With the country atwitter about tax cuts, there are dozens of important issues that are firmly placed on the backburner of Washington’s agenda. As a result, many important issues are getting short shrift in the current debate. Here’s one I bet you’ve never heard of: retransmission consent. Here’s the Cliff’s Notes version: broadcasters (think ABC, for example) are charging ever-higher amounts to cable companies/other television service providers (think Comcast or DirecTV) to carry their content to consumers, leading to higher costs or blacked-out content. So, what’s the limited-government, free-market response to this? As with everything in Washington, it’s complicated…
When a broadcaster creates content (say, a television show like American Idol), they then negotiate with cable and satellite television providers in order to allow them to carry the content to your TV screen (i.e. Comcast paying the Philadelphia Fox affiliate for the right to carry American Idol and the other content they create). With increasing frequency, broadcasters are demanding huge fees in order to allow their content to be shown on certain systems. That can lead to higher costs for consumers or, in the worst case scenario, black outs of programming if they cannot come to agreement. The most famous recent example is when 3 million New Yorkers were unable to watch the beginning of the Oscars because the local ABC affiliate and Cablevision couldn’t agree on fees to retransmit the program.
So, what’s the problem, you say? Why should anyone care about negotiations between two private businesses? After all, if the providers aren’t willing to pony up to broadcasters in order to secure retransmission rights for their content, then so be it. Well, as with everything else in Washington, it’s a bit more complicated than that.
For example, broadcasters are allowed to choose a “must carry” designation, which forces television providers to carry their content and are also able to dictate on what specific channel their programming appears. Also, providers are limited to negotiating with one local affiliate, meaning that RCN Cable in the Washington, DC metro area may only negotiate with, say, CBS’ affiliate in Washington, DC. If they can’t come to an agreement with the DC affiliate, they’re not allowed to go to a Baltimore affiliate and try to purchase the content from them at a potentially lower cost.
This can all be traced back to 1992 when the retransmission consent rules were last rewritten. The marketplace looked very different back then, as most consumers had only one choice for cable television service. Congress structured the rules in favor of broadcasters because they were viewed to have less negotiating power in the face of monopoly cable providers of the early 1990s.
Nowadays, people can often choose between three or four providers, from cable to satellite to new fiber optic networks. That means that broadcasters have much more negotiating power than they once did, which is reflected in the prices they’re charging for their content.
The cable companies and other providers have put together what they call the American Television Alliance, a group which is dedicated to reforming retransmission consent laws. Some of their recommendations are common sense, but they’re also reflective of the core problem that we face here: too much government involvement in the first place, given how vibrant and competitive this market is. That’s why the ideal answer is not to simply rebalance the scale so that government grants equal benefits to broadcasters and providers. The best answer is to overhaul our telecom law in a way that reflects the realities of the modern, competitive marketplace.
This applies to far more than just retransmission consent, of course. A comprehensive free-market overhaul would allow us to get government bureaucrats out of the way on a number of other issues, like network neutrality, where there are attempts to force regulation of the internet under outdated and burdensome Depression-era monopoly telephone provider laws. There are also lingering issues Universal Service Fund abuse, e-911 taxes on wireless service, and ongoing battles regarding spectrum allocation that could and should be dealt with in a much more intelligent and modern fashion.
The way that Congress works, this stuff never gets dealt with until a crisis has arrived, but we can all hope that won’t be the case this time around. Otherwise, you may only see the evidence when the Super Bowl gets blacked out because your affiliate and cable company couldn’t come to an agreement. Then, you'll inevitably get a bunch of angry consumers yelling "There oughta be a law!"