Time to Curb Broadcasters’ Market Power

By Zack Christenson, American Consumer Institute -- Multichannel News, 1/9/2012 12:01:00 AM

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introduced into both the House and Senate that would reform the television industry, doing away with what many say are outdated and onerous regulations that are hampering innovation and fair competition between multichannel video programming distributors (MVPDs) and broadcasters.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where we’re bombarded with information from a variety of media, many feel that the rules governing video services are outdated and unnecessary.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.

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