|As 2017 Begins, Broadcasters Exploit Outdated Federal Law to Impose Blackouts on Pay TV Consumers|
By Timothy H. Lee
Thursday, January 05 2017
In so many ways, America begins 2017 on a very high note.
Since the election, stock markets have ascended to new record highs. Gallup reports that Americans enter the new year with "higher confidence in the U.S. economy than they have expressed at any other point since 2008," and that U.S. investor optimism "rose further in the fourth quarter to its highest point since January 2007." Rasmussen similarly reports that the number of those who "think that the country is heading in the right direction" has jolted upward since November. The prospect of lower taxes and federal regulatory rollback led The Wall Street Journal to report that, "After years of buybacks and cash-hoarding, U.S. business move to spend on factory and equipment upgrades."
In some corners, however, there is darkness. Or rather, blackouts.
As 2016 became 2017, broadcasters in 25 states spanning the country blacked out local stations for millions of pay TV consumers, even though those same local stations are otherwise free of charge over the air. It was all a negotiating tactic amid ongoing negotiations with pay TV providers across the country. Consequently, in places like Boston, Baltimore, Pittsburgh, Kansas City, New Orleans and Seattle, pay TV viewers suddenly couldn't watch their local stations as usual, including college bowl games or the NFL.
And all occurred due to antiquated federal "must-carry/retransmission consent" laws created for a bygone TV era left behind by technological innovation and market forces.
In 1992, fully a quarter-century ago, Congress determined that the growing prevalence of cable TV required it to step into the market and promote localism. Accordingly, it enacted must-carry/retransmission consent laws to regulate cable system carriage of local broadcast stations, which in subsequent years it extended to satellite and other TV providers. These laws empowered local broadcasters, as opposed to nationwide broadcast networks, to either demand mandatory carriage (i.e., "must-carry") or negotiate for carriage pursuant to retransmission consent regulations, which grant the pay TV provider the right to use a broadcast station's signal for an agreed-upon fee.
Through that regulatory structure, Congress sought to ensure that pay TV subscribers would retain access to local stations, particularly for the emergency information and local news content they could offer. That's why Congress granted retransmission consent rights to local broadcast stations, rather than the networks.
Twenty-five years later, however, the major networks increasingly prevail over their local affiliates' retransmission negotiations and demand a larger share of those stations' retransmission consent fees. In turn, that has resulted in more and more blackouts for consumers each year as broadcasters exploit the law as a negotiating lever.
Additionally, an increasing number of local stations progressively reduce the amount of local news and community programming, which was what Congressional retransmission consent laws were enacted to protect in the first place.
To be sure, no reasonable person objects to broadcasters' right to secure payment for their copyrighted content. They deserve and receive compensation for their intellectual property carried by pay TV providers. Broadcasters also earn money from national advertising during the programs that they distribute.
But the problem is that existing rules created for a bygone TV era are no longer fair or efficient, and American consumers ultimately pay the price.
Over the past 25 years, an incredible degree of innovation in how consumers receive broadcast programming has occurred, from the Internet to digital transmission. In 1992, most Americans possessed just one pay TV provider option, but today they enjoy everything from cable to satellite to telco video, not to mention a blossoming number of online video distribution options. Among other problems, that allows broadcasters to increasingly make their shows available for free online, even as the outdated federal laws require pay TV providers to carry the same programming and pay high sums for it.
That has tilted the playing field, and consumers ultimately suffer when broadcasters exploit the advantage that antiquated laws provide by using blackouts as a negotiating tactic. Broadcasters maintain a government-created negotiating advantage through the retransmission consent rules, and are guaranteed a place on pay TV providers' basic service.
But Congress can alleviate this growing problem and bring broadcast laws into the 21st century. Namely, it can make the TV marketplace more free by repealing must-carry and retransmission consent, thereby allowing the involved parties to mutually bargain for carriage of broadcast stations on a more fair footing, just as they already allow in negotiations for carriage of non-broadcast channels.
The ever-evolving TV market shouldn't continue to suffer under federal laws dating back a quarter of a century, and American consumers shouldn't continue to pay the price in the form of blackouts and excessive prices resulting from those laws.
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