New legislation aims to increase competition and lower consumer prices

{mosads}As a refresher, currently MVPDs are required under law to carry broadcast channels (think ABC, NBC, Fox and CBS) free-of-charge, meaning the broadcast channels don’t have to pay the cable operators a fee for them to carry their programming. So, they’re able to have their product delivered without any compensation to the cable operators. This is known as must-carry. This was a law enacted by Congress in 1992, under the idea that broadcast channels are of vital importance to consumers and citizens.  This is a different scenario than with cable channels (MTV, ESPN and the Food Network) that negotiate with MVPDs (think Comcast, Time Warner, etc.) in an open market, free of rules and regulations imposed by the government. This puts the channels and the cable operators on an even negotiating ground.

Giving preference to the broadcast channels might have, at one time, made sense. In an earlier era, broadcast channels were of a vital importance for getting out news and information.

Where it gets unfair, in some people’s opinion, is a rule enacted in 1994 known as retransmission consent. This rule says that broadcasters can opt-out of the must carry rules described above.  This might happen in a scenario where a broadcast channel has something extremely valuable, maybe the rights to the World Series or the Super Bowl.

In this case, the broadcasters can then force the MVPDs to pay to carry their channels. This puts cable operators at an extreme disadvantage, giving them nearly zero negotiating power.  One ACI analysis found that broadcasters have used this market power to their advantage — increasing programming costs three times faster than other cable prices.  While distributors have lost on the deal, so have consumers by paying much higher cable TV prices. This legislation will mean lower prices for consumers.

Other video regulations are also badly in need of an update. Currently, government places limits on how many broadcast stations a single entity can own in a given market, and bans a broadcaster from owning a newspaper in the same market, harkening back to a time when newspapers and three broadcast stations were consumers’ exclusive source of news.

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 a lot of interesting statistics about where people get their information.  Nearly all news sources 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 seems silly and quaint.

Senator DeMint, the sponsor of the Senate version, says in a press release:

“The laws and rules governing video services were largely written decades ago, and do not reflect the tremendous technological advancements, dramatic growth of competition, and rapidly changing consumer behavior of the 21st Century.  If we want to encourage innovation, job creation, and consumer benefits, we need to stop issuing new regulations and instead remove and modernize rules written to address the last century’s business and regulatory models.”

The bills introduced into the House and Senate would recognize the competitive marketplace by solving the problems of retransmission and must carry, deregulating outdated media ownership restrictions, and allow 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, and it should lead to lower consumer prices.  This would go a long way in creating a fair and more open system, which is in the best interest of consumers.

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


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