CBS and Time Warner Cable have been embroiled in a heated contractual battle over the past week that has resulted in viewers in some major markets losing access to CBS programming. When disputes like these go nuclear and signal blackouts occur, it is inevitable that some folks will call for policy interventions since nobody likes it when the content they love goes dark.

While some policy responses are warranted in this matter, policymakers should proceed with caution. Heated contractual negotiations are a normal part of any capitalist marketplace. We shouldn’t expect lawmakers to intervene to speed up negotiations or set content prices because that would disrupt the normal allocation of programming by placing a regulatory thumb too heavily on one side of the scale. This is why I am somewhat sympathetic to CBS in this fight. In an age when content creators struggle to protect their copyrighted content and get compensation for it, the last thing we need is government intervention that undermines the few distribution schemes that actually work well.

On the other hand, Time Warner Cable deserves sympathy here, too, since CBS currently enjoys some preexisting regulatory benefits. As I noted in this 2012 Forbes oped, “Toward a True Free Market in Television Programming,” many layers of red tape still encumber America’s video marketplace and prevent a truly free market in video programming from developing. The battle here revolves around the “retransmission consent” rules that were put in place as part of the Cable Act of 1992 and govern how video distributors carry signals from TV broadcasters, which includes CBS.

But those “retrans” rules are not the only part of the regulatory mess here. There are many related federal rules that tip the scales toward broadcasters and content creators, such as the requirement that video distributors carry broadcast signals even if they don’t want to (“must carry”); rules that prohibit distributors from striking deals with broadcasters outside their local communities (“network non-duplication” and “syndicated exclusivity” rules); regs specifying where broadcast channels appear on the cable channel lineup; and prohibitions against carrying sporting events on cable when the local stadium doesn’t sell all its seats on game day (“sports blackout rule”).

As they say on TV.. ” But Wait, There’s More!” Working in the favor of video distributors are the compulsory licensing requirements of the Copyright Act of 1976, which essentially forced a “duty to deal” upon broadcasters. Broadcasters have to let cable operators and other video distributors retransmit local stations, though the system at least ensures they get compensated for it. As I noted in my old Forbes essay, along with must carry rules, “Compulsory licensing is the original sin of video marketplace regulation. We could have avoided most of the regulatory mess of the past quarter century if Congress had simply left these rights and contractual negotiations alone. Once Congress forced broadcasters to share their programming, however, marketplace manipulation was off and rolling.”

Of course, the more primal and problematic intervention came decades before in the 1920s and ’30s when the government decided to nationalize spectrum management. Once mandates instead of markets where chosen as the primary allocation agent, America was off and running with a grand experiment in spectrum central planning. We’re still living with the results today. The very fact that spectrum is licensed and can only be used and sold for very narrow purposes as detailed in meticulous FCC regulations is a sign of just how far-removed we are from a pure free market here.

The question now is, what are we going to do about this fine mess? And is there any chance we can get it done?

The problem in this debate is that there are multiple layers of interventions that have built up over the years and created constituencies that are wedded to their preservation. Broadcasters, networks, independent content creators, big cable companies, small cable companies, satellite companies, sports leagues, and viewing consumers themselves — they all have conflicting interests and a stake in how this debate turns out. In his 2012 Mercatus Center working paper, “Consumer Welfare and TV Program Regulation,” media economist Bruce M. Owen noted that “What distinguishes TV programs from other mass media content, including both traditional print and new online media, is the extreme eagerness of Washington to engage in efforts to prevent markets from working freely, often in response to interest group pressures and opportunities for political advantage and with almost complete indifference to the welfare of consumers.”

As a result, if you talk to almost anyone involved in this debate, they will all insist that only their very specific reforms are the ones that can or should be implemented. Consequently, comprehensive reform will be challenging precisely because of all the conflicting interests and layers of law and regulation that must be eradicated.

But at least there is a blueprint for how to get the job done right. Many times here before I have written about “The Next Generation Television Marketplace Act,” which was floated last session by Rep. Steve Scalise (R-LA) and then-Senator Jim DeMint (R-SC). It proposed wiping off the books all the archaic rules outlined above. Alas, the bill never went anywhere in the last Congress and now that Sen. DeMint has left to lead the Heritage Foundation, there is no supporter in the Senate this session. Instead, we have some lawmakers floating bad ideas like S.912, the “Television Consumer Freedom Act of 2013,” which just proposes more regulatory gaming of an already over-gamed system.

We instead need policy reforms like the old DeMint-Scalise bill that clean up the regulatory mess of the past. But there just isn’t much appetite for such a house-cleaning. Most parties affected by these rules want very specific outcomes and deregulation won’t give them any such guarantees. After all, there will still be blackouts after deregulation. And the cost of some content may continue to go up in response to demand. And there will still be fights over sports programming. And there’s no certainty that all local broadcasters or small video distributors will survive. And so on, and so on.

But it is also true that a deregulatory environment is more likely to lead to even more experimentation and innovation with new business models, technologies, and methods of content creation and delivery. We already see much innovation in this marketplace despite all the red tape that exists. Just look at what’s been going on recent years with alternative video delivery platforms, including: Netflix, Hulu, XBox Live, Vudu, Roku, Redbox, Boxee, Amazon, Apple TV, Aereo, Google Chromecast, and so on. And don’t forget the strides that the old broadcast and cable giants have made here, too. CBS is actually a pretty good model for how content can be re-purposed online in creative ways on a firm’s own digital platform. Likewise, cable companies like Time Warner Cable are slowly but surely adapting to consumers’ demand for video to be delivered to multiple devices.

Of course, there there will always be hiccups along the road to video nirvana. Some regulatory activists seemingly expect that all content can be delivered effortless and cheaply to consumers without giving a thought in the world to just how complicated it is to get that content financed and distributed in the first place. Great content and great delivery platforms don’t just happen by magic or the good intentions of activists or policymakers. Those platforms happen because new markets and monetization mechanisms develop to facilitate them. If we cut back the regulatory deadwood in our modern information marketplace, we’d likely get even more experimentation and innovation that would likely produce all new ways of financing, creating, and delivering content to consumers. But we’ll never know unless we are willing to embrace change and kill all those old regulatory weeds that continue to grow in our information garden.

Alas, if Congress can’t muster the courage to do that, then lawmakers ought to at least consider asking the broadcasters to return all that juicy spectrum they are sitting on. After all, the current retrans racket gives the broadcasters an increasingly lucrative revenue stream when they deliver content on cable and satellite systems (in addition to the advertising revenues they already receive). No good reason exists to give them preferential treatment relative to any other cable channel out there today. Don’t forget, there are all sorts of garden-variety cable carriage disputes that happen outside the regulated retrans system today. (Remember last year’s big spats between AMC vs. Dish and Viacom vs. DirecTV?) There are no special rules that either side can rely on in those instances. So why should special rules be applied to other content companies simply because some of their properties are broadcast channels? Answer: they shouldn’t.

But if no other reforms occur and if companies like CBS still want to be more like a cable mega-channel — albeit, a very handsomely compensated cable channel — then by all means go for it. In the meantime, however, they can return all that spectrum for re-auction for some better purpose. In fact, back early 2009, CBS Corp. President and CEO Les Moonves told an investor conference that moving all CBS network programming to cable and satellite platforms would be “a very interesting proposition.” I agree! But, absent other reforms, it might be time to make that “interesting proposition” a mandatory one.

Writing over at the conservative Big Government blog (part of the Breitbart.com network of blogs), someone who goes by the pseudonym “Capitol Connection” has posted an editorial about the debate over retransmission consent reform that is full of misinformation and misguided policy prescriptions, at least if you believe is truly limited government. The piece is entitled, “Big Cable Would Prefer if You Paid Their Bills,” and the problems are almost immediately evident from that headline alone.  First, what is a supposedly small government-oriented blog doing using a silly label like “Big Cable” to describe a vigorously competitive sector of our capitalist economy? Using terms like “Big Cable” is a silly lefty tactic. Second, no one in the cable industry is proposing anyone “pay their bills” except for the customers who enjoy their services. Isn’t a fee for service part of capitalism?

Anyway, that’s just the problem with the title of the essay. Sadly, the rest of the piece is filled with even more erroneous information and arguments about the retransmission consent regulatory process as well as the bill that aims to reform that process, “The Next Generation Television Marketplace Act” (H.R. 3675 and S. 2008). That bill, which is sponsored by Senator Jim DeMint (R-SC) and Rep. Steve Scalise (R-LA), represents a comprehensive attempt to deregulate America’s heavily regulated video marketplace. In a recent Forbes oped, I argued that the DeMint-Scalise effort would take us “Toward a True Free Market in Television Programming” by eliminating a litany of archaic media regulations that should have never been on the books to begin with. The measure would:

• eliminate: “retransmission consent” regulations (rules governing contractual negotiations for content);
• end “must carry” mandates (the requirement that video distributors carry broadcast signals even if they don’t want to);
• repeal “network non-duplication” and “syndicated exclusivity” regulations (rules that prohibit distributors from striking deals with broadcasters outside their local communities);
• end various media ownership regulations; and
• end the compulsory licensing requirements of the Copyright Act of 1976, which essentially forced a “duty to deal” upon content owners to the benefit of video distributors.

This represents genuine and much-needed deregulation of a market that has been encumbered with far too much top-down control and micro-management by the FCC over the past several decades. To be clear, none of these rules apply to any other segment of our modern information economy. Every day of the week, deals are cut between content creators and distributors in many other segments of the media industry without these rules encumbering the process. The DeMint-Scalise bill is an attempt to get big government out of the way and let these deals be cut in a truly free market without regulators putting their thumb on the scale in one direction or the other.

Thus, it came as a bit of a shock to me to see a blog that rails against and is self-titled Big Government suggesting that we should retain a form of big government regulation! Indeed, the author gets the intent of the DeMint-Scalise bill exactly backward. The author says the The Next Generation Television Marketplace Act:

would strip broadcasters of their ability to negotiate in the free marketplace. Some cable operators, it turns out, would love to provide Americans with the quality content American broadcast companies churn out. They just don’t happen to want to pay for it.

The author of the piece also says that cable industry representatives:

are lobbying in Washington for key provisions in legislation that would that would allow the Federal government to intervene in what is otherwise a sound, private sector marketplace that benefits consumers each and every day. And they’re doing so under the guise of “deregulation.”

This is all utter poppycock. While I am sure that the cable industry would love to get all that content free of charge, that’s not what the DeMint-Scalise bill would do. It doesn’t end free-market contracting; it bolsters it. Again, the bill would get the government out of the business of setting rules for how these deals get cut and instead allow these big boys to come to the bargaining table and hammer out these deals on their own.  That is called deregulation and true capitalism!

The author of the misguided Big Government editorial seems to be resting their case on a letter that the American Conservative Union (ACU) sent to members of Congress in late March. I addressed the claims found in that letter in this essay and pointed out that ACU had almost everything exactly backward. Both the ACU letter and the Big Government essay just keep erroneously assuming that the end of the regulatory retrans process means that “broadcasters [will] be forced to simply give away their signals and content.” Again, nothing could be further from the truth. As I noted in my response to the ACU letter:

nothing in this bill forces content creators or broadcasters to deal their content to other distributors. And nothing in the bill gives those other video distributors the right to freely distribute content without the permission of its owners. In sum, the bill does not repeal copyright law — it only repeals the compulsory licensing rules that force content owners to deal their programming against their consent on government regulated terms.  That means copyright is actually strengthened under this bill and that content owners have more bargaining power than they do today. Thus, the ACU is horribly mistaken in asserting that the DeMint-Scalise bill would “allow an uncompensated use of broadcast signals and content.” The exact opposite is the case.

Finally, if nothing else convinces the folks at the Big Government blog and the ACU of the error in their thinking, consider this: The preservation of the current retransmission consent regime and all its corresponding regulations means the preservation and growth of the Federal Communications Commission as a federal regulatory agency overseeing the information economy. Is that a truly free market-oriented position? Do we need federal bureaucrats overseeing free market contractual negotiations in this or any other sector? Because that’s what the law allows today. By contrast, the DeMint-Scalise bill offers us the chance to finally get real deregulation rolling and get FCC downsizing back on track. You will never get a smaller FCC by advocating the retention of regulation.

Thus, I think it’s pretty clear which approach is the most liberty-enhancing. I hope, therefore, that the ACU and the folks at the Big Government blog will reconsider their position.

It really is amazing how much the audio marketplace has evolved over the past decade. I’ve written about the growing “competition for our ears” here before, but over at the Radio Survivor blog, there’s an outstanding collection of essays about “The Decade’s Most Important Radio Trends” by several long-time industry experts. Dennis Haarsager of National Public Radio has a nice listing of all the entries over on his blog, which I have reproduced down below.

It just blows my mind to think that just 10 years ago I didn’t have satellite radio (now have 3 subscriptions); I didn’t have Pandora (my 8 different personalized channels are playing in the background on my computer non-stop); I had never heard a podcast (and now subscribe to several and have hosted one here on occasion); I didn’t have an MP3 player and had never burned any of my music (now have 3 players and my entire 25-year collection of CDs on all 3 devices); and I had never spent any time listening to music online (and now am quite in love with Lala and LastFM). Meanwhile, I am still listening to the old fashion radio quite a bit, including on a new HD Radio player in my house.  You gotta love choice like that!

Anyway, read these essays for a fuller investigation into the state of the audio marketplace. I don’t agree with everything said in each of the entries but still recommend you check out the entire series:

#1 (Paul Riismandel):  The birth and troubled childhood of satellite radio.

#2 (Jennifer Waits):  The growth of internet radio.

#3 (Waits):  iPod and iTunes lure listeners away from terrestrial radio.

#4 (Riismandel): Podcasting.

#5 (Matthew Lasar):  The age of Pandora.

#6 (Riismandel):  HD Radio launches, but who listens, who cares?

#7 (Lasar):  Internet radio’s Day of Silence.

#8 (Lasar):  The Great Fairness Doctrine Panic.

#9 (Riismandel):  The FCC authorizes Low-Power FM.

#10 (Riismandel):  Clear Channel goes private equity.

#11 (Waits):  Cash-strapped schools turn back on college radio.

#12 (Lasar):  National Public Radio keeps growing.

#13 (Waits):  College radio tightens its playlist.

#14 (Lasar):  Pacifica Radio democratizes itself.

I recently finished reading Free the Market: Why Only Government Can Keep the Marketplace Competitive, a new book by noted antitrust agitator Gary L. Reback. Unsurprisingly, Reback, who led the antitrust jihad against Microsoft during the 1990s, has written a book that reads like an extended love letter to antitrust law. This man loves antitrust the way teenage girls love the Jonas Brothers — gushing, teary-eyed, ‘I-would-just-die-for-you’ sort of love.  In Reback’s world, antitrust seemingly has no costs, no downsides, no trade-offs.  It is our salvation and he serves as its high prophet. Everything good that happened in the world of high-tech over the past few decades?  Oh, you can thank Almighty Antitrust for that.  Anything bad that happened?  Well, then, clearly there just wasn’t enough antitrust enforcement!  That’s this book in a nutshell.

Think I’m kidding?  How about this gem of quote from pg. 247: “Antitrust enforcement spawned Silicon Valley’s software industry as well.”  Wow, who knew!  Of course, that’s utter poppycock and should be somewhat insulting to the many entrepreneurial men and women in the high-tech world who risked everything in an attempt to build a better mousetrap. In Reback’s view of things, however, none of those mousetraps would have ever gotten built without antitrust there to supposedly shelter them from wicked “monopolists” (read: any large company) already operating in the marketplace.   I’m sure many in Silicon Valley will also be surprised to hear Reback’s assertion that, “On closer examination, the Valley looks like one big public welfare project.” (p. 54)  Ah yes, the old myth that government gave us the Net we know and love today. Please. Like many others, Reback spins a revisionist history of how early ARPANET involvement and seed money somehow made the Internet great when, in reality, the Net was stuck in the digital dark ages until it was finally allowed to be commercialized in 1992.

What irks me most about this book, however, is Reback’s perpetuation of the myth that antitrust is somehow not a form of economic regulation.  I hear this tired old argument trotted out time and time again, even by many conservatives. Reback says, for example, that “Antitrust sets the rules of the road, so to speak, but doesn’t tell people where to drive.” By contrast, he argues, “Advocates of regulation want[] continuing government oversight and rule making to produce what would be the beneficial results of a free market… Neither approach works all the time, and decided between them remains difficult.” (p. 19)  Again, this “choice” is largely a fiction since, for many industries, we end up getting both!

But the even bigger fiction here is the suggestion that antitrust law doesn’t “tell people where to drive.”  It most certainly does. Hell, it practically redraws the entire map of where you can drive!  And it massively distorts markets in the process, just as regulation does.  As Wayne Crews noted in the opening lines of  his excellent 2001 Cato Institute white paper,”The Antitrust Terrible 10: Why the Most Reviled “Anti-competitive” Business Practices Can Benefit Consumers in the New Economy“:

Antitrust law is a form of economic regulation.  And like all economic regulation, it transfers wealth, often in response to special-interest urging… [I]n antitrust cases, the targeted companies’ rivals have a direct financial, as opposed to ethical, interest in the outcome. Assertions that antitrust law is in the public interest do not change the fact that the private motives of rivals, and even ambitious enforcers, are always lurking in the background.

Moreover, in his important 2001 study on “The Failure of Structural Remedies in Sherman Act Monopolization Cases,” economist Robert W. Crandall of the Brookings Institution noted:

An antitrust decree may be even counterproductive by establishing an inefficient market structure… A decree may also be ineffective because the government and the court fail to anticipate changes in technology or customer demand. ..

The ongoing costs of enforcing antitrust decrees can be very large. If an industry is changing rapidly, structural remedies may be difficult to enforce…  Most of the antitrust decrees in the leading cases analyzed below continued in effect for many years, even decades. In many cases, these decrees required the continual supervision by the lower court and often led to appeals to the higher courts.

So much for antitrust supposedly not being a form of economic regulation and not having substantial costs. Moreover, after surveying 95 major Section 2 Sherman Act cases won by the government or ending in consent decrees, Crandall concluded that there was “remarkably little evidence that these cases and the relief that emanated from them had a positive effect on competition and consumer welfare.”  Gary Reback is unmoved by such evidence, however. Instead, he just builds his narrative on the old myth of the robber barons that so many antitrust crusaders rely on, and which has long-since been discredited by serious economic historians.

Perhaps worst of all, in Reback’s world, there’s no such thing as too much litigation when it comes to antitrust enforcement:

“Just keep on suing them” is a time-honored American antitrust strategy of choice for dealing with dominant firms that choke vast sectors of the economy. The magnitude of the potential gain to society from opening multiple markets to competition more than offsets the somewhat uncertain likelihood of producing the right results by bold antitrust enforcement. (p. 246)

Again, no mention here of the deadweight loss to society associated with years and years of legal wrangling that accompanies such lawsuits.  Reback just sweeps all that under the rug — and why wouldn’t he as an antitrust lawyer!  But those costs on the economy and innovation are real.  There’s also no serious mention of how antitrust law has all too often been used as weapon by disgruntled marketplace competitors to hobble rivals using such legal tactics.  Reback gives the same lip service to antitrust being about “protecting consumers” as many other defenders do, but all too often his book — like antitrust law itself — sounds more like a defense of certain companies, industry sectors, or old ways of doing business.

Oh, and the earlier antitrust intervention and litigation comes the better!  That’s another favorite of Reback and the antitrust bar. Referring specifically to the Microsoft case, Reback argues that, “government intervention at an early stage of market development was less intrusive and more beneficial than waiting for a bad problem to get worse.”  (p. 185)  Where does one draw the line in terms of how early might be too early to intervene?  Reback never makes it clear because, as with so much else in the world of antitrust, it’s all an arbitrary guessing game.  We’ll let unelected bureaucrats and judges make those judgment calls and engage in a preemptive strike to establish a sensible industrial policy competition policy for high-tech markets.  After all, it’s not like these markets are fast-moving and prone to sudden disruptive change or anything!

Let’s be clear about something here.  What separates Mr. Reback from those of us here who are antitrust skeptics is not the question of whether “market power” sometimes exists within certain industry sectors.  There certainly are times when it does, but we differ over how to best deal with those problems.  To borrow from some remarks I made during a recent debate with Larry Lessig, what separates us is that those of us who are antitrust skeptics believe that market power concerns:

are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting [market] failure comes down to the rapidity and nimbleness of those response(s).

Of course, this assumes we can agree on a definition of “market failure.” What concerns me about the way antitrust proponents come at things is that they are typically far too quick to declare short-term market fluctuations as sky-is-falling market failures.  The end result of such myopic thinking is the inevitable call for governments to intervene and “do something” to correct supposed market failures that will likely adjust in time.  Thus, we antitrust skeptics counsel patience over preemptive strikes.  Again, here’s how I put it in that debate with Prof. Lessig:

Let’s give those other forces — alternative platforms, new innovators, social norms, public pressure, etc. — a chance to work some magic. Evolution happens, if you let it. Moreover, if you are always running around crying “market failure!” and calling in the code cops, it creates perverse marketplace incentives by discouraging efforts to innovate or “route around” bad code or code failure. We don’t want the whole world sitting around waiting for government to regulate the mousetrap to improve it or even give everyone better access to it; we should want the world to be innovating to create better mousetraps! [But] one need not believe that the markets… are “perfectly competitive” to accept that they are “competitive enough” — or at least, better than regulatory alternatives.

I can think of no better example of this than the case of IBM in the 1970s and early 80s.  Back then, IBM was the big, bad dog of the computing world, with significant “market power” in mainframes — the only computers that really counted at the time.  And some folks at the time feared IBM might “leverage” that power into new fields. As a result, the Department of Justice opened an antitrust case against Big Blue in 1969 that would become a 13-year quagmire, with little to show for all the legal wrangling by the time the case was abandoned in 1982.  Here’s how CNet staff writer Rachel Konrad summarized the fiasco back in 2000:

In January 1969, the government began a sweeping antitrust investigation into IBM’s dominance and attempted to break it into smaller companies that would compete against one another. During the six most critical years of the trial, from 1975 to 1980, the parties called 974 witnesses and read 104,400 pages of transcripts, according to Emerson Pugh’s 1995 book “Building IBM: Shaping an Industry and Its Technology.”

The 13-year investigation, which required IBM to retain 200 attorneys at one point, fizzled in the early ’80s as the computing landscape shifted from mainframes to personal computers. The government abandoned the tainted effort entirely in 1982, as clones of the IBM PC eroded Big Blue’s dominance. But the company, still fearful of the watchful eye of the Justice Department, took pains to avoid the appearance of a monopoly long after it relinquished its hold on the market. People who worked for IBM in the ’80s and early ’90s said the company routinely fell victim to “pricing death strategy”–a reluctance to lower prices below cost, even on products that weren’t selling–to avoid what the government would call predatory pricing. By the mid-’80s, the company was in bad shape. The antitrust troubles, combined with ill-timed product failures such as the Future System, pinched revenues. The company began a nearly decade-long financial slide. In retrospect, the antitrust case against IBM seemed laughable.

IBM had become the victim of a classic “disruptive technology” paradigm shift that few could have foreseen in 1969.  As Peter Pitsch noted in his 1996 PFF book The  Innovation Age, “In 1981 the Department of Justice was still pressing their case against IBM while market forces were about to lay waste to the company.” Pitsch continued:

IBM certainly did not expect to see PCs erode the market share and profitability of its venerable mainframe computers, but the fall of the old “big iron” machines was rapid and spectacular. The revenue of IBM’s mainframe unit fell from roughly $9 billion in 1990 to an estimated $4.5 billion in 1994… [T]he parties destined to become players in the PC revolution were unknown when the PC was introduced, and the experts’ predictions of a much-ballyhooed computer face-off between IBM and AT&T never materialized. Innovative companies that did not exist at the beginning of the revolution rose rapidly. Few people had ever heard of a small company named Microsoft. Nor had they heard of Intel, Novell, Compaq, Dell, or Netscape.

Pitsch went on to summarize how IBM’s manufacturing capacity was slashed in the years that followed and also notes that, astonishingly, “ in the space of five years after 1987, IBM lost two thirds of its market value — more than $70 billion.”  In sum, new marketplace innovation and competition handled the short-term market power concern that antitrust regulators had about Big Blue.  Pitsch goes on to explain what the antitrust regulators missed:

A dominant firm can lose its “King of the Hill” status in two ways. First, if it does not continually improve, it will lose market share and profits to low-cost imitators. For example, the ability of low-end PC manufacturers to make IBM clones fostered robust price competition in the PC market. Second, today’s market leaders must worry that some established and well-financed competitor or possibly an upstart produce a technical breakthrough that will displace them. This situation reflects [the] fact that gains from innovation are so powerful and beneficial to consumers that they outweigh the higher prices dominant firms can charge. Indeed, attempts to eliminate these high profits by regulating prices would almost certainly disserve consumers even if the regulations dampened the incentives for innovation only slightly.

What Pitsch is talking about here is dynamic competition, not the static competition, fixed-pie mentality that Gary Reback and so many antitrust defenders espouse.  Those of us who believe in dynamic competition see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, price competition, and so on. But the static competition crowd looks at the same situation outlined above and imagines that the only hope is to wheel in the wrecking ball of antitrust regulation.  Indeed, such dynamic thinking is completely alien — even outlandish — to passionate antitrust supporters like Reback.  Nonetheless, the last 30 or 40 years of economic literature on antitrust — and the work of “Chicago School” economists in particular — has illustrated that antitrust is not the pro-consumer nirvana that Reback makes it out to be.

But Reback considers just about everything the Chicago School taught us to be antitrust apostasy and he would like to erase four decades worth of economic literature and evidence that suggests antitrust law is a form of economic regulation and does have unintended consequences that often hurt consumer welfare.  His fairy tale narrative of antitrust as the savior of capitalism is utter rubbish, and his recommendations to expand antitrust enforcement wouldn’t “Free the Market” as he argues in his book’s shameful title, but would instead wrap it in chains.

In closing, I would just like to encourage everyone to go out right now and read R.W. Grant’s classic story about the madness of antitrust, “Tom Smith and His Incredible Bread Machine.”  Or, if you want a more serious treatment of the issue, then I highly recommend Dominick T. Armentano’s, Antitrust and Monopoly: Anatomy of a Policy Failure.  Oh, and just for kicks, you might want to read this Wall Street Journal story from earlier this week about how antitrust officials are being pressed by dairy farmers to open an antitrust investigation because some of them believe consolidation is responsible for the fact that milk prices have dropped 36% recently, the lowest level in three decades.  Only deep in the story do you read that: “Consumers are benefiting. The federal Bureau of Labor Statistics said in its monthly Consumer Price Index report released Wednesday that retail dairy prices in August were 10.4% lower than they were a year ago.”  Of course, once you realize that antitrust is more about protecting companies than protecting consumers you are not surprised that such information becomes an afterthought.

Much ink is spilled over the expanding array of video marketplace choices that are competing for the attention of our eyeballs, but much less is usually written about the competition for our ears.  As this excellent new Business Week article by Olga Kharif makes clear, competition and innovation in the audio marketplace has never been more vibrant.  It’s something I’ve pointed out here before and here’s a chart I created for my Media Metrics report to highlight all the new competition for our ears.   We’ve come a long way since the days of my youth, when transistor radios and vinyl records were the extent of audio competition!

Speaking of socializing media, acting FCC Chairman Michael Copps is someone who has devoted much of his life to regulating the media marketplace into the ground. If he had his way, federal bureaucrats would be controlling virtually every aspect of the media universe. Nothing would get done with Big Nanny’s permission.

That’s what makes his recent comments about the impact of media regulation so delicious.. and hypocritical.  According to an article  Bloomberg ran on Thursday, Copps is now saying that, with newspapers struggling to remain afloat, the FCC should now reconsider regulations that prohibit combined ownership of broadcast stations and newspapers.  The agency should “visit this whole problem” before long, Copps apparently told Bloomberg.

“Visit this problem before long”??  Please!  Congress and the FCC have had opportunities to “visit” and revisit this problem for many years now, but it has been Michael Copps and his merry band of media reformistas who have stopped every reform effort dead in its tracks.  (See my essays “Congress Fiddles, Newspapers Burn” and “Media Deregulation is Dead” for more evidence of how these radicals hijacked media policy in this country.)  As I documented in my 2005 Media Myths book, these charlatans have used hyperbolic rhetoric, shameless fear-mongering, and unsubstantiated claims in opposition to each and every sensible effort to reform our nation’s outdated media ownership policies.  Those laws and regulations have created artificial market structures and hindered the ability of media operators to find new business models that might throw them a lifeline in difficult times.

Consider the fact that it was just 14 months ago that then-Commissioner Copps issued this gem of a hysteria-ridden statement in response to the agency’s last effort to ever-so-slightly loosen the newspaper-broadcast cross ownership rule:

Today’s decision would make George Orwell proud. We claim to be giving the news industry a shot in the arm—but the real effect is to reduce total newsgathering. We shed crocodile tears for the financial plight of newspapers—yet the truth is that newspaper profits are about double the S&P 500 average.

I remember when I read that back in Dec ’07 and thinking to myself that Michael Copps is either willfully blind to the facts or intentionally twisting them to suit his own ends.  Regardless, the writing was on the wall years ago with the rise of unprecedented information abundance and media competition and there was no good reason to force traditional media operators to face these new challenges with one arm tied behind their backs.  But that’s exactly what Copps and his radical cronies over at Free Press and other groups did.

But now Copps is suddenly having second thoughts?  Now that he has dug their graves and driven stakes through their hearts, he suddenly wants to cast himself as an Information Age Jesus and resurrect Lazarus?  Oh, the hypocrisy of it all!  As my boss Ken Ferree recently pointed out:

They’ve all now suddenly discovered that the business model for daily newspapers is under strain and may not be sustainable? Was it the New York Times slouching toward bankruptcy that got their attention, or the failure of the Seattle Post-Intelligencer? […] The sad truth is, the newspaper business has been heading toward a cliff for the last ten years; only willful ignorance can explain the failure of these people who have so recently come to be concerned about the fate of journalism to acknowledge the threat. Time will tell whether their new-found concern has come too late, or whether they have poisoned the political well too thoroughly for any effective policy change.

Moreover, as Ken also points out, it’s not just Copps who has apparently seen the light and had a sudden conversion.

This follows a letter from Speaker Pelosi to Attorney General Holder suggesting restrained antitrust review of transactions involving newspaper assets, and a proposal from Senator Cardin (D-MD) for a quasi-government bailout of newspaper firms.

Ken has more commentary on the Pelosi letter here.   Like Ken, when reading these comments from Pelosi and Copps, I don’t know whether to laugh or cry.  I suppose I should be happy that they have finally seen the error in their ways.  It’s just a shame it took such devistation for them to open their eyes to the truth.  Regulatory reform might not have been able to save these old media operators, but they should have at least been giving the freedom to structure their affairs and restructure their business models in an attempt to avoid extinction.  Copps and Pelosi now have to live with the grim reality that it’s tough to throw someone a lifeline after you’ve already sank the ship.