'I TRANSFERS 0F CATV SYSTEMS AND
I FRANCHISES IN MICHIGAN: AN -
I '- INVESTIGATIVE STUDY

 

Thesis for the Degree of M. A. .
MICHIGAN STATE UNIVERSITY
’ CHRISTOPHER M. K. WEST.
1975 ‘

 

 

 

 

15651.3

 

if; 0%.”);«7/1 WW";

Accepted by the faculty of the Department of Television
and Radio, College of Comunicetion Arts, Michigan State
University, in partial fulfillment of the requirements for

the Heater of Arts degree.

A164 c 7 #144903,

Director of Thesis

  
   

ABSTRACT

TRANSFERS OF CATV SYSTEMS AND FRANCHISES
IN MICHIGAN: AN INVESTIGATIVE STUDY

BY
Christopher M. K. West

There has been growing concern over the transfer
of CATV systems and franchises in the United States. Un-
fortunately, there has been no empirical evidence upon
which regulatory decisions may be based. This study was
undertaken in order to provide some of this evidence for
the state of Michigan.

The data for the study was collected by two
methods. First, questionnaires were sent to all CATV
operators in the state. The return rate for this ques-
tionnaire was 52.9 percent. Additional data, plus data
for those Operators not responding to the questionnaire .

was abstracted from the Television Digest Factbook from

 

the years 1952 to 1973.

The results of the study indicated a strong re-
lation between the type of ownership of CATV systems and
their transfer. Systems acquired by non-Michigan multi-
ple system Operators were involved in 79.6 percent of all

transfers and these owners acquired 74.4 percent of their

Christopher M. K. West

systems through transfers. In contrast, only 28.6 per-
cent of those systems held by local owners and 15.7 per-
cent of those owned by Michigan based multiple system
Operators were acquired through transfers. A majority of
all CATV subscribers in Michigan were affected by all
transfers. Finally, it was discovered that the majority
of the state's largest systems are owned by out of state

firms.

TRANSFERS OF CATV SYSTEMS AND FRANCHISES

IN MICHIGAN: AN INVESTIGATIVE STUDY

BY

Christopher M. K. West

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS
Department of Television and Radio

1975

Copyright by
CHRISTOPHER M . K . WEST

1975

TABLE OF CONTENTS

Page
LIST OF TABLES o o o o o o o o o o o 0 iii
LIST OF FIGURES o o o o o .‘ o o o o 0 iv

LIST OF APPENDICES O O O O O O O O O C v

INTRODUCTION . . . . . . . . V. . . . 1
THE GROWTH OF CATV IN MICHIGAN . . . . . . 4
METHODOLOGY . . . . . . . . . . . . . 5
GENERAL FINDINGS OF STUDY . . . . . . . . 7

ANALYSIS . '. . . . . . . . . . . . . 12
CONCLUSION . . . . . . . . . . . . . l7
FOOTNOTES . . . . . . . . . . . . . 22
BIBLIOGRAPHY . . . . . . . . . . . . 25

APPENDICES O O O O O O O O O O O O O 29

ii

LIST OF TABLES

Table . Page
1. CATV System Transfers by Year. . . . . 32
2. Transfer Analysis by Type of Ownership. . 32

3. System Transfers by Subscribers and Plant
Mileage 0 o o o o o o e o ' o o o 33

4. Transferred System Completion. . . . . 33
5. Transferred System Growth . . . . . . 33

6. Transferred and Non—Transferred Systems
by Type of Ownership. . . . . . . . 34

7. Subscribers by System Owner and Transfer . 34

iii

LIST OF FIGURES

Figure Page

1. System Acquisition Pattern, Local
Operators . . . . . . . . . . . 36

2. System Acquisition Pattern, Michigan
Based MSOs. . . . . . . . . . . 36

3. System Acquisition Pattern, Non-Michigan
M808. 0 O O O O O O O I O O O 37

4. Pre-Transfer System Ownership Breakdown
(Transferred Systems Only) . . . . . 38

5. Post-Transfer System Ownership Breakdown
(Transferred Systems Only) . . . . . 38

6. New CATV Systems by Year . . . . . . 39

7. Number of CATV System Transfers by Year . 40

iv

Appendix
A. Tables of Data and Results .
B. Figures and Graphs . . .
C. Glossary of Terms . . . .
D. Sample Questionnaire . . .
E. CATV System Owners and Operators

LIST OF APPENDICES

Page
30
35
41
44
46

LIST OF APPENDICES

Appendix
A. Tables of Data and Results . .
B. Figures and Graphs . . . .
C. Glossary of Terms . . . . .
D. Sample Questionnaire . . . .
E. CATV System Owners and Operators

Page
30
35
41
44
46

INTRODUCTION

In the last ten years, the field of Community An-
tenna Television (CATV) has experienced extremely rapid
growth within the state of Michigan.1 Not only were
systems previously in operation growing rapidly, but also
new systems appeared in increasing numbers, especially in
the more densely pOpulated areas of the lower peninsula.

As reported by the Television Digest Factbook, the number

 

of CATV systems in the state has grown from ten systems

in 1960 to fifty-six systems in 1974 with the most rapid

2 The drop-

growth occurring during the years 1966-1968.
off in new systems after 1968 may be attributed to the
uncertainty placed upon the CATV industry by the Federal
Communications Commission (FCC). In 1966 the FCC asserted
the Commission's jurisdiction over all CATV systems in its

3

Second Report and Order. This jurisdiction was affirmed

 

by the Supreme Court in 1968 by its decision in the "South-

4

western Case." The FCC then responded by asserting more

rigorous control over CATV in the nation's top 100 markets,
which effectively closed those markets to CATV.5
Coincident with the rapid expansion of CATV systems

during the mid-sixties was an increase in the number of

transfers of CATV systems, both by purchase and by merger}5
This increase has been linked to the tightening FCC regu-
lations:

The enforcement of major market cable
regulations imposed definite patterns upon
CATV expansion during the period from March
1966 through December 1968. The effect was
twofold: it diverted investment into medium
and smaller markets until cable saturation
in these areas often reached 50-60 percent,
and it encouraged mergers and consolidation
in major market areas . . . a substantial
amount of . . . capital within the industry
began to seep into smaller markets, seeking 7
out almost any cable system in Operation. . ..

This tendency toward consolidation has been alarming to
many state and national legislators, citizens and stu-
dents of communications regulations:
If, as the FCC has Often maintained,

local owners are generally far more sensitive

to the needs of their audiences than con-

glomerate managers, this period of restraint,

by encouraging the assimilation of locally

owned cable systems, diminished the respon-

siveness. . ..
This author feels that this laissez-faire attitude toward
CATV system transfers has resulted in an even greater
abuse: the creation of a market in CATV systems and fran-
chises.

The trafficking of CATV systems and franchises
creates a regulatory problem of considerable magnitude,
if it is indeed occurring. Unfortunately there exists

very little empirical evidence upon which decisions re-

garding regulation may be based. Experience in public

utility regulation has been applied to CATV regulation in
some cases, but generally this approach has seemed to this
author to be ineffective and inappropriate.

This study attempts to provide some of the lacking
evidence. This evidence consists of a detailed and fact-
ual analysis of all CATV system and franchise transfers
which have occurred in Michigan between 1952 and 1974.
Factors in this analysis are system ownership, system

size and elapsed time and growth between system transfers.

THE GROWTH OF CATV IN MICHIGAN

The growth of CATV in Michigan, as might be ex-
pected, followed the national CATV growth pattern.9 The
first areas to benefit from CATV were those population
centers in which television reception and/or availability
was either poor or nonexistent. Of the twenty-five sys-
tems in Operation by the end of 1965, twenty (80%) were
located in the upper peninsula and four (16%) were in the
northern third of the lower peninsula.

Beginning in 1966 the CATV industry experienced
rapid growth, doubling in size over the next three years.l0
In contrast to the earlier pattern, the growth concentrat-
ed in.the lower two-thirds of the lower peninsula where,
of the thirty-seven new systems, twenty-six (70.3%) were
located. This growth trend peaked in 1968, and was
followed by a gradual reduction in the number of new
systems established. A small surge of growth occurred in
1970-1971, but it did not reflect any tendency toward a
new period of industry expansion. This trailing off of
CATV expansion may be attributed to several factors, in-
cluding uncertainty concerning government regulations,
reduction of available venture capital, a tightening money

market and a general downturn of the national economy.11

4

METHODOLOGY

A questionnaire and cover letter were sent to

every CATV system operator in the state.12

Follow-up
letters were sent to those who did not respond to the
initial mailing. Included in the mailings was a stamped
and addressed return envelope.

The information for systems not responding to the

follow-up letters was abstracted from the Television Qi-

 

gest Factbook. By this method a complete body of data

 

was assembled. However, it must be noted that this data
is limited in its accuracy by two factors: incomplete or
misleading reporting by the CATV companies and the time
lag involved in gathering and publishing the data.13
For this last reason, all data will be considered as
being accurate to January 1, 1974 only. Any transfers of
ownership occurring after that date, unless reported by
those operators returning questionnaires, will not be re-
flected in the data or the analysis.

Questionnaires were sent to 51 Operators of 72
CATV systems. Of the 51, 28 operators returned question-

naires covering 36 systems. The return rate was there-

fore 54.9 percent for the Operators and 50.0 percent for

the systems. A complete list of owners and operators may

be found in Appendix E.

GENERAL FINDINGS OF STUDY

Until 1962 there had been no reported transfers

of CATV systems within the state.14

Since that date
there have been thirty-nine system transfers, with the
highest number of transfers occurring in 1968 and 1971.
The number of transfers seems to have followed an approx-
imately cyclical pattern.15
Of the ninety systems currently either franchised
or in operation, 28 (31%) have been transferred at least
one time. The majority of transfers (52.3%) have occur-
red between non-Michigan based multiple system Operators
(MSO's). The next most common type of transfer was from
local ownership to a non-local MSO (18.2%). The total
number of transfers in which a non-local MSO gained or
retained control of a system was thirty-five (79.6%).
In contrast, the number of transfers in which a local
single system operator gained or retained control of a
system was two (4.5%). The remainder of the transfers
(15.9%) resulted in control by a Michigan based MSO. For
a graphic comparison of this data, see Appendix B, Figure
l.

The average elapsed time between system transfers

was 3.99 years for all transfers, and 3.67 years for
' 7

transfers between non-local MSO's. The average time that
a local single system operator owned a system before trans-
ferring to a non-local MSO was 6.3 years. The average
system age at the time of the first transfer was 5.6years.
For second transfers this system age was 7.66 years and
for third transfers, 9.66 years. The average time elapsed
between first and second transfers was 2.0 years, and 2.2
years between second and third transfers.

As measures of system growth, three factors were
measured before and after transfers. These factors were
market penetration, cable mileage and number of subscri-
bers. Market penetration is the pr0portion of subscri-
bers to potential subscribers, expressed as a percentage.
This figure is an indicator of system maturity, since a
more established or mature system would be expected to
have a higher market penetration than a newer system.
Cablendleage,if'it increases, indicates a growth in
capital investment in the system by the Operating company.
When compared to the total planned mileage, if given, it
also can be used to further determine the maturity of the
system. The number of subscribers is also obviously an
indicator of system growth in addition to its use in cal-
culating market penetration.

The average market penetration of transferred
systems, in respect to total potential market, was 51.5%

at the time of transfer. The average gain in total market

penetration per transfer was 12.45 percent. The average
system size at the time of transfer, in terms of number
of subscribers, was 1,649. The average number of sub-

scribers added was 879.16

For all transferred systems, the average total
plant mileage at the time of transfer was 74.8 miles.

The average mileage added after transfer was 11.42 miles.
At the time of transfer the average percentage of system
completion, measured in relation to the current total
system mileage, was 71.6 percent. An average of 10.9 per-
cent of completed plant mileage was added after each
transfer.

A majority (76.5%) of the transferred systems
added subscribers after transfer. Among those systems
the average number of subscribers added was 1,174 and the
average number of subscribers at the time of transfer
was 3,091.

A majority (55.9%) of the systems had additional
plant mileage constructed after being transferred. The
average additional mileage measured 16.2 miles. For
these systems the average completion before transfer was
76.2 percent and the average increase was 15.5 percent.

Half (50.0%) of the systems transferred added
both subscribers and plant mileage after they were trans-
ferred. For those systems, the average increase in market

penetration was 16.8 percent and the average number of

10

subscribers at the time of transfer was 3,607. The aver-
age completion of these systems at the time of transfer .
was 75.6 percent and an average of another 16.1 percent

of the total plant was added after the transfer. The
average mileage at transfer was 77.4 miles, and an aver-
age of 17.4 miles were added subsequent to the transfer.

In contrast, only 7.4 percent of all system trans-
fers resulted in no additional subscribers and no addi-
tional plant construction.l7 These two systems were
transferred only once and both transfers occurred in 1973.
One system is located on an Air Force base and is assumed
to have been a fully completed system.

When only first transfers are considered, 65 per-
cent of the transfers resulted in additional subscribers
and 75 percent resulted in additional plant mileage.

Only 10 percent of these transfers resulted in both no
additional subscribers and no additional plant mileage.

For second transfers, 88.9 percent recorded addi-
tional subscribers and 77.8 percent added plant mileage.
No second transfers lacked both. All third transfers
resulted in additional subscribers and plant mileage.

The final average market penetration of all trans-
ferred systems was 64.5 percent, compared to 62.4 percent
for non-transferred systems. The average completion of
the transferred systems was 73.5 percent and the average

for non-transferred systems was 76.1 percent.

11

In terms of subscribers, a total of 166,990(54.5%)
subscribe to systems which have been transferred while
139,292 (45.5%) subscribe to systems having their original
owner. Of the subscribers of transferred systems, 133,890
(80.2%) subscribe to systems controlled by non-Michigan
MSO's. In comparison, this class of Operator accounts
for 87,462 (62.8%) subscribers of non-transferred systems.

Of the 306,282 total subscribers in the state,
72.3 percent subscribe to systems controlled by non-
Michigan MSO's. The majority (60.5%) of these subscri-
bers have been obtained through transfer of systems. In
contrast, Michigan based companies have Obtained only
39.0 percent of their subscribers in this manner.

Franchise transfers were much less common than
system transfers. Only five franchise transfers occurred
during the period of time covered by this study and all
of these franchises were transferred only one time.

These franchises comprise 16.6 percent of all outstand-
ing (non-Operating) franchises and 5.5 percent of all
systems and franchises combined. When broken down by
class of operator 40 percent of these transfers were to
non-Michigan MSO's and the remaining 60 percent were to
Michigan MSO's. NO franchise had been transferred more
than once. Considering the original franchisees of these
systems, 60 percent were non—Michigan MSO's and the other

40 percent were local single system Operators.

ANALYSIS

There have not been a great number of transfers
of CATV systems and franchises within the state of Michi-
gan. Less than one-third of all systems currently fran-
chised or in Operation have been transferred, and over
two-thirds of those systems have experienced only single
ownership changes. These figures seem to indicate that
the transfer or sale of CATV systems and franchises is
not widespread in this state.

In regard to CATV system transfers, there are
four areas which bear closer scrutiny. The first of
these areas is the type or class of system operator.

The class of Operator with the highest incidence of sys-
tem transfers is the non-Michigan based Multiple System
Operator. Of all systems owned by this type of Operator,
81 percent have been transferred. These systems account
for 66.6 percent of the total number of systems trans-
ferred during the period under investigation. Of the
remaining systems, 20.5 percent were operated by local
single system Operators and 12.8 percent by Michigan
based MSO's. More importantly, all of the second and

third transfers that occurred were between these same

12

13

non-Michigan MSO's. (See Appendix B, Figures 2 and 3 for
graphic representation of this analysis.)

Additionally, those systems which were eventually
transferred to non-Michigan MSO's have the potential of
more than 134,000 subscribers, while those transferred to
other types of operators have a potential of only approx-
imately 34,000 subscribers. A closer inspection of the
data shows that of the states twenty potentially largest
CATV systems, fifteen are owned by non-Michigan MSO's,
as are eight of the ten largest in terms of subscribers.
Of the fifteen, six originally had been owned by Michigan
based firms.

The next area concerns the time elapsed between
transfers. There is no significant difference between
the average elapsed time for all‘transfers and the aver-
age elapsed time for transfers between non-Michigan MSO's,
3.99 and 3.67 years, respectively. The average times
elapsed between first and second, and second and third
transfers, 2.0 and 2.2 years, do seem significant. It
would seem that a larger sample of cases would be needed
before any firm conclusions could be reached in this
particular area.

An additional area which may be analyzed is sys-
tem growth as defined in the preceding section. The
figures for transferred systems do not vary appreciably

from those figures for systems which were not transferred.

14

The average total market penetration is the ratio of sub-
scribers to total potential subscribers. This ratio, ex-
pressed as a percentage, is 51.5 percent for transferred
systems at the time of transfer, but the individual
figures range from 5 percent to 94 percent. The current
average total market penetration differs very little
between transferred and non-transferred systems, being
64.5 percent and 62.4 percent, respectively.

Regarding average percentage of total construction
completed, systems which were transferred were 71.6 per-
cent complete at the time of transfer. Again, however,
the individual figures ranged from 24.5 percent to 100
percent. The current average completion figure is 76.1
percent for transferred systems and 73.5 percent for non-
transferred systems. Again, there appears to be no signi-
ficant difference between these figures.

Considering those systems currently in Operation,
a majority of the transfers resulted in an increase in
the number of subscribers and a greater majority resulted
in additional plant mileage construction. Only 35 percent
of all first transfers resulted in no increase in sub-
scribers and only one quarter of those first transfers
resulted in no additional plant mileage construction. The
figures for these statistics for second transfers are even
lower and for third transfers both figures are zero.

Transfers without additional capital investment in plant

15

construction are clearly in the minority. Trafficking in
CATV, if it is occurring, is not taking place, in most
cases, without capital investment by the companies in-
volved. It would seem that this would not be the case if
system trafficking were widespread.

The final area of analysis is CATV industry growth
as defined by the number of new CATV systems added. Trans-
fers have occurred most often during periods of CATV indus-

try expansion within the state.18

It may be possible to
predict growth periods, and thereby the greater possibil-
ity of transfers by noting the number of new franchises
granted within the state and the number of Certificates
of Compliance issued by the Federal Communications
Commission.

The correspondence between industry growth and
the number of transfers cannot be ignored. During periods
of rapid growth, in any industry, entrance by purchase or
merger becomes more attractive and therefore more common.
This pattern certainly has been true concerning the CATV
industry in Michigan. Another evident trend in this
pattern is the reversal of the relation between new sys-

19 Prior to that date the

tems and transfers after 1969.
number of new systems consistently exceeded the number of
transfers. After 1969 the reverse relation occurs. This
reversal may be due to an increasing saturation of profit-

able CATV markets within the state, especially in those

areas Outside of metropolitan Detroit.

16

There is only one measure available in the data
which may aid in analyzing franchise transfers. This
measure is the number and proportion of transfers for each
type of franchisee. .The highest prOportion of transfers
occurred when the franchisee was a non-Michigan MSO. Of
the franchises held by such companies, 43 percent have
been transferred and these companies accounted for 60
percent of all transferred franchises.

The next highest incidence occurred when the fran-
chisee was a local single system Operator. Of all fran-
chises held by firms of this type, 25 percent have been
transferred, comprising 40 percent of all franchise
transfers. The Michigan based MSO accounted for no fran-

chise transfers during the period under investigation.

CONCLUSION

The evidence presented by the data suggests that
there has not been widespread trafficking of CATV systems
and franchises within the state of Michigan. Less than
one-third of all systems and one-sixth of all franchises
have been transferred at all, and the majority (65.2% and
100%, respectively) of those only once. These figures
refute any claims of wholesale buying and selling of
systems and franchises. It is not suggested, however,
that complacency is the correct response to this evidence.

There are three major patterns which have been
revealed in the analysis of the available data. The
first of these patterns is the heavy involvement of non-
Michigan based Multiple System Operators in system trans-
fers. This acquisition pattern is highly significant
because such a pattern could be expected to occur if traf-
ficking in CATV systems was occurring. This type of sys-
tem operator is also exclusively involved in all second
and third transfers of systems. It would seem that once
a system is acquired by one of these firms, which is high-
ly probable, it simple becomes a commodity, to be bought

and sold at will.

17

18

Related to this trade in systems is the second
major pattern. An increasing number of subscribers are
affected by these transfers. Over 60 percent of the sub-
scribers to non-Michigan MSO controlled systems are con-
nected to transferred systems, and these Operators serve
over 72 percent of all Michigan CATV subscribers. Since
most Multiple System Operators employ "local" operating
companies to conduct the day to day business Of CATV
system management, most subscribers are probably unaware
of their system's ultimate ownership. These "local" com-
panies are firms which have been established by the owner
of the system to oversee the Operation of the CATV system.
The "local" company's name may differ from that Of the
owner and it usually conducts its business from a local
office. The subscribers also probably are unaware of any
transfers which might take place, since the local operat—
ing company's name usually remains unchanged, eSpecially
when the transfer involves only partial changes in owner-
ship. Unless they are informed by the company, most of
these subscribers therefore do not know that the CATV
system to which they subscribe is controlled by an out of
state firm whose main interest in them lies in the value
which they add to the system on the CATV system market
and nothing more.

Finally, closely related to the two preceeding

patterns is the fact that the majority of the largest

19

systems in the state are owned by out of state firms.
This fact means that the number of subscribers subject to
these firms, already the majority of subscribers, is dis—
prOportionate to the number of systems which these firms
own. The 36.8 percent of the systems controlled by non-
Michigan MSO's account for 72.3 percent of all subscribers.
The most logical explanation for this phenomenom is the
belief that the larger systems require the capital and
expertise of these firms. Possibly more emphasis should
be placed upon local or in state ownership during the
franchising process.

These three patterns were the only areas in which
transferred systems differed appreciably from non-trans-
ferred systems. System growth and market penetration
figures for both types of systems were very close,
showing little difference.

The ultimate solution to patterns of behavior of
the types described in the Michigan CATV industry must be
comprehensive regulation at the local, state and national
levels. Local ordinances and franchise agreements should
contain sections dealing with system transfers, both at
the local operating company level and at the ultimate
ownership level. The franchisee selection process should
favor truly local or in state companies, rather than local
Operating companies established by national firms solely

to compete for the franchise.

20

State CATV regulations should be established in
order to protect subscribers from actual or potential
abuses. Rules concerning franchise and system transfers
should be established and enforced, especially in the
absence of such regulation at the local level. Rules
concerning full public disclosure of the ownership of
operating companies are also necessary.

Finally, national regulation of large multi-state
Multiple System Operators is also needed. Limits similar
to those affecting broadcasters need to be placed on
these operators. Oligopolistic control of CATV would be
just as, in not more, injurious as such control of broad-
casting. Obviously, vigorous regulation at the national
level is the only method by which the American public may
be assured protection from abuses by nationally diversi-
fied CATV operators.

The future of CATV within Michigan seems assured
to be prosperous. It is incumbent upon local, state and
federal authorities to insure that this prosperity does
not lead to the abuse of the power such prosperity brings.

There is a compelling need for more research in
the area of CATV regulation. Studies such as this may
best serve to point out areas of future investigation.
Among those areas are the times elapsed between system
construction and transfer, and between subsequent trans-

fers. The relationship between industry growth and level

21

of transfer activity also bears further study. Finally,
national patterns of CATV growth and transfers should be
investigated.

The potential for the CATV industry to affect the
daily lives of the nation's population is greater than
almost any medium of communication, and is the greatest
advance in mass communication since television, whose po-
tential has been poorly utilized. It is hoped that the

potential of CATV is not similarly wasted.

FOOTNOTES

22

FOOTNOTES

lAll historical information, unless otherwise
noted, has been abstracted from the Television Digest
Factbook, TV Digest Inc., Washington, D.C., 1952-1973.

2

 

Ibid 0

3Federal Communications Commission, Second Report
and Order 92 Dockets 14895, 15223 and 15971, 2 FCC 2d 417
(1966). '

4U.S. v. Southwestern Cable, 88 S Ct 1994, 392 US
157, 20 L Ed 2d 1001 (1968).

 

 

 

 

 

5Federal Communications Commission, Notice 9:
Inquiry and Notice gf PrOposed Rulemaking i3 Docket 18397,
15 FCC 2d 417 (1969).

 

 

 

 

6Television Digest Factbook, TV Digest Inc.,

7Don R. LeDuc, Cable Television and the FCC,
Temple University Press, Philadelphia, 1973, pp. 158-159.

8

 

 

Ibid., pp. 159-160.

9For a more detailed analysis of the CATV industry
in Michigan, I would refer the reader to Lawrence Thompson,
"A Preliminary Analysis of Cable Television: Its Impact on
Michigan with Alternatives for Legislation" (unpublished
M.A. Thesis, Dept. of Television and Radio, Michigan State
University, 1974.)

10Television Digest Factbook, TV Digest Inc.,

11Examination of business publications such as the-
Wall Street Journal, Barron's, Fortune, Business Week,
Broadcasting, Forbes, Time, Newsweek and U.S. News and
World Report during this period will provide a more com-
plete picture of the economic factors Operative at this
time. Specific issues of these publications which may
prove to be informative are: Fortune 1/72; Newsweek 4/1/68,

 

 

 

 

 

 

 

 

 

23

24

7/29/68, 10/28/68, 12/23/68, 12/29/69, 1/12/70, 6/29/70;
Time 6/28/68, 8/16/71, 2/14/72; Business Week 3/9/68,
12/7/68, 5/23/70, 11/6/71, 2/12/72; U.S. News and World
Re ort 6/24/68, 10/21/68, 12/23/68, 1173/69, 10/19/70,
11512773, 12/17/73; and Forbes 1/1/70, 3/1/72 and 12/1/73.

As far as government regulations are concerned,
Specific reference should be made to U.S. v. Southwestern
Cable, 88 S Ct 1994, 392 US 157, 20 L Ed 2d 1001 (1968);
Federal Communications Commission, First Report and Order,
20 Fcc 2d 201 (1965) and Federal CommufiIcations Commission,
Second Report and Order 19 RR 2d 1775 (1966).

12

 

 

 

 

Sample questionnaire, Appendix D.

131t is assumed that the information gathered by
the publisher of the Television Digest Factbook is as com-
plete and accurate as possible. The informatIon is ob-
tained from the CATV Operators and/or the local franchis-
ing authority. Information supplied by either of these
sources may be misleading in certain areas, such as plant
mileage and subscribers, either through deliberate mis-
representation or deletion. The information supplied,
however, is the most accurate information obtainable
through any method other than personal contact. The data
collected by the questionnaire was used to validate the
data obtained from the Television Digest Factbook.

14All figures in this section, unless otherwise
noted, were obtained from the Television Digest Factbook
and/or from the data collected by the questionnaire.

 

 

 

15Appendix B, Figure 7.

16Appendix A, Table 3.

17These systems are located in Bay City and K.I.
Sawyer Air Force Base near Marquette.

18Appendix B, Figure 6 and Figure 7.

19Appendix B, Figure 6 and Figure 7.

BIBLIOGRAPHY

25

BIBLIOGRAPHY

"At Last, Signs of a Slowdown." Newsweek. Vol. LXXIV No.
26. December 29, 1969. p. 48.

Bleiberg, R.M. (ed.). Barron's. Chicopee, Massachusetts:
Dow Jones and Co.

Broadcasting. Washington, D.C.: Broadcasting Publica-
tions, Inc.

 

"CATV On A Hot Tin Roof." Newsweek. Vol. LXXII No. 26.
December 23, 1968. p.74.

"Cable TV: Thriving, But Still A Rough Road Ahead." U.S.
News and World Report. Vol. LXXV No. 25. Decem-
ber 17, 1973. pp. 47-48. '

 

Cameron, Juan. "How the U.S. Got On the Road to a Con-
trolled Economy." Fortune. Vol. LXXXV No. 1.
January 1972. pp. 74-77, 156-165.

Donovan, H. (ed.). "Victory for CATV." Time. Vol. XCI
No. 26. June 28, 1968. p. 55.

 

. "The Economic Blues." Time. Vol. XCVIII NO. 7.
August 16, 1971. pp. 9-10.

. "The Showdown Fight Over Inflation." Time.

Vol. XCVIII No. 7. August 16, 1971. pp. 64-72.

. "The Future of Free Enterprise." Time. Vol.
XCIX No. 7. February 14, 1972. pp. 50-51.

. "Cable Compromise." Time. Vol. XCIX No. 7.
February 14, 1972. p. 65.

Federal Communications Commission. First Report and Order
93 Dockets 14895, 15223 and 15971. 20 FCC 2d 201,
1965.

 

. Second Report and Order 92 Dockets 14895, 15223
and 15971. 2 FCC 2d 417, 1966.

 

 

26

27

. Notice 9: Inquiry and Notice 9: Proposed Rule-
making ig_Docket 18397. 15 FCC 2d 417, 1969.

 

 

 

Forbes, M.S. (ed.). "Too Much of a Good Thing." Forbes.
Vol. CIV No. 1. January 1, 1970. pp. 31-82.

. "A Capital Game." Forbes. Vol. CIX No. 5.
March 1, 1972. pp. 33-34.

. "Physician, Heal Thyself." Forbes. Vol. CXII

No. 11. December 1, 1973. pp. 62-65.

"Inflation: A Call For Restraint." Newsweek. Vol. LXXV
No. 26. June 29, 1970. pp. 61-62.

Kramer, K. (ed.). "Telling It To The FCC." Business Week.
March 9, 1968. pp. 36-38.

 

. "The Fed Clamps Down." Business Week. March 9,
1968. p. 38.

 

. "Why Loans Cost More." Business Week. December
7, 1968. pp. 31-32.

 

. "New Lines for Communications." Business Week.
December 7, 1968. p. 40.

 

"FCC Draws Line for Cable TV." Business Week.
December 21, 1968. pp. 28—30.

 

. "A New FCC Tune Elates Cable TV." Business Week.
May 23, 1970. pp. 38—39.

 

. "The Revolution in the Phone Business." Busi-
ness Week. November 6, 1971. pp. 66—74.

 

"CATV'S Green Light May Change Color." Business
Week. February 12, 1972. pp. 19-20.

LeDuc, Don R. Cable Television and the FCC. Philadelphia:
Temple University Press, 1973.

 

"More and More Signs That Business is Slowing." U.S. News
and World Report. Vol. LXXV NO. 20. November 12,
1970. pp. 37-38.

 

"New Warning About U.S. Economy." U.S. News and World
Report. Vol. LXXIV No. 26. June 24, 1968. p. 91.

28

"Recession Ahead? What the Odds Are." U.S. News and
World Report. Vol. LXVII No. 18. November 3,
1969. pp. 21-22.

 

"Sluggish '70's - Unless. . .." U.S. News and World
Report. Vol. LXV No. 26. December 23, 1968.
pp. 56-60.

Television Digest Factbook. Washington, D.C.: TV Digest
Inc. 1952-1973.

 

"The Boom That Threatens to Bust." Newsweek. Vol. LXXII
No. 18. October 28, 1968. pp. 89-90.

"The Chill of a Cooler Economy." Newsweek. Vol. LXXII
No. 5. July 29, 1968. pp. 71-72.

"The Money Crisis: Far From Over." Newsweek. Vol. LXXI
No. 14. April 1, 1968. pp. 71—77.

"The U.S. Economy in 1970: Can Inflation Be Stopped?"
Newsweek. Vol. LXXV No. 2. January 12, 1970.
pp. 49-58.

Thompson, Lawrence. "A Preliminary Analysis of Cable
Television: Its Impact on Michigan with Alterna—
tives for Legislation." Unpublished Master of
Arts Thesis, Department of Television and Radio,
Michigan State University, 1974.

"To Give Business A Boost." U.S. News and World Report.
Vol. LXIX No. 16. October 19, 1970. pp. 33-36.

United States v. Southwestern Cable, 88 S Ct 1994, 392
US 157, 20 L Ed 2d 1001. 1968.

 

"What Happens When Inflation Takes Over." U.S. News and
World Report. Vol. LXV No. 17. October 21, 1968.

 

APPENDICES

29

APPENDIX A

TABLES OF DATA AND RESULTS

30

AUTHOR'S NOTE ON TABLES

The totals for some tables may not be 100 percent
due to rounding. All rounding was done to the nearest
tenth of one percent using accepted methods. This round-
ing was done in order to simplify the results while re-
taining the significant portion of the data. The rela-
tively small size of the sample would preclude the re-
tention of any data past the point of rounding.

Due to incomplete data for a number of systems,
the base totals for different tables may differ. It
would therefore be inappropriate to compare these totals

between tables.

31

32

TABLE 1.--CATV System Transfers by Year.

 

Number of Total Number % of Total % of Total

 

Year Transfers of Systems Systems Transfers
1973 2 61 3.3 5.1
1972 3 60 5.0 7.7
1971 8 59 13.5 20.5
1970 6 54 11.1 15.4
1969 l 53 1.9 2.6
1968 8 52 15.4 20.5
1967 3 42 7.1 7.7
1966 4 35 11.4 10.2
1965 - . 25 - -
1964 1 20 5.0 2.6
1963 - 19 - -
1962 1 17 5.9 2.6

 

TABLE 2.--Transfer Analysis by Type Of Ownership.

 

 

Syitems % Franihises % Total %
Local to Mich.

M80 1 2.6 1 20.0 4.5
Local to M80 7 17.9 1 20.0 18.2
Mich. MSO to M80 4 10.2 - - 9.1
Mich. MSO to

Mich. M80 1 2.6 - - l 2.3
M80 to M80 22 56.4 1 20.0 23 52.3
MSO to Mich. M80 2 5.1 2 40.0 9.1
M80 to Local 2 5.1 - - 2 4.5

 

Key: Local - Local single system owner.
Mich. MSO - Michigan based M80.
M80 - Non—Michigan MSO.

33

TABLE 3.--System Transfers by Subscribers and Plant Mile-

 

 

 

age.
Before Transfer After Transfer
Average % of Plant Average % of Plant
Number Poten- Mile- Number Poten- Mile-
Of tial age of ’ tial age
Subscri- Subscri— Subscri— Subscri—
bers bers bers bers
2966 51.5 74.8 3921 63.95 86.2

 

TABLE 4.--Transferred System CompletiOn.

 

Before Transfer After Transfer

 

71.6% 86.2%

 

TABLE 5.--Transferred System Growth.

 

 

% Adding % Not Adding

Subscri- Plant Subscri- Plant

bers Mileage bers Mileage Both
All
Transfers 76.5 70.4 23.5 29.6 7.4
First
Transfers 65 75 35 25 - 10
Second
Transfers 88.9 77.8 11.1 22.2 -
Third

Transfers 100 100 - - -

 

34

TABLE 6.--Transferred and Non-Transferred Systems by
Type of Ownership.

 

Fran- Fran-
Systems chises Total Systems chises Total

 

Local 19 6 25 8 2 10
Local

M50 12 15 27 5 - 5
M80 6 4 10 26 3 29

TABLE 7.--Subscribers by System Owner and Transfer.

 

 

Transferred Non-Transferred
MSO 133,890 87,462
Non-MSO 33,100 51,830

Total 166,990 139,292

 

APPENDIX B

FIGURES AND GRAPHS

35

36

Systems
Acquired
Through
(flL6%)

 

Systems Acquired
Through Construction
(71.4%)

Figure 1.--System Acquisition Pattern, Local Operators.

Systems
Acquired
Through
(15.7%)

 

Systems Acquired Through
Construction
(&L3%)

Figure 2.--System Acquisition Pattern, Michigan Based MSOs.

37

     
        
     
   

  

Systems
Acquired
Through
Construction
(zsxm)

 

 

Systems Acquired Through
Transfer
(74.4%)

Figure 3.--System Acquisition Pattern, Non-Michigan MSOs.

38

Local
(20.5%)

 
   
 

 

Michigan MSO

Non-Michigan MSO
(66.7%)

Figure 4.—-Pre-Transfer System Ownership Breakdown
(Transferred Systems Only).

Local
(arm

   
     
 

Michigan
MSO
(10.2%)

 

Non-Michigan MSO
(84.7%)

Figure 5.--Post-Transfer System Ownership Breakdown
(Transferred Systems Only).

39

mnma

[

tha AhmH onma mmma mmma hmma mmma mmma vmma mwma NmmH

 

.oa

Figure 6.--New CATV Systems by Year.

40

mnma thH HhmH onma mmma mwma

hmma

mmma

mwma

coma

mmma

NmmH

 

 

‘

II

E

J

II

 

OH

Figure 7.-—Number of CATV System Transfers by Year.

APPENDIX C

GLOSSARY OF TERMS

41

42

Glossary of Terms

 

CATV (Community Antenna Television) - A method of

 

television signal distribution using a master antenna to
receive such signals off the air and a coaxial cable to
relay the signals to individual receivers. Synonym:
Cable TV.

Certificate pf Compliance - A document issued by

 

 

the Federal Communications Commission denoting that the
terms of a CATV franchise meet with its approval. The
certificate is required before system operation may legal-
ly begin.

Franchise - CATV system.not yet in operation.

 

Franchise Agreement 6 A contract between a CATV

 

system Operator and the local governing body stating terms,
conditions, rights and responsibilities of both parties in
relation to the Operation of the CATV system.

Lppal - The type of CATV operator which is based
in Michigan and operates only one system.

Local MSO - The type of CATV operator which is

 

based in Michigan and Operates two or more systems, all
within the state.

Market Penetration - The prOportion of CATV sys-

 

tem subscribers to total potential subscribers, expressed

as a percentage.

43

M80 (Multiple System Operator) - The type of CATV

 

 

Operator which is not based in Michigan and operates
systems in other states.

Plapp - The physical assets of a CATV system,
consisting mostly of cable laid under or strung along city

streets.

Subscriber - Any residenCe, dwelling unit or build-

 

ing which receives television signals from the CATV system.

System - The CATV facilities serving a locality or
group of adjacent localities, having a single terminus and
currently in operation.

Traffickipg - The transfer of CATV systems or

 

franchises from owner to owner with little or no invest-
ment in services or facilities by the owners.
Transfer - Any change of ownership, in part or

whole, by means of purchase, merger or any other method.

APPENDIX D

SAMPLE QUESTIONNAIRE

44

l)

2)

3)

4)

5)

6)

7)

45

CATV QUESTIONNAIRE

SYSTEM:

DATE OF FRANCHISE, ORDINANCE OR AGREEMENT AUTHORIZING

OPERATION OR CONSTRUCTION

 

DATE THAT CONSTRUCTION STARTED OR WILL

START

 

DATE THAT CONSTRUCTION WAS OR WILL BE

COMPLETED

 

DATE THAT OPERATION STARTED OR IS SCHEDULED TO

START

 

DATE SYSTEM OR FRANCHISE WAS ACQUIRED BY PRESENT

OPERATION

 

METHOD OF ACQUISITION: (PURCHASE, MERGER, ETC.)
PREVIOUS OWNER(S) OR FRANCHISEE(S) AND DATE(S) OF

TRANSFERS:

PLEASE RETURN TO: CHRISTOPHER M. K. WEST
2605 E. KALAMAZOO ST.
LANSING, MICHIGAN 48912

(517) 487-5055

APPENDIX E

CATV SYSTEM OWNERS AND OPERATORS

46

 

47

Michigan CATV System Owners and Operators

 

(Ownership, if different, appears in parentheses)

Alden CATV Inc.
Southfield
(Alden Care Enterprises)

Alpena Cablevision
Alpena
(Cable Information Systems)

American Cablevision Inc.
Ironwood

Iron Mountain

Sault Ste. Marie
Escanaba

Calumet

(Teleprompter Inc.)

Booth American Co.
Detroit

Cablevision In.
Ludington

Capital Cablevision
Lansing
(Gross Telecasting)

Caspian Community TV Corp.
Caspian
(Subscriber Owned)

Cass Community Antenna TV Inc.
Whitehall

Coldwater Cablevision Inc.
Coldwater

Continental Cablevision of
Michigan

Jackson

(Continental Cablevision)

Covenant Cable TV Inc.
Port Huron
(Covenant Cable)

Crystal Falls CATV
Crystal Falls
(City Owned)

Fetzer Cablevision
Kalamazoo
(Fetzer Broadcasting)

Flint CATV Inc.
Flint
(Lamb Communications)

General Television of Mi.
Oscoda

(American Television and
Communications)

Gerity Cablevision
Essexville
(Gerity Broadcasting)

Glen Lake Cable Co.
Traverse City
(R.D. Rodenbaugh)

Great Lakes Cable Televi-
sion

Petoskey

(G.R. Clark)

Huron CATV Inc.
Harbor Beach

Iron Range Cable TV
Marquette
(Cox Cable Communications)

Iron River Community TV
Antenna Corp.

Iron River

(Subscriber Owned)

Lake Charlevoix Cable TV
Inc.
Charlevoix

 

48

Liberty Cable TV Inc.
Adrian
(Liberty Communications)

Manistee TV Cable Inc.
Milford
(George Mott)

Manistique TV Cable Co.
Manistique

Michigan CATV Co.
Sturgis
(80% WSTR AM-FM)

Michigan Communications Group
Ann Arbor

Midwestern Cablevision Corp.
Traverse City
(Midwestern Broadcasting Co.)

Monroe Cablevision
Monroe

Muskegon Cable TV Co.
Muskegon

(Michigan Communications
Group, Plains TV, J. Lahey)

National Cable Co.
East Lansing
(LVO Communications)

Northern Video Inc.
Ontonagon

Northern Cable CO., Inc.
Rogers City
(Cable Services Co.)

City of Norway Community TV
Norway
(City Owned)

Rapid Cablevision
Big Rapids
(J.A. White II)

Saginaw Cable Television
C0.

Saginaw

(Cox Communications)

Satellite Systems Corp.
Marquette

Stanbaugh Cable Co.
Caspian
(A.Melchiori & L.B.Ghiggia)

Tequamenon Cablevision Inc.
Escanaba

Thumb TV Cable Co.
Port Huron
(J. Wismer)

Thumb Video
Mount Pleasant

Triad Cablevision Inc.
Marshall
(Triad Systems Inc.)

Tri-City Cable TV
Allegan

Twin Valley CATV Inc.
Hillsdale
(Lamb Communications)

Warner Cable Corp.
Menominee
(Warner Cable Corp.)

WGN Electronic System Co.

Houghton
(Tribune Co.)

Wolverine Cablevision
Battle Creek

(Fetzer Broadcasting &
Time-Life Inc.)

 

49

Michigan CATV System Franchisees
(Not listed under ownership)

M.J. Alan Inc.
St. Clair Shores

Barry Cable Corp.
Hastings

Cable TV Inc.
Benton Harbor

Canton Communications Systems Inc.
Canton

Century Cable Communications
Owosso
(Century Cable)

Clearview TV Inc.
Charlotte

G.E. Cablevision
Wyoming

Grand Rapids
(General Electric)

J.A. McCoy
Caro

National Cablecasting Service
Grayling

Northside TV Corp.
Iron Mountain .
(Private System Located in Trailer Park)

Port Huron TV Cable Co.
Port Huron