The laws and regulations that govern the video marketplace, and in particular the relationship between broadcasters and pay-TV providers, are in a sorry state. They weren’t planned by anyone. Instead, they’ve accumulated over the decades, as policymakers’ objectives changed over time (in sometimes inconsistent ways). To make out any rhyme or reason to the regulatory scheme that is in place today, you have to be as much of a historian as a lawyer.
Unsurprisingly, a dysfunctional regulatory system results in a dysfunctional marketplace. The “retransmission consent” rules, which control how pay-TV providers carry broadcast signals, have become the leading example of what’s wrong with the current system. They were enacted in 1992, when the video marketplace was different than today’s—and in the past 22 years, broadcasters have figured out ways to exploit them in ways Congress never intended.
However, the retransmission consent rules are only one piece of the puzzle. That’s why members of Congress of diverse political backgrounds—Sens. Rockefeller (D-W.Va.) and McCain (R-Ariz.), then-Sen. DeMint (R-S.C.), and Reps. Scalise (R-la.) and Eshoo (D-Calif.), have all come forward with bills to reform the video marketplace. To be sure, different members disagree on many of the details. The problem is complicated. But video reform is not about giving cable providers, or any other industry segment, special treatment. Some of the bills, such as Rockefeller’s, have the express goal of increasing pay TV competition from online providers, which is not something on the cable industry’s wish list. Rather, the video reform effort is about making sure that the system we have serves the needs of viewers by giving them more control over what they watch and how they pay for it.
It can be hard to keep track of the various proposals, as well as the various policies (distant signal importation, sports blackout, syndicated exclusivity, compulsory copyright licenses, program access, and program carriage, to name a few) they would change. So it helps to focus on one, called “basic tier buy-through,” that many members of Congress, as well as the cable industry and consumer groups like mine, agree should be eliminated. Under this policy, which is rooted in both statute and FCC regulation, all pay-TV customers are required to buy cable packages that include a complete broadcast lineup. This policy has a number of negative effects:
- Forget about whether cable wants to offer an à la carte option to subscribers. When it comes to broadcast content, à la carte is illegal.
- In negotiations with broadcasters, a cable system can’t agree to pay the carriage fee that the broadcaster demands—but only for viewers who willingly sign up for that station. This eliminates a bargaining chip that cable would otherwise have, and tilts the negotiation in favor of the broadcast side.
- Guaranteed carriage by cable systems—a privilege which cable networks like Discovery, the Food Network, or Bloomberg News don’t enjoy—creates an incentive for broadcasters to stay on the air, without giving them any reason to make sure they provide compelling programming. These perverse incentives reduce the likelihood that a broadcaster would voluntarily participate in the upcoming incentive auction, which has the aim of freeing up spectrum for wireless broadband.
To be clear, the buy-through rules have nothing to do with the must-carry rules that benefit public, non-commercial, low-power, and minority-interest stations. Those continue to serve a valuable purpose. The buy-through rules primarily benefit large, commercial, network-affiliated stations that have no need of a helping hand.
If these rules were phased out, viewers who opted out of paying for supposedly “free” broadcast programming would not have to fumble around with rabbit ears or a rooftop antenna, or switch their TVs between different “modes.” It would make sense for pay TV companies and third-party manufacturers to provide consumers with set-top boxes that seamlessly integrated over-the-air signals with other content in a seamless user interface. Needless to say, these devices don’t exist today, because of the restrictive rules that makes the market for them illegal.
On many issues relating to video reform, I have differences of opinion with my pay-TV counterparts. Nevertheless, when it comes to the rules that control the broadcaster/pay-TV relationship, they have a point. The existing rules are slanted too far in favor of broadcasters. Congress should fix this, not to benefit any one industry, but to help viewers.
Bergmayer is a senior staff attorney at Public Knowledge, specializing in telecommunications, Internet, and intellectual property issues.