Media Deconsolidation

Adam and I recently published a Mercatus research paper titled Video Marketplace Regulation: A Primer on the History of Television Regulation And Current Legislative Proposals, now available on SSRN. I presented the paper at a Silicon Flatirons academic conference last week.

We wrote the paper for a policy audience and students who want succinct information and history about the complex world of television regulation. Television programming is delivered to consumers in several ways, including via cable, satellite, broadcast, IPTV (like Verizon FiOS), and, increasingly, over-the-top broadband services (like Netflix and Amazon Instant Video). Despite their obvious similarities–transmitting movies and shows to a screen–each distribution platform is regulated differently.

The television industry is in the news frequently because of problems exacerbated by the disparate regulatory treatment. The Time Warner Cable-CBS dispute last fall (and TWC’s ensuing loss of customers), the Aereo lawsuit, and the Comcast-TWC proposed merger were each caused at least indirectly by some of the ill-conceived and antiquated TV regulations we describe. Further, TV regulation is a “thicket of regulations,” as the Copyright Office has said, which benefits industry insiders at the expense of most everyone else.

We contend that overregulation of television resulted primarily because past FCCs, and Congress to a lesser extent, wanted to promote several social objectives through a nationwide system of local broadcasters:

1) Localism
2) Universal Service
3) Free (that is, ad-based) television; and
4) Competition

These objectives can’t be accomplished simultaneously without substantial regulatory mandates. Further, these social goals may even contradict each other in some respects.

For decades, public policies constrained TV competitors to accomplish those goals. We recommend instead a reliance on markets and consumer choice through comprehensive reform of television laws, including repeal of compulsory copyright laws, must-carry, retransmission consent, and media concentration rules.

At the very least, our historical review of TV regulations provides an illustrative case study of how regulations accumulate haphazardly over time, demand additional “correction,” and damage dynamic industries. Congress and the FCC focused on attaining particular competitive outcomes through industrial policy, unfortunately. Our paper provides support for market-based competition and regulations that put consumer choice at the forefront.

Aereo’s antenna system is frequently characterized perjoratively as a Rube Goldberg contraption, including in the Supreme Court oral arguments. Funny enough, Preston Padden, a veteran television executive, has characterized the legal system producing over-the-air broadcast television–Aereo’s chief legal opponents–precisely the same way. It’s also ironic that Aereo is in a fight for its life over alleged copyright violations since communications law diminishes the import of copyright law and makes copyright almost incomprehensible. Larry Downes calls the legal arguments for and against Aereo a “tangled mess.” David Post at the Volokh Conspiracy likewise concluded the situation is “pretty bizarre, when you think about it” after briefly exploring how copyright law interacts with communications law.

I agree, but Post actually understates how distorted the copyright law becomes when TV programs pass through a broadcaster’s towers, as opposed to a cable company’s headend. In particular, a broadcaster, which is mostly a passive transmitter of TV programs, gains more control over the programs than the copyright owners. It’s nearly impossible to separate the communications law distortions from the copyright issues, but the Aereo issue could be solved relatively painlessly by the FCC. It’s unfortunate copyright and television law intertwine like this because a ruling adverse to Aereo could potentially–and unnecessarily–upend copyright law.

This week I’ve seen many commentators, even Supreme Court justices, mischaracterize the state of television law when discussing the Aereo case. This is a very complex area and below is my attempt to lay out some of the deeper legal issues driving trends in the television industry that gave rise to the Aereo dispute. Crucially, the law is even more complex than most people realize, which benefits industry insiders and prevents sensible reforms. Continue reading →

Clearly many groups contend there’s a “crisis” in journalism, even to the extent of advocating government support of news organizations, despite the dangers inherent in the concept of government-funded ideas and their impact on critique and dissent. 

Georgetown is hosting a conference today called “The Crisis In Journalism: What should Government Do,” (at which Adam Thierer is speaking), with the defining question, “How can government entities, particularly the Federal Trade Commission and the Federal Communications Commission, help to form a sustainable 21st century model for journalism in the United States?”

We actually resolved the question of “What Government Should Do,” Continue reading →