Today’s FCC leadership has a penchant for adopting massive regulatory schemes to solve trivial or hypothetical problems. Time and again it abjures well-functioning, if imperfect, markets, opting instead to put a government thumb on the scale in favor of its preferred outcome — whether supported by economic logic or not.
In a typical example, the FCC is in the midst of constructing a massive new regulatory regime to dictate “open standards” for all your existing video options – pay TV bundles, Netflix plans, even YouTube – in an effort, the Commission says, to create more “competition.”
Readers will be forgiven for wondering why we need a new regulatory mandate for the video market. From cable to Netflix to Roku boxes to Apple TV to Amazon FireStick, we have more ways to find and watch TV than ever — and we can do so in our living rooms, on our phones and tablets, and on seat-back screens at 30,000 feet.
Oddly enough, FCC Chairman Tom Wheeler, who proposed the new rules this week, agrees: “American consumers enjoy unprecedented choice in how they view entertainment, news and sports programming. You can pretty much watch what you want, where you want, when you want.”
So what’s the problem?
It turns out that Wheeler’s beef is over one small sliver of the ecosystem that brings us this programming bonanza: Set-top boxes. Wheeler thinks prices will come down and choice will increase if existing TV providers are required by law to share their programming (for which they have negotiated and paid dearly) with competitors under “open standards.” This forced interoperability, the argument goes, will make it easier for rivals to sell TV interface boxes in competition with the ones already on the market from TiVo, Roku, and your existing TV provider.
Oh, and here’s the best part: “[M]y proposal will pave the way for a competitive marketplace for alternate navigation devices, and could even end the need for multiple remote controls.” (Emphasis mine). We’re really going to upend the entire video market in order, essentially, to make it less likely that consumers will lose their remotes in the sofa cushions? That’s appalling.
Never mind that Wheeler’s dream of a one remote world already exists. Media gateways and universal remotes that solve this unified device and “too many remotes” quandary are in the market already, and more options are clearly on their way.
Indeed, without Wheeler’s proposed mandate, competitors such as Apple, Amazon, Roku, and literally dozens more have managed to build thriving video businesses by simply negotiating for programming rights directly. TiVo already sells boxes that compete directly with the ones offered by cable, telcos and satellite TV. And a flood of new “boxless” digital apps is reshaping the market even more radically, letting viewers subscribe to channels like HBO and Showtime, or buy live games from the NHL or MLB, without any package TV subscription or set top box at all.
If the companies lobbying for this rule want to break into this market, they can — all they have to do is negotiate and pay for programming rights just as others have. There’s no need for an FCC handout to create competition in a market already overflowing with it.
But what about the “whopping” (Wheeler’s word) cost of set top boxes to consumers?
The reality is that overall prices for video have fallen precipitously under the existing rules. According to the FCC, even including box fees, per-channel cable prices have fallen by 2 percent since 1994, while overall consumer prices have increased by 56 percent — a massive inflation-adjusted price decrease.
When Wheeler and others cite contrary numbers they are (disingenuously) comparing 1990s apples (low-resolution cable with 55 channels of programming) with today’s supercharged oranges (440 channels of high-def TV, on-demand programming, cloud-based DVRs and more).
Meanwhile, the quality and quantity of programming has skyrocketed – as anyone who has tried to keep up with the backlog on their DVR well knows.
And far from monopolizing the market, pay TV companies continue to lose subscribers. If these firms constitute a set-top box cartel gouging an unwitting public, they are the most bungling monopolists in the history of the world.
In sum, the declaration that the only thing standing between consumers and video nirvana is set-top boxes and a second remote is utterly mystifying. We’d be a lot better off if the agency just bought every household a universal remote and left the video programmers, service providers and device makers alone to continue doing what they’re doing.
Manne is executive director of the International Center for Law & Economics in Portland, Oregon.