In Senate Resolution No. 65, S.D. 1, the Legislature sought
answers to five specific questions.  In researching the issues,
it became apparent that the answers would not illuminate the
picture without adequate background.  A significant part of this
study will be a description of the issues and the structure and
operations of the access organizations.  This chapter describes
the interrelationship between the federal and state cable
television access laws and between the three major entities
involved:  the State, through the Department of Commerce and
Consumer Affairs (DCCA), the cable companies, and the access
organizations.  The issue of what type of access is intended by
the law will be reviewed.  Chapters 3 through 6 will review the
structure and functions of each of the four access organizations.

     It should be stressed that this study is intended to address
policy issues, and is not an audit of the public access
organizations.  Some people who contacted the Bureau in
connection with the study reported issues relating to alleged
problems such as purchase of the wrong equipment, improper use of
facilities, and improper installation of equipment.  These are
not the issues relevant to the resolution.  This study represents
an examination of the philosophy behind public access, whether
the access organizations are fulfilling their mission, and
answers specific questions requested by the Legislature.


                           The Players

     There are four entities involved in this topic.


The Federal Government

     The federal government, through the Federal Communications
Commission (FCC), regulates the cable industry.  Between 1972 and
1979, the FCC required PEG (public, education, and government)
programming for the larger franchise areas.  That requirement was
struck down in 1979.  In 1984, Congress passed the Cable
Communications Policy Act of 1984 (1984 Act), in which the
franchising authorities of the cable companies were permitted,
but not mandated, to require their franchisees (i.e., the cable
companies) to provide PEG access.


The State

     In most locales, the franchising authority is at the county
level or lower.  In Hawaii, the State has taken on that function.
Under chapter 440G, Hawaii Revised Statutes, the State requires
its franchisees, the cable companies, to provide PEG access as a
condition of granting the franchise.  The Department of Commerce
and Consumer Affairs (DCCA) is the state agency that handles the
franchise agreements.


The Cable Companies

     The cable companies are the private entities that provide
cable television service to their subscribers.  At the time this
study was prepared, those providers were:  on O'ahu, Oceanic
Cablevision(1) and Chronicle Cablevision of Hawaii; on the Big
Island, Jones Spacelink of Hawaii, Inc., Sun Cablevision of
Hawaii and Kamehameha Cablevision Cable Systems,(2) and Chronicle;
on Maui, Chronicle and Hawaiian Cablevision Company;(3) and on
Kaua'i, Garden Isle Cablevision and Kauai Cablevision.  As
discussed in detail below, the cable companies each pay a small
portion of their annual gross revenue to fund the cable access
organizations.


The Access Organizations

     The access organizations are known by several descriptions:
"PEG access organizations", "nonprofit cable access
organizations", and "access centers".  This study will refer to
them as the "access organizations".  This term refers to the
private, nonprofit companies set up solely to handle the PEG
obligations of the cable companies.  These access organizations
are intended to be independent; they are not intended to be state
agencies and they are not affiliated with the cable companies.
On O'ahu, the access organization is 'Olelo:  The Corporation for
Community Television; on Maui, Akak-u:  Maui County Community
Television, Inc.; on Kaua'i, H-o'ike:  Kauai Community Television;
and on the Big Island, Na Leo 'O Hawai'i.

     Each of these organizations has a written or oral contract
with the State by which they agree to provide PEG services (or in
the case of Maui, P services only).

     The federal act is silent on the role of access
organizations, as Congress did not anticipate their existence.(4)
The Act does provide that cable companies may be required, in
each twelve-month period, to pay the franchising authority a
franchise fee of not more than five percent of gross revenues.(5)
However, the legislation does not provide instruction on the use
of the fee.  The federal legislation also indicates that the
cable companies can be required to make capital contributions to
the access organizations, which are not included in the five
percent franchise fee limit.

     Neither the state statutes nor state rules directly mention
this franchise fee, although the statute refers to conditions
that the Director of Commerce and Consumer Affairs may place on
franchisees, and also specifies that each cable operator shall
pay an annual fee, to be determined by the Director, to offset
the costs of administering the state law.(6) 

     The franchise fees are mentioned explicitly in the Decisions
and Orders that constitute the contract between the State and the
cable operators.  At the time this study was requested, 'Olelo
was receiving three percent of the gross revenues and, for the
most part, the neighbor island access organizations were
receiving only two percent.(7)  The situation has changed since
that time, as documented in a letter from the Cable Television
Division of the DCCA, included as Appendix B.  Most of the
neighbor island access organization now have access to three
percent.  H-o'ike's agreement will change as of 1996 but it will
not receive payment at the three percent rate until the end of
1996.  See Appendix B.  This change is appropriate; the neighbor
island access organizations have been operating on a comparative
shoestring due to their much smaller subscriber bases.  While
they cannot expect the kind of revenues and facilities that
'Olelo has, the disparity in resources is marked.  While 'Olelo
has sufficient resources with which to purchase its own building,
two of the neighbor island organizations cannot even afford to
rent enough space for a small studio. As they lack the economies
of scale that a large organization such as 'Olelo enjoys, equity
would seem to demand that they receive at least the same
percentage as 'Olelo.

     In addition to the two to three percent paid to the access
organizations, the cable companies are required to pay to the
DCCA one percent of their gross revenues for its operating
expenses.  Another one percent of gross revenues has been
designated in some franchise areas for the Hawaii Public
Broadcasting Authority (HPBA).  This means that Oceanic, for
example, is at its maximum 5 percent franchise fee capacity:  3
percent to PEG access, 1 percent to DCCA, and 1 percent to HPBA.

     While the federal act is silent as to the uses of the
franchise fee, paying a portion to HPBA is problematic.  HPBA's
mission is to establish and operate public broadcasting
facilities, to produce or obtain programs intended to enlighten
the people of the State, and to air these programs.(8)  HPBA, which
is also within the DCCA, is intended to be funded by a revolving
fund, the sources of which include funding from the state
Legislature.  HPBA has had additional funding needs for a number
of years, and, according to Robbie Alm, the then-director of the
DCCA, in 1991, half a percent of the franchise fee was diverted
to HPBA in a one-year only agreement to provide for community
programming.(9)  Alm saw HPBA as complementary to public access,
with HPBA providing "broadcast" programs drawing a wide audience
and capable of competing with commercial television, and PEG
access providing "narrowcasting," programming for more discrete
audiences, such as ethnic, social, religious, and political
groups.  The funding lapsed until January 1993, when the DCCA
required 1% of Oceanic's gross cable revenues (as part of its
franchise fee) to go to HPBA.  The rationale for such a decision
was (1) that HPBA was a major resource to the State and that
without equipment resources it would not be able to continue
broadcasting; and (2) HPBA managed the Hawaii Interactive
Television System (HITS), which is an integral part of the state-
wide cable communications network.  HITS is a closed circuit
microwave television facility with two-way video and audio that
can be picked up by all cable companies.  HITS is the source for
TEC (The Education Channel) programming in Honolulu, and is also
one of the sources for educational programming in the other
counties.  The HITS microwave distribution system allows
programming to be delivered to cable subscribers statewide,
including emergency broadcasting information.

     The DCCA approved three franchise transfers in 1995.  Sun
Cablevision, Kamehameha Cablevision Cable Systems, and Hawaiian
Cablevision, were transferred to Time Warner, despite, in
Hawaiian's case, opposition by Akak-u.  These transfers included
provisions that the franchise fee also include a one percent
transfer to the HPBA.(10) 

     However, as of January 1995, HPBA no longer administers
HITS, which has been transferred to the University of Hawai'i.(11)
Thus the propriety of continuing to fund HPBA should again be
examined by the DCCA, as the funding acts as a barrier to
increased funding for public access.  This is an issue of great
importance to the access organizations, as it appears that the
maximum operational funding that can be required from the cable
companies is five percent of gross revenues.  With three percent
(in most areas) of revenues already going to access, one percent
going to the DCCA, and another one percent going to HPBA, there
is no room for growth in the allocations for the access
organizations.  This may be less of a problem in Honolulu, as the
subscriber base is very large, so that three percent constitutes
a seven-figure sum.  However, one of the neighbor island access
organizations noted that they have a far smaller subscriber base,
and hence a much smaller budget.  This organization fears that
the diversion of funds will prevent it from meeting the demand
for public access services in its county.

     If the State finds that HPBA still needs the funds and that
another source is available, the State may choose to continue to
dedicate these funds to HPBA.  However, the State should weigh
this concern against the potential deprivation to the access
organizations.  The State has warned the access organizations
that "funding for PEG access via cable companies' contributions
should not be viewed as permanent" and encourages access
organizations to seek other funding strategies.(12)  However, the
feasibility of the access organizations to raise significant sums
has not been determined.


    Interconnections between the State, the Cable Companies,
                  and the Access Organizations

     The connection between the State and the cable companies is
statutory and contractual:  chapter 440G, Hawaii Revised
Statutes, requires the cable companies to provide PEG access, and
the franchise agreements between the State and the companies
provide that, in exchange for the grant of the franchise, the
cable companies will provide a minimum of three access channels
and pay the franchise fee and make capital contributions for the
access programming.

     The connection between the State and the access
organizations is contractual.  After each access organization was
created, it entered into a contract with the State to:

     (1)  Manage the PEG channels;

     (2)  Provide facilities and equipment for the production of
          PEG programming;

     (3)  Train governmental, educational, and community
          organizations and the general public to use the
          facilities and equipment;

     (4)  Market and promote the organization and the channels;
          and

     (5)  Provide support services to the users of the channel(13)
          in exchange for the access fees and equipment and
          facilities funds paid by the cable companies in the
          respective counties (the "access fees" are apparently
          the access organizations' share of the franchise fees).

The State's part of the connection is its ability to appoint a
majority of all board members by the Director of DCCA.

     The relationship between the cable companies and the access
organizations is less formal.  The only reason for the access
organizations to exist is to fulfill the cable companies' PEG
requirements, yet the access organizations do not, with one
important exception, have a direct interconnection with the cable
companies.  The moneys collected by the cable companies are
transmitted to 'Olelo, which, upon approval by the DCCA of the
access organization's budget, disburses a certain percentage of
those funds to the access organization.  The only direct contact
the entities have is the ability of almost all the cable
companies(14) to appoint a specified number of members, depending
on the organization, to the access organization's board:

     H-o'ike: out of 11 members, 2 are appointed by Garden Isle
             Cable and 2 appointed by Kaua'i CableVision.(15) 

     'Olelo: out of 9 members, 3 are appointed by Oceanic.(16) 

     Akak-u:  out of 11 directors, 2 appointed by Chronicle
             Cablevision and 1 by Hawaiian Cablevision, Inc.(17) 

     Na Leo: out of 11, 2 appointed by Jones Spacelink and 2
             appointed by Sun Cablevision.(18) 

The propriety of having cable companies appoint board members of
the access organizations will be discussed in detail in chapter 8.



Other Issues

     One issue that reached national prominence as this report
was finalized was a First Amendment challenge to the federal law
that encourages access organizations (and other cable operators)
to restrict indecent programming.(19)  To date, indecent
programming does not appear to be an issue in Hawaii.