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Pending Cable TV Rules: Keep Rabbit Ears Handy : Television: New regulations taking hold next October could spark a confusing reshuffling of channel offerings, with some being dropped altogether.


It's 9:30 on Thursday night, and you turn on the TV happily expecting to watch "Seinfeld" on Channel 4. Instead, "Partridge Family" reruns from an obscure UHF station rudely appear.

You maddeningly scroll through the channels in search of "Seinfeld," and, lo, there it is: on Channel 46 sandwiched between C-SPAN 2 and the Catholic Cable Network.

That's the worst-case scenario of the television future, under new federal regulations that are set to take effect later this year. Industry analysts say that cable TV viewers could be subjected to a dizzying array of changes under the pending federal guidelines as some channels are reshuffled to distant spots on the cable spectrum and others are discarded altogether.

Some are even predicting a return to the television days of yore, with viewers retrofitting their sets with rabbit ears to pull in broadcast channels no longer carried on cable.

The cause of all this confusion is a law taking effect in October requiring cable operators to pay for the right to carry local broadcast stations. An obscure clause in the new legislation says cable operators must pay to carry broadcast stations or drop them.

The clause was inserted after heavy lobbying by the broadcasting industry, which complained that cable systems are picking up their signals and retransmitting them without payment.

Under "must carry" regulations, a broadcast station would be guaranteed carriage by a local cable TV operator, but in exchange for that safety net the station would not be compensated. The riskier "retransmission consent" option would allow the station to collect a fee from the cable operator, but if the parties couldn't agree on terms, then the station could be dropped.

The new rules have TV stations and cable operators in a quandary as they face a June 17 deadline over which option to elect. Most TV stations in big cities such as New York and Los Angeles are expected to elect "retransmission consent" because they know that cable operators don't want to face a backlash from subscribers for dropping local stations.

Nonetheless, the new rules set up broadcasters and cable operators in a dangerous game of chicken, waiting to see who blinks first--and whether a popular station is deleted or carried.

Indeed, retransmission consent could turn out to be a windfall for broadcasters, many whom have seen their lucrative profit margins eroded in recent years. Wertheim Schroder entertainment analyst David Londoner estimates that such fees could generate about $750 million annually.

How successful broadcasters will be in negotiating payments from cable operators is unknown. Two of the country's largest cable operators, Denver-based Tele-Communications Inc. and Boston-based Continental Cablevision, have said that they will refuse to pay. Observers expect Time Warner Inc., the country's second-biggest cable TV company, to follow suit.

One reason for their stance is a provision in the new law that says cable TV operators may not pass along the added cost to subscribers.

"No business can be expected to sign up for new costs without having any means to recoup them," Continental Chief Executive Amos Hosteter last week told a group of Washington communications lawyers. He predicted "massive, massive subscriber dislocation."

Although it is clearly in the cable industry's interest to play up the notion that new rules will wreak havoc on their business so as to win concessions from regulators, in fact rapidly advancing technology may make the whole issue moot in the not-too-distant future.

Cable operators have begun upgrading their systems to 500 or more channels, thanks to new technologies such as video compression that can squeeze more channels into the cable pipeline.

Not surprisingly, broadcasters are anxious to have access to all that expanded channel capacity. Ed Reilly, president of McGraw Hill Broadcasting, which owns KGTV in San Diego and KERO-TV in Bakersfield, says that in lieu of cash payment, broadcasters may seek an extra channel on the cable system to produce local all-news programming in cooperation with the cable operator.

"We want to talk about the growing capacity of cable systems to target specific parts of the community," Reilly says. "There are technological ways to cooperate."

The idea of jointly creating local news channels is endorsed by cable TV giant TCI. "If the local broadcasters can inspire themselves to go beyond the 60-year-old concept of what they do, the entire market will benefit," says Bob Thomson, senior vice president at TCI.

For example, Thomson suggests that a 24-hour news channel in the San Fernando Valley where TCI operates cable TV systems could show traffic updates, local high school sports and community concerts.

"All we'd be asking is for (the stations) to shoot a little bit extra, enough for a special hourlong feed, and we'll give them an extra channel for that," he explains.

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