News

Time to Curb Broadcasters’ Market Power

1/09/2012 12:01 AM Eastern

Late last month, legislation was introduced
into both the House and Senate that would reform
the television industry, doing away with what many say are
outdated and onerous regulations that are hampering innovation
and fair competition between multichannel video
programming distributors (MVPDs) and broadcasters.

The Next-Generation Television Marketplace Act would
repeal the retransmission-consent rules that
allowed broadcasters to have the upper hand
in negotiations for carriage with distributors.
It would also do away with government limits
on media ownership and the one-size-fits-all
compulsory copyright license.

Current law requires MVPDs to carry broadcast
channels (think ABC, NBC, Fox and CBS)
free of charge. This is known as must-carry.

Must-carry was enacted by Congress in 1992,
with the idea that broadcast channels are of vital
importance to consumers and citizens. This is a
different scenario than with cable channels that
negotiate with MVPDs in an open market, free of
rules imposed by the government.

Giving preference to over-the-air TV stations might have,
at one time, made sense. In an earlier era, broadcasters were
vital in getting news and information to the populace.

Where it gets unfair is a rule enacted in 1994 known as retransmission
consent. This rule says that broadcasters with
valuable programming— maybe the rights to the World Series
or the Super Bowl — can opt out of the must-carry rules
described above and force the MVPDs to pay to carry their
channels.

One American Consumer Institute analysis found that
broadcasters have used this market power to their advantage
— and, as a result, programming costs have risen three
times faster than other cable costs. Distributors have lost
on the deal, and so have consumers, who must pay muchhigher
cable bills.

Last but not least, the act would do away with the compulsory
copyright system, in which government sets the royalties
MVPDs pay to broadcasters for their content. Instead,
these royalties would be negotiated in a free market based
on the value of the content being offered.

In an age where we’re bombarded with information
from a variety of media, many feel
that the rules governing video services are
outdated and unnecessary. Most people don’t
get their news and vital information from the
broadcast networks today. One study from Pew
shows that nearly all news sources have stalled
in growth, except for one sector — the Internet
and mobile devices. When nearly 80% of the
population has access to the Internet, a law that
supposes most get their information from the
evening news broadcast seems silly and quaint.

The bill introduced in the House and Senate
would recognize the competitive marketplace
by solving the problems of retransmission and
must-carry, allowing the free market to determine licensing
agreements between MVPDs and broadcasters. It puts
all operators on even footing and takes government out of
the equation.


Zack Christenson blogs for the American Consumer
Institute, a nonprofit educational and research organization.
September