Cable Firms Unfair? The Picture Is Fuzzy

In Louisville, Ky., last week, the Rev. Jesse Jackson led a protest rally against the local cable-television company, which he accuses of ignoring the city's poor, mostly minority neighborhoods in favor of the richer, predominantly white suburbs.

"This is not a question of black or white, it's a question of wrong and right," insisted the civil rights leader.

Yet, on the same day in New York, the local cable company in the Bronx announced it was pouring millions of dollars into a new, 24-hour cable news channel specifically targeted at one of the city's poorer boroughs.

"We have a belief and a confidence in the ability of the world and the Bronx to change, and that we can have a hand in that," says Joshua Sapan of Rainbow Media Holdings, Cablevision's programming subsidiary.

Welcome to the complex world of cable economics. It's a place where chasing the bottom line in a competitive environment can produce results that look like racism and redlining to some, as in Louisville. Or, as in the Bronx, it can manifest what appears to be socially enlightened capitalism designed to serve both social and commercial needs.

In the middle, are consumers and communities - the gold ring in the race between cable, telephone, and direct satellite broadcast (DBS) companies as they vie to capture more of the entertainment and high-tech dollar.

Mr. Jackson and other social activists argue that unless communities push to guarantee that the poor receive the same services as the wealthy, telecommunications companies will simply cater to the rich and "cream" their profits from the top.

The National Association for the Advancement of Colored People is conducting a review of the telephone and wireless industries to determine if they're hiring minorities and deploying state-of-the-art systems in minority and low-income neighborhoods. If they're not, NAACP officials say, the companies can expect to lose business. The results are due in May.

But cable and other telecommunication industry officials deny any redlining is going on. They argue the current competition is so heated, it would be foolish business practice not to have the most high-tech, consumer-friendly operation in place in every community to be ready to confront any newcomers to the arena.

"The accusation of redlining is just patently untrue," says Charles King, vice president and general manager of TKR Cable in Louisville.

Jackson charges that TKR upgraded the suburbs with fiber-optic, interactive, digital cable and 82 channels first, leaving the city with an antiquated 44-channel system.

"Access to information is power," says Jackson. "It's a civil rights issue."

But TKR's Mr. King says the company made the same promises to Louisville that it did to surrounding suburbs. But negotiations with the city have dragged on since September 1995, he says, because of changes in the makeup of the city's Board of Aldermen. The management of the company has also changed hands since then.

"Every customer is valuable to us. We provide service to everyone equally and charge the same rates," says King

Studies of cable-subscriber usage also suggest it would be bad business for a cable company to "redline," or intentionally provide lower quality services in minority neighborhoods.

A universal service

Surveys by the Pew Research Center for the People and the Press suggest that cable service is almost universally available, regardless of race or income. While an equal percentage of blacks and whites take cable, African-Americans were much more likely than whites to subscribe to premium channels and to buy pay-per-view services.

"A cable company is in the business of selling its services, and people in poor neighborhoods consume a lot of cable TV," says Eli Noam, a professor at Columbia Business School and director of its Institute for Tele-information.

But Professor Noam and other analysts say the issue becomes "fuzzier" when it comes to costly upgrades to fiber-optic cable. In most cases, they say, companies start in the wealthier neighborhoods because they expect to reap the greatest profit there.

"The cable companies can upgrade the networks to provide Internet access, digital service, and just to add channel capacity for more pay-per-view movies - all of which is expensive," says Michael Salinger, an economist at Boston University School of Management. "It comes down to a business decision of where you're going to make your money back the fastest."

Business incentives

The Pew Research Center suggests that there's a strong economic incentive for cable firms to upgrade in wealthier areas first. Laying cable costs a fixed amount of money. Profitability depends on how many people along the line choose to subscribe.

Only 65 percent of the people who make less than $20,000 a year say they subscribe to cable, compared with 88 percent of people who make more than $70,000. "The question is, how long will it be before they get to the poorer neighborhoods?" says Noam.

In New York, Cablevision's Bronx system has not been upgraded to digital. But it is one of the firm's newest systems and already offers 80 channels and interactive capability. Cablevision officials say they plan to upgrade to digital, but they're waiting to see which technology ultimately proves to be the least expensive and most effective.

"You don't want to be the one who buys the last 8-track tape," says Cablevision's John Hamill. "But we're mandated to stay state-of-the-art, and if you don't, you're finished anyway."

For now, the company is banking on the success of its new 24-hour cable news station to keep its Bronx subscribers wired to cable when DBS and other competitors come knocking at the door.

Cablevision pioneered the concept of local, 24-hour cable news operations in Long Island more than a decade ago. Against all predictions at the time, they've proven to be successful. News 12 Bronx is Cablevision's fifth such operation.

"Neilson surveys show we're the No. 1 choice for news in our areas. People turn to us when something happens," says Cablevision's Norm Fein. "So by dealing with local issues, and dealing with them deeply and in an ongoing basis, you create a larger, committed audience."

The company also touts the expected social benefits of its profitmaking entity.

"If we come in with a news service that portrays the Bronx differently than it's conventionally portrayed in electronic media, that in itself will have a contributing effect to changes that we already think are occurring in the Bronx," says Mr. Sapan.

Cable critics applaud such additions but contend that, in the long run, low-income communities will be best served by getting access to the highest-tech cable services sooner, rather than later.

"The new fiber-optic lines and digital switches, they're the infrastructure you need to participate in the electronic economy that's dominating our society," says Jeffrey Chester of the Center for Media Education.