In the United States, the Federal Communications Commission (FCC) regulates this area of business and public policy.[1] These rules were upheld in a 5-4 decision by the Supreme Court of the United States in 1997 in the case Turner Broadcasting v. FCC (95-992). The United States was the first country to implement a must-carry scheme.
Although cable TV service providers routinely carried local affiliates of the major broadcast networks, independent stations and affiliates of minor networks were sometimes not carried, on the premise it would allow cable providers to instead carry non-local programming which they felt would attract more customers to their service.
Many cable operators were also equity owners in these cable channels, especially TCI, then the nation's largest multiple system operator (MSO), and had moved to replace local channels with equity-owned programming (at the time, TCI held a large stake in Discovery Communications). This pressure was especially strong on cable systems with limited bandwidth for channels.
The smaller local broadcasters argued that by hampering their access to this increasing segment of the local television audience, this posed a threat to the viability of free-to-view broadcast television, which they argued was a worthy public good.
Local broadcast stations also argued cable systems were attempting to serve as a "gatekeeper" in competing unfairly for advertising revenue. Some affiliates of major networks also feared that non-local affiliates might negotiate to provide television programming to local cable services to expand their advertising market, taking away this audience from local stations, with similar negative impact on free broadcast television.
Although cable providers argued that such regulation would impose an undue burden on their flexibility in selecting which services would be most appealing to their customers, the current "must-carry" rules were enacted by the U.S. Congress in 1992 (via the Cable Television Protection and Competition Act), and the U.S. Supreme Court upheld the rules in rejecting the arguments of the cable industry and programmers in the majority decision authored by Justice Anthony Kennedy. That decision also held that MSOs were functioning as a vertically integrated monopoly.
A side effect of the must-carry rules is that broadcast networks cannot charge the cable TV companies license fees for the program content retransmitted on the cable network, except potentially as a part of retransmission consent agreements in lieu of must-carry.