concerned with protecting theexisting broadcast industry. However, in thatyear the Commission issued its first ruling con-cerned with the very nature of cable service apartfrom its effect on broadcast stations. This ruling,permitting cable systems to originate program-ming and sell commercials, became effective in1971. The ruling further required systems with3,500 or more subscribers to originate a significantamount of programming, but in May 1971 a lowerfederal court held this requirement beyond theFCC's power. The Commission's petition forSupreme Court review has been granted, and theCourt is expected to hear the case before the endof its current term. (Although the FCC at onetime suspended operation of the challenged rulepending the outcome in the Supreme Court, therule has been reinstated in the Commission's mostrecent rule-making.)

In the past two years, the FCC has intensifiedits rule-making efforts relating to cable television.In addition to promulgating rules prohibitingcross-ownership between cable systems and tele-

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vision stations, television networks and telephonecompanies, the Commission issued a series ofproposals and held extensive hearings on a widerange of subjects pertaining to cable. Then, inAugust 1971, the Commission outlined its plansfor the "near-term" regulation of cable in a "letterof intent" to Congress. Subsequently, the WhiteHouse Office of Telecommunications Policy "spon-sored" a "consensus agreement" among majorbroadcast, cable and copyright interests relatingto broadcast signal carriage by cable systems.The FCC's new rules for cable television servicewere issued February 3, 1972; although the "con-sensus agreement" departed somewhat from theCommission's August 1971 "letter of intent," itwas nonetheless incorporated.

The FCC's new rules, which went into effectMarch 31, 1972, deal with four general areas:(1) television broadcast signal carriage; (2) non-broadcast channels (access) ; (3) technical stand-ards; and (4) federal-state/local division of regu-latory jurisdiction. In addition, rules are in-cluded relating to "origination cablecasting," per-program or per-channel charges for reception ofcablecasts and diversification of control. TheCommission also issued proposed rules forcarriage of sports events and radio signals.

In the television broadcast signal area, theCommission will apply the following rules to thetop 50 markets (including Detroit). First, eachcable system may carry (or will be required tocarry upon request) the signals of all broadcaststations licensed to communities within 35 milesof the cable system's community. Second, thesystem may (or if asked, must) carry allother signals which have "significant" over-the-air viewing in the cable system's community.Third, the system will be required to provide aminimum service of three network stations andthree independents; and if this cannot be achievedby the foregoing carriage rules, distant signalsmay be imported to make up the difference.Fourth, a cable system may import two additionalindependent distant signals, less those importedto achieve the required minimum service. Theselection of distant independent signals is gov-erned by the following "leapfrogging" rule: Thesignals of any independent station may be carried;however, if signals are selected from stations inthe top 25 markets, the signals must be takenfrom one or both of the two closest such markets.For Detroit, this would apparently limit the choiceto the Cleveland and Pittsburgh markets.

An exception to the leapfrogging rule is made,

however, where signals on the regularly carriedindependent stations must be deleted because of"exclusivity" requirements; in this situation, thesystem may carry the signal of any other tele-vision broadcast station consistent with "exclusiv-ity" rules. Fifth, a cable system may carry (orwill be required to carry. upon request) all educa-tional stations within 35 miles and those thatplace a grade B contour (measure of signal qual-ity) over any part of the cable system's com-munity. Additionally, the system may carry thesignals of all educational stations perated by anagency of the state within which the cable systemis located. And the signals of any other educa-tional station may be carried in the absence ofobjection by local educational stations or a stateor local "television authority." Sixth, as a generalrule, signals of non-English language stations maybe imported without restrictions.

A cable system's right to carry broadcastsignals under the new rules will be circumscribedby certain "program exclusivity" provisions. Withrespect to network programming, a cable systemwill be prohibited from simultaneously duplicatingthe programming of stations having a "priority"on the system. For this purpose, "priority" will bedetermined by signal strength in the system'smarket; the greater the signal strength, the higherthe priority. Systems operating in the top 50television markets will also be governed byexclusivity rules for "syndicated" programming,defined as

Any program sold, licensed, distributed or offered totelevision station licensees in more than one marketwithin the United States for non-interconnected(i.e., non-network) television broadcast exhibiting butnot including live presentations.

These rules are: First, upon notice by the copy-right holder, a cable system may not carry aprogram via a distant signal "for a period of oneyear from the date that program is first licensedor sold as a syndicated program to a televisionstation in the United States for television broad-cast exhibition." Second, upon notice by a localbroadcast station with exclusive broadcast exhibi-tion rights (both over-the-air and by cable), acable system may not carry a program via adistant signal for the duration of the exclusivecontract. The rules provide no limitation on theduration of these contracts, and existing contractsare presumed exclusive.

A cable system's rights to carry broadcastsignals as well as non-broadcast signals would befurther limited by the Commission's proposed

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rules relating to sports programming. Purportingto embody the spirit of federal law approvingagreements providing for teleVision blackouts ofgames in the home territory of a team when it isplaying at home, the proposed rules would pro-hibit a cable system from carrying any profes-sional baseball, basketball, football or hockeygame when the home team is playing a game ofthe same sport at home unless the system has theconsent of the home team and its league or theevent is available on a local television broadcaststation.

Another proposed Commission rule relates tocarriage of AM and FM radio signals. Under theproposed rule, cable systems carrying distant AMor FM signals would be required, on request, tocarry all local AM or FM stations, respectively.Additionally, a system carrying a local radiosignal would be required to carry all local signalsof the same type.

The FCC's new rules governing non-broad-cast channels, access, and local origination aregrouped under the general heading of cablecast-ing. The reinstated origination requirement wouldprohibit systems with 3,500 or more subscribersfrom carrying television broadcast signals "unlessthe system also operates to a significant extentas a local outlet by origination cablecasting."Automated services,-e.g., time, weather, would notsatisfy the requirement. The rules further requirethat the channel or channels designated fororigination cablecasting be used for no otherpurpose. "The "equal time" and "fairness" doc-trines would apply, and transmission of lotteriesand obscenity would be prohibited. Advertisingwould be permitted only "at the beginning andconclusion of each such program and at naturalintermissions or breaks." Sponsor identificationwould be required.

Per-program or per-channel charges for re-ception of cablecasts would be governed by thefollowing: In general, the rules prohibit chargingfor cablecasts of feature films which "have hadgeneral release in theatres anywhere in the UnitedStates more than two (2) years prior to theircablecast." Similarly, the cablecast of sportsevents would be prohibited where the events"have been televised live on a non-subscription,regular basis in the community during the two(2) years preceding their proposed telecast."Cablecast of "series type [s] of programs withinter-connected plot or substantially the same castof principal characters" would be prohibited out-right. Finally, combined programming of feature

films and sports events would be limited to 90percent of total cablecast time.

Access to non-broadcast channels will begoverned by the following. All new systems inthe top 100 markets will be required to provideat least one non-broadcast channel for each broad-cast signal carried. In no event, however, will asystem be permitted to have less than 20 channelsavailable for immediate or potential use. Also,systems will be required to have the technicalcapacity for non-voice return communications.

Each cable system will be required to allocatechannels for certain public purposes. These willinclude one free public access channel, one channelfor educational use and one for local governmentuse. Use of the education and government chan-nels is to be free for five years after completionof the basic trunk line; the FCC then will decidewhether to expand or curtail free' channel usefor these purposes. The cable operator will berequired to maintain at least minimal productionfacilities for use of the public access channelwithin the franchise area; however, the Commis-sion indicated that it does not want free uses toconstitute an unreasonable economic burden onthe system operator or subscriber and thereforerequires only use of the cable channel to be free.Production costs, except for live studio presenta-tions not exceeding five minutes, may be chargedto the user. Additionally, the new rules prohibitstate or local governments from designating otherchannels for particular uses. However, the Com-mission will entertain petitions to authorize addi-tional channel assignments on an experimentalbasis.

All channels not used for transmitting broad-cast signals or assigned to origination cablecast-ing, public access, education or government usesare to be available for lease by the operator oneither a part-time or full-time basis. Should thedemand for time on the public access, education,government and leased channels exceed a certainpercentage of available time, the operator will berequired to make an additional channel availablewithin six months.

The FCC's new rules seem to preempt stateand local regulation of channels used for non-broadcast services except those channels desig-nated for governmental use. Specifically, the rulesprovide that

Except on specific authorization, or with respect tooperation of the local government access channel, nolocal entity shall prescribe any other rules concern-ing the number or manner of operation of accesschannels . . .

This means that, absent a specific authorizationfrom the FCC, local governments must leave itto the cable system operator to decide whetheror not to exceed FCC minimum requirements forassignment of access channels. Moreover, the newrules provide that the cable system (rather thanlocal governmental entity) shall establish operat-ing rules for the access channels consistent withFCC requirements.

The Commission will require that the systemestablish rules for operation of the access channelsas follows: For public access, education andleased channels, the rules shall prohibit the pres-entation of lottery information and obscene orindecent matter. For public access and educa-tional channels, presentation of any advertising"designed to promote the sale of commercialproducts or services (including advertising by oron behalf of candidates for public office)" shallbe prohibited. For public access and leased chan-nels, access shall be on a first-come, non-discrim-inatory basis. Finally, for leased channels, sponsoridentification shall be required and an "appropri-ate" rate schedule specified. Other than theforegoing, the system will be prohibited fromexercising any control over program contentfor public access, education, governmental andleased channels.

In connection with the regulation of accesschannels, the Commission indicates that it willencourage experimentation in such areas asneighborhood origination centers, mobile com-munications centers and neighborhood councils tooversee access channels. However, it seems fairto assume that where such "experimentation"takes the form of requirements imposed by thefranchising authority which will result in signifi-cant added costs for the cable system operator,Commission approval will be required.

The Commission has promulgated technicalstandards only for carriage of over-the-air televi-sion broadcast signals. These standards, which areminimal, include the following: performance teststo assure satisfactory system operation; compati-bility between signals and television broadcastreceivers; permissible amplitude for power fre-quency hum; signal to interference ratios; terminalisolation; and radiation. In addition, the cablesystem operator will be made responsible jointlywith the subscriber for receiver-generated inter-ference. The Commission indicates that theseminimal standards will be augmented as soon aspossible with standards for: (1) receivers designedspecifically for use with cable systems; (2) fre-

quency allocations within cable networks; (3)carriage of other than over-the-air televisionbroadcast signals; (4) carriage of aural broadcastprogramming; and (5) various performance re-quirements such as cross-modulation and "ghost-ing." No role in setting technical standards isindicated for state and local governments.

The FCC's August 1971 letter of inten dealtat length with the Commission's view of appro-priate federal-state/local relationships in regulat-ing cable television. Federal regulation was saidto be "clearly indicated in such areas as signalscarried, technical standards, program origination,cross-ownership of cable and other media, andequal employment opportunities." On the otherhand, local governments were said to be "marked-ly involved" because cable requires easementsover public ways, and because local authoritiesare in a better position to parcel out cable districtsand follow up on service complaints. Thus, theCommission envisioned leaving a number of areasto local regulation, including franchising, butspecifying minimum requirements for the fran-chising process. Federal licensing was rejected ongrounds that it "would place an unmangeableburden on the Commission."

The FCC's recent decision closely parallels theearlier letter of intent. The control over thefranchising process will be effected by requiringthat the cable system, before commencing oper-ations with broadcast signals, file a copy of itsfranchise and certify that the franchising author-ity has held a public hearing to consider thesystem operator's character and legal, technicaland financial qualifications and the adequacy andfeasibility of construction arrangements. TheCommission did not issue rules for franchiseselection, but "expect [s] ": (1) public invitationto bid to all prospective franchisees; (2) publicdisclosure of all bids; (3) public hearing withadequate notice to all interested parties and (4)public report of the basis for decision.

The specific substantive franchise considera-tions addressed by the Commission's new rulesare franchise areas, economic discrimination, con-struction timetable, franchise duration, subscriberrates, service and franchise fees. Decisions as tofranchise areas or districts were said to be mattersfor local authorities. However, the franchisingauthority must require that service be extendedequitably and reasonably to all parts of thefranchise area; economic discrimination will notbe permitted. The establishment of a constructiontimetable was apparently considered a dual re-

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sponsibility. The rules require that the franchisecall for "significant construction" within one yearafter the Commission grants a certificate of com-pliance and that the annual rate of extension ofenergized trunk cable be "substantial." A rateof 20 percent per year, beginning one year afterthe certificate of compliance is issued, was sug-gested, but the rate was said to be the responsi-bility of local authorities. Similarly, the franchiseduration was left to the franchising authority withonly the requirement that it be of "reasonableduration"; the Commission suggested a maximumof 15 years and noted support for shorter franchiseperiods.

The franchising authority will be required tospecify or approve initial subscriber rates andprovide for review and adjustment of rates, in-cluding public notice and hearings affording dueprocess. The appropriate standard was said to be"rates that are fair to the system and to thesubscribing public."

As noted above, the FCC has set and intendsto set further technical standards. However, thenew rules require that the franchisee specify"procedures for the investigation and resolutionof all complaints regarding the quality of service,equipment malfunctions, and similar matters . . ."

Franchise fees are likely to be a subject ofcontinuing controversy between the FCC andlocal governments. The Commission's recent de-cision strongly disapproves of the use of such feesfor revenue raising purposes, reasoning that highfees would be a regressive tax on subscribers andcould frustrate the federal goal of an integrated,national communications program. Instead, theCommission indicates that it will limit franchisefees to the level necessary to support the localregulatory program. Although a limitation of twopercent of gross revenues had previously beenproposed, the new' rules require only that the feebe "reasonable." A range of three to five percentwas said to be reasonable; however, where the feeexceeds three percent, the franchisee will be re-quired to demonstrate that the fee does not inter-fere with effectuation of federal goals and thefranchising authority will be required to make ashowing that the fee is appropriate in light of itsresponsibilities and planned regulatory program.

Finally, the new rules require that any amend-ments to the FCC's franchise standards be re-flected in franchises within one year after theamendment's adoption or at the time of franchiserenewal, whichever occurs first.

The section of the new rules dealing with

diversification of control is largely a restatementof previously adopted rules: Cross-ownership isprohibited between cable systems and nationaltelevision networks, television broadcast stationsserving all or part of cable system's service areaand television translator stations licensed to thecable system's community. The Commission hadearlier proposed rules dealing with cross-owner-ship between cable systems and radio stations andcable and newspapers and multiple ownership.The decision indicates that these proposals willbe considered in a separate proceeding.

One further section of the new rules deservescomment. This section, titled "Special Relief,"provides that upon petition by any interestedparty, "the Commission may waive any provisionof the rules relating to cable television systems,[or] impose additional or different require-ments . . ." The petition must demonstrate "theneed for the relief requested and . . . support adetermination that a grant of such relief wouldserve the public interest."

One other development at the federal levelshould be noted. In September 1971 the FCCrendered a decision in the Comtel case whichcould have important consequences for localfranchising authorities in their efforts to regulatecable television. As discussed above, telephonecompanies sometimes furnish the distributionsystem for cable television signal transmissionunder tariffs (schedules of rates and service condi-tions) filed with the FCC; and since 1968 these"leased services" have been subject to th' certifi-cation provisions of the Communications Act.Cable system operators, however, have often takenthe position that a "leased services" arrangementexempts them from local franchising requirementsbecause the telephone company already has a"state franchise" and is simply using its existingeasements to install the cable distribution system.This position has, in effect, been upheld by theMichigan Public Service Commission and at leastone Michigan circuit court. And prior to theFCC's decision, the New York State courts hadreached the same result in a case involving theComtel parties. However, in the Comtel decision,the FCC refused to grant a certificate of necessityand convenience to New York Telephone to allowit to provide service to Comtel in New York City.The decision was based first on the Commission'sfinding that the services for Comtel would be awasteful duplication since the Comtel cable wouldin part duplicate the system of a City-franchisedoperator and consume already-limited conduit

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space. The Commission further observed that itwas not in the public interest to allow Comtel toavoid local franchise requirements. Whether thelack of a local franchise, in itself, would be suffi-cient to compel denial of certification was leftopen. However, the Commission's reliance in itsnew rules on the local franchising process stronglysuggests an affirmative answer.

2. STATE REGULATIONA. IN GENERAL

A recent decision by a three-judge federaldistrict court, affirmed by the Supreme Court,makes clear that states have broad powers toregulate cable television. In the TV Pix case,several cable system operators sought an injunc-tion against enforcement of a Nevada statuteregulating the systems as public utilities. Plain-tiff's three arguments that the statute placedan unconstitutional burden on interstate com-merce, that the field of regulation had been pre-empted by federal law, and that the state regula-tion deprived them of property without dueprocess were all rejected. The Court found,instead, that neither the commerce clause of theConstitution nor any Congressional action takenunder it had preempted state regulation of cabletelevision. Moreover, the Court found the statestatute not in conflict with due process guaran-tees, but rather a reasonable, non-discriminatoryexercise of a state's powers to protect its citizens.

While the continuing validity of the TV Pixdecision with respect to federal preemption de-pends on future actions of Congress and the FCC,the states undoubtedly have had and continue tohave broad powers to regulate cable television.However, few states have exercised those powers.Public service commissions in Wyoming, Cali-fornia and Illinois have asserted jurisdiction overcable television under existing law; however,the Wyoming and California commissions havebeen reversed in the state courts. Since 1963,the legislatures in only five other states Con-necticut, Nevada, Rhode Island, Vermont andHawaii have brought cable television undertheir utilities commissions. In general, cablesystems in these states are subject to public utilitytype regulations; for example, certificates of con-venience and necessity are required to begin oper-ation and some form of rate control is imposed.

B. MICHIGANState involvement in cable television regula-

tion in Michigan has been largely non-existent.

Three bills calling for regulation by the PublicService Commission (MPSC) have been intro-duced in the Legislature but died in Commit-tee. Apparently the Commission's only brushwith the subject came as a result of efforts in 1966by the City of Jackson to prevent a non-franchisedcable system from operating in that communityvia a distribution system owned by Michigan BellTelephone Company. At that time, Bell had onfile with the Commission a tariff for cable tele-vision "leased services," and the tariff specifiedthat cable systems using the services "shall com-ply with applicable laws and shall obtain fran-chises and permits as so required." (A tariff forthese services was later filed with the FCC andthe state tariff was withdrawn.) In a decisionimplying that it lacked jurisdiction over cabletelevision per se, the Commission held that Bellcould provide cable signal distribution services toa customer (the cable system) without a fran-chise, and ordered that language implying thecontrary be deleted from the tariff.

The question of whether the MPSC couldassert jurisdiction over cable television underexisting law is far from settled. Like the FCC,the MPSC's gram. of powers from the legislativebranch takes the form of a section stating powersand duties in general terms followed by othersections detailing powers over particular publicservices. Unlike the FCC, however, the MPSCacquired its powers both in the form of a specificstatute creating the agency and the transferto it, intact, of powers held by its predecessoragencies the Public Utilities Commission andRailroad Commission.

The MPSC's basic grant of jurisdiction, section6 of Public Act No. 3 of 1939, amended, vests itwith

complete power and jurisdiction to regulate all publicutilities in the state except any municipally ownedutility and except as otherwise restricted by law . . .

to regulate all rates, fares, charges, services, rules,conditions of service and all other matters pertainingto the formation, operation or direction of such publicutilities . . . to hear and pass upon all matters per-taining to or necessary or incident to such regulationof all public utilities including . . . all public trans-portation and communication agencies other thanrailroads and railroad companies. (emphasis added)

While the jurisdictional grants to the Commis-sion's predecessor agencies were all reasonablyspecific and none could fairly be read to includecable television, the above section, taken fromthe Act creating the Commission, seems to saythat communication agencies or public communi-cation agencies are public utilities within theCommission's jurisdiction. Whether a cable tele-

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vision system is a public communication agencyfor purposes of the Act is not answered by thelegislative history or Michigan case law. How-ever, several states and the federal district courtin TV Pix have found that a cable system is a"business affected with a public interest and mayproperly be treated as a public utility." This con-clusion seems justified on two grounds: the specialprivileges conferred on a cable system by govern-mental franchise; and cable's attributes of naturalmonopoly. Finally, any notion that the sectionquoted above is not an affirmative grant of powerbut a mere recital of powers to be searched forelsewhere is dispelled by both the legislativehistory and a recent decision of the MichiganSupreme Court. During the legislative process,the section of the bill in question was amended toinclude the exemption for railroads. This wasdone to limit the MPSC's powers over railroadsto those possessed by its predecessor agencies.Also, a recent Michigan Supreme Court decisionrepudiates language in an earlier case suggestingthat the quoted jurisdictional statement is onlyan "outline of jurisdiction" rather than an affirma-tive grant of powers.

To summarize, the MPSC could probably suc-cessfully assert jurisdiction over cable televisionin the State of Michigan. It should be noted, how-ever, that the Commission's jurisdictional grantexpressly exempts municipally owned utilities.Furthermore, the Commission to date has shownno interest in asserting jurisdiction; however, itis thought to be re-evaluating its position and astatement of intent may be forthcoming in thenear future.

Some movement in terms of state legislationhas occurred recently. House Bill No. 5811 hasbeen introduced in the Michigan House. It wouldgive the Michigan Public Service Commission(MPSC) jurisdiction over cable television in theState. Construction or operation of a cable systemwithout a permit from the MPSC would be pro-hibited, and the bill, expressly or implicitly, wouldrequire Commission approval of the following:(1) applicant's "citizenship, character, and finan-cial, technical or other qualifications"; (2) ratesto be charged; (3) services to be offered; (4)service area; and (5) construction schedule. Theapplicant would be required to disclose the identityof the "principals," "beneficial owners," "true"ownership of facilities, and sources of funds. Inaddition, the applicant would be required to sub-mit a performance bond to insure satisfactory andtimely completion of construction.

The bill gives the MPSC few standards on whatto base issuance or denial of a permit. The onlyspecified service requirement is that the applicantprovide cable drops at reduced rates to educationalinstitutions within the service area. Otherwise,the Commission is directed to issue a permit"when it is convinced that it is in the publicinterest to do so," considering such factors as:(1) "public need for the proposed service"; (2)the applicant's "suitability" and ability "to per-form efficiently" and "offer services at a reason-able cost to subscribers"; and (3) "the geographyand topography of the proposed service a"' :, andboth the present operations and the planned andpotential expansion of the applicant's and otherCATV companies."

The Commission would be permitted to issuepermits "upon terms, limitations, or conditionswhich it deems required for the public interest."Permits are to be nonexclusive but are to be fora period of 20 years, subject to renewal for notless than 10 nor more than 20 years. Permitswould be subject to revocation on a variety ofgrounds, including: (1) failure to meet Commis-sion standards for signal quality; (2) transfer ofpermit without Commission consent; (3) violationof terms of the permit, the Act, or Commissionrules; and (4) "inability to provide CATV servicesat reasonable cost to the service area."

The bill apparently contemplates continuingMPSC rate regulation. Rate schedules are to befiled, and the Commission is required to "main-tain surveillance over the filed rates and termsand conditions of service to insure that the ratesand terms and conditions of service are fair toboth the public and to the CATV company . . ."

Several points in the bill are unclear. Mostimportantly, the bill is not clear on the extent towhich it would preempt local regulation of cablesystems. Indeed, the bill is strangely silent onthe relationship between State regulation andlocal franchising. Local regulation cannot bealtogether precluded because the State Constitu-tion grants local governments control over theirpublic ways. However, under Michigan courtdecisions, the City could be left with no more thanthe powers to prescribe regulations for the useof the public ways and charge a commensurate"franchise fee." That is, the City would haveno power to choose between competing prospec-tive franchisees, but would be required to granta "franchise" to any party issued a permit bythe MPSC.

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The bill is also unclear as to whether it appliesto publicly as well as privately owned cablesystems. The bill uses the term "CATV company"(or the like), defining it as "ally person who owns,controls or operates or manages a cable televisionsystem." "Person," however, is not defined.

3, LOCAL REGULATION

A. IN GENERALAs the foregoing discussion of state and

federal regulation suggests, local governmentshave, by default, been most responsible for theregulation of cable television. For the most part,this regulation has been accomplished through themechanism of the franchise a grant allowingthe cable system to use the public ways for string-ing cable in exchange for the system's agreementto meet certain conditions. However, it shouldhere be noted that some systems reportedly12 are municipally owned.

Franchise grants are usually non-exclusive,are for a specific number of years, and call forpayment of a franchise fee to the grantingauthority; but here the similarity ends. The dura-tion of the franchise may vary from under fiveyears to over 30. The franchise fee may rangefrom one or two percent of gross receipts to 30percent at the top of a sliding scale. Somefranchise agreements require that certain chan-nels be provided If for public uses; most have nosuch requirement. A few provide some ,-!ontrolover subscriber rates; most do not. A very fewrequire system upgrading to keep pace with thisstate of the art. And fewer still provide for anyform of regulatory agency to oversee operationof the system.

Local regulation of cable television via thefranchise has, on occasion, been successfullyattacked in the courts. Some decisions haveturned on a finding that, under a particular state'slaws, the would-be franchising authority simplyhas not been delegated powers to franchise. Othercourts, shortsightedly, have failed to find a publicpurpose sufficient to justify regulation beyondthat relating immediately to use of streets andalleys. Subscriber rate regulation has been in-validated upon a finding that cable television isnot a public utility. The better view, howeverand the one accepted in the TV Pix case affirmedby the Supreme Court is that cable televisionis sufficiently affected with a public interest tosupport not only regulation, but regulation as apublic utility,

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Two further difficulties with regulation via thefranchise relate to telephone company ownershipof the distribution system and to fees based ona percentage of gross receipts. As noted above,some cable system operators have attempted toavoid local franchising requirements when leasing"services" (the cable distribution system) fromtelephone companies. The rationale given is thatthe telephone company already has a "state fran-chise" and transmission of cable signals is withinthe scope of that franchise and does not add anynew burden to the telephone company's existingeasements to use the public ways. This argumenthas been accepted by a Louisiana appellate courtand the highest courts of New York and Maine;in Michigan, a like rationale has been approvedby at least one trial court and, by implication, bythe Michigan Public Service Commission. How-ever, as noted in the discussion of federal regula-tion, the FCC's September 1971 Comtel decisionmay reverse this result. And although Comtelcan be read for the limited proposition that federalcertification will be denied phone companies onlywhere the proposed service will result in "wastefulduplication," such a narrow reading seems un-reasonable especially in light of the necessaryrole contemplated for local authorities in theFCC's new rules.

Although franchise fees are commonly basedon a percentage of gross receipts, the FederalCourt of Appeals for the Sixth Circuit (whichembraces Michigan) recently held that such anarrangement amounted to a gross receipts taximposing an unconstitutional burden on interstatecommerce. The decision was unclear as to whetherthe defect was due to some peculiarity of thefranchise ordinance or whether any fee based ongross receipts was invalid. The latter interpreta-tion is questionable given the fact that cablesystems' revenue sources are usually limited toa single state. Nevertheless, the decision wasfollowed without question by the Federal DistrictCourt for the Western District of Michigan in adecision invalidating a Lansing franchise. A draftrevised Lansing ordinance seeks to avoid theproblem by basing the franchise fee on an annualfixed dollar amount for each subscriber. How-ever, it should be sufficient simply to limit the feeto gross receipts from sources within the state.

B. DETROITThe City of Detroit's powers to franchise and

regulate or own a cable television system derivebasically from the Michigan Constitution, the

1,05.

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Home Rule Act and the Detroit City Charter.Each provides certain general grants of powerwhich serve as a point of departure for analysisof powers to perform specific acts.

The powers of local governments derive in thefirst instance from article 7 of the 1963 MichiganConstitution. Section 22 of that article empowerscities to adopt and amend a charter and providesthat a city "shall have power to adopt resolutionsand ordinances relating to its municipal concerns,property and government, subject to the constitu-tion and law." The section goes on to add animportant rule of construction: "No enumerationof powers granted to cities . . . in this constitutionshall limit or restrict the general grant of author-ity conferred by this section." This rule is re-inforced by section 34 of the same article: "Theprovisions of this constitution and law concern-ing . . . cities shall be liberally construed in theirfavor."

The Home Rule Act provides for the incorpora-tion of cities and sets forth a number of manda-tory and permissible charter provisions andlimitations on the powers of cities. Section 4j (3)of the Act empowers each city to provide, bycharter,

[f]or the exercise of all municipal powers . . in theadministration of the municipal government, whethersuch powers be expressly enumerated or not; [and]for any act to advance the interests of the city, thegood government and prosperity of the municipalityand its inhabitants and through its regularly consti-tuted authority to pass all laws and ordinances re-lating to its municipal concerns subject to the consti-tution and general laws of this state.

Moreover, the Act has been interpreted by theMichigan Supreme Court to confer upon citiesexclusive rights in the conduct of local affairsnot in conflict with the Constitution or generallaws.

The Charter of the City of Detroit, title I,chapter 1, section 1, provides that the City "shallhave, exercise and enjoy such powers as are con-ferred by the Constitution and laws of the Stateof Michigan and this Charter." The CommonCouncil, in turn, is empowered by title III, chapter1, section 12(d), to enact ordinances to imple-ment the powers conferred and "to promote thegeneral peace, health, safety, welfare and goodgovernment of the City." The power to promotethese values is generally described as the "policepower," and the Michigan Supreme Court hasfound that the police power of Detroit, as a home-rule City, is of the same general scope and natureas the State, except where limited by the Constitu-tion or by statute.

1. POWERS TO FRANCHISE ANDREGULATEA municipality's powers to directly regulate an

enterprise such as a cable television system andto regulate that same enterprise via a franchiseare two very different things. Indeed, regulationvia a franchise is not, strictly speaking, regulationat all but rather is a contract between the munici-pality and the franchisee. Put another way, thefranchise is a bilateral arrangement while regula-tion is a unilateral exercise of the municipality'spolice powers. And a municipality's powers overcable television will vary depending on the regula-tory course chosen.

The Michigan courts, like those in most if notall other jurisdictions, characterize the franchiseas a contract. In this contract, the franchiseeagrees to provide certain services in exchange forthe right to use the public ways. In Michigan, theright of local governments to control their publicways is guaranteed by the Constitution. ArticleVII, section 29 prohibits public utilities from usingpublic ways without the municipality's consentand from transacting local business withoutobtaining a franchise. In more general terms, thesection reserves to local governments "reasonablecontrol" over their public ways except where theConstitution provides otherwise. Similarly, theHome Rule Act permits each city to provide bycharter for the use of its public ways. And titleVII, chapter 1 of the Detroit Charter providesthat the Common Council shall have generalcontrol of all entities operating public utilities viathe public ways of the City.

Control via the franchise is not without limita-tions. First, article 7, section 30 of the MichiganConstitution prohibits a franchise period greaterthan 30 years. This, however, should present nodifficulty since estimates of the time required forcable television plant amortization are generallyfar less than 30 years. Indeed, the FCC's newrules suggest a 15-year maximum franchiseduration.

Second, the Constitution, article 7, section 25,provides that:

No city or village shall acquire any public utilityfurnishing light, heat or power, or grant any publicutility franchise which is not subject to revocation atthe will of the city or village, unless the propositionshall first have been approved by three-fifths of theelectors voting thereon.

On its face, this section raises the question ofwhether the franchise voter-approval limitation

-es to all public utilities or only those furnish -ii heat or power. And if the former, the

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further question of whether cable television is apublic utility is presented. The Michigan SupremeCourt, however, seems to have held that voterapproval is required, at most, only for acquisitionor franchise of utilities furnishing water, light,heat, power and transportation. This is the importof a decision interpreting a similar section of the1908 Michigan Constitution. At that time, thesection under discussion included no enumerationof utilities, but the Court reasoned that the limita-tion applied only to those utilities specified in acompanion section empowering cities to acquirepublic utilities for supplying water, light, heat,power and transportation. Although the reason-ing in the decision is questionable, it would prob-ably be controlling for present purposes. (TheMichigan Attorney General was once asked torender an opinion as to whether the voter approvalrequirement of article C, section 25 applied to afranchise for a cable television system. He de-clined to do so on the grounds that a suit waspending in which the issue had been raised. Thesuit was later decided on other grounds.)

Third, and most important, the contractualnature of the franchise makes it a relatively in-flexible control device. That is, the terra.3 of thefranchise are bargained-for and, as a general rule,any change in those terms requires renegotiationbetween the franchising authority and franchisee.For example, terms relating to rates and servicescannot simply be revised to reflect advances inthe state-of-the-art. Rather, they must be re-negotiated with a party who may have littleincentive to agree to reduced rates or an upgrad-ing of services. An arbitration clause may help tobreak stalemates, but the result may be a less-than-satisfactory compromise of conflicting inter-ests. In short, any unilateral attempt to alter theconditions under which service is to be furnishedmay be challenged as an invalid impairment ofthe contract (franchise). And while the Michigandecisions do ma'-se clear that a franchise does nottotally disable municipality from exercises ofpolice power that do, in fact, affect the conditionsof service, the contractual concept of the fran-chise predominates.

Finally, a cable system operator may be ableto avoid the franchise altogether by resort toleasing "services" (a distribution system) fromthe telephone company. While appellate courtsin three other jurisdictions and a Michigan trialcourt have found legal support fcr such avoid-ance, the outcome in Michigan much indoubt. First, the question is primarily one of

1.C6

interpretation of each individual state's laws.Second, a telephone company's so-called statefranchise in Michigan, Public Act No. 129 of1883, as amended, is limited to the "powerto construct and maintain lines of wire orother material, for use in the transmission oftelephonic messages . .." The Michigan trial courtreasoned from this that the "franchise" was forthe transmission of electronic impulses, regardlessof the purpose. The court buttressed its rationalewith the observation that the transmission ofcable television signals added no additional burdento the phone company's existing easement forlines and poles. However, neither line of reason-ing is persuasive. Historically, the notion that"telephonic messages" included cable televisionsignals is insupportable. And surely the Legisla-ture's purpose was not to preclude local controlof a communications medium so amenable to thatform of control, especially in the absence of stateregulation. Moreover, a cable system adds signifi-cantly to the burden on the phone company's exist-ing easements. Cable requires a new, separatedistribution system. This means not only addi-tional poles and wires (cables) consuming spaceon existing poles and in conduits, but the installa-tion and maintenance of the system will no doubtoften disrupt use of the public ways. But even ifthe Michigan courts are willing to permit cablesystem operations to avoid local franchising re-quirements by leasing phone company "services,"the FCC may not be. As noted above, the Com-mission simply may refuse to allow the phonecompany to provide "services" where the cablesystem operator lacks a local franchise.

The inflexibility and uncertainties of regulationvia the franchise may lead one to inquire whetherthe City can simply regulate a local cable tele-vision system in the same fashion that the StatePublic Service Commission regulates utilitiesbrought within its jurisdiction. Under such aregulatory model, the City would grant a cablesystem the right to operate in Detroit but wouldseparately promulgate rules of service and setrates. The rules of service could be changed asoften as desirable, and the cable system operatorgiven a reasonable time to comply. The rate-making process could be triggered by petition ofthe cable system operator or the City regulatoryagency. All proceedings, of course, would haveto afford due process to the cable system operator;however, the public interest would no longer besubjected to the bargaining process of a franchiserenegotiation.

Taken at face value, the powers granted to

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cities under the Constitution and Home Rule Actseem broad enough to support a puLlIc utilitiesform of local regulation. Both the Constitutionand Act speak of local powers to legislate relativeto "municipal concerns." Moreover, as notedabove, the Michigan Supreme Court has foundthat Detroit's home-rule police powers are com-parable to those of the State except where limitedby the Constitution or by statute. Nevertheless,numerous Michigan decisions make a clear dis-tinction between a city's power to regulate via thefranchise and through an exercise of its State-delegated police power. And in its typical contextfor the distinction the power to regulaterates the courts have found cities lacking inthe necessary power. The authority to fix ratesis said to be a power which the Legislature candelegate to municipalities only by express termsor necessary implication; and the Legislature hasdone neither. The City's lack of power to directlyregulate rates does not, of course, mean that itlacks poWer to regulate other conditions of serviceabsent a franchise. However, many of the condi-tions of service recommended in this Report areso unlike traditional municipal exercise of thepolice power that reliance on such power wouldbe risky at best.

To summarize, if a choice is to be made be-tween regulation via the franchise and under theCity's police. power, the traditional franchiseapproach is preferable. The conditions which maybe imposed via the franchise are limited only bycontract principles (and the franchisee's willing-ness), and franchise inflexibility can be offset, atleast in part, by renegotiation and arbitrationclauses. Finally, the City's powers to franchiseare well established, while regulation under thepolice power would be vulnerable to challenge inmany areas, particularly rate-setting.

2. POWERS TO OWNThe power to own and operate a cable system

is not normally thought of as a form of regulation;however, it is discussed here because it representsthe most direct form of government control. Inkeeping with the recommendations of this Report,two alternative modes are considered: (1) owner-ship by the City proper; and (2) ownership by aspecial-purpose governmental agency spawned bythe City a special public authority.

Several constitutional provisions bear on theCity of Detroit's powers to own and operate acable television system. As noted above, article 7,section 22 of the Constitution empowers cities toadopt resolutions and ordinances relating to

"municipal concerns" and provides that ncenumeration of powers elsewhere in the Constitu-tion shall limit this general power. Section 34 ofthe same article calls for a liberal constructionof both Constitution and law in favor of cities.Against this background, section 24 of article 7provides that

any city ... may acquire, own or operate . . . publicservice facilities for supplying water, light, heat,power, sewage disposal and transportation to themunicipality and the inhabitants thereof.

Section 23 of the same article empowers cities toacquire, own, establish and maintain . . . parks,boulevards, cemeteries. hospitals and all works whichinvolve the public health or safety.

The foregoing seem to provide ample Constitu-tional support for City ownership of a cable tele-vision system. The City, of course, acts throughits resolutions and ordinances, and cable tele-vision's public service potential and naturalmonopoly characteristics make it clearly a "mu-nicipal concern." The enumerations of sections 22and 23 should not be considered limitations, butrather examples of proper "municipal concerns."A cable system is certainly a public service facilitysimilar to those enumerated, particularly trans-portation. Indeed, a properly developed systemis a work "which involves the public health orsafety."

If the constitutional provisions discussed aboveare not self-executing, as some Michigan decisionssuggest, the Home Rule Act seems to grant amplepowers for the City's ownership of a cable tele-vision system. As noted previously, section 4j(3)of the Act empowers the City to provide, bycharter,

[f]or the exercise of all municipal powers ... whether. expressly enumerated or not; [and] for any act

to advance the interests of the city, the good govern-ment and prosperity of the municipality and itsinhabitants and through its regularly constitutedauthority to pass all laws and ordinances relatingto its municipal concerns . . .

Under section 4e, the charter may provide forthe construction of "public works, and publicbuildings of all kinds." Similarly, section 4f(3)provides for the construction of public utilities forsupplying water, light, heat, power and transpor-tation. Here again, however, as section 4j(3)makes clear, the enumeration should not be takenas a limitation. Thus, the Home Rule Act seemsto empower a city to provide, by charter, forownership of a cable television system. Becausethe Home Rule Act sections are permissive, notmandatory, the key question becomes whetherthe City of Detroit Charter takes advantage ofthe broad grants of power flowing from the Con-

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stitution and the Home Rule Act. The Charter,title I, chapter 1, section 1, provides that the Cityshall have the powers "conferred by the Constitu-tion and laws of the State of Michigan and thisCharter." In title III, chapter 1, section 12(d),the Common Council is empowered

to enact ordinances to carry into effect the powersconferred . . . by the Constitution and laws of thestate, to make operative the provisions of the Charter,and to promote the general peace, health, safety,welfare and good government of the city . . .

This section certainly is broad enough to encom-pass construction and ownership of a cable television system. Further, section 12(g) providesthat the Council shall authorize the constructionof "necessary works for public improvement," andsection 12(u) permits the Council to acquireproerty for "public purposes." Finally, section12(k) provides "for the construction, ownershipand operation . . . of public utilities for supplyingwater, light, heat and power and transporta-tion . . ."

With respect to whether or not the Charterembraces sufficient Home Rule Act powers toallow construction and ownership of a cable tele-vision system, the general language of title I,chapter 1, section 1 is ambiguous since the Charteris, in itself, a document of limitation. That is, tosay that the City shall have all powers conferredby the Constitution, State law and the Chartermay mean that, to the extent State law is per-missive, the Council has only those powers em-braced by the Charter. Title III, chapter 1,section 12(d), however, is clearer. The generallanguage of this section seems to embrace thebroad, permissive grant of powers in section 4j (3)of the Home Rule Act. And this section of theAct certainly is broad enough to encompass con-struction and ownership of a cable televisionsystem. Cable system ownership might also bebased on charter sections 12(g) and 12(u), butonly when read along with the more general pro-visions of section 12(d).

A further hurdle is section 12 (k) , providingfor the construction of certain enumerated utili-ties. It might be argued that this section pro-hibits construction and ownership of a cable tele-vision system since the Charter does not expresslystate that enumerations are not to be read aslimitations (as does the Constitution and HomeRule Act). However, the general language ofsection 12(d) and the philosophy reflected in theexpress provisions of the Constitution and HomeRule Act repel the notion that an enumerationimplies a limitation on a broad statement ofCharter powers.

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A final question relates to section 5(e) of theHome Rule Act, providing that no city shall havepower to "engage in any business enterprise re-quiring an investment of money in excess of 10cents per capita . .. unless approved by a majorityof the electors voting thereon at any general orspecial election." (Title III, chapter 1, section12(h) of the City of Detroit Charter contains thesame prohibition except that approval by three-fifths of the voting electorate is required. TheHome Rule Act requirement was originally three-fifths; the change to a simple majority wasapparently intended to preempt any differingcharter requirements.) If a cable televisionsystem is found to be a "business enterprise" forpurposes of the Act and Charter, any City invest-ment beyond about $150,000 would require voterapproval. And since estimates of required invest-ment far exceed $150,000, the voter approval issueis squarely presented.

A question of whether the City of Detroit isengaging in a business enterprise calling for voterapproval has twice been before the MichiganSupreme Court. In the first instance, the Cityproposed to construct an underground parkinggarage; in the second, a marina. Both were foundnot business enterprises for purposes of the Actand Charter. If there is a common thread run-ning through the controlling opinions, it is thatif the City expends funds for a public purpose,it is not engaging in a business enterprise. Thus,if construction and operation of a cable televisionsystem is a proper "municipal concern," i.e., publicpurpose, it is not a "business enterprise" requiringvoter approval.

The City lacks powers under existing law tocreate a quasi-independent, single-purpose govern-mental entity, i.e., special public authority, toconstruct, and operate a cable television system.State law provides no general grant of powers tocreate such entities; rather, powers are delegatedto create or charter public authorities for nar-rowly specified purposes. For example, Public ActNo. 31 of 1948 (1st Ex. Sess.), empowers a cityto charter an authority "for the purpose ofacquiring, enlarging, furnishing, equipping, own-ing, improving, operating and maintaining a build-ing or buildings, automobile parking lots or struc-tures and the necessary site or sites therefore."This Act and some others permit a city to chartersuch an authority either alone or jointly withanother general purpose local governmentalentity, such as another city or a county. Stillother acts are limited to joint incorporation.

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The City can, however, create agencies withsome degree of autonomy where the City has thepower to issue revenue bonds to finance projectsfor which the agency is responsible. This is notonly possible, but necessary in order to sell reve-nue bonds. That is, the revenues from theagency's project must be earmarked to meet debtservice and operating costs before any revenuescan be used by the City for other purposes. Suchan agency, however, is not a true authority forseveral reasons. For example, its budget, projects,contracts, etc. would still, under the Charter, besubject to Council approval. Also, its employeeswould be governed by Charter requirements re-lating to civil service.

In conclusion, this report's recommendationthat a cable system be financed, constructed,owned and operated by a special public authoritywill require state enabling legislation. This legis-lation should, of course, include bonding powersrequired by the recommendations under part III,Financing and Construction.

3. POWERS TO REGULATE POLEATTACHMENT CONDITIONS

The power to regulate conditions for attachingtelevision cable to poles may seem a prosaic sub-ject to treat along with the power to franchise,own or regulate a cable television system. How-ever, it becomes a very important subject in lightof the fact that any cable system installed in De-troit must, of economic if not aesthetic necessity,utilize existing poles in large measure. Moreover,many of these poles are owned by private utilities,including the telephone company, which hasshown a propensity in other communities to chargepole attachment rates bearing little relationshipto the economic cost of having an additional wireon their poles. This "windfall," in turn, is borneby the cable system subscribers.

By ordinance, the right to erect poles andstring wire in Detroit requires a permit from theDepartment of Public Works. The Public LightingCommission (PLC) is empowered to supervise theconstruction of all lines erected pursuant to thepermit. But more importantly, poles are erectedsubject to the condition that the PLC may author-ize others to use them "upon such terms and con-ditions as the PLC may direct." Thus, the City ofDetroit is apparently in the fortunate position ofbeing able to insure that pole attachment fees donot become an unreasonable economic burden onthe cable system and, in turn, the subscribingpublic.

4. RECOMMENDED REGULATORY SYSTEM

RECOMMENDATIONS:

1. THAT THE COMMON COUNCIL GRANT AUTHORITY FOR CONSTRUCTION, OPERATIONAND PROGRAMMING OF THE CABLE SYSTEM, AND APPROVE SUBSCRIBER RATES.

2. THAT OVERALL REGULATORY RESPONSIBILITY, EXCEPT FOR PROGRAMMING COM-MUNITY, EDUCATIONAL, MUNICIPAL AND PUBLIC ACCESS CHANNELS, BE DELEGATEDTO THE SPECIAL PUBLIC AUTHORITY. HOWEVER, IF THE OPERATING ENTITY IS NOT ASPECIAL PUBLIC AUTHORITY, THEN THE COMMON COUNCIL SHALL CREATE A CABLEAUTHORITY, OPERATING WITH REGULATORY RESPONSIBILITY, MEMBERS OF WHICHSHOULD BE CHOSEN BY THE MAYOR WITH ADVICE AND CONSENT OF COMMON COUN-CIL; ALL SUCH MEMBERS SHALL BE RESIDENTS OF THE CITY OF DETROIT AND RE-FLECT THE MINORITY GROUP COMPOSITION OF THE POPULATION OF THE CITY.

3. THAT COMMON COUNCIL SHOULD CREATE AN APPROPRIATE CONFLICT OF INTERESTORDINANCE REGARDING THE CABLE SYSTEM.

4. THAT THE CABLE SYSTEM AUTHORITY WILL HOLD AN ANNUAL REVIEW OF SYSTEMOPERATIONS, ESTABLISH A SYSTEM FOR HEARING GRIEVANCES CONCERNING THEOPERATION OF THE SYSTEM AND RENDER AN ANNUAL REPORT TO COMMON COUNCIL.

A common criticism of local regulation ofcable television is that it begins and ends with thegranting of a franchise. That is, regardless ofhow well the franchise was thought out, no com-petent agency thereafter oversees the franchisee'sperformance to insure that the municipality getswhat it "bargained for." It is obviously imprac-ticable for the local legislative body to assumesuch a role, and even where an existing agencyis assigned the task, it generally lacks the neces-sary expertise.

This Report's primary recommendation thatthe cable system be operated by a special publicauthority deals with the problem of regulationin a unique way. In concept, the authority islargely self-regulating. Its directors, i.e., govern-ing body, would be appointed by the Mayor withthe advice and consent of the Common Counciland would govern according to the terms of theordinance or charter by which the authority wascreated. The Council would retain regulatorycontrol only to the extent of its power to modifythe authority's charter, confirm the appointmentof new members as vacancies occur and setsubscriber rates.

If the operating entity is not a special publicauthority, the problem of regulation is approachedin a more conventional way. For example, if thesystem is owned and operated by a non-profitcorporation or a private franchisee, the franchiseitself becomes the primary instrument of controland regulation is limited largely to enforcementof the franchise terms and renegotiation. How-ever, the Committee would not leave these mattersto existing City agencies, but recommends instead

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the creation of a specialized regulatory agency.As in the case of a special public authority, themembers of the regulatory agency would beappointed by the Mayor with the advice andconsent of the Common Council and the Councilwould retain regulatory control to the extent ofapproving or disapproving renegotiated franchiseterms (including rates) and confirming newappointments to the agency as vacancies occur.

a. SPECIAL PUBLIC AUTHORITY MODELSpecial public authorities differ from munici-

palities in several ways. First, they are usuallycreated to provide a single service while munici-palities have multiple responsibilities. Second,they raise capital through bond issues which mustbe liquidated from "user charges" for servicesfurnished; current operating expenses also mustbe met out of user charges. Third, public authori-ties are relatively independent of the electorate andautonomous vis-a-vis local units of governmentwhich create them. However, this independenceand autonomy are functions both of the statelegislation which enables a local unit of govern-ment to create an authority and of the locallegislation which performs that creation.

This Report's recommendation that cable tele-vision service be furnished in the City of Detroitby a special public authority will, as noted earlier,require enabling legislation. This legislationshould, of course, be designed so that the Citycan create an authority and at the same timespecify the form of cable system which it mustprovide. Thus, the creating ordinance or charterwill not only define the structure and powers of

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the authority, but it will set forth the conditionsof service in much the same fashion as a franchise.

The authority's responsibility for self-regula-tion will extend to all aspects of the cable system'soperation except for programming community,educational, municipal and public access channels.In the authority's areas of responsibility, it shouldbe required to promulgate rules to carry out theduties prescribed by its charter. These areaswould include supplying channels, equipment, andfacilities to agencies responsible for administeringthe community, educational, municipal and publicaccess channels; making channels available tocommercial users; establishing affirmative minor-ity employment and training programs; andestablishing a system for hearing grievancesrelated to operation of the system. Under therecommendations, the authority would also berequired to hold an annual review of system oper-ations and render a report to Common Council.

One advantage commonly cited for publicauthorities is that separation of an entrepreneu-rial function from those of local governmentmakes for more efficient operation and quicker,more imaginative, and far - sighted decisionmaking. This relates to one of the authority'smost important self-regulatory responsibilities:upgrading the system to keep pace with the state-of-the-art and anticipating future demands. Here,the authority should be limited only by themarketplace, i.e., its ability to sell bonds tofinance improvements.

Under the recommended public authoritymodel, the Council's direct regulatory role wouldbe limited. The Council would not pass on theauthority's budget or approve its projects as itdoes with the so-called Municipal Parking Author-ity (more a City department than a trueauthority). Instead, the Council would be limitedto approving subscriber rates and annually re-viewing the system's operations. Even whereCouncil chose to exercise its reserved power toamend the authoity's charter, it could not impairthe terms on which bonds previously had beensold.

Because the directors of the special publicauthority are somewhat removed from the politi-cal process, special care must be taken to insurethat their decisions will reflect the public interest.Thus, the Committee has included recommenda-tions relating to membership qualifications andconflict of interest. With respect to the former,the Committee recommends simply that members

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be City residents and that total authority mem-bership reflect the minority group composition ofthe City's population. The conflict-of-interestproblem could be dealt with by prohibiting anydirect or indirect financial interest in transactionsof the authority by members of their immediatefamilies during their term of office and for a five-year period thereafter; violations would be sub-ject to criminal sanctions. Transactions subjectto the prohibition would include, but not belimited to, purchases of equipment, contracting forservices, leasing facilities and channels, and bondsales.

b. NON-PROFIT CORPORATION AND/ORPRIVATE FRANCHISEE MODELIn terms of regulation, non-profit corporation

an1 private franchisee models would operate inmuch the same way. That is, both would providecable television services to the City under theterms of a City-granted franchise. However, ifa non-profit corporation seeks to take advantageof Internal Revenue Service Rulings conferringtax-exempt bonding status (and the State ap-proves), it could take on somewhat the appear-ance of the special public authority. Nonetheless,it would conceptually still operate under afranchise from the City.

As noted above, the Committee recommendscreation of a single-purpose regulatory agencywith the required expertise to oversee the fran-chisee's performance. This agency would, in effect,be charged with enforcing the terms of thefranchise. This would mean that the services tobe provided by the franchisee and its relationshipwith those organizations responsible for com-munity, educational and municipal programmingwould be subject to the agency's review to insurecompliance with terms of the franchise. Addi-tionally, the agency would keep a weather eye onfactors indicating a need for franchise renegotia-tion, e.g., trends in demand for services, fran-chisee's profit, advances in the state-of-the-art.Finally, the agency would be responsible forestablishing a system for hearing grievancesrelating to system operations and for conductingan annual review and rendering a report to theCommon Council.

As with the special public authority model,the Council's direct regulatory role would belimited. For reasons mentioned earlier, theCouncil could not, generally, unilaterally alter theterms of the franchise. Instead, the agency wouldnegotiate with the franchisee and Council's role

would consist of approval or rejection of renegoti-ated terms. However, the Council would be ableto shape negotiations in the first instance throughits review based on the agency's annual report.

Finally, the Committee recommends the same

5. INTERCONNECTABILITY

membership qualifications and conflict of interestcontrols imposed on the special public authorityto insure that the regulatory agency's decisionswill reflect the public interest.

RECOMMENDATIONS:

1. THAT THE COMMON COUNCIL REQUEST STATE LEGISLATION TO ASSURE COMPATIBIL-ITY AND INTERCONNECTION OF ALL SYSTEMS IN EXISTING REGIONAL PLANNINGDISTRICTS.

2. THAT THE CITY TAKE THE LEADERSHIP IN DEVELOPING THE INTERCONNECTABILITYOF ITS SYSTEM WITH OTHERS IN THE REGION AND IN THE STATE.

The full potential of cable will never berealized so long as each system is an island untoitself. No doubt much entertainment program-ming will only be economically feasible whereregional or state-wide viewing is possible. Thesame could be said of specialized commercial pro-gramming such as televised housing multi-lists,seasonal fashion shows or new-model automobileintroductions. Future services such as marketingsurveys will be unnecessarily complicated if theyrequire system-by-system origination.

The non-commercial uses of cable will simi-larly be hampered without regional and state-wide interconnectability. Much educational andgovernmental-social service programming willrequire regional or state-wide distribution. Andwhile programming on public access and com-munity channels may at first be intended for alimited, local audience, this may not always bethe case. Indeed, as systems throughout the

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region and state become interconnected, the trendcould be toward inter-community programming totake advantage of the new avenues of communi-cation opened by cable.

For all the potential benefits of interconnecta-bility, experience elsewhere has shown that itdoesn't happen if the decision is left to cablesystem operators. For this reason, the Commit-tee recommends that Detroit take the lead ininterconnecting its system with others in theregion and State. Such interconnectability will,of course, require compatibility between systems.Moreover, interconnection between Detroit's sys-tem and those in neighboring cities does notnecessarily mean direct interconnection betweenthose systems. The Committee therefore recom-mends that Common Council seek State legislationto assure both compatibility and interconnectionof all systems in existing regional planningdistricts.

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VIII. ADDITIONAL SERVICES FUTURE IMPLICATIONS

RECOMMENDATION:

1. THAT GIVEN THE SERIOUS ECONOMIC IMPACT OF PAY T.V. ON CABLE SYSTEM SUB-SCRIBERS, PAY T.V. NOT BE APPROVED AT THIS TIME; THAT SUCH DECISION AWAITTHE ENGINEERING AND FINANCIAL PROJECTIONS WHICH WILL SPECIFICALLY AD-DRESS THE ISSUE AS TO WHETHER PAY T.V. IS NEEDED TO MAKE THE CABLE SYSTEMECONOMICALLY VIABLE; THAT IF PAY T.V. IS REQUIRED FOR THIS PURPOSE, THENSUCH USES OF THE SYSTEM SHOULD BE LIMITED TO THE MINIMUM NECESSARY TOINSURE FINANCIAL VIABILITY. SIPHONING OF PROGRAMMING WHICH WOULD OTHER-WISE BE AVAILABLE TO ALL SUBSCRIBERS (PARTICULARLY LOW-INCOME) SHOULD BEMINIMIZED.

Pay television is the delivery over a cablesystem of signals which are viewable only bythose subscribers who pay an extra fee, in addi-tion to the monthly subscription fee, on a perprogram or per channel basis. Pay television viathe cable offers services and programming de-signed to meet distinct needs of subscribers andprovides a means whereby specialized program-ming not ordinarily televised can be produced.

Because of the multiplicity of channels on acable system, special "pay channels" could beaccommodated without diminishing the level ofeducational, municipal, public access and com-munity channels. At present, it appears that paytelevision could provide services in the followingareas: entertainment, e.g., movies, sporting events,and cultural activities; business/professional pro-gramming, e.g., in-service training programs,management meetings, data transmission, andrecord keeping; and monitoring services, e.g., fireand burglar alarms.

It is obvious that provision of business andmonitoring services are entrepreneurial in natureand must be paid for by the user. However, in thearea of entertainment and sports the issue be-comes somewhat ambiguous what programsshould be paid for separately and what should beincluded as part of programming available forthe monthly cable fee?

HOW PAY TV WORKSPay TV operates on the premise that special-

ized programming can be restricted to only those

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viewers who have ordered it. Most pay systemsinclude some method of scrambling or encoding theprogram at the transmission point and a systemfor unscrambling or decoding the program at theauthorized subscriber's home. In most cases, theprogram can't be unscrambled without attachingto the television set a special converter or de-coder, for which the subscril'er pays. Each paychannel or program is assigned a different code.Only if the subscriber has ordered a particularprogram by this code will the scrambled signal beunscrambled by the converter. Some systems alsoinclude a transponder, a device which can regulateany piece of equipment which operates with anon/off control. The addition of a transpondergives the cable system the potential of sensingand operating numerous types of householdequipment.

Two pay-TV arrangements are currentlybeing utilized. Charges can be on a per-programbasis, according to the "admission" bought forindividual shows or a weekly or monthly basis,with the payments then located among pay-TVprogrammers according ti audience patterns. Thesubscriber can be billed for his use of the pay-TVchannel along with his regular cable fees.15

The Committee believes that Pay TV, like non-television uses of cable, should not be authorizedby the Council at this time, due to its financial

15. A Discussion of Pay-Cable Television, Theodore S.Ledbetter, Jr., and Susan C. Greene, Yale Journal ofLaw and Social Action, December 1971.

impact on many viewers and the lack of informa-ton on the need for it to make the cable systemfinancially viable.

We foresee a "serious economic impact" byPay TV on those who first have to pay simply tohave viewer access to the cable system. Withoutadequate controls, "siphoning" will occur; i.e.,much of what is available to all subscribers with-out payment of an additional fee will become avail-able only on Pay TV. In that case, subscribersmight end up paying a fee for the nightlynews or situation comedies. The Committee fearsthe poor, who tend to rely on the medium for in-formation and entertainment more than the middleclass does, will find themselves having to spenddisproportionate amounts of money on televisionto the detriment of their basic needs. And, allviewers would receive less than promised fromtheir cable subscription.

ADVANTAGES OF PAY TVThere are often touted advantages for Pay

TV. Such a system would provide an additionaldegree of choice to the individual viewer, par-ticularly in making available specialized, richlyvaried and highly professional programs to thosewho are willing to pay a fee for such services.Programming is costly and, according to someexperts, "pay television may be the most promis-ing means of compensation for programming ofinterest to specialized audiences."16 Pay tele-vision may also increase the financial viability ofthe entire cable system, because it offers a servicewhich is attractive to the subscriber, thereby in-creasing subscriber penetration, and at the sametime produces revenue itself. Obviously, some ofthe revenues from a well supported Pay TVchannel could, if the City so stipulated, help sup-port programming costs for municipal, educa-tional, public access and community channels.

Pay television may, in the future, provideentertainment not currently available to the publicat large because of 1) cost of admission, 2) diffi-culty in obtaining tickets, or 3) location of theevent.

1. First run movies one of the mostpopular uses for pay cable is for the presentationof first-run movies without commercial interrup-tion on the home screen. This use of the systemis currently being installed in several cities with

16. Kestenbaum, Lionel, Common Carrier Access toCable Communications, Regulatory and EconomicIssues, August 1971.

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sizable cable penetration.17 An entire family canview current movies for a fee considerably lowerthan the price of two theater tickets and withoutconcerns for such things as transportation orbaby sitter problems.

2. Sporting events Pay TV may offer theopportunity to present sporting events which havenever before been available to television viewers. Asthe FCC has noted, "some cable systems currentlycarry the blacked out home games of sports teamsto their subscribers pursuant to a contract withthe team involved. Sports teams apparently entersuch agreements when they are playing to capac-ity crowds and the number of cable subscriberswould not hurt the home gate but would provideadditional revenue through the sale of the cablecarriage rights. In this instance, cable is perform-ing a valuable public service to its subscribers inpresenting sports programming that was previ-ously unavailable to any television viewer."18

3. Specialized cultural programming eventssuch as opera, theater, dance and graphic artspresentations do not have mass audiences andtherefore receive little exposure on television. Butthe promise of the mature cable system with itssatellite interconnction and penetration of at least40% by the end of this decade) will make pos-sible the promotion and distribution of culturalprograms originating anywhere in the country.While the number of subscribers for such pro-gramming in an individual city may be small,through interconnection, the base of support maybecome satisfactorily large. Indeed, in time thepayment of a relatively nominal fee will allowcultural events occurring almost anywhere in theworld to be available on the home screen andtheaters and opera houses being built today areincluding facilities for cablecasting.

GUIDELINESWhile the Committee does not feel that it

should make specific recommendations about PayTV at this time, it requests that the CommonCouncil consider these aspects of Pay TV, inaddition to the findings of the financial and engi-neering projections, before granting authority forany Pay TV uses of the system:

1. That a percentage of the gross revenues

17. Optical Systems, Los Angeles, Jeffrey Nathenson.18. FCC Letter of Intent, August 5, 1971.19. Sloan Report, Television of Abundance, 1971.

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from Pay TV be allocated to support programmingcosts for public access, community, municipal andeducational channels, and

2. That the amount of Pay TV be regulatedso as to minimize "siphoning effects" and maxi-mize diversity of service.

In any event, a major concern of the City ofDetroit and the Common Council must be toprotect the rights of all viewers. To ignore thepossibility of the siphoning off of a majority ofprograms to Pay TV is to allow the subversion ofmany of the beneficial aspects of cable television.

NON-TELEVISION USES

RECOMMENDATION:1. THAT NON-TELEVISION USES OF THE CABLE SYSTEM, E.G., DATA TRANSMISSION, FAC-

SIMILE REPRODUCTION, SHALL BE CONSIDERED BY THE COMMON COUNCIL SEPA-RATELY FROM ITS CONSIDERATION OF THE GRANT OF AUTHORITY TO ESTABLISH THECABLE SYSTEM.

Assuming that the cable system installed inthe City of Detroit will have limited two-waycapability, services which can be available im-mediately include: (1) locally originated pro-gramming on educational, municipal, public accessand community channels; (2) quality reception;(3) FM signals; (4) commercial channels for useby professional and business interests; (5) sportsprograms and new movies; (6) public opinionpolling; (7) traffic surveillance; (8) shopping; and(9) reservation services. A mature cable systemcan accommodate an extremely large number ofadditional services. Many of these services arereferred to as "non-television" or non-broadcastuses of the cable system, uses for other thanvisual transmission of entertainment or publicservice programs. Non-television uses. of thesystem (made possible by the broad-band capa-bility of cable) are considered by many to havethe potential of revolutionizing the communica-tion of business, industry, governmental and edu-cational institutions.

As The Industrial Electronic Division of theElectronic Industries Association stated beforethe Federal Communications Commission, theservices to be provided by broadband communi-cations network in the late 1970's and the early1980's will be of landmark importance. "We lookupon such systems as being of 'national resources'dimensions, and the development of these re-sources as a national goal." The EIA stated, "wevisualize new services for all our broadband com-munications network that, in aggregate . . . willfar transcend current entertainment television viacable in importance to the American public,industry and business."

What then are these services, and at whatpoint will they become a part of a cable system?The nature of services carried on a cable systemwill to some extent be a function of the "matur-ity" for the system. Once the system has achieved

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full two-way capability, computer directed switch-ing and a network of point-to-point services, someof the possible uses might be:

A. TWO-WAY SERVICES1. Banking and Credit Services For each

subscriber, banking, income tax, budget and otherrecords could be maintained and retrieved ondemand. The value of stock portfolios could bekept up to date, and other types of bankingservices could be performed by the system.2°

2. Meter Reading and Automatic BillingsAutomatic meters now available for electricity,gas and water can be adapted for use with theresponse terminals of a two-way cable system.These meters could be interrogated as often asdesired by a central computer. Each meter re-sponse would carry with it the address of thesubscriber. The central computer would store andtabulate the data received, automatically calculatemonthly bills and transmit these utility bills tothe subscribers via a cable facsimile printer.

3. Selective Load Control and Load Monitor-ing refers to the use of a two-way, interactivecable system for selective control of electricaldevices in homes, offices, business establishmentfor schools, etc. For example, a number of powercompanies offer special low rates to customerswho are willing to use automatic connectors onthe lower element of two-element electric hotwater heaters during periods of other heavy powerusage, thereby lessening the peak usage of power.However, with the advent of widespread use ofair conditioners, washing machines, and dryers,the characteristics of daily power loads are hardto predict. Detroit Edison has recently imple-mented a radio system for rapid, direct controlof hot water switches during peak periods to over-

20. Urban Cable Systems, an interim report, The MitreCorporation, November 1971.

come these limitations. Automatic disconnectionof various equipment controlled via a cable, wouldbe more responsive to moment by moment powerusage. The cost savings in power generation andtransmission facilities can be very significant.21

4. High Speed Computer Channels Cablechannels can accommodate a wide variety of com-puter-related uses. This technology will allowcommunication between user and the computerand between computer and computer. Applica-tions are virtually limitless.

5. Facsimile Channels Information re-trieval from libraries, delivery of mail, and de-livery of printed media directly to the home canbe accomplished on these channels.

B. POINT-TO-POINT SERVICESOther uses will be possible with the installation

of a point-to-point network, a system which canbe used for direct communication in much thesame fashion as the telephone. Point-to-pointchannels are designed to meet special needs ofsuch users as government, educational institutions,and business organizations. Some of the uses towhich such a network might be put are:

1. Police Communications The broadbandcapability of cable may provide the means ofexpanding police communication at a reasonablecost. The cable network can tie together Detroitpolice headquarters and local precincts, the Train-ing Academy, Wayne County Jail and Dehoco.The cable can also be used for record keeping andother data transmission. Procedures now requir-ing the presence of the police officer could behandled instead on the cable, making for moreefficient use of police time. Lineups, for example,could be monitored from the local precincts, re-moving the need for the policeman or witness totravel to main headquarters.

2. Automatic Vehicle Monitoring SystemA cable system can report the position of everymember of a set of moving vehicles. There haslong been a need for up-to-the-minute informationon the location of service vehicles which are oper-ating under the jurisdiction of municipal govern-ments. In addition to public transit, police,sanitation, and fires, other functioning depart-ments of the city government could increase theirefficiency and service capabilities if a vehiclelocator system could be shared among them. Someof the specific uses of this system are:

a. full-time monitoring and dispatching ofpolice and emergency vehicles;

21. Ibid.

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b. dynamic scheduling and routing of transitvehicles;

c. re-routing vehicles in emergencies, such asmajor fires, away from a specified area.

3. Health Delivery Systems A variety ofhealth services can be delivered on the cable.Included are: provision of service by a physicianto a patient over a point-to-point hook-up; con-tinuing follow-up care to patients recently re-leased from hospitals; participation in diseaseprevention programs; transmission of health datafrom hospital, clinic and offices; professional con-ferences on medical advances; and programs forconvalescents, the handicapped, etc.

These illustrations are but a few of the possi-bilities that cable may provide. The technologyis available; the components necessary for theirimplementation have been developed. They arenot available in quantity for implementation atthis time, however. The necessary production willonly begin as a number of sophisticated urbancable systems develop and the demand grows. Itis difficult to speculate which of the servicesdescribed here will actually become a part of thecable system in Detroit, and at what point in time.It is, however, entirely possible to predict thatuses similar to these will become reality.

Anticipation of the demand for such servicesand the costs cannot knowledgeably be made, atthis time. The Committee's concern for addi-tional research in this area is reflected in itsrecommendation for financial and engineeringprojections. The service potential, cost benefits,and revenue potential must be analyzed beforeimplementation decisions can be responsibly made.To grant authority for the implementation of non-television services when the original grant ofauthority is made could impose inflexible con-straints on the city. Further, it has been acknowl-edged by many industry leaders that revenuesfrom non-television uses of the system may be themost significant financial segment of cable. Togrant these rights initially would be equivalent togiving a blank check to the system operator. It iswith this understanding that the Committeerecommends that the initial grant of authority toestablish the cable system should exclude non-television/radio uses of the cable system.

Additional studies in the area of non-television uses of thesystem have been proposed by the following: Arthur D.Little, Inc., New York; National Science Foundation,Washington, D. C.; Urban Institute, Washington, D. C.;National Laboratory of Urban Communications, Inc.,Kansas City, Missouri.

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IX. TECHNICAL STANDARDS

RECOMMENDATION:

1. THAT THE CITY SET THE TECHNICAL STANDARDS FOR THE CABLE SYSTEM TO INSURETHE HIGHEST POSSIBLE QUALITY OF PERFORMANCE REGARDING THE PICTURE ANDSOUND TO BE DELIVERED TO SUBSCRIBERS.

Poor cable television service, service thatfrequently breaks down, inferior equipment orthat which transmits pictures and sound of poorquality is little better than none at all. The Com-mittee urges that Council include in any cablespecifications definite technical standards forquality of performance as well as upgrading thestandards as new technology develops and en-forcement of these technical standards activelythroughout the life of the system authorized.

Additional standards to be adhered to are anengineering matter which can be determinedthrough the technical projections which CommonCouncil will need to secure and which have beenpreviously recommended. Such projections shouldconsider the FCC rules effective March 31,1972 as minimum requirements. In determiningtechnical standards consideration should be givento interconnection of Detroit's cable system withother cities in the region or, via satellite, withother cities in the country. A potential cableoperator might well be asked to specify possiblealternative equipment that meets the standardsset, the various uses and the respective costs ofeach alternative.

Although cable television is a technology ofabundance, there are nevertheless limits on theabsolute number of channels to be received by acable. The flow of channels to a home televisionset (downstream communications) is limited bythe total cable bandwidth, largely determined bycable amplifiers, by interference effects on somechannels, and by the number of channels laterneeded for upstream transmission. It is alsothought that use of some channels within thecable range may be proscribed as possible hazardsto aircraft navigation. Further special equipmentis needed for reception of more than 12 channels.At present the technical systems with options

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for providing more than 12 channels on the cableare:22

A. Multi-cable systems: two (dual) or moreparallel cables are installed as feeder lines andthe cable drops from the feeder line to the setthrough a switch which the viewer uses to selectone cable at a time to be shown on his receiver.This is termed a "tree" network. The first cablecarries up to 12 channels while 12 additionalchannels are carried on the second cable. Channelcapacity is nominally 12 channels for each cable,although interference decreases this numbersomewhat.

Substituting a converter for the switch in thesystem, however, would, at a cost of $30 to $100,increase the capacity of a single cable to 21 to25 channels, and of a dual cable to 42 to 50channels. If the two cables are installed at thesame time, the cost is about 50 percent less thanfor installing each cable separately.23

The Rand Summary estimated dual cableinstallation to cost only 15 percent more thansingle cable and with a further 15 percentinvestment, one of the cables can be two-wayoperationable.

B. Augmented channel systems: a singlecable is installed with a converter attached to thetelevision set to increase channel capacity beyondthe VHF channels that normally could bereceived. Converter technology is now in therange of 25 to 26 channels, although it may reach30 to 35 channels in the near future. The con-verters cost $30 to $50 and are attached to thetelevision set. One kind, the tuner, operates by

22. Rand, Summary Cable Communications in the DaytonMiami Valley, p. 9.

23. Sloan Commission Report, The Television of Abund-ance, p. 188.

pushbuttons or dials; the other, the block con-verter, converts seven channels normally outsidethe VHF band to VHF frequencies with a switchdetermining whether the choice is made from thisgroup or from the unconverted regular channels.

C. Switched (dial) systems: Channels areselected by remote control devices located gener-ally in neighborhood switching centers containingthe switching equipment, Only one or a fewchannels are actually sent along the cable to theset. To do this, all subscriber drops in a severalblock area must extend to some central pointwhere the switching is performed instead ofattaching to the feeder line at the nearest point.Thus, the switched system involves a radiatinghub network of drops as compared to a conven-tional tree network. The chosen programs aresent along the cable at special low-frequenciesthat have low interference. The switched systemscurrently in use involve the Rediffusion Dial-a-Vision system, with a capacity of multiples of 36channels. Another switched system, Discade, usesten small coaxial cables, each with a capacity of

two to four channels. A remote switching centercan then provide 20 to 40 channels.

Technical standards must also deal with cer-tain interference problems that plague cablesystems. Cable's technical problems, as sum-marized for the Sloan Commission, are:

1. On-channel interference: interference on asubscriber's set due to direct pickup of local VHFbroadcast stations.

2. Intermodulation and harmonic inteference:a misfunction of cable frequency allocations.

3. Image interference..4. Oscillator leakage interference.5. Adjacent channel interference.6. CATV leakage interference with over-the-

air services.Choice of the correct technical standards will

alleviate these problems. Cable equipment, in-cluding the headend, the cables, the amplifiersand the subscriber terminals, should be tested forquality before, during and at intervals afterinstallation.

RECOMMENDATION:

2. THAT THE INITIAL INSTALLATION OF EQUIPMENT PROVIDES THE GREATEST POTEN-TIAL FOR MAXIMUM NUMBER OF CHANNELS AND OFFER THE GREATEST FLEXIBILITY;AND THAT EQUIPMENT INITIALLY INSTALLED HAVE DUPLEX OR TWO-WAY CAPACITY.

The future use of cable television depends toa great extent uopn the minimum channel capac-ity that the Common Council insists upon insetting the terms for a cable system. If a maxi-mum potential is not provided in the beginning,it will mitigate against the full development ofservices that a cable system can provide in thefuture. In addition, it is much more economicalto provide a large channel capacity in the originalinstallation than to add more channels later.Similarly, it is both economically wise and nowrequired by the FCC to provide for two-way com-munications and point-to-point networks, linking,say, all fire stations or all hospitals, from thebeginning. The initial investment for a fully de-veloped system will increase initial capital andcosts. Unless a cable operator is required to pro-vide for full services, he may well offer a minimumsystem that will cost less and have a greaterearning capacity in earlier years but not providesufficient services then. Later addition of ade-quate services will be far more expensive thanproviding them at the beginning.24

24. Rand Summary, Cable Communications in the DaytonMiami Valley, 1972.

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Current technology provides the opportunityfor a simple two-way or duplex system. One-wayis audio and visual and the return is a non-voiceaudio. This standard is now being required bythe FCC rules that were announced in February1972 and became effective March 31, 1972. Cer-tainly, technology will continue to refine thepossibilities of a two-.way system. Eventually, itis envisioned that it will be two-way: both audioand visual. The Common Council should insistthat the maximum possibility for a two-waysystem should be required as a technologicalstandard when the system is ready to be installed.

In recognition of the many foreseeable andpotential demands for channel space, and inrecognition of the economic advantages of avoid-ing piecemeal installation processes, the Commit-tee recommends that any cable system approvedhave a potential for a full range of cable services(see Channel Allocation), even though maximumuse might not immediately be made. To do other-wise would be to limit the system unwisely, andto cause delays and economic penalties at a latertime.

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RECOMMENDATION:

3. THAT ALL CONSTRUCTION RELATED TO CABLE INSTALLATION BE DONE IN A MANNERCONSISTENT WITH SOUND ECOLOGICAL AND AESTHETIC CONSIDERATIONS.

The Committee would prefer that cable beunderground, if this is possible. There are obviouscost implications that must be balanced here.Recognizing the environmental dangers of asystem that will pass by every house in the city,

the Committee urges that the Council exercise areview function over cable installation and otherconstruction, such as location of master antennas,to assure they are in accord with sound aestheticand ecological practices.

RECOMMENDATION:

4. THAT EXISTING OVER-THE-AIR CHANNELS SHALL HAVE THE SAME CHANNEL NUMBERON THE CABLE SYSTEM WHEREVER POSSIBLE.

It would be confusing if existing over-the-airchannels had a different channel number on thecable system. For the convenience of the viewerand the encouragement of the over-the-air chan-nels, we believe it only fair that such channelsshould retain their current channel numbers onthe new cable system. This is not a difficulttechnical question to resolve.

This recommendation does not mean that the

frequency at which a signal is carried on the cableis in question. The Committee understands thatit may be electronically impossible to carry eachover-the-air channel at its broadcast frequency.What we do strongly recommend is that the homeviewer's cable dial indicate the same channelnumber as an over-the-air dial would show. Theproblem may be resolved with labels, not withelectronics.

RECOMMENDATION:

5. THAT THE SYSTEM OPERATOR BE REQUIRED TO CONSTANTLY UPGRADE TECHNICALFACILITIES, EQUIPMENT AND SERVICES SO THAT THE SYSTEM IS AS ADVANCED ASTHE CURRENT STATE OF TECHNOLOGY WILL ALLOW.

The technology of cable television is rapidlychanging. In many respects, cable is still in itsinfancy and can be expected to change appreciablyin the next several decades. Once a system isestablished the temptation may be to continue touse existing technology and resist, for variousreasons, innovations that would enhance thesystem. If cable is to serve the public, it mustkeep up with the most current "state of the art."There should, therefore, be appropriate require-

110

ments either in the charter or the franchise agree-ment that would assure that the most advancedstate of the art be maintained.

One difficulty may be that in the early stagesof the cable system, the initial installation willhave to be fully utilized for a long period of timein order that there is amortization of the initialinvestment, reinforcing the Committee's recom-mendation that the initial installation be of thebest possible quality.

X. EMPLOYMENT AND ECONOMIC DEVELOPMENT

Quite apart from the myriad community, edu-cational, municipal and entertainment servicescable television will make available to the citizensof Detroit, the advent of a cable system will meana major new industry for the city. Unlike manyother industries, this one cannot move to thesuburbs; it will be primarily located within, pro-vide service to and derive its income from withinthe city limits. The Committee urges that the

Common Council give full consideration to theeconomic and employment opportunities that willbe created by the granting of the authority tosome entity to operate a cable system. TheCommittee strongly desires that these benefits beenjoyed by those citizens who will ultimatelysupport the cable system the residents of theCity of Detroit.

RECOMMENDATIONS:

1. THAT ALL PERSONS EMPLOYED IN CONNECTION WITH THE CONSTRUCTION, OPER-ATION AND MAINTENANCE OF THE SYSTEM BE RESIDENTS OF THE CITY OF DETROIT,AND THAT THE WORK FORCE OF ALL ENTITIES ENGAGED IN THE CONSTRUCTION,OPERATION OR MAINTENANCE OF THE SYSTEM PROPORTIONATELY REFLECT THERACIAL AND MINORITY GROUP COMPOSITION OF THE POPULATION OF DETROIT.THAT THOSE CONNECTED WITH THE CONSTRUCTION, OPERATION AND MAINTE-NANCE OF THE SYSTEM BE REQUIRED TO FULFILL AFFIRMATIVELY THE EQUAL EM-PLOYMENT PROVISIONS OF CITY, STATE AND FEDERAL LAW AND THAT THE WORKFORCE OF THE SYSTEM REFLECT THE RACIAL, SEXUAL AND ETHNIC GROUP COMPOSI-TION OF THE POPULATION OF DETROIT. THAT PERSONS NOT BE ARBITRARILY ELIMI-NATED FROM CONSIDERATION FOR EMPLOYMENT BECAUSE OF AGE.

2. THAT IN THE CARRYING OUT OF THE CONSTRUCTION, MAINTENANCE AND OPERATIONOF THE CABLE SYSTEM, SYSTEM OPERATOR WILL NOT DISCRIMINATE AGAINST ANYEMPLOYEE OR APPLICANT FOR EMPLOYMENT BECAUSE OF RACE, CREED, COLOR,SEX, OR NATIONAL ORIGIN. THE SYSTEM OPERATOR WILL TAKE AFFIRMATIVE ACTIONTO INSURE THAT APPLICANTS ARE EMPLOYED, AND THAT EMPLOYEES ARE TREATEDDURING EMPLOYMENT, WITHOUT REGARD TO THEIR RACE, CREED, COLOR, SEX, ORNATIONAL ORIGIN. SUCH ACTION SHALL INCLUDE, BUT NOT BE LIMITED TO, THEFOLLOWING: EMPLOYMENT, UPGRADING, DEMOTION OR TRANSFER, RECRUITMENT ORRECRUITMENT ADVERTISING, LAYOFF OR TERMINATION, RATES OF PAY OR OTHERFORMS OF COMPENSATION, AND SELECTION FOR TRAINING, INCLUDING APPRENTICE-SHIP. THE SYSTEM OPERATOR SHALL POST IN CONSPICUOUS PLACES, AVAILABLE TOEMPLOYEES AND APPLICANTS FOR EMPLOYMENT, NOTICES SETTING FORTH THEPROVISIONS OF THIS NON-DISCRIMINATION CLAUSE. THE SYSTEM OPERATOR SHALL,IN ALL SOLICITATIONS OR ADVERTISEMENTS FOR EMPLOYEES PLACED BY OR ON BE-HALF OF THE SYSTEM OPERATOR STATE THAT ALL QUALIFIED APPLICANTS WILLRECEIVE CONSIDERATION FOR EMPLOYMENT WITHOUT REGARD TO RACE, CREED,COLOR, SEX, OR NATIONAL ORIGIN. THE SYSTEM OPERATOR WILL INCORPORATE THEFOREGOING REQUIREMENTS OF THIS PARAGRAPH IN ALL OF ITS CONTRACTS FORWORK RELATIVE TO CONSTRUCTION, MAINTENANCE AND OPERATION OF THE CABLESYSTEM AND WILL REQUIRE ALL OF ITS CONTRACTORS FOR SUCH WORK TO INCOR-PORATE SUCH REQUIREMENTS IN ALL SUBCONTRACTS FOR SUCH WORK.

Elsewhere we have recommended the necessityfor this city to assume the leadership role inregional development of cable television. The

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Committee's initial concern relates principally tothe system's development within the politicalboundaries of the City of Detroit. It is well docu-

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mented that the long-term unemployment ratewithin the city itself is consistently much higherthan that reported for the Detroit metropolitanarea (tri-county). Furthermore, the historicpattern of job discrimination which many minoritygroups have experienced still limits their fullaccess to employment opportunities in the Detroitarea. On this basis alone the city should seek tomaximize the employment potential of a cablesystem. To help off -set these prior patterns ofdiscrimination the Committee felt that the sys-tem's work force should be reflective of the racial,sexual, ethnic and minority group composition ofthe City.

The hiring of Detroit residents for cable systemjobs will have a direct and immediate effect onthe revenue derived by the City from the system.This is accounted for by the differential whichis enjoyed by non-residents who derive theirincome within the City, but who pay less thanresidents by way of direct income taxation.

The huge investment in capital goods (hard-ware) necessary to install the cable system andthe large number of electronic components usedin the system, promises an immediate potentialfor economic development. Any manufacturerwho is asked to supply that equipment will have

RECOMMENDATION:

a large and continuing production operation. Notonly will employees be needed to produce thisequipment, but the manufacturer can be expectedto need additional buildings, capital equipmentand materials. The potential exists, then, for theestablishment of a manufacturing facility withinthe city; at the very least we should look forwardto assembly and finishing work being done inDetroit by Detroiters. The potential for a localentrepreneur to contract much of this work fromthe prime supplier of equipment would furtherincrease the attractiveness of the system to theeconomy of the City.

The variety of skills to be utilized in the con-struction, installation, operation and maintenanceof the system is extremely broad. It is not un-reasonable to project that three to five hundredpermanent jobs may ultimately result from thecreation of a Detroit cable system; some estimatesare even higher. Engineers, linemen, cablesplicers, drivers and laborers will be needed inconstruction. Installers for homes and otherfacilities will be needed as will maintenance per-sonnel to insure the cable system's proper oper-ation. A variety of skills will be utilized in oper-ations from management and sales to billing andclerical operations.

3. IN ORDER TO HELP REDUCE THE LEVEL OF UNEMPLOYMENT AND UNDEREMPLOY-MENT IN THE CITY, THE SYSTEM OPERATOR WILL, WITHIN THREE MONTHS AFTERINITIATION OF THE SYSTEM INSTALLATION, PREPARE A GENERAL OUTLINE OF ANAFFIRMATIVE ACTION PLAN DESIGNED TO TRAIN AND PROVIDE EMPLOYMENT TOQUALIFIED UNEMPLOYED AND UNDEREMPLOYED RESIDENTS OF THE CITY AT EVERYOPERATIONAL LEVEL INVOLVED IN THE CONSTRUCTION, OPERATION AND MAINTE-NANCE OF THE CABLE SYSTEM. THE GENERAL OUTLINE SHALL BE DRAWN UP AFTERCONSULTATION WITH ADMINISTRATORS OF THE PRINCIPAL MANPOWER PROGRAMSOF CITY AND STATE AGENCIES, AS WELL AS WITH THE SYSTEM OPERATOR'S PRINCI-PAL CONTRACTORS AND SUBCONTRACTORS, AND REPRESENTATIVES OF LOCAL UNIONORGANIZATIONS.THE GENERAL OUTLINE OF THE AFFIRMATIVE ACTION PLAN SHALL BE SUBJECT TOTHE APPROVAL OF THE COMMON COUNCIL AND, WITHIN THREE MONTHS AFTER SUCHAPPROVAL, THE SYSTEM OPERATOR SHALL PREPARE A FINAL AND DETAILED PLANWHICH SHALL ALSO BE SUBMITTED TO THE COMMON COUNCIL FOR ITS APPROVAL.ANNUALLY, THE SYSTEM OPERATOR SHALL FILE REPORTS WITH THE COUNCIL SET-TING FORTH ITS ACTIVITIES UNDER THE AFFIRMATIVE ACTION PLAN AND STATINGIN DETAIL ANY FAILURES TO COMPLY WITH THE PROVISIONS OF THE PLAN. THE PRO-VISIONS OF THE PLAN, AS APPROVED BY THE COMMON COUNCIL, WILL CONSTITUTEMATERIAL TERMS AND CONDITIONS OF ANY GRANT OF AUTHORITY TO OPERATE THECABLE SYSTEM.a) THAT A SEMI-ANNUAL EMPLOYMENT CENSUS APPROPRIATE TO THE FOREGOING

RECOMMENDATION SHALL BE PROVIDED TO THE MEMBERS OF THE COMMON COUN-CIL SO THAT IT CAN BE DETERMINED WHETHER THEIR STANDARDS ARE BEINGCOMPLIED WITH.

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b) THE COMMON COUNCIL SHALL PROVIDE BY ORDINANCE FOR ENFORCEMENT OFTHE REQUIREMENTS OR THE FOREGOING RECOMMENDATIONS AND PENALTIESFOR THE VIOLATION THEREOF.

Just as there exists the problem of racial andeconomic discrimination in the use of existingmedia, there exists the same potential in theeconomic and employment opportunities generatedby the cable system. We believe that equalemployment opportunity in the cable system mustbe the subject not just of legislation and con-versation, but also of significant and affirmativeaction.

Affirmative action must be clearly understoodto include a great deal more than the passiveacceptance of applications for employment. Itmust be understood to include the active recruit-ment of minority persons, through those informa-

RECOMMENDATION:

tion sources they normally utilize. It must beunderstood to include seeking out of skilled indi-viduals who might not otherwise make themselvesavailable. It must be understood to include apositive orientation to these goals by the manage-ment and particularly those who screen and placeemployees. The requirements, the Committeebelieves, should apply not only to the operatingentity directly responsible for the system, but alsoto contractors or subcontractors to the operators.To assist in developing such affirmative steps, theCommittee has recommended submission of plansby the system operator as well as periodic progressreports.

4. THAT IMMEDIATELY UPON THE INITIATION OF WORK FOR INSTALLATION OF THECABLE SYSTEM, A TRAINING PROGRAM FOR THE DEVELOPMENT OF CAREER OPPOR-TUNITIES FOR ALL EMPLOYEES OF THE SYSTEM OPERATOR BE ESTABLISHED BYTHE SYSTEM OPERATOR. IN ADDITION, THE SYSTEM OPERATOR SHALL DEVELOP ATRAINING PROGRAM FOR THOSE PERSONS NOT EMPLOYED BY THE SYSTEM OPERATORBUT WHO ARE INVOLVED IN PRODUCTION AND PROGRAMMING OF COMMUNITY, EDU-CATIONAL, MUNICIPAL, AND PUBLIC ACCESS CHANNELS.

The system operator should have a trainingprogram for his employees to assure effectivedevelopment of career opportunities in this newfield. The Committee believes, too, that the cableoperator must assume a major share of responsi-bility for insuring the effective use by the com-munity of its access to the cable system. For this

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reason, we have recommended that he undertaketraining activities for persons to operate com-munity channels. This should include all func-tions necessary for community groups to producetheir own programming, such as cameramen,engineers, directors, console operators and soundmen.

XI. PRIVACYRECOMMENDATION:

1. THAT CABLE SYSTEM SUBSCRIBERS BE GRANTED, BY LAW, A RIGHT OF ACTION FORINVASION OF THEIR PRIVACY INVOLVING THE CABLE SYSTEM, AND THAT SUCH IN-VASIONS OF PRIVACY ALSO BE MADE A CRIMINAL OFFENSE WITH VIOLATORS SUB-JECT TO FINE AND/OR IMPRISONMENT.

Any system that creates a potential for two-way transmissions to and from each household inthis city provides the basis for an invasion of theprivacy of these residents. This may be thegreatest danger that the citizens of Detroit willface from a cable system. It is but a short stepfrom the wiring of the city to the kind of abusesrecounted in George Orwell's "1984." The imageof "Big Brother" determining the effectivenessof one's performance of his morning exerciseroutine as described there could easily turn toreality once most residential units are connectedto a duplex cable system. At that time, arrange-ments for surveillance would then be technicallyfeasible.

The only one to whom the citizen can look forprotection against abuse of that system is thegovernment. In the minds of some, however, thegovernment may be the most tempted to im-properly use this opportunity to get information.The Committee feels, nevertheless, that the bestprotection against abuse of the system is to pro-vide protection for the individual by law. To assurethat the protections are meaningful, it is necessary

that the subscriber or his guests be granted aprivate right of action for invasion of their privacyby anyone, whether it be another private indi-vidual or the government itself. At the same time,the Committee urges that the government makethe violation of an individual's rights of privacyinvolving the cable system a criminal offense withviolators subject to a fine and imprisonment.Embodiment of these rights of privacy in lawcreate the strongest statement of their import-ance for purposes of individual freedoms. Inaddition, the government will have the responsi-bility to bring criminal sanctions against thosewho violate the rights of others.

The fear of invasion of privacy is not anabstract concern for the Committee. It is raisedby the temptation of some to obtain informationand to use such data for control of the indi-vidual. The opportunity to do so has been createdby this new technology. Even with these legalprotections, violations may be difficult to deter-mine and harder still to prove in court. The exist-ence of the legal sanctions, however, should itselfprovide much needed protection.

RECOMMENDATION:

2. THAT THE CABLE SYSTEM BE DESIGNED TO PREVENT ANY DUPLEX RETURNS WITH-OUT A SUBSCRIBER'S SPECIFIC PERMISSION: THAT THE SYSTEM DESIGN AND OPER-ATION INCORPORATE SAFEGUARDS TO PREVENT THIRD PARTIES FROM TAPPING INTOTHE SYSTEM AND THEREBY INVADING A SUBSCRIBER'S PRIVACY.

As a reflection of the deep concern with whichthe Committee holds the potential of abuse ofindividual privacy through this new technology,it desires that specific attention in the technologi-cal development of the system be given to wayto prevent unauthorized duplex returns. Thismight require that some automated record be keptof all duplex returns in such a way as to indicatewhether there was subscriber permission. Al-

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though no system is fail-safe, sufficient attentionshould be given, in the design of the system, topreventing such abuses; this may be as importanta protection as imposition of criminal penaltieson violations of privacy.

The system operator, who has control of thedistribution system, because of his access to thatsystem may be in the best position to abuse his

trust. But, it is equally possible that third partiescould break in upon the cable system in such away as to intrude upon a subscriber's privacy.Again, appropriate design consideration may beable to develop necessary mechanisms to preventsuch encroachment on an individual's privacy.

RECOMMENDATION:

Whether it is technically feasible to do so by pro-viding a warning to the subscriber when othersare intercepting his return transmissions, or, byproviding adequate protections against such tres-passes on the cable, itself, appropriate safeguardsshould be constructed.

3. THAT MONITORING OF A CABLE SYSTEM SUBSCRIBER'S VIEWING HABITS WITHOUTHIS EXPRESS PERMISSION BE PRECLUDED, IF POSSIBLE, BY SYSTEM DESIGN ANDPROHIBITED BY LAW. SUCH PROHIBITIONS SHALL NOT PREVENT CUMULATIVE VIEW-ING ANALYSES AND RESEARCH SAMPLING.

Although it is a less inviduous form of sur-veillance, monitoring of the viewing habits or thespecific viewing of a particular program shouldbe prevented without express permission of thesubscriber. This can be accomplished by a systemsdesign technique or by providing criminal or civilsanctions. At the same time the Committeerecognizes that information about viewing habitsand research sampling of programs or advertisingis valuable in making appropriate programmingdecisions. Such information could be provided incumulative form as to number of households with-out determining the individual household's view-ing of particular programs. This would not seemobjectionable. In allowing this exception, however,the Committee again stresses its concern withindividual privacy and the need for absolute pro-tection. It seems fairly evident that without cable

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such forms of surveillance would not be attemptedor possible. With the availability of cable and thepotential of two-way communications the possi-bility of such surveillance will become quite real.In the end the individual must rely upon hisGovernment and his legal system to provide himthe protection necessary. Design techniques shouldreduce the temptation for improper and un-authorized invasions of privacy. Further, a freeand open communication system may be thegreatest of protections against abuses by otherindividuals or even by the Government itself.Cable has a tremendous potential and only zealousconcern by the citizenry will help it reach thisgoal. At the same time that freedom of accessmust be maintained, equal care must be exercisedto protect cable from becoming an instrument ofoppression through surveillance or monitoring.

XII. BIBLIOGRAPHY

REPORTS:

Rand Corporation, Santa Monica, California:

CABLE TELEVISION AND UHF BROADCASTING, Rolla Edward Park (R-689-MF, January,1971). A report prepared under a grant from the John and Mary R. Markle Foundation.CABLE TELEVISION: OPPORTUNITIES AND PROBLEMS IN LOCAL PROGRAM ORIGINA-TION, N. E. Feldman (Report 570-FF). Prepared for Ford Foundation.CABLE TELEVISION: THE PROBLEM OF LOCAL MONOPOLY, Richard A. Posner (RM-6309-FF, May 1970). A report prepared under a grant from the Ford Foundation.CABLE TELEVISION AND THE QUESTION OF PROTECTING LOCAL BROADCASTING, LelandL. Johnson (R-595-MF, October 1970). Prepared under a grant from the John and Mary R. MarkleFoundation.

POTENTIAL IMPACT OF CABLE GROWTH ON TELEVISION BROADCASTING, Rolla EdwardPark (R-587-FF, October, 1970). Prepared under grant from the Ford Foundation.PRELIMINARY FINANCIAL PROJECTIONS FOR A CABLE TELEVISION SYSTEM IN DAYTON.OHIO, Walter S. Baer and Rolla E. Park (WN-7522-KF/FF). Prepared under joint financial supportfrom the Ford Foundation and the Charles F. Kettering Foundation.TELEVISION AND THE DAYTON RESIDENT: THE RESULTS OF A PUBLIC OPINION SURVEY,Robert K. Yin (WN-7560-KF/FF). October 8, 1971.THE APPLICATION OF CABLE T V SYSTEM IN THE DAYTON, OHIO AREA TO CONTINUINGMEDICAL EDUCATION, Rudy Bretz (WN-7479-KF/FF). June, 1971, prepared under joint supportfrom the Ford Foundation and the Kettering Foundation.THE FUTURE OF CABLE TELEVISION: SOME PROBLEMS OF FEDERAL REGULATION,Leland L. Johnson (RM-6199-FF), January, 1970.

THE POTENTIAL OF CABLE TELEVISION IN WASHINGTON, D. C.: THE QUESTION OFMULTIPLE FRANCHISES, Walter S. Baer (WN-7584-I-FF/MF). August, 1971. A Working Noteprepared under joint financial support from the Ford Foundation and the John and Mary R. MarkleFoundation. This Note was prepared to facilitate communication of preliminary research results.

General:

CABLE DEVELOPMENT AND THE FRANCHISING PROCESS, Monroe E. Price, September, 1970.ISSUES FOR STUDY IN CABLE COMMUNICATIONS, Arthur L. Singer, Jr., An Occasional Paperfrom the Alfred P. Sloan Foundation.ON THE CABLE THE TELEVISION OF ABUNDANCE, Report of the Sloan Commission onCable Communications, McGraw-Hill, December, 1971.

JURISDICTION TO REGULATE CABLE TELEVISION: ISSUES IN THE SCOPE OF FEDERAL,STATE AND MUNICIPAL POWERS, Steven Rankin, December 15, 1970.

A DISCUSSION OF PAY-CABLE TELEVISION, Theodore S. Ledbetter, Jr., and Susan Greene(DRAFT). Yale Journal of Law and Social Action.

ALTERNATIVE OWNERSHIP CONCEPTS FOR CABLE TELEVISION SYSTEMS, by Urban Com-munications Group, Suite 405 M. Street, Washington, D. C. (prepared for Cable T.V. Study Committee,Common Council, City of Detroit).

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AMERICAN CIVIL LIBERTIES UNION MODEL CODE OF REGULATION CABLE TELE-VISION BROADBAND COMMUNICATIONS, Jerrold Oppenheim, ACLU, Illinois Division, June,1971.

A SHORT COURSE IN CABLE, Office of Communication, United Church of Christ, 1971.

A PRELIMINARY REPORT CONCERNING THE PROBLEMS . . . AND POTENTIAL OF COM-MUNITY ANTENNA TELEVISION IN SOUTHEASTERN MICHIGAN, Patrick Kenney, SEMCOG.

A PROPOSAL FOR THE UTILIZATION OF THE TELEVISION MEDIUM IN EFFECTING IN-CREASED COMMUNICATION WITHIN THE CITY OF DETROIT (for discussion purposes only).Submitted by Gilbert A. Maddox, Administered by the University Center for Adult Education, WSU-U of M- Eastern Michigan U. A component of the Mayor's Committee for Human Resources Develop-ment.

A REPORT ON CABLE TELEVISION AND CABLE TELECOMMUNICATIONS IN NEW YORKCITY, The Mayor's Advisory Task Force on CATV and Telecommunications, September 14, 1968(New York, N. Y.)

A REPORT ON NEW YORK CITY'S OPTIONS FOR CABLE TELEVISION FRANCHISES, LanceLiebman, assisted by Risa Dickstein. Prepared by the Staff of the Vera Institute of Justice under agrant from the Alfred P. Sloan Foundation.BROADBAND COMMUNICATIONS NETWORK (BCN), MONROE COUNTY, NEW YORK, FEASI-BILITY STUDY AND MARKET SURVEY. Prepared for Community T.V. Trust.

CABLE COMMUNICATIONS IN THE DAYTON MIAMI VALLEY: BASIC REPORT, L. Johnson,W. S. Baer, R. Bretz, D. Camph, N. E. Feldman, R. E. Park, R. K. Yin, Rand, prepared with the finan-cial support from the Charles F. Kettering and Ford Foundation, 1972.

CABLE IN EMBRYO ECONOMIC CONSIDERATIONS FOR URBAN FRANCHISING (RevisedDraft, Part I), Foundation '70, September, October, 1971.

CABLE TELEVISION AND THE IMPACT OF REGULATION, William S. Comanor and B. M.Mitchell (Bell Telephone Research Lab).

CABLE TELEVISION IN THE CITIES COMMUNITY CONTROL, PUBLIC ACCESS ANDMINORITY OWNERSHIP, Charles H. Tate, Editor, January, 1972.

COMMUNICATIONS TECHNOLOGY FOR URBAN IMPROVEMENT, June, 1971. Report to theDepartment of Housing and Urban Development under Contract No. H-1221 (Committee on Tele-communications, National Academy of Engineering).

COMMUNITY ANTENNA TELEVISION (CATV) IN MICHIGAN MUNICIPALITIES, MichiganMunicipal League, Information Bulletin No. 119, May, 1971.

CROSSED WIRES, CABLE TELEVISION IN NEW JERSEY. A Report by the Center for Analysisof Public Issues Princeton, New Jersey (92A Nassau Street Copyright 1971).

ENGINEERING FEASIBILITY STUDY: CABLE TELEVISION, CITY OF PALO ALTO, CALI-FORNIA, June, 1970. Hammett and Edison, Consulting Engineers.

FEASIBILITY STUDY AND MARKET SURVEY, November 27, 1970. Prepared for CommunityT.V. Trust, by Malarkey, Taylor and Associates, Inc. (1225 Connecticut Avenue, N.W., Washington,D. C.).

MODEL CODE OF REGULATIONS CABLE TELEVISION, BROADBAND COMMUNICATIONS,Jerrold Oppenheim, American Civil Liberties Union, Illinois Division. June, 1971.

PROPOSAL TO ESTABLISH AN URBAN CATV ADVISORY FACILITY FOR THE NATIONALLEAGUE OF CITIES AND THE UNITED STATES CONFERENCE OF MAYORS, Ross D. Davis,December 16, 1971.

REGIONAL AND URBAN COMMUNICATIONS. A Research Project by the Metropolitan Fund,Detroit, Michigan, 1970.

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1°'6

REGULATION AND COPYRIGHT . . . WHERE WE STAND, National Cable Television Association,Inc., 918 Sixteenth Street, N.W., Washington, D. C., 1970.

SCHOOLS AND CABLE TELEVISION, Division of Educational Technology, National EducationAssociation, 1971.

SEMINAR FOR INSTITUTIONS INVESTORS ON COMMUNITY ANTENNA TELEVISION, DrexelHarriman Ripley, Incorporated (Proceedings on Forum, December, 1969).THE CATV INDUSTRY AND REGULATION, National Cable Television Association, 918 SixteenthStreet, N.W., Washington, D. C. 20006.

THE FCC AND CATV: OVERKILL, National Cable Television Association, Washington, D. C.

THE ELECTRONIC GRAPEVINE (Cable and the Community), Lois Cunniff, New York University.URBAN CABLE SYSTEMS an interim report.URBAN CABLE SYSTEMS an interim report prepared under a grant from the John and Mary R.Markle Foundation, The Mitre Corporation, November, 1971.

CABLE TELEVISION: A GUIDE FOR CITIZEN ACTION, Monroe Price and John Wicklein, PilgrimPress, 1972.

OTHER:

FRANCHISE DOCUMENTS, RE: Applications for City Franchise to Operate a CATV System withinthe City of Kansas City, Missouri.

HEARINGS Before Subcommittee of the Committee on the Judiciary House of Representatives, 89thCongress (Parts 1, 2, and 3 1965).

IN THE SUPREME COURT OF THE STATE OF KANSAS, Capital Cable, Inc., Appellee, vs. Cityof Topeka, Kansas . . .

LETTER from Mr. Edward Roth (Corporation for Public Broadcasting, Washington, D. C.) to Mr.George Collins (Director, Promotion and Public Relations, WTVS, WSU, Detroit) of July 12, 1971;enclosing copy of "BOSTON ORDINANCE" as it was submitted by the Metropolitan Council of Nash-ville by the non-profit Metropolitan Nashville Education Association, Inc.

LETTER from McGeorge Bundy to the Honorable Dean Burch, December 4, 1970; re: submission ofcomments from the Ford Foundation on the issues raised in Docket 18892 regarding the Commission'sproposed rule-making on CATV.

LETTER from Mr. Bruce W. Rhyne to Vincent E. Ferretti (Assistant City Attorney, City of Sockville,Maryland) of August 4, 1971; re: Report No. 151, Municipal Regulation of CATV CommunityAntennae Television Model Ordinance.

ARTICLES, MAGAZINES:

"Cable Television," William T. Knox, Scientific American, October, 1971."Burch Reveals FCC Plans for Cable T.VV.," Special Edition of Black Communicator, August, 1971.Broadcasting The Business Weekly of Television and Radio, The Broadcast News Service, 220 East42nd Street, New York, N. Y. (March-December, 1971)."The Wired National," Ralph Lee Smith, The Nation Magazine, May 18, 1970.

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XIII. APPENDIX 1

OFFICE OF THE MAYOR - MILWAUKEE

January 8, 1971

To the Honorable, the Common Councilof the City of Milwaukee

Honorable Members of the Common Council:This is to respectfully inform you that I am

vetoing Common Council File Number 70.1671which grants authority for a cable televisionsystem in our street right of way.

The point is made in "The Wired Nation" byRalph Lee Smith that cable television meets everyhistoric test for classification as a common carrierand for regulation as a common carrier and forregulation as a public utility. Cable systems, saysMr. Smith, "are natural and unavoidable monopo-lies" because "few communities need, or willsupport, two cable systems." I agree.

Based upon my reading of cable television'spotential, those of us who have decried the lossof freedom of speech and press in the practices ofthe current mass communications monopoly "ain'tseen nothing yet."

Computer experts tell us that, in addition tothe telephone and radio and television servicesnow available, cable television's communicationscenter in every home of the future will offer audio,video and facsimile transmissions that will pro-vide newspapers, mail service, banking and shop-ping facilities, data from libraries and otherstorage centers, school curricula and more. Inshort, it will become the most influential factorin our society. This vast potential power con-centration demands all the foresight we cancommand.

It is shameful that we must fashion the safe-guards for the future, as much as we can, in anarea of human development that touches everyfamily in the country. But, the Federal Com-munications Commission bobs between force -fieldsof dollar bills as though the publicly-owned electro-magnetic spectrum, floating free in the air orcanned in a wire, belongs to a relative handfulrich enough to hire armies of lobbyists. And,only four states (Wisconsin is not among them)

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have even passed laws bringing cable systemsunder regulation as a utility.

In the absence of any national or state regula-tory agency willing or able to protect the publicinterest, we certainly owe it to ourselves, ourchildren and our children's children to try to actin our own interest and the interest of the future.

Before attempting to outline to you some ofthe unexplored questions which I believe ought tobe examined, let me assure you that I have theutmost respect for the representatives of thecurrent applicant. They have been even tempered,courteous and most helpful through what musthave been an anxious week for them. My purposeis not to thwart this applicant, or any other, butto place before you some important, unansweredquestions, the answers to which ought to beformally spelled out in a comprehensive resolution.

It may well be that members of the Councilwill need to inspect cable television operations inother cities. If so, I will support that. It may bethat experts, such as Mr. Smith, ought to beinvited to testify. If so, I will support that. Youmay even want to hear from members of the FCCor its staff or the Wisconsin Public Service Com-mission or its staff. If so, I will support that.Anything which will make our options and theirconsequences clear, I will support.

The following questions certainly should notbe considered all encompassing. Perhaps a fulldeliberation will show some of them are extrane-ous. However, it seems to me they are all properquestions.

We are told that the applicant is Time-LifeBroadcasting, Inc., a subsidiary of Time, Inc., butthat it will operate through Milwaukee Cable-vision, Inc., a subsidiary of a subsidiary. Who isMilwaukee Cablevision, Inc.? Who are the offi-cers, the stockholders? What commitments hasit made, and to whom, for stock options and otherforms of participation in the venture? What isthe nature of that relationship? What was therelationship between the applicant and two othersubsidiaries, both Wisconsin corporations, for

which articles of dissolution are pending beforethe Secretary of State? What happened to thosesubsidiaries and why? Why did not the officesof the applicant sign the application or furnishwritten support of its appointment of an agent?Why is a financial statement of Time, Inc., fur-nished when another corporation is the applicant?

Why are the rates indefinite for apartmentbuildings, hotels, motels or commercial buildings?What is an apartment building, etc.? Why is therate indefinite for a second receiving set in thesame home? Rates in other cities are subF,can-tially lower than $5.95 per month. What evidenceis there to support that charge here? What lier-cent of profit factor are we confronting? Do wewant to prohibit pay TV in any form? Or estab-lish a procedure for regulating pay TV charges?

We are asking ten percent of gross beforetaxes as the city's consideration. Why not asliding scale based upon the gross as was estab-lished in Aubuquerque, New Mexico, and Modesto,California?

We are told that the Wisconsin TelephoneCompany has filed rates with the State PublicService Commission to accommodate installation.What, if any, will be the impact, on telephonecharges? Are we creating an extension of thetelephone monopoly into other fields by thearrangement in the event of default? What hap-pens if the applicant defaults? Is it true thattelephone poles can accommodate only one cablethus effectively creating the monopoly by con-structing out competition?

Why is not the timetable for constructionspecified? Are we buying another lawsuit byapproving vagueness? How many streets will becut? Why should we proceed without knowingoffice and tower locations, the applicant's agree-ments with other utilities or the magnitude ofstreet disruption? Where is the written agreementto conform with our policy of removing woodpoles from the street? Where is the agreementthat the applicant locate its taxable propertywithin the city? If street cuts are numerous,should we re-examine our requirements for res-toration of the surface? Why doesn't the resolu-tion state an amount of public liability insurancecoverage that will be furnished? Can we make itabsolutely clear that all rates and charges mustbe approved by the Common Council? Why can'twe regulate the opening of additional channelsand assure in the resolution the use of somechannels by the schools and city government?

J9120

As I said, the applicant has been most coopera-tive. Some of these questions he has offered toanswer by telegram and include in the resolutionby reference, at best a questionable legal pro-cedure. It would be infinitely better to have itspromise of no pay television, a channel for ourschools, a channel for city government and itsconstruction timetable incorporated in carefullycompleted language within a comprehensiveresolution.

In order to avoid undue delay, I respectfullyrequest that you suspend any rule which wouldplace a time restriction upon the amendmentswhich I am sure a full deliberation will produce.

It is a complicated decision, but few decisionswith such far-reaching effects for our society andthe generations to come will ever be in your hands.

Respectfully submitted,

/s/ HENRY W. MAIERMayor

IN MY OPINION

CATV Involves Many Complex Questionsby Mayor Henry W. Maier

January 22, 1971When people laughed at the first automobile

scaring the daylights out of the horses on MainStreet, few could envision the tremendous impactof the automotive industry on the way we wereto live in the years ahead.

Today many communities in the nation are inthe "horseless carriage" stage of cable television(CATV), which many believe will eventuallybring about a new communications revolutionreaching into our homes and offices and greatlyaffecting our every day lives.

Eleven members of the Milwaukee CommonCouncil this week showed their concern for thefuture ramifications of CATV when they upheldmy veto of the application by Time-Life Broad-cast, Inc., for a cable television franchise inMilwaukee.

By their action they have made it possiblefor the Council to consider a new CATV ordi-nance taking into account the many implicationsof cable television that have surfaced since theoriginal ordinance was passed almost five yearsago.

As I indicated, my veto was not based on adesire to thwart Time-Life or any other applicant

but to raise important, unanswered questionswhich ought to be formally spelled out in a morecomprehensive agreement.

CATV does not represent simply anotherentertainment media.

As Ralph Lee Smith has pointed out in hisexhuastive article, "The Wired Nation": "In addi-tion to the telephone and to the radio and tele-vision programs now available, there can comeinto homes and into business places audio, videoand facsimile transmissions that will providenewspapers, mail service, banking and shoppingfacilities, data from libraries and other storagecenters, school curricula and other forms ofinformation too numerous to mention."

If its full potential is realized, it will revolu-tionize our society and a city without a full com-munications system will find its quality of lifesecond class.

Every indication is that whoever is first inCATV in a city will enjoy a virtual monopolysince it is unlikely that homes or businesses willsubscribe to two or more wired services.

As Smith has pointed out, cable televisionmeets every historic test for classification as acommon carrier and for regulation as a publicutility.

Five states Connecticut, Nevada, RhodeIsland, Vermont and Hawaii already classifyCATV as a public utility and regulate its ratesto subscribers. New York State's Public ServiceCommission has recently asked for similarauthority.

Regulation by the FCC should place CATVin the position of other common carriers suchas telephone systems with its interstate ratescontrolled as a public monopoly with a vast

capacity for future profits.

With common carrier status, the CATV oper-ation itself would not have control over the pro-grams and messages sent over its wires. Therewould also be the likelihood of much morediversity than under present. systems, greaterfreedom of speech, of press and of entertainment,education and business opportunities.

If CATV is to reach its full potentiality it willalso require the use of two-way cables, allowingsignals to travel both from and to the owner's set.

John W. Macy, Jr., President of the Corpora-tion for Public Broadcasting, told delegates tothe 1970 Congress of Cities in Atlanta that "thepossibilities opened by linking such a two-wayfeedback system to our schools, hospitals, librariesand businesses are almost too startling to imagine.But they are a clear and present possibility."

Our present ordinance does not call for acomplete plan from cable television operatorsindicating whether or when they will provide forthese possibilities. Nor does it require a plan ofconstruction detailing which area will be wiredfirst, which last and by when.

Full service to the people of the city and theguarantee of fair rates may well be more im-portant in the long run than the question of thepercentage of profit that will return to the city.

In fact, the Federal Communications Commis-sion could well make financial return to the cityan academic question by adopting a proposallimiting the maximum municipal return from afranchise at two percent gross profits, a proposedrule it is now considering.

In any event, there are a number of involvedquestions to be considered before we give the goahead to making Milwaukee a "wired city."

XIII. APPENDIX 2

CABLE TELEVISION AUTHORITY ENABLING ACT

AN ACT to provide for the incorporation ofauthorities to acquire, equip, own, improve, en-large, operate and maintain cable televisionsystems together with appurtenant properties andfacilities necessary or convenient for the effectiveuse thereof, for the use or benefit of any countyor for the use or benefit of any county and anycity or village therein, or for the use or benefit ofany city, village or township; to provide forcompensation of authority commissioners; topermit transfers of property to authorities; toauthorize the execution of contracts, leases andsubleases pertaining to authority property andthe use thereof; to provide for the issuance ofrevenue bonds by such authorities; to validateaction taken and bonds issued; and to provideother powers, rights and duties of authorities andincorporating units, including those for the dis-posal of authority property.

County, City, Village or Township Authorities;Incorporation, Purposes

Sec. 1. Any county, city, village or townshipmay incorporate, as provided in this act, one ormore authorities for the purpose of acquiring,equipping, owning, improving, enlarging, operat-ing and maintaining a cable televsion systemtogether with appurtenant properties and facilitiesnecessary or convenient for the effective usethereof.

County and City, Township, or Village Authorities;Incorporation, Purposes

Sec. 2. Any county and any city, township orvillage therein, may incorporate one or moreauthorities for the purpose of acquiring, equipping,owning, improving, enlarging, operating and main-taining a cable television system together withappurtenant properties and facilities necessary orconvenient for the effective use thereof.

Incorporating Unit DefinedSec. 3. The term "incorporating" unit as used

in this act shall be deemed to mean a county, city,village, or township incorporating an authority orjoining in such incorporation.

131 122

Incorporation of Authority, ProcedureSec. 4. The incorporation of such an author-

ity shall be accomplished by the adoption ofarticles of incorporation by the legislative bodyof each incorporating unit. For such adoption, theaffirmative vote of the majority of the memberselect of each such legislative body shall be re-quired. The articles of incorporation shall beexecuted for and on behalf of each incorporatingunit by the following officers, to-wit: For thecounty, by the chairman of the board of super-visors and county clerk; for the city by its mayorand city clerk; for the village, by its presidentand clerk; for the township, by its supervisor andclerk. The clerk or secretary of each incorporat-ing unit shall also affix to the articles of incorpora-tion following the signatures thereto, a certificatein form substantially as follows:

"The foregoing articles of incorporation wereadopted by the of theof County, Michigan, at a meetingduly held on the day of19

Dated , 19

(Clerk/Secretary)"

County or Municipal Cable System Authority;Articles of Incorporation Contents; LegislativeBody Members Ineligible for AuthorityCommission

Sec. 5. The articles of incorporation shall setforth the name of such authority; the name ornames of the unit or units incorporating the same;the purpose for which the authority is created;the number, terms and manner of selection of itsofficers including its governing body which shallbe known as the "commission"; the powers andduties of the authority and of its officers; thedate upon which the a., thority shall become effec-tive; the name of the newspaper in which thearticles of incorporation shall be published; andany other matters expedient to be incorporatedtherein: Provided, however, That the members ofthe legislative body of each incorporating unit of

an authority should be ineligible to serve asofficers.

Board of Commissioners; Compensation,Per Diem, Mileage

Sec. 6. Members of the commission may bepaid such compensation and such per diem andmileage for attending meetings, as may be pro-vided by the commission with the approval of theincorporating unit or units.

Articles of Incorporation; Execution,Filing, Time Effective

Sec. 7. The articles of incorporation shall beexecuted in duplicate and delivered to the countyclerk who shall file one such duplicate in his officeand the other with the recording officer of theauthority when selected. The county clerk shallcause a copy of the articles of incorporation tobe published once in a newspaper designated insaid articles of incorporation and circulatingwithin the county. He shall file one printed copyin his office, attached to each of which printedcopies shall be his certificate setting forth thatthe same is a true and complete copy of theoriginal articles of incorporation on file in hisoffice and also the date and place of the publica-tion thereof. Such authority shall become effec-tive at the time provided in the articles of incor-poration. The validity of such incorporation shallbe conclusively presumed unless questioned in acourt of competent jurisdiction within 60 daysafter the filing of such certified copies with thesecretary of state and county clerk.

Body Corporate; PowersSec. 8. Such authority shall be a body corpo-

rate with power to sue and be sued in any courtof this state. It shall possess all the powers neces-sary to carry out the purpose of its incorporationand those incident thereto. The enumeration ofany powers in this act shall not be construed asa limitation upon such general powers.

Contracts to Acquire Property; Leases toIncorporating Units, Terms, Consideration;Subleases, Condition, Terms

Sec. 9. The authority and any incorporatingunit or units shall have power to enter into acontract or contracts whereby the authority willacquire property contempated by the terms ofthis act and lease the same to the incorporatingunit or units for a period not to exceed 50 years.The consideration specified in such contract forsuch use shall be subject to increase by the

123

authority if necessary in order to provide fundsto meet its obligations. Any rental obligation orconsideration applicable to the incorporating unitor units under such contract, shall not be con-sidered as indebtedness of the incorporating unitor units within the meaning of any statutory orcharter debt limitation of such incorporating unitor units. With the consent of the authority ascontained in the contract or otherwise secured,any incorporating unit or units to which theproperty is leased, may sublease the property orany part thereof to any one or more persons,firms or corporation or may contract for the useof the property or any part thereof by and one ormore persons, firms or corporations, where thesublease or contract benefits and serves a legiti-mate public purpose of the sublessor. Any sub-lease or contract may extend for a period not toexceed 50 years and is not a franchise or grantwithin the meaning of any statutory or charterprovision.

Acquisition of Property CondemnationSec. 10. For the purpose of accomplishing

the objects of its incorporation the authority mayacquire property by purchase, construction, lease,gift, devise or condemnation, and for the purposeof condemnation, it may proceed under the pro-visions of Act No. 149 of the Public Acts of 1911,as amended, being sections 213.21 to 213.41 ofthe Compiled Laws of 1948, or any other appro-priate statute.

TRANSFER OF PROPERTY

The legislative body of any incorporating unit,by a majority vote of the members thereof, maytransfer any real property except cemeteryproperty owned by the incorporating unit to anauthority established pursuant to this act.

Amendment of ArticlesSec. 11. Amendments may be made to articles

of incorporation if adopted by the legislative bodyof each incorporating unit: Provided, that no suchamendment shall impair the obligation of anybond or other contract. Any city or village whichis the county seat of a county incorporating anauthority under the provisions of this act, maybecome an incorporating unit of the authority byamendment to the articles of incorporationadopted by the legislative body of such city orvillage and by the legislative body of the county.Any such city or village shall thereafter bedeemed to be an incorporating unit. Each amend-ment shall be adopted, executed and published,

132

and certitfied prmted copies filed, in the samemanner as above specified for the original articlesof incorporation, insofar as applicable.

Revenue, Bonds, ReferendumSec. 12. For the purpose of acquiring, im-

proving and enlarging any such cable televisionsystem, together with appurtenant properties andfacilities necessary or convenien for the effectiveuse thereof, and equipping the same, the authoritymay issue self-liquidating revenue bonds in ac-cordance with and subject to the provisions ofAct. No. 94 of the Public Acts of 1933, as amended,being sections 141.101 to 141.139 of the CompiledLaws of 1948, except that the bonds may be eitherserial bonds or term bonds or any combinationthereof, as shall be determined by the authority.Such bonds shall be payable solely from therevenues of such property, which revenues shallbe deemed to include payments made under anylease or other contract for the use of such prop-erty. Where and to the extent that the bonds arepayable from revenues derived from payments tobe made pursuant to any lease or other contractobligations, the bonds shall be deemed to be issuedin anticipation of contract obligations and suchobligations shall be deemed to be contract obliga-tions in anticipation of which bonds are issuedwithin the meaning of section 6 of article 9 ofthe constitution. No such bonds shall be issuedunless the property whose revenues are pledgedhas been leased by the authority for a periodextending beyond the last maturity of the bonds.For the purpose of section 33 of Act No. 94 of

124

the Public Acts of 1933, the limits of the authorityshall be deemed to coincide with the limits of theincorporating unit, or in the case of a joint author-ity organized under section 2 within the limits ofthe county. If a sufficient referendum petitionshall be filed requesting a referendum upon thequestion of the issuance of revenue bonds by theauthority, then such question may be submittedby the commission of the authority at any generalor special ele lion or elections to be held in theincorporating unit or units whose limits coincidewith those of the authority.

Tax ExemptionSec. 13. All property owned by any authority

shall be exempt from taxation by the state or anytaxing unit therein.

Bonds Retired, Conveyance of PropertySec. 14. When all bonds issued pursuant to

the provision of this act shall have been retired,then the authority may convey the title to theproperty acquired hereunder to the incorporatingunit or units in accordance with the provisionstherefor contained in the articles of incorporation,or, if there be no such provisions, then in accord-ance with the directions of the governing body ofthe incorporating unit or any agreement adoptedby the respective governing bodies of the incorpo-rating units.

Construction of ActSec. 15. The powers herein granted shall be

in addition to those granted by any statute orcharter.

133

XIII. APPENDIX 3

DETROIT PUBLIC SCHOOLSDIVISION OF CURRICULUM AND EDUCATIONAL RESEARCH

OFFICE FOR IMPROVEMENT OF INSTRUCTION

DEPARTMENT OF EDUCATIONAL BROADCASTING9345 LAWTON DETROIT, MICHIGAN 40206 PHONE 313/933-7900

October 11, 1971

Lois P. Pincus, Project Director5229 Cass AvenueDetroit, MI. 48202

Dear Mrs. Pincus:

I am enclosing a very sketchy list of possibilities for the sixchannels we hope will be set aside on cable TV for education. In

addition, the enclosed lift of inservice programs we now have ontape for teacher use will serve as an example of the kinds ofpossibilities there are for inservice programs.

We have on videotape a series of eighteen programs on modern mathfor parents. Certainly cable might be used to acquaint parents withnew curricula- such as the new sciences, math and English. These

should serve to prevent some of the frustrations parents experiencewhen trying to help their children with homework.

Rhoda Bowen and her colleagues in the School of Nursing at Wayne havedone a great series on nursing which should be made available to morepeople. A similar course or courses on practical nursing would enablemany people to do all necessary course work in their own homes.

As you know, the possibilities are endless. All we need are the peoplewith push and imagination, plus much money for planning and production.

I am anxious to see what the final verdict will be for Detroit andcable TV. Certainly, your Committee deserves the thanks.of allcitizens for spending so much time on the study.

Sincerely yours,

(Mrs.) Ethel Tincher, DirectorDepartment of Educational Broadcasting

ET:hh

Enc. 2

125 134

CATV RECOMMENDATIONS

Six channels should be reserved for education. Recommend that these channelsbe divided as follows:

2 for elementary education

2 for secondary education

2 for adult education including in-service education and community services

Examples of the kinds of programming which should be broadcast:

Elementary

Basic skills of reading and mathematics

Science

Art and Music

Language arts, including English as a second language

Foreign languages

Secondary

Humanities

"New" Science-Mathematics

Vocational subjects

Driver training, leaving practice sessions to schools

Courses for the potential drop-out

Courses for sick and/or handicapped children confined to their homes

Adult

Inservice programs for teachers (list of programs of this natureis enclosed as a possible illustration of the kinds of things whichmight be done.

High school courses leading to the GED certificate. This would bea more practical extension of the kinds of programs now being tele-cast cooperatively by the Detroit Public Schools and Blue Shield,resulting in more than 2500 people receiving the high schoolequivalency certificate.

1 35 126

2/CATV Recommendations

Parent Education

Courses to teach the several thousand illiterates in Detroitto read and write. The Detroit Public Schools' PROJECT READhas had significant success with this program to date. Cabletelevision would make classes available to those who are unableto come to READ centers or who are reluctant to expose theiracademic deficiencies to others.

Job-Training skills

Consumer Education

English as a second language

Drug use and abuse

Advance courses for job-upgrading skills. An example of this isthe present cooperative project 'by the Detroit Public Schoolsand the College of Engineering Of the University of Michiganin which graduate courses in engineering are being televisedboth to off-campus classrooms and to business and industry inthe Detroit area. Last semester, students earned more than900 credit hours by using the television courses.

Courses such as practical nursing and medical technology wouldenable many more people to learn theory and rudiments, thusfreeing instructors for supervision of practice sessions.

Enc.

WAYNECOUNTY

re/11WW1 mtg.COLLEGE

Mrs. Lois Pincus, Project DirectorCable TV Study Committee5229 Cass AvenueDetroit, Michigan 48202

Dear Mrs. Pincus:

4612 WOODWARD AVENUE DETROIT. MICH. 411201TELEPHONE 313 0:32-2300

October 18, 1971

As an institution, Wayne County Community College has beencommitted to the application of improved technology to the educa-tional process. We recognize that there are many ways in whichinstruction can be conducted, and that individuals respond differ-ently to different teaching stimuli. Therefore", we support theuse of all possible instructional modes'. Television has long beenrecognized as a meaningful educational tool; Cable TV could makeacademic instruction even more accessible.

In keeping with our philosophy of the "open door", Wayne CountyCommunity College supports those programs intended to provideaccess to education. We do not provide instruction on a contained,well-defined campus. In reality, our "campus" is the entirety ofthe CoUnty; we now conduct classes at 25 locations all over theCounty. For our purposes, cable dispersed in such fashion as topermit our students the use of television in their homes, in theinstructional center or at the public library in which they do re-search, study, or other supportive activities, would be a goal tostrive for. As a consequence of strategically located Cable TV,all departments of the College could develop instructional programsdesigned for this medium. In addition, since it is anticipated thatat some time in the near future Wayne County Community Collegewill offer certificate programs in Mass .Communications and forthe Audio Visual Technology classification, the College could thenprovide a public service through "participation in the training ofcommunity people for purposes of local original programming".

Mrs. Lois PincusPage 2October 18, 1971

Our support for Cable TV in Detroit is obvious. We urge thatthis technological advance be made available to the broadcastpopulation possible within the area. To implement the programsnoted above, two of the proposed educational channels assignedto Wayne County Community College could provide a reasonablepotential for successful utilization. May we urge that yourdeliberations take these suggestions and our students into con-sideration.

Sincerely yours,

Reginald Wilson, Ph. D.President

Eveline P. CarsmanDirector of Learning Resources

129 138

College of Arts and Sciences 4001 W. McNichols Road, Detroit, Michigan 48221 Telephone: (313) 342-1000

October 12, 1971

Ms. Lois Pincus, Project DirectorCable T. V. Study Committee5229 Cass AvenueDetroit, Michigan 48202

Dear Ms. Pincus:

I am sorry that we kept missing each other in our attemptsto call and return calls. I shall try to provide, though, some-thing of a reaction to the Cable TV program that may be ofuse to you.

The University of Detroit, as you know, was among those whopioneered in the possible uses of television for educational andcommunity viewing. This dates our activity back to 1950-51.Consequently, the prospects of Cable TV's availability strikesexperienced and friendly ears.

Our own studios are still active, and could offer much andbenefit much from production involvement. The College ofArts and Sciences is in general actively interested. As detailswork out and we learn of them, we will be anxious to explorewhere we can help most.

JM/s

Sincerely,

john ahoneyDean College of Arts and Sciences

130139

OFFICE or THE PRESIDENT

WAYNE STATE UNIVERSITYDETROIT, MICHIGAN 46202

March 17, 1972

Rev. James W. Bristah, ChairmanCable T.V. Study Committee5229 Cass AvenueDetroit Michigan 48202

Dear M ristah:

am writing to you in regard to Cable T.V. 'System planning inDetro`9E.

Cable T.V. is a communication medium with great potential if usedin the public interest, and Wayne State University is committedto assisting the Detroit Common Council in research, analysis, anddevelopment of a cable T.V. system. The University assures theCommittee that it has both the need and the desire for numerous chan-nels on such a cable system, and if given the opportunity, will notonly utilize these channels to their fullest, but will assist anypublic or governmental organization in developing their uses of theirchannel allotments.

There exists within the University a significant body of knowledgeand expertise in the production of audio, film, and television thatpresently uses electronic distribution systems for the faculty andstudent body. At present, these systems are technically and geo-graphically limited in their ability and reach only the campus community.Two examples of the communications systems used by the University are:

1. The 2500 MHz band (KPV - 20 Channel E-I) televisiondistribution system which distributes lessons tospecially designed and installed receiving unitswithin a 20-mile radius. Unfortunately equipmentand operational costs limit more extensive use ofthe educational tools we have developed. Studentand public access to lesson materials via channelsof a cable system would be enhanced because ingeneral the technical and monetary problems ofCable T.V. are easier to overcome.

2. Two different dial-access systems which provideaccessibility to banks of prepared learningmaterial to students (on demand-as needed) inmany subject matter areas: The present twosystems (one devoted to learning of foreignlanguages and tha other to the liberal arts) are

131 14o

Rev. James W. Bristah, ChairmanMarch 17, 1972Page 2.

2. continued

only available via on-campus phone line users dueto equipment and circuit limitations. However, asignificant increase in utilization could beachieved if a cable T. V. channel were availablefor self-initiated access to the data-bank ofavailable learning materials by an individual orgroup on the cable system.

Other systems, including an extensive closed-circuit TV system,which covers only the University campus, have been in intensive usefor over 10 years, and radio and television productions of the Univer-sity are presently being carried by cable systems in Canada, in thePort Huron-Thunder Bay area and in the Upper Peninsula of Michigan.These, however, are being received "off the air" and distributed onthe cables by a simple direct pick-up with no involvement on the partof the University (except through the viewers or listeners who, quiterightly, feel a sense of intimacy with the University through theprograms they receive).

If a cable system is approved for Detroit, it is imperative thatcitizens' desire for access to the University's learning materialsand data-banks of prepared lessons should be honored. An educatedcitizenry is a productive citizenry.

It should be noted that Wayne State University has had manyexperiences and contacts with several Detroit citizens and communitygroups not only for the purpose of producing programs for them butalso to prepare citizens to operate radio and television equipmentand to produce program material of their own choosing. It has becomeclear that community groups need communication systems of their ownnot only to disseminate but also to produce material that is uniquelyshaped and prepared for the specific needs of the group. The channelson the cable system required by the FCC to be dedicated for publicpurposes such as public access communications and education, raisescertain questions: How should such audio/visual (T.V.) material beprepared, produced and distributed? Who will provide the needed

organizational "expertise?" This University has capability toprovide some input into the resolution of such questions and presentsitself as a resource to community planners for these and other problemswhich are ancillary but highly significant to consideration of a City

132

141

Rev. James W. Bristah, ChairmanMarch 17, 1972Page 3.

cable T.V. system. As an indication of our activities, I am enclosingthe descriptive literature describing the commercial distribution ofeducational video tapes which we developed in nursing education.

It is our considered opinion that the best interest of the publicwill be served if the Common Council of the City of Detroit continuesto provide leadership in identifying the complex issues raised by thequestion of a cable T.V. system. Wayne State University is a vitalresource standing reedy to assist in developing the optimum Cable T.V.system for Detroit. I should emphasize the integral part which Wayneplays in enhancing the dynamism and viability of our City. Allow meto assure you of Wayne's sincere interest in continuing its involve-ment in the creative planning of, a pioneering Cable T.V. Systemsecond to none.

I look forward to hearing from you. We would very much welcomethe opportunity of discussing these important matters of mutualinterest.

Sincerely yours,

George E. Gullen, Jr.Acting President

133 142

CAPITAL COSTS

Cable Trunk Lines

(a)

Aerial

$4,272,000

$4,485,600

$4,709,880

$4,945,374

$5,192.616

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

Subscriber Equipment

660,000

693,000

727,660

764,031

267,411

1-4

(a)

Hook-ups

621,300

507,300

507,300

507,300

507,300

(b)

Convertors

745,560

608,760

608,760

608,760

608,760

Total

$8,139,160

$6,735,975

$7,016,969

$7,312,011

$6,746,374

iLMILES OF CABLE

534

120

534

534

534

534

(a)

Aerial

(b)

Underground

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

1.1=.

HOUSEHOLDS PAST

(a)

New

124,260

101,460

101,460

101,460

101,460

/*A

fgai

(b)

Accumulated

SUBSCRIBERS AS OF DEC. 31 OF YEAR

124,260

225,720

327,180

428,640

530,100

530,100

530,100

(a)

New

24,852

20,292

20,292

20,292

20,292

(b)

Accumulated

24,852

45,144

65,436

85,728

106,020

106,020

Revenue

(a)

Subscription

$745,560

$2,099,880

$3,317,400

$4,534,920

$5,752,440

$6,361,200

(b)

Hook-ups

248,520

202,920

202,920

202,920

202,920

Total

$994,080

$2,302,800

$3,520,320

$4;737,840

$5,955,360

$6,361,200

207.--Low

PROFIT AND LOSS STATEMENT

1St

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross Revenues

$994,080

$2,302,800

$3,520,320

$4,737,840

$5,955,360

$6,361,200

Operating Expenses

(1,220,874)

(2,231,270)

(3,283,815)

(4,380,617)

(4,380,617)

(5,392,573)

(5,392,573)

Gross Profits

(1,220,874)

(1,237,190)

(981,015)

(860,297)

357,223

562,787

968,627

Interest Expense

(406,958)

(743,756)

(1,094,605)

(1,460,205)

(1,797,524)

(1,797,524)

(1,797,524)

Depreciation

(542,556)

(990,683)

(1,458,014)

(1,944,994)

(21372,732)

(2,372,732)

(1,627,832)

(2,524,070)

(3,066,303)

(3,778,516)

(3,385,295)

(3,607,469)

(3,201,629)

Net Income (Loss)

CASH FLOW STATEMENT

Add Depreciation

542,556

990,683

1,458,014

1,944,994

2,372,732

2,372,732

Funds Committed

8,139,160

6,735,975

7,016,969

7,312,011

6,746,374

Cash Available

6,511,328

4,754,461

4,941,349

4,991,509

5,306,073

1,234,737

(828,897)

Deduct

Capital Asset Costs

(8,139,160)

(6,735,975)

(7)016,969)

(7,312,011)

(6,746,374)

Working Capital

(1,627,832)

(1,981,514)

(2,075,620)

(2,320,502)

(1,440,301)

(1,234,737)

(828,897)

Accumulated Working Capital

(1,627,832)

(3,609,346)

(5,684,966)

(8,005,468)

(9,445,769)

(10,680,506)

(11,509,403)

2,1t

.:7:-

-

1st

Year

CAPITAL COSTS

Cable Trunk Lines

COST-REVENUE BREAKDOWN

20% - -High

2nd

Year

3rd

Year

4th

Year

5th

Year

(a)

Aerial

$5,340,000

$5,607,000

$5,887,350

$6,181,914

$6,490,700

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

621,300

507,300

507,300

507,300

507,300

(b)

Convertors

745,560

608,760

608,760

608.760

608.760

Total

$9,207,160

$7,857,375

$8,194,439

$8,548,221

$8,044,528

6th

Year

7th

Year

1-4

Cr.

3MILES OF CABLE

534

120

534

534

534

534

(a)

Aerial

(b)

Underground

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

HOUSEHOLDS PAST

124,260

101,460

101,460

101,460

101,460

(a)

New

(b)

Accumulated

124,260

225,720

327,180

428,640

530,100

530,100

530,100


24,852

20,292

20,292

20,292

20,292

(a)

New

(b)

Accumulated

24,852

45,144

65,436

85,728

106,020

106,020

Revenue

(a)

Subscription

$745,560

$2,099,880'

$3,317,400

$4,534,920

$5,752,440

$6,361;200

(b)

Hook-ups

248,520

202,920

202,920

202,920

202,920

Total

$994,080

$2,302,800

$3,520,320

$4,737,840

$5,955,360

$6,361,200

1st

Year

2nd

Year

20% - -High

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year


Gross Revenues

$994,080

$2,302,800

$3,520,320

$4,737,840

$5,955,360

$6,361,200

Operating Expenses

(1,381,074)

(2,558,680)

(3,788,846)

(5,071,079)

(6,277,758)

(6,277,758)

(6,277,758)

Gross Profits

(1,381,074)

(1,564,600)

(1,486,046)

(1,550,759)

(1,539,918)

(322,398)

83 442

Interest Expense

(460,358)

(853,226)

(1,262,948)

(1,690,359)

(2,092,586)

(2,092,586)

(2,092,586)

Depreciation

(631,196)

(1,136,498)

(1,682,247)

(2,251,559)

(2,762,213)

(2,762,213)

Net Income (Loss)

(1,841,432)

(3,031,022)

(3,885,492)

(4,923,365)

(5,884,063)

(5,177,197)

(4,771,357)

CASH FLOW STATEMENT

Add Depreciation

613,196

1,136,498

1,682,247

2,251,559

2,762,213

2,762b213

Funds Committed

9,207,160

7,857,375

8,548,221

21,04[1.2128

Cash Available

7,365,728

5,439,548

5,445,445

5,307,103

4,412,024

(2,414,984)

(2,009,144)

Deduct

Capital Asset Costs

(9,207,160)

(7,857,375)

(8,194,439)

(8,548,221)

(8,044,528)

Working Capital

(1,841,432)

(2,417,826)

(2,748,994)

(3,241,118)

(3,632,504)

(2,414,984)

(2,009,144)


(1,841,432)

(4,259,258)

(7,008,252)

(10,249,370)

(13,881,874)

(16,296,858)

(18.306.002)


30% - -Low

CAPITAL COSTS

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

6th

7th

Year

Year

Year

Cable Trunk Lines

(a)

Aerial

$4,272,000

$4,485,600

$4,709,880

$4,945,374

$5,192,616

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331 ,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

931,950

760,950

760,950

760,950

760,950

(b)

Convertors

1,118,340

913,140

913,140

913,140

913,140

$8,822,590

$7,294,005

$7,574,999

$7,870,041

$7,304,404

Total

MILES OF CABLE

(a)

Aerial

(b)

Underground

534

120

534

534

534

534

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

HOUSEHOLDS PAST

124,260

101,460

101,460

101,460

101,460

(a)

New

(b)

Accumulated

124,260

225,720

327,180

428,640

530,100

530,100

530,100

SUBSCRIBERS AS OF DEC. 31 OFYEAR

37,278

30,438

30,438

30,438

30,438

(a)

New

(b)

Accumulated

37,278

67,716

98,154

128,592

159,030

159,030

Revenue

(a)

Subscription

$1,115,340

$3,149,820

$4,976,100

$6,802,380

$8,628,900

$9,541,800

(b)

Hook-ups

372,780

304,380

304,380

304,380

304,380

$1,491,120

$3,454,200

$5,280,480

$7,106,760

$8,933,280

$9,541,800

Total

30% - -Low


1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross Revenues

$1,491,120

$3,454,200

$5,280,480

$7,106,706

$8,933,280

$9,541,800

Operating Expenses

(1,323,388)

(2,417,489)

5225.52,22.2.1

(4,734,245)

(5,829,905)

(5,829,905)

(5,829,905)

Gross Profits

(1,323,388)

(926,369)

(99,539)

546,235

1,276,855

3,103,375

3,711,895

Interest Expense

(441,129)

(805,829)

(1,184,579)

(1,578,081)

(1,943,301)

(1,943,301)

(1,943,301)

Depreciation

(587,584)

(1,073,365)

(1,577,860)

(2,102,004)

(2,591,069)

(2,591,069)

Net Income (Loss)

(1,764,517)

(2,319,782)

(2,357,483)

(2,609,706)

(2,768,450)

(1,430,995)

(822,475)

CASH FLOW STATEMENT

Add Depreciation

587,584

1,073,365

1,577,860

2,102,004

2,591,069

2,591,069

Funds Committed

8,822,590

7,294,005

7,574,999

7,870,041

7,304,404

Cash Available

7,058,072

5,561,807

6,290,880

6,838,192

6,637,957

1,160,074

1,768,594

Deduct

Capital Asset Costs

(8,822,590)

(7,294,005)

(7,574,999)

(7,870,041)

(7,304,404)

Working Capital

(1,764,517)

(1,732,198)

(1,284,118)

(1,031,846)

(666,446)

1,160,074

1,768,594


(1,764,517)

(3,496,715)

(4,780,833)

(5,812,679)

(6,479,125)

(5,319,051)

(3,550,457)

Iv;

1st

Year

CAPITAL COSTS

Cable Trunk Lines


30% - -High

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

...

(a)

Aerial

(b)

Underground

(c)

3-cable

$5,340,000

1,320,000

300,300

$5,607,000

315,315

$5,887,350

331,069

$6, 181,584

347,631

$6,490,770

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

931,950

760,950

760,950

760,950

760,950

(b)

Convertors

1,118,340

913,140

913,140

913.140

913,140

Total

$9,890,590

$8,415,405

$8,752,469

$9, 106,251

$8,602,558

MILES OF CABLE

534

534

534

534

534

(a)

Aerial

(b)

Underground

120

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

HOUSEHOLDS PAST

124,260

101,460

101,460

101,460

101,460

(a)

New

(b)

Accumulated

124,260

225,720

327,180

428,640

530,100

530,100

530,100


37,278

30,438

30,438

30,438

30,438

(a)

New

(b)

Accumulated

37,278

67,716

98,154

128,592

159,030

159,030

Revenue

(a)

Subscription

$1,118,340

$3,149,820

$4,976,100

$6,802,380

$8,628,900

$9,541,800

(b)

Hook-ups

372,780

304,380

304,380

304,380

304,380

Total

$1,491,120

$3,454,200

$5,280,480

$7,106,760

$8,933,280

$9,541,800

30% --High

PROFIT ANDLOSS

STATEMENT

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

GrossRevenues

$1,491,120

$3,452,200

$5,280,480

$7,106,760

$8,933,280

$9,541,800

Operating

Expenses

(1,483,588)

(2,745,779)

(4,058,769)

(5,424,707)

(6,715,090

(6,715,090)

(6,715,090)

Gross

Profits

(1,483,588)

(1,254,779)

(604,569)

(144,227)

391,670

2,218,190

2,826,710

Interest

Expense

(494,529)

(915,299)

(1,352,923)

(1,808,235)

(2,238,363)

(2,238,363)

(2,238,363)

Depreciacion

(658,7131

(1,219,179)

(1,802,093)

(2,408,570)

(2,986,686)

(2,986,686)

Net Income

(Loss)

(1,978,117)

(2,828,791)

(3,176,671)

(3,754,555)

(4,255,263)

(3,006,859)

(2,398,339)

CASH FLOWSTATEMENT

Add Depreciation

658,713

1,219,179

1,802,093

2,408,570

2,986,686

2,986,686

FundsCommitted

9,890,590

8,415,405

8,752,469

9,106,251

8,602,558

CashAvailable

7,912,473

6,245,326

6,794,976

7,153,788

6,755,864

(20,173)

588,347

Deduct

Capital Asset

Costs

(9,890,590)

(8,415,405)

(8,752,469)

(9,106,251)

(8,602,558)

WorkingCapital

(1,978,117

(2,170,078)

(1,957,492)

(1,952,462)

(1,846,693)

(20,173)

588,347

AccumulatedWorkingCapital

(1,978,117)

(4,148,195)

(6,105,687)

(8,058,149)

(9,904,842)

(9,925,015)

(9,336,668)

cri


40% - -Low

CAPITAL COSTS

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

6th

7th

Year

Year

Year

Cable Trunk Lines

(a)

Aerial

$4,272,000

$4,485,600

$4,709,880

$4,945,374

$5,192,616

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

1,242,600

1,014,600

1,014,600

1,014,600

1,014,600

(b)

Convertors

1,491,120

1,217,520

1,217,520

1,217,520

1,217,520

Total

$9,506,020

$7,852,035

$8,133,029

$8,428,071

$7,862,434

MILES OF CABLE

(a)

Aerial

(b)

Underground

534

120

534

534

534

534

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

HOUSEHOLDS PAST

124,260

101,460

101,460

101,460

101,460

(a)

New

(b)

Accumulated

124,260

225,720

327,180

428,640

530,100

530,100

530,100


$49,704

$40,584

40,584

40,584

40,584

(a)

New

(b)

Accumulated

49,704

90,288

130,872

171,456

212,040

212,040

Revenue

(a)

Subscription

$1,491,120

$4,199,760

$6,634,800

$9,069,840

$11,504,880

$12,722,400

(b)

Hook-ups

497,040

405,840

405,840

405,840

Total

$1,988,160

$4,605,600

$7,040,640

$9,475,680

$11,910,720

$12,722,400

40% - -Low


1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross Revenues

$1,988,160

$4,605,600

$7,040,640

$9,475,680

$11,910,720

$12,722,400

Operating Expenses

(1,425,903)

(2,603,708)

(3,823,662)

(5,087,873)

(6,267,238)

(6,267,238)

(6,267,238)

Gross Profits

(1,425,903)

(615,458)

781,938.

1,952,767

3,208,442

5,643,482

6,455,162

Interest Expense

(475,301)

(867,902)

(1,274,554)

(1,695,957)

(2,089,079)

(2,089,079)

(2,089,079)

Depreciation

(633,100)

(1,156,046)

(1,697,706)

(2,259,015)

(2,785,659)

(2,785,659)

Net Income (Loss)

(1,901,204)

(2,116,550)

(1,648,662)

(1,440,896)

(1,139,652)

768,744

1,580,424

CASH FLOW STATEMENT

Add Depreciation

633,100

1,156,046

1,697,706

2,259,015

2,785,659

2,785,659

Funds Committed

9,506,000

7,852,035

8,133,029

8,428,071

7,862,434

Cash Available

$7,604,816

$6,368,584

$7,640,412

$8,684,880

$8,981,796

$3,554,403

$2,785,659

Deduct

Capital Asset Costs

(9,506,020)

(7,852,035)

(8,133,029)

(8,428,071)

(7,862,434)

Working Capital

(1,901,204)

(1,483,450)

(492,616)

256,810

1,119,363

3,554,403

4,366,083


(1,901,204)

(3,384,654)

(3,877,270)

(3,620,460)

(2,501,097)

1,053,306

5,419,389


40°4-High

CAPITAL COSTS

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

6th

7th

Year

Year

Year

Cable Trunk Lines

(a)

Aerial

$5,340,000

$5,607,000

$5,887,350

$6,181,584

$6,490,770

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

1,242,600

1,014,600

1,014,600

1,014,600

1,014,600

(b)

Convertors

1,491,120

1,217,520

1,217,520

1,217,520

1,217,520

Total

$10,574,020

$8,973,435

$9,310,499

$9,664,281

$9,160,588

at.

CJI

. MILES OF CABLE

(a)

Aerial

534

(b)

Underground

120

(c)

3-cable

23.1

HOUSEHOLDS PAST

124,260

(a)

New

(b)

Accumulated

124,260


vz(a)

New

(b)

Accumulated

Revenue

(a)

Subscription

(b)

Hook-ups

Total

534

534

534

534

23.1

23.1

23.1

7.7

101,460

101,460

101,460

101,460

225,720

327,180

428,640

530,100

530,100

530,130

49,704

40,584

40,584

40,584

40,584

49,704

90,288

130,872

171,456

212,040

212,040

$1,491,120

$4,199,760

$6,634,800

$9,069,840

$11,504,880

$12,722,400

497,040

405,840

405,840

405,840

405,840

$1,988,160

$4,605,600

$7,040,640

$9,475,680

$11,910,720

$12,722,400

40% --High

PROFIT ANDLOSS

STATEMENT

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross

Revenues

$1,988,160

$4,605,600

$7,040,640

$9,475,680

$11,910,720

$12,722,400

OperatingExpenses

(1,586,103)

(2,932,118)

(4,328,693)

(5,778,335)

(7,152,423)

(7,152,423)

(7,152,423)

GrossProfits

(1,586,103)

(943,958)

276,907

1,262,305

2,323,257

4,758,297

5,569,977

InterestExpense

(528,701)

(977,372)

(1,442,897)

(1,926,111)

(2,384,141)

(2,384,141)

(2,384,141)

Depreciation

(704,229)

(1,301,860)

(1,921,939)

(2,565,580)

(3,178,877)

(3,178,877)

Net Income

(Loss)

(2,114,804)

(2,625,559)

(2,467,850)

(2,585,745)

(2,626,464)

(804,721)

6,959

CASH FLOW

STATEMENT

Add Depreciation

704,229

1,301,860

1,921,939

2,565,580

3,178,877

3,178,877

Funds

Committed

10,574,020

8,973,435

9,310,499

9,664,281

9,160,588

CashAvailable

8,459,216

7,052,104

8,144,508

9,000,474

9,099,703

2,374,156

3,185,836

Deduct

Capital AssetCosts

(10,574,020)

(8,973,435)

(9,310,499)

(9,663,806)

(9,160,588)

Working

Capital

(2,114,804)

(1,921,330)

(1,165,990)

(663,332)

(60,884)

2,374,156

3,185,836

AccumulatedWorkingCapital

(2,114,804)

(4,036,134)

(5,202,124)

(5,865,930)

(5,926,814)

(3,552,658)

(366,822)


50%--Low

CAPITAL COSTS

1st

Year

2nd

Year

3rd

Year

4th

Year

5th

6th

7th

Year

Year

Year

Cable Trunk Lines

(a)

Aerial

$4,272,000

$4,485,600

$4,709,880

$4,945,374

$5,192,616

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121.,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,600

764,031

267,411


(a)

Hook-ups

$1,553,250

$1,268,250

$1,268,250

$1,268,250

$1,268,250

(b)

Convertors

1,863,900

1,521,900

1,521,900

1,521,900

1,521,900

Total

$10,189,450

$8,410,065

$8,691,059

$8,986,101

$8,420,464

MILES OF CABLE

(a)

Aerial

(b)

Underground

534

120

534

534

534

534

(c)

3-cable

23.1

23.1

23.1

23.1

7.7

HOUSEHOLDS PAST

124,260

101,460

101,460

101,460

101,460

(a)

New

(b)

Accumulated

124,260

225,720

327,180

428,640

530,100

530,100

530,100

SUBSCRIBERS AS OF DEC.31 OF YEAR

62,130

50,730

50,730

50,730

50,730

(a)

New

(b)

Accumulated

62,130

112,860

163,590

214,320

265,050

265,050

Revenue

(a)

Subscription

$1,863,900

$5,249,700

$8,293,500

$11,337,300

$14,381,100

$15,903,000

(b)

Hook-ups

621,300

507,300

507,300

507,300

507,300

Total

$2,485,200

$5,757,000

$8,800,800

$11,844,600

$14,888,400

$15,903,000

507. - -Low


1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross Revenues

$2,485,200

$5,757,000

$8,800,800

$11,844,600

$14,888,400

$15,903,000

Operating Expenses

(1,528,417)

(2,789,927)

(4,093,586)

(5,441,501)

(6,709,570)

(6,704,570)

(6,704,50)

Gross Profits

(1,528,417)

(304,727)

1,663,414

3,359,299

5,140,030

8,183,830

9,198,430

F-+

Interest Expense

(509,472)

(929,975)

(1,364,528)

(1,813,833)

(2,234,856)

(2,234,856)

(2,234,856)

00Depreciation

(672,503)

(1,238,727)

(1,817,552)

(2,416,026)

(2,979,809)

(2,979,809)

(2,037,889)

(1,907,205)

(939,841)

(272,086)

489,147

2,969,165

3,983,765

Net Income (Loss)

CASH FLOW STATEMENT

Add Depreciation

672,503

1,238,727

1,817,552

2,416,026

2,979,809

2,979,809

Funds Committed

10,189,450

8,410,065

8,691,059

1122.8621-01

8,420,464

Cash Available

8,151,561

7,175,362

8,989,944

10,531,566

11,325,637

5,948,974

6,963,574

Deduct

Capital Asset Costs

(10,189,450)

(8,410,065)

(8,691,059)

(8,986,101)

(8,420,464)

Working Capital

(2,037,889)

(1,234,702)

298,886

1,545,466

2,905,174

5,948,974

6,963,574


(2,037,889)

(3,272,597.)

(2,973,705)

(1,428,239)

1,476,935

7,425,909

14,389,483

$A.

cfl

1st

Year

CAPITAL COSTS

Cable Trunk Lines


50%--High

2nd

Year

3rd

Year

4th

Year

5th

Year

(a)

Aerial

$5,340,000

$5,607,000

$5,887,350

$6,181,914

$6,490,700

(b)

Underground

1,320,000

(c)

3-cable

300,300

315,315

331,069

347,631

121,667

Master Antenna

100,000

Local Antennas

120,000

126,000

132,300

138,915

48,620

Local Broadcasting

660,000

693,000

727,660

764,031

267,411


(a)

Hook-ups

1,553,250

1,268,250

1,268,250

1,268,250

1,268,250

(b)

Convertors

1,863,900

1,521,900

1,521,900

1,521,900

1,521,900

$11,257,450

$9,531,465

$9,868,529

$10,222,311

$9,718,618

Total

6th

Year

7th

Year

MILES OF CABLE

534

120 23.1

534

23.1

534

23.1

534 23.1

534 7.7

(a)

Aerial

(b)

Underground

(c)

3-Cable

HOUSEHOLDS PAST

)611

(a)

New

(b)

Accumulated

124,260

124,260

101,460

225,720

101,460

327,180

101,460

428,640

101,460

530,100

530,100

530,100

GI

".}


(a)

New

62,130

50,730

50,730

50,730

50,730

(b)

Accumulated

62,130

112,860

163,590

214,320

265,050

265,050

Revenue

(a)

Subscription

$1,863,900

$5,249,700

$8,293,500

$11,337,300

$14,381,100

$15,903,000

(b)

Hook-ups

621,300

507,300

507,300

507,300

507,300

Total

50% - -High


1st

Year

2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

Gross Revenues

$2,485,200

$5,757,000

$8,800,800

$11,844,600

$14,888,400

$15,903,000

Operating Expenses

(1,688,617)

(3,118,337)

(4,598,616)

(6,131,963)

(7,589,755)

(7,589,955)

(7,589,755)

Gross Profits

(1,688,617)

(633,137)

1,158,384

2,668,837

4,254,845

7,298,645

8;313,245

Interest Expense

(562,872)

(1,039,445)

(1,532,872)

(2,043,987)

(2,529,918)

(2,529,918)

(2,529,918)

Depreciation

(749,746)

(1,384,541)

(2,041,785)

(2,722,591)

(3,373,227)

(3,373,227)

1--L

Net Income (Loss)

(2,251,489)

(2,422,328)

(1,759,029)

(1,416,935)

(997,664)

1,395,000

2,410,100

Gil 0

CASH FLOW STATEMENT

Add Depreciation

749,746

1,384,541

2,041,785

2,722,591

3,373,227

3,373,227

Funds Committed

11,257,450

9,531,465

9,868,529

10,222,311

9,718,618

Cash Available

9,005,961

7,858,882

9,494,040

10,847,160

11,443,544

4,768,727

5,783,327

Deduct

Capital Asset Costs

(11,257,450)

(9,531,465)

(9,868,529)

(10,222,311)

(9,718,618)

GZ

Working Capital


(2,251,489)

(2,251,489)

(1,672,582)

(3,924,071)

(374,488)

(4,298,559)

624,850

(3,673,709

1,724,927

(1,948,782)

4,768,727

2,819,945

5,783,327

8,603,272

Profit and Loss Statement

Gross Revenue

Operating Expenses

Gross Profits

Interest Expense

Depreciation

Net Income (Loss)

Cash Flow Statement

Add Depreciation

Funds Committed

Cash Available

Deduct

Capital Asset Costs

20%

20%

TOTALS

30%

30%

40%

40%

50%

50%

Low

High

Low

High

Low

High

Low

High

$23,871,600

$23,871,600

$35,807,640

$35,807,640

$47,743,260

$47,743,260

$59,679,000

$59,679,000

(26,282,339)

(31,632,953)

(29,518,576)

(33,858,233)

(31,742,860)

(36,082,518)

(33,967,141)

(38,306,798)

(2,410,739)

(7,761,353)

6,289,064

1,949,407

16,000,400

11,660,742

25,711,859

21,372,202

(9,098,096)

(10,544,649)

(9,839,521)

(11,286,075)

(10,580,951)

(12,027,504)

(11,322,376)

(12,768,930)

(9,681,711)

(11,207,926)

(10,522,951)

(12,061,927)

(11017,185)

(12,851,362)

(12,104,426)

(13,645,117

(21,190,546)

(29,513,928)

(14,073,408)

(21,398,595)

(5,897,736)

(13,218,124)

2,285,057

(5,041,845Y

9,681,711

11,207,926

10,522,951

12,061,927

11,317,185

12,851,362

12,104,426

13,645,117

35,950,489

41,851,723

38,866,589

44,767,273

41,781,589

47,682,823

44,697,139

50,598,373

24,441,654

23,545,721

35,316,132

35,430,605

47,201,038

47,316,061

59,086,622

59,201,645

(35,950,489)

(41,851,723)

(38,866,589)

(44,767,273)

(41,781,589)

(47,682,823)

(44,697,139)

(50,598,373)

Cable Trunk Lines

207.

Low

20%

High

30%

Low

30%

High

40%

Low

40%

High

50%

Low

50%

High

(a) Aerial

$23,605,470

$29,506,704

$23,605,470

$29,506,704

$23,605,470

$29,506,704

$23,605,470

$29,506,704

(b) Underground

1,320,000

1,320,000

1,320,000

1,320,000

1,320,000

1,320,000

1,320,000

1,320,000

isc) 3-Cable

1,415,982

1,415,982

1,415,982

1,415,982

1,415,982

1,415,982

1,415,982

1,415,982

Master Antenna

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

Local Antenna

565,835

565,835

565,835

565,835

565,835

565,835

565,835

565,835

Local Broadcasting

3,112,102

3,112,102

3,112,102

3,112,102

3,112,102

3,112,102

3,112,102

3,112,102


(a) Hook-ups

2,650,500

2,650,500

3,975,750

3,975,750

5,301,000

5,301,000

6,626,250

6,626,250

(b) Convertors

3,180,600

3,180,600

4,770,900

4,770,900

6,361,200

6,361,200

7,951,500

7,951,500

Total

$35,950,489

$41,851,723

$38,866,039

$44,767,273

$41,781,589

$47,681,823

$44,697,139

$50,598,373

Miles of Cable

(a) Aerial

2670

2670

2670

2670

2670

2670

2670

2670

(b) Underground

120

120

120

120

120

120

120

120

(c) 3-Cable

100.1

100.1

100.1

100.1

100.1

100.1

100.1

100.1

Revenue

(a)Subscription

$22,811,400

$22,811,400

$34,217,340

$34,217,340

$45,622,800

$45,622,800

$57,028,500

$57,028,500

(b)

Hook-ups

1,060,200

1,060,200

1,590,300

1,590,300

2,120,400

2,120,400

2,650,500

2;650,500

Total

$23,871,600

$23,871,600

$35,807,640

$35,807,640

$47,743,200

$47,743,200

$59,679,000

$59,679,000

XIV. SEPARATE VIEWS

AVERN COHN

I support the idea of a public authority if it isfinancially feasible (though I have no doubt publicauthorities can be as guilty of abusing their re-sponsibility as the Committee fears of privateenterprise). I also strongly support the need foradditional analysis before the Common Counciltakes another step.

The projections should include the impact of thenew FCC Regulations as well as a strong emphasison the possible need for a regional system asquestioned in Section I of the Report. I, with therest of the Committee, urge a moratorium untilsuch projections are completed.

Beyond the foregoing and with all due respectfor the labor and good faith of my colleagues onthe Committee, I refrain from joining in the restof the recommendations. I refrain because amajority of the recommendations are based onconjecture, desire and wishful thinking with littlein the way of empirical data to support them.

The worth of the Report is in Section I of theRecommendations: Need for Engineering andFinancial Projections.

Had the committee stopped at the end ofSection I, it would have made a valuable contribu-tion to the Common Council's efforts to findanswers to the questions of CATV in Detroit. Asit is, by going on and on into a myriad of detailthere is great danger that the grain will be lostto the chaff. The considerable emphasis on publicservice and community involvement is conjecture.The impression gained from reading the Reportis that in some magical way with half the Cityperforming and the other half watching, thequality of life in Detroit will improve with cable.I hope so. There is nothing I have seen or studiedwhich supports any such utopian dream. Untilengineering and financial projections are obtainedwe shall not know whether CATV is even feasiblein a city the size of Detroit. The thirty to seventy-five million dollars it will cost to wire Detroit willnot come forth without a considerable assurancethat it can be repaid.

153

Many of the recommendations rely more onfaith than fact. For example: there has been nostudy of the economics of using revenue fromcommercial operations to support the enormouspublic service component of cable envisioned bythe study. The recommendations in OrganizationFor Operation Of The System (III) Channel Allo-cation (IV) and Access (V) may well violate FCCRegulations (as well as being impractical) to theextent that no waiver is even remotely possibleand there will be no opportunity for franchisingunder the conditions required by them.

The section on Employment (X) introducesnovel and potentially divisive principles in thecriteria for affirmative action in assisting minori-ties in gaining rightful employment. No study hasbeen made either of the feasibility or consequencesof the first recommendation in this section or forthat matter its legality.

The Study should have included a modelordinance (or at least a check list for a modelordinance).

The criteria by which to judge an applicationand the conditions for a grant of a private fran-chise are buried deep in Section III. This shouldhave been a major part of the Study, consideringparticularly the wholly inadequate and in someways deceptive applications currently before theCommon Council for franchises and whichapparently prompted the appointment of thecommittee in the first place.

The section on Regulation (VII) while descrip-tive of the general nature of the regulatory sys-tems currently in effect at the federal, state andlocal levels, fails to make any significant recom-mendation. The plain blunt fact is that the Stateof Michigan has been wholly lax in coming togrips with the need for regulation. There 'are overfifty CATV systems in operation in our State.The franchise ordinances which give rise to thesesystems range from one to fifty pages in length.Up until now there has been no attempt made toestablish state-wide standards for franchising.Until this year the Michigan Public Service Com-mission shied away from regulation in this area.The Governor has yet to express himself on thequestion, while New York and other states have

1E1

found it necessary to declare a moratorium onfranchising to bring some order out of the chaosfound.

The Council needs the services of considerablymore expertise than a lay committee is able tobring to bear before it proceeds further.

/s/ AVERN COHN

HENRY DODGE

The recommendations of the Cable TelevisionStudy Committee created by the Detroit CityCouncil constitute a very comprehensive, ambi-tious but unrealistic undertaking. If CATV is tobecome a reality in Detroit, no potential cableoperator will be able to live with or comply withmany of the stipulations. Due to limitations oftime and space, the following represent only afew highlights of dissent.

Since metropolitan Detroit residents have achoice of receiving at least seven television chan-nels clearly, without experiencing weak signalstrength, distortion or other reception difficulties,the immediate attraction of CATV, and its primeeconomic feasibility are questioned. Most large,multiple dwelling buildings and hotels alreadyhave antenna systems with distribution outletsand signal amplifiers.

CATV hardware and software should beprivately owned, operated and financed. It shouldtake on the status of a public utility, subject tofederal, state and local regulatory agencies. Itsstatus as a potential common carrier needs to befurther explored and defined.

Provisions for interconnectability with re-gional, state and national CATV networks shouldnot be neglected. The potential capability to in-corporate Pay TV is to be a basic component ofthe system.

Subscription rates for users shall be uniform;consisting of a reasonable, flat monthly chargefor the first set, plus a small "extension" fee foreach additional receiver connected to the cablein each household or unit.

Definite technical standards shall be estab-lished for the CATV operator. Minimum signalstrength and quality at each receiver shall beestablished. CATV operator shall provide andmaintain converter for each receiver as an inte-gral part of subscription plan. Converters shall

be so designed as to be readily connectable to allcommonly marketed TV receivers. CATV oper-ator shall not offer sales and service of TVreceivers. Standard TV receivers shall continueto be capable of receiving "over-the-air" signalsupon disconnecting CATV equipment.

CATV operator shall abide by establishedfederal and state Fair Employment Practiceslegislation.

While privacy of viewing and respondinghabits of individual subscribers shall be protected,general data for market surveys, without identify-ing specific subscribers, may be permissible.

Sufficient flexibility must be accorded theCATV operator(s) in most phases of the oper-ation, such as channel allocations, channel desig-nation, revenue allocation and distribution, as wellas contract negotiations with potential users andadvertisers, in order to render the system (s)economically feasible.

Submitted byHENRY DODGE

CATV Study Committee Member(Chairmen, Detroit Civic & Consumer Council)

P.O. Box 5122, Seven Oaks StationDetroit, Michigan 48235

Joined bySTANLEY KRAJEWSKI

CATV Study Committee Member(Editor, Polish Daily News)

EDNA BENDERS ON

TO: Dr. James Bristah, Chairman of the CableTV Study Committee,

AND: Honorable Members of the CommonCouncil

The development of cable television is a newtelecommunications technology. When one con-siders the state of our world, our country, ourcities, and the number of television sets in ourhomes, cable television can become as importantto people as the air they breathe and the foodthey eat. Cable television will provide manychannels and an opportunity for all citizens totelecast, view a vast variety of programs andutilize the non-television services possible on adual cable system.

In order to better understand the recom-mendations of this Report, I raise the following

154 162

questions as they relate to some basic issues con-cerning the granting of a cable franchise in theCity of Detroit.

1. How much money has Detroit lost in revenuesfrom private businesses moving out of thecity within the last ten years, more recently,the last three years?

2. To what extent did the Common Councilappeal to these businesses to remain inDetroit?

3. What is the potential of cable television togenerate revenues annually?

4. Why is the Common Council being pressuredconstantly by private entrepreneurs to grantthem a franchise?

5. Considering the potential of millions ofdollars in revenues, in a decade possiblybillions, why would the Common Council con-sider granting this source of revenue to aprivate corporation?

6. How will the revenues generated from thedevelopment of cable television in Detroitbenefit the City of Detroit and its citizens?

7. How can the revenues from cable televisionbe used to help to develop its potential as animportant medium for people in communica-tions?

8. How will municipal control of developing jobsand job opportunities benefit the City ofDetroit and its citizens?

9. How would municipal control of subcontract-ing to minority and local small businessesbenefit the City of Detroit and the businesseswith limited capital?

10. Would more citizens be provided with a lowersubscriber fees and more services by generat-ing the revenues from them back into thecable system?

11. Will sufficient funds be available to developa high level of community programming andthe non-television services for the public?

12. Is the City of Detroit the largest area to beconsidered for the construction of a singlecable system presently?

13. Will the inclusion of one or more suburbsnegate any of the recommendations of thisCommittee's report?

14. Can the Common Council criticize privatebusiness and industry for moving out of theCity of Detroit when it does not seize thisopportunity to help the City of Detroit?

Respectfully submitted,

/s/ EDNA HENDERSONCable Television Study Member

155

EDWARD R. KOCH

Reverend James Bristah, ChairmanCable TV Study Committee

Dear Reverend Bristah:

Having labored through the many months ofthis Committee's life, along with my fellow mem-bers, I feel that we have had adequate debate andthat a reasonable decision making process hasbeen followed. My support for the major con-clusions and viewpoint of the Report is wellknown to you and to other members. Our concernhas been to raise the pertinent public interestissues. In this effort, I believe we have beenreasonably exhaustive.

Our recommendation in particular, which wasthe subject of prolonged debate within the Com-mittee, seems to me to have been resolved in away which is inconsistent with our general regardfor the "best use" of this new medium. Recom-mendation 5 of the ACCESS section takes the posi-tion "that subscribers in any Cable District beable to view programming on all channels withinthe City's Cable System . . ." with certain minorexceptions. I believe that such a recommendationis inconsistent with the most effective use of theCable medium and with other of our own recom-mendations.

It is now a well established principle thatCable will multiply the available television spec-trum. This principle is recognized in our treat-ment of channel allocation and the need to assureaccess for every variety of opinion and com-munity interest. This does not mean, however,that the available number of channels will beunlimited. Quite the contrary, we are lookingforward to the installation of a system whichinitially provides something less than 40 channels.Even recognizing the potentiality of additionalchannels within a fairly short run perhaps tenyears it is clear that we are dealing with afinite number. Whether or not that number be-comes significantly larger than we can immedi-ately foresee, it will still always remain a finitenumber. It seems inconceivable that we, the Com-mittee, have been unable to apply the principlesnow so vigorously advocated by conservationistsand ecologists to Cable. As we have learned withair, land, water and energy, we must not be waste-ful of our resources, no matter how abundant theyseem to be at the moment. The television ofabundance, as the Sloan Committee has called it,

is not nor do I believe it will become a tele-vision of unlimited availability.

I do not believe, therefore, that an efficientuse of this resource will be realized by insistingupon the universal availability of all program-ming to all viewers. One of the many benefitsenvisioned for Cable is the ability to limit pro-gramming on the basis of geographic or "com-munity of interest" boundaries. Viewers inter-ested in the proceedings of a particular regionalschool board or zoning proceeding, for example,will be much more likely to have viewing accessto such proceeding if they are available on aselective, rather than universal, basis.

Our recommendation that all programming beviewable system wide will initially limit com-munity programming to ten channels if ourrecommendations are accepted by the ultimatedecision makers. While this number seems ex-tremely large in comparison to the current situa-tion, I cannot believe that these channels willexhaust the diversity of interest and opinions inour City.

Ten city-wide community channels occupyingten full channels on the Cable is a wasteful useof this medium. Limiting the coverage of five ofthese channels to the Cable District in which theyoriginate will multiply the number of availablechannels by the number of districts, and we haverecommended five such districts. If only half thesechannels allow viewer access in the geographicarea from which they originate, we can addtwenty more community channels immediately.This would still allow five city-wide communitychannels to function, a much more efficient useof the available medium from my point of view.

In addition, I must note that we have recom-mended, under the section on regulation, that thecity take leadership in developing the intercon-nectability of the city system with others in theregion and in the state. By assigning one quarterof the available channels to the community atlarge, rather than on a selective basis, we willimmediately use all the available channel capacity.This prevents a system beyond the politicalboundaries of the city from interconnecting withthe Detroit system and still enjoying some accessfor their own community, unless they choose toeliminate or selectively receive Detroit's origina-tions. If there is any anticipation that othersystems will, indeed, interconnect with the Detroitsystem, there must be channel capacity availableto those communities. We have recognized in ourdiscussions that- the Cable medium can create

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further divisions between people and communitiesin the urban area. Conversely, we have recognizedthe potential for the Cable to break-down some ofthose same barriers. I believe that in applying theuniversal viewing rule to community program-ming we will be exhibiting the same attitude wenormally disdain: that is, we must not dismiss thelegitimate needs of people simply because theyare beyond the nearest political boundary.

In fairness I must recognize that many of myfellow Committee members have endorsed thisrecommendation for universal viewer access onthe basis of a very genuine concern for the veryfullest availability of information among thevarious segments of our community. While Iagree in principle that this is needed, I cannotacquiesce in the implementation method they havechosen to achieve this desirable end.

Respectfully yours,

/s/ EDWARD R. KOCH

CONRAD L. MALLETT

Except for one of its recommendations, Isubscribe fully to the report of the CATV StudyCommittee and am proud that I had an oppor-tunity to participate in its deliberations.

The exception taken, however, is important.So important, indeed, that I am compelled toexpress my dissent most emphatically.

The Report's Summary gives as its first a"major" recommendation, "That a cable tele-vision system for Detroit be publicly (rather thanprivately) owned . . ."

Ironically, the Report itself provides evidenceto prove that this recommendation is not onlyimpractical but undesirable. A publicly ownedCATV system is a self-defeating concept, withouthistorical precedent and contrary to the bestinterests of the people of Detroit. In effect, ifthis recommendation were to be accepted it wouldmean no CATV for Detroit residents.

Yet the Committee's Report testifies that thetask facing Detroit is "to ensure cable television,both for commercial and public services, for thecitizens of Michigan." In the next sentence (p. 8),the CATV investment needs are estimated asranging "anywhere from $30 million to $120million depending on the sophistication of thesystem. Second, the Report continues, "the systemwill no doubt operate at a loss for the next fewyears . . ."

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Obviously, this city cannot undertake a debtresponsibility of this magnitude in this decade.Our city services are being curtailed, our financesare in disarray, our debt structure is already over-burdened. It is no secret that city leaders havealready used the word "bankruptcy" in referringto their fiscal projections.

If $30 million to $120 million were made avail-able to Detroit and the Committee Report failsto indicate how this miracle might come to passcertainly its allocation would more properly bedirected to other purposes.

The City of Detroit would be permitted togenerate CATV capital from one of three sources:additional taxes, bonds presently authorized ornew bond issues. The first of these, taxes, cannotseriously be entertained as a genuine revenueraising possibility. The citizens will not permit it.

As for bonds, the city now has less than $3million per year of bond margin which may bemade available for new investment. Even if thiswere allocated to CATV, it would not be sufficientto begin installation of even the smallest segmentof a system.

And, thirdly, the political and economic feasi-bility of a new bond issue, to support a speculative,long range, non-essential service such as CATVat a time when the city is confronted with severefinancial crisis is nil. Detroit is in no position nowor in the foreseeable future to undertake a capitalinvestment of the dimensions described for CATV.To advocate public ownership of CATV when itsimply cannot be accomplished is in reality torecommend that it not be introduced.

Even assuming that public money was .madeavailable for a CATV system and that the com-munity would somehow concur that this was avalid and necessary priority, there are other criti-cal reasons why private ownership is preferable.

The Committee's Report states that, "anycable system for the city ought to provide publicas well as commercial services at its inception;and the public services ought to be supportedin large part by revenue from commercialoperations."

The inference here is that only public owner-ship would encourage public services. As a matterof fact, private owners in most communities nowprovide a wide range of public services. They havenot been compelled to do so . . . they are anxiousto do so, because it enhances their position andenlarges their audience. There is no conceivablereason why private owners would restrict publicparticipation. As a future guarantee, strong,

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realistic, "public service" requirements should bespecified in the city CATV franchise together withprovisions for assignment of commercial revenueto help finance these purposes. The "public serv-ice" features of CATV would not, on the otherhand, necessarily or automatically flow frompublic ownership.

The control of public service programmingby a city administration or other public bodycould, in fact, act to inhibit the free flow ofcommunication.

Public ownership in America has failed toprove itself sufficiently responsive to the com-munity in most of the areas of its authority,especially since WW II. To argue otherwise re-quires belief that America's cities serve theirinhabitants equally and adequately. It requiresbelief that city Civil Service systems allow equalopportunities to such minorities as youth, blacks,chicanos and other "newcomers" to the "betterjob" market. It requires a demonstration thatgovernmental policies at any level are in thebroadest public interest, such as welfare, educa-tional, housing, health programs, and the dis-asterous politics of Vietnam.

On the contrary, a strong argument could bemade to prove that public ownership i.e., the postoffice, the schools, the garbage collection agencies

is structured to work against the best interestsc the most needy elements of our society. At theleast, public ownership certainly does not guar-antee community betterment.

The ownership and control of any medium ofcommunications by an organ of government posesa critical threat to our First Amendment liberties.A dramatic example is the effort of the U. S.Department of Justice to stifle publication of thePentagon papers.

Imagine the reaction of local officials if aDetroit-owned CATV system were to broadcastpreviously concealed data which might bring em-barrassment or even criminal charges againstthose same officials.

The separation of government from directcontrol of the communications media is, indeed,the distinct purpose and genius of the FirstAmendment!

It would be naive to assume that a city-ownedstation would always countenance truly objectivereporting. Who would control the handling ofsuch sensitive hypothetical topics as:

1. A rent strike provoked by failure of thegovernment to maintain liveable conditionsin public housing.

1.G5

2. A confrontation with police which evokespassionate public outcry.

3. A protest involving picketing of the City-County Building.

4. A breakdown in city or county services, suchas garbage collections or jail sanitation,where the cause is primarily governmentinefficiency.

Besides the concerns over the temptations ofcensorship by city government, there are other,more immediate priorities which CATV mustsatisfy.

CATV, according to Ted Ledbetter, can create750,000 to 1,000,000 new jobs in the next 10years.'

Shall we leave it to government to distributethese jobs fairly? If we do, we should recognizethat past performance would indicate that dis-crimination would be rampant, nepotism andfavoritism would flourish, and the Civil Servicesystem would not guarantee that the most quali-fied and the most deserving would get the best orthe most jobs. If history is our teacher, clearlythe government personnel and the practices oncebuilt into the system would be almost immune tomeaningful change. And a primary interest ofeach bureaucratic overlord in the system wouldbe to enlarge and protect his fiefdom, not neces-sarily to serve the people.

Those, unfortunately, are some of the charac-teristics of government as we have come toknow it.

It is, however, not as much a matter of ap-proaching the subject with cynicism as it is arecognition of self-interest.

The "self-interests" served by the owners ofa CATV system are not the same as with com-mercial TV. With the latter, revenues are derivedfrom advertisers. As a consequence, programsare directed to masses of consumers. They aredesigned primarily to sell products, and only in-cidentally to communicate. This emphasis per-vades all commercial broadcasting, including thenews, chiidren's shows, talk shows and old movies.Quality, diversity and relevance have long capitu-lated to ratings and market appetites.

CATV is not designed to profit from adver-tisers. Its principal, if not sole, source of revenue

1. A Historical Overview of Cable Television, prepared byTed Ledbetter for the Urban Institute, page 12.

is in its subscriptions to the service. Its self-interest, therefore, is to appeal to as manygeneral and specific audiences as possible. Thebroader and the more diversified its programming,the more subscriptions it will enroll.

Commercial over-the-air TV would no morebe willing to broadcast a high school play than itwould a regional school board meeting. Yet CATVmight be delighted to serve those small but de-voted audiences. The self interests of CATVmanagement, in fact, would be best served byproviding the maximum number of channels foras much time as possible to as many communitygroups as could avail themselves of the service.

Similarly with hiring and personnel practices.Where commercial TV can ignore communitypressures for greater attention to minority jobapplicants, CATV would profit by spreading itsjob opportunties broadly. The inducement wouldbe the wider support for subscriptions generatedby the more liberal personnel policies. The assur-ance that fair employment practices would befollowed could even be written into the franchiseand supervised by a higher authority.

And, lastly, public ownership embodies thedanger of institutionalizing a vital communica-tions power whose autonomy might never be re-voked. If the city, for example, owns its ownCATV franchise, who will police its practices? Itmust be noted that even the Federal Communica-tions Commission has on occasion revoked thepublic broadcasting licenses of commercial TV.In Boston and San Francisco, for example, TVlicenses were revoked because of overlappingownership by local newspapers. Similar suits arepending or threatened in several other cities.

With a city-owned facility, however, thevulnerability tc political control by the party orgroup in power, combined with the absence of apublic protective body or the ability to amend orrevoke the franchise would make the systemvirtually impregnable to outside influence.

The fact is that, despite the traditional andhistoric acceptance of the view that public owner-ship provides more democratic service, the oppositemay be closer to the truth. The danger thatCATV may be used against the people rather thanfor the people is not resolved by a decision forpublic ownership.

Public ownership of a cable system, the Com-mittee Report suggests, might "be viewed as apublic utility." The Report cites the need for

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"public investment" but it fails to identify possibleinvestors.

The "public utility" concept, moreover, is nota synonym for public ownership. All three majorutilities in Detroit, for example, are privatelyowned stock corporations.

The Report does a disservice when it recom-mends "public ownership" and at the same timeadvocates the establishment of a public utility,knowing full well that Detroit is in no position toprovide the investment capital required.

Further, in its opposition to private owner-ship, the Report predicts "significant competitionbetween legitimate needs for profit and supportfor the system's public services." This argumentis not substantiated by the testimony of CATVexperts nor is it consistent with experience inother cities where CATV is in use. On the con-trary, profits for private owners are increasedin direct proportion to the public's use of andinterest in CATV. The same cannot be said formany publicly owned facilities and services, in-cluding the library, the art museum, our parksand pools, and the many other city services whichare curtailed and restricted as a matter of citypolicy or economic necessity.

The original Committee arguments for publicownership stem largely from an understandablefear of private corporate authority. The evidencesupporting such fear is abundant . . . one needonly read the sordid history of some of America'sgiant predatory corporate powers. But privateownership under proper public surveillance is notcontrary to the public interest, especially whenthere is no viable alternative. More important,public ownership would in fact be less desirable,less profitable for the city and more susceptible topolitical abuse and manipulation.

Ideally, public ownership is an attractive andappealing concept. In Detroit, and in a profitmotivated society, it can be no more than awisp of fancy, an unrealizable dream that canmore likely turn into a nightmare.

If CATV is to be a reality in our time, it mustbe built with private capital, managed by privateownership in the public interest, and it must bemade to serve the maximum public good. Torecommend otherwise is to resign this city toinaction on a program that has the potential nowto render important service to all the people.

/s/ CONRAD L. MALLI:rf

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REGINALD D. McGHEE

Chairman James W. Bristah, fellow membersof the Cable TV Study Commission, distinguishedmembers of the Detroit Common Council:

PositionAs a member of the Cable TV Study Commis-

sion charged with the responsibility of drafting areport which will determine the best interests ofDetroit and its citizenry, I am impelled by thenature of the majority opinion to file the followingminority report.

Realizing the need of Detroit to promote anddevelop industries with which to financially sustainthe city, and which will provide democratic par-ticipation at all levels for all citizens, it is mybelief that only public ownership of Cable TVcan satisfy these requirements.

Public OwnershipPublic ownership represents ownership of the

highest form. It contains a built-in elasticity farmore receptive to change than, in my opinion,other forms of ownership which by their privatenature makes access to the decision-makingprocess more difficult, and less democratic.

What Is Public Ownership?Simply this, a product whose ownership is

vested in the total community, and not in thehands of a few. Its chief concern is the deliveryof services, and not in the accumulation of capitalfor the purpose of aggrandizing the monetarypursuits of a selected few. It is noteworthy tomention that various federal, state and localgoverning bodies own and operate business enter-prises. Many services, and not a few products,are produced directly by municipal departmentsand bureaus. Nearly all large cities operate suchenterprises as their own water supply systems.Cable TV, in the case of Detroit, could becomean additional service analogous to other servicesbeing offered residents of the city. (It is interest-ing to note that the Common Council of Palo Alto,California, has approved the concept of mur!,:ipalownership of its Cable TV.)

The following subjects, as they relate to Detroitand Cable TV, are herein presented for yourthoughtful consideration.

EmploymentA municipally owned system would create

literally hundreds of jobs for the trained as well

167

as the untrained. To transform Detroit into a"wired city" would require the services of variousengineers: Electrical, Mechanical, Radar, andElectronic. In addition to the aforementionedcategories or personnel, the need would arise formanagement, accounting, maintenance, and con-struction employees. It would also require trucks,test equipment and office equipment, and thesupportive personnel for these systems.

The all-pervasive myths that private enter-prise, or a non-profit organization could handlemore efficiently and more economically the de-livery of Cable TV to Detroit, can very easily bedispelled in analyzing the experiences of suchcompanies as Lockheed and the Penn CentralRailroad; certainly examples of gross inefficiencyand mismanagement in private enterprise.

A city-owned system would be an excellentmeans for providing jobs for Detroiters, many ofwhom face unemployment or who are at thismoment unemployed. They could be rapidlytrained to the technologies of cable by on the jobtraining and by observing the installations ofother systems. (At the present time, TelevisionCommunications, Inc., is presently installing aCATV system in Akron, Ohio.) The cable couldbe installed either below or above ground, whichby the nature of the cable system, an untrainedperson could perform. Think of the many jobsthat could evolve from this plan of ownership.Actors, actresses, technicians, equipment oper-ators, repairmen, and various categories of servicepeople connected with the sales and service ofancillary equipment incidental to the needs ofCable TV. It would indeed create a new workforce, replete with a purchasing power to bolsterthe sagging economy of the City of Detroit.

The Minority RoleIn my opinion, employment for minorities

within the total field of CATV can best beachieved were it to emanate from the public ratherthan the private sector. The private sector, by itspast performance has proven its indifference toact positively on the voluntary utilization ofminorities at their highest level of competencewithout legal, or mass public pressures. And. asshown in the figures below, it is evident that theownership of mass media is continuing to be con-centrated in the hands of a few, rather than beingdisbursed among the many.

Media Ownership of CATV SystemsOf the 2,490 systems operating as of March

1970, the following is ownership of CATV systemsby other media systems.'

MediaNumber of

Systems Owned

Broadcasters 910 36.5Phone Companies 146 5.8Newspaper-Publishing 207 8.2

1263 50.5

CATV systems at the present time serve over3,000,000 homes in the United States. If thisgrowth trend continues cable television will bea multi-billion dollar industry by the time thenext decade rolls around.

According to Ralph Lee Smith, "CATV is . . .

by its nature a monopoly and must secure fran-chises from local municipal governments."2 Be-cause of the tremendous sums of money involved,franchise fights can become bloody and drawn out,as witnessed by the indictment of Irving B. Kahn,President of Teleprompter Corporation, and threeofficials of Johnstown, Pennsylvania, on chargesof bribery and conspiracy in connection with thegranting of a franchise by the city of Johnstownto Teleprompter.3 A good way to avoid thesepossible franchise fights is in the municipal owner-ship of Cable TV.

FinancingCable TV represents the most exciting era in

technology since the advent of the radio and tele-vision. A municipality desirous of owning its ownsystem could do so by selling city "backed" bonds.It is my understanding that "Industrial Develop-ment Revenue Bonds" could be looked into. Con-trary to the opinions of some people, Cable TVrepresents no more of a risk, financially, than didradio and television. Why? Because it has beenproven through experience that the audio-visualmedia (such as movies, radio, television) providepeople with means of entertainment, education,and stimulation; certainly profitable enterprises.Forward thinking people realize Cable TV's po-tential riches. Regardless of the costs, a munici-

1. "Cable," Radical Software, Vol 2, 1970, New York City.

2. "The Wired Nation, Ralph Lee Smith, The Nation,Vol. 210, No. 19, May, 18, 1970.

3. The Wall Street Journal; page 2, January 29, 1971;page 38, April 20, 1971.

Also recommended reading is the "Industry Reporton Community Antenna Television" published by theinvestment research firm of Drexel, Harriman andRipley, October 1968.

160 168

pality undergoes in creating a operative system,the reward is a reality.

Detroit has a potential of roughly 550,000units, possibly more when all multiple units areincluded. Using the break-even figures of theprivate sector, when 50% market penetration hasbeen achieved, the system can look forward tomaking money. Assuming 250,000 homes sub-scribed at the rate of $6.00 per month, the grossincome amounts to $1,500,000 per month. Multi-plied by twelve months, the gross income is $18,-000,000. This figure does not represent additionalincome for other services which will be incomeproducing, such as Pay TV, i.e., additional costsfor witnessing a championship football game,championship fights, etc. It is conceivable that forspecial events the operator could charge an addi-tional $4.00 or more per subscriber to witnessthese events. The bonds themselves could be ofa four, five, six, seven or ten year duration, eachcarrying with it a stipulated rate of interest,preferably callable bonds.

This field is safe and secure. If it wasn't, whythe clamor for Cable TV? Look at the revenuethat could be used to advance the City of Detroit.The building of hospitals, aid to higher education,and a multiplicity of additional services could bemade available to Detroit citizens from the surplusprofits derived from the ownership of Cable TVby the City of Detroit.

I am reminded of an address given by Mr.John W. Macy, Jr., President, Corporation for

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Public Broadcasting (PBS), in which Mr. Macysaid, "To build your own system, you would haveto float public bonds, but it would appear to bewell worth the investment both in terms of finan-cial return and in terms of public benefit."4 Foryour additional information, it might be well tonote that under existing FCC (Federal Communi-cations Commission) regulations, 2% of a fran-chiser's gross profit is all that a municipality isentitled to! Citing the previous figures as anexample, the city would net only $360,000. Cer-tainly an insignificant sum as compared to thereturn if we owned the system.

ConclusionWe witness the rapid abandonment of many

former residents of the City of Detroit to otherlocations. Therefore, it should become plain tous, the inheritors of the city, that if the despair,the hopelessness, and the complacency which nowdictates the pattern of our thinking is to be over-come, we must begin to re-orient our thinking.It is time to get about the enormous job of re-juvenating what is left of our city. The publicownership of Cable TV provides us with the oppor-tunity to generate our own resources in the re-building of Detroit. This is an opportunity whichwe cannot afford to give away.

/s/ REGINALD D. McGHEE

4. "The Public's Dividend," an address by John W. Macy,Jr., at the 47th Annual Congress of Cities, December10, 1970, in Atlanta, Georgia.

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X.V. CONSULTANTS TO CABLE TV STUDY COMMITTEE

Mr. Jay Brant, Consultant.

Mr. John F. X. Browne, Jr., Browne Renaud Associates, Inc., Telecommunications Consultants.

Mr. Robert Bruce, Director of Research, Public Broadcasting Service, Washington, D. C.

Mr. George M. Collins, Director, Promotions and Public Relations, Channel 56.

Dr. Alexander Glass, Chairman, Department of Electrical Engineering, Wayne State University.

Dr. Leland L. Johnson, Senior Economist, Rand Corporation: Director, Cable CommunicationsDayton Miami Valley Report.

Mrs. Peg Kay, Consultant.

Mr. Theodore S. Ledbetter, President, Urban Communications Group, Washington, D. C.; Consultantto the White House Office of Telecommunications Policy.

Dr. Gilbert A. Maddox, Department of Journalism, University of Michigan. Producer, Profiles in Black,WWJ-TV, Detroit.

Miss Carol Oughton, Cable Television Information Service, Urban Institute, Washington, D. C.

Mr. Edward J. Roth, Corporation of Public Broadcasting.

Mrs. Judy Serrin, Journalism Instructor, University of Detroit.

Mr. Michael Springer, Research Assistant, Center for Urban Studies, Wayne State University.

Mr. Stuart F. Sucherman, Program Officer, Public Broadcasting, Ford Foundation.

Mr. Roger Trenary, Urban Fellow, Center for Urban Studies, Wayne State University.

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