DISH Network gets another opportunity on Tuesday to plead with Congress for another Satellite Home Viewer Act reauthorization—ostensibly to protect consumers from unwarranted rate increases and program blackouts, but actually to preserve and expand DISH Network’s and DirecTV’s access to broadcast programming at regulated, below-market rates.
A couple minor provisions in the Act that have nearly outlived their original purpose are due to expire, but DISH Network is taking advantage of this opportunity to argue that “there is much more that Congress can do to expand consumers’ access to local programming…” DISH’s plea is an example of the narcotic effect of supposedly benign regulation intended to promote competition by giving nascent competitors a leg up. DISH Network, in particular, has become addicted to artificially low prices for broadcast programming, and will seize any opportunity to reduce its programming costs some more through regulation.One of the problems with betting your shareowners’ company on regulation is that in politics, nothing lasts forever. Another is that there are certain laws of economics, and they still apply. Shareowners really ought to be on high alert for the appearance of a Beltway, State Capitol or City Hall strategy—firms that can compete and win in the marketplace have no need for regulatory advantages.
When the Act was passed, broad-beam satellite technology meant that carriers had to transmit the same programming across North America. The carriers were given the right to retransmit distant broadcast signals from “superstations” (without first having to obtain the broadcaster’s consent) to households that could not receive an adequate over-the-air signal from any local station affiliated with a particular major network.
Spot-beam technology now allows the carriers to deliver local broadcast signals to each of the 210 corresponding local viewing areas. And as a result of significant investment by the satellite carriers, very few households are without access to major networks or local stations.
In that sense, the Act and its progeny can be viewed as a success. On the other hand, SNL Kagan estimates that, in 2013, programming fees received by broadcasters will represent a total of only $2.7 billion, compared to $31.5 billion for basic cable networks. This data suggests the possibility that broadcasters are not recovering the fair market value of their programming. If that’s the case, their ability to continue producing popular programming is in jeopardy.
DISH Network Chairman Charlie Ergen complains that broadcasters “cling to the status quo instead of meeting consumer demand and embracing new technologies and business models.”
But clearly, broadcasters are adapting to the fact that advertisers who used to underwrite the entire cost of broadcasting now have many more options that include cable networks. It’s unrealistic to pretend we were still living in the 1970’s, when broadcasters had market power.
The facts are: (1) broadcasters are competing for their lives, and (2) broadcasters are a potent source of competition in content and delivery. The last thing policymakers should be contemplating is forcing broadcasters to subsidize their competitors.
Under current law, satellite carriers will no longer be able to retransmit distant network signals to unserved households without first obtaining the consent of the broadcaster after Dec. 31, 2014. Nor will broadcasters be prohibited from engaging in exclusive contracts for carriage of their signals.
As content producers, broadcasters generally have an incentive to reach as many viewers as possible by any means. But there are exceptions. If both a professional ball club or a movie studio and a cable network or broadcaster, for example, believe it is in their mutual best interest to strike an exclusive deal, what’s wrong with allowing them to recover the full economic value of their collaborative enterprise?
If you are DISH Network and if reason prevails and your lobbyists cannot persuade Congress to prohibit exclusivity, there is a solution. You can become the exclusive supplier of must-see content.
Consumers are best served in the long run by an efficient economy that expands prosperity, not by unholy alliances between struggling firms and policymakers. Consumers benefit when a producer of something is permitted to obtain the full economic value of his or her product, because then they will produce more of it and look for ways to improve it.
So far, no one has demonstrated that consumers will be harmed if these expiring provisions—which are quite narrow in scope—are allowed to sunset. The reality is that satellite carriers pay market-based rates for cable networks but don’t want to pay market-based rates for broadcast programming. The simple fact is DISH Network is receiving a subsidy, and if Congress preserves it that is corporate welfare.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.