Media Deconsolidation – Technology Liberation Front https://techliberation.com Keeping politicians' hands off the Net & everything else related to technology Tue, 10 May 2022 15:49:24 +0000 en-US hourly 1 6772528 Podcast: Remember FAANG? https://techliberation.com/2022/05/10/podcast-remember-faang/ https://techliberation.com/2022/05/10/podcast-remember-faang/#comments Tue, 10 May 2022 15:47:16 +0000 https://techliberation.com/?p=76986

Corbin Barthold invited me on Tech Freedom’s “Tech Policy Podcast” to discuss the history of antitrust and competition policy over the past half century. We covered a huge range of cases and controversies, including: the DOJ’s mega cases against IBM & AT&T, Blockbuster and Hollywood Video’s derailed merger, the Sirius-XM deal, the hysteria over the AOL-Time Warner merger, the evolution of competition in mobile markets, and how we finally ended that dreaded old MySpace monopoly!

What does the future hold for Google, Facebook, Amazon, and Netflix? Do antitrust regulators at the DOJ or FTC have enough to mount a case against these firms? Which case is most likely to have legs?

Corbin and I also talked about the of progress more generally and the troubling rise of more and more Luddite thinking on both the left and right. I encourage you to give it a listen:

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Locast and deteriorating TV laws https://techliberation.com/2019/10/15/locast-and-deteriorating-tv-laws/ https://techliberation.com/2019/10/15/locast-and-deteriorating-tv-laws/#comments Tue, 15 Oct 2019 18:55:54 +0000 https://techliberation.com/?p=76616

In the US there is a tangle of communications laws that were added over decades by Congress as–one-by-one–broadcast, cable, and satellite technologies transformed the TV marketplace. The primary TV laws are from 1976, 1984, and 1992, though Congress creates minor patches when the marketplace changes and commercial negotiations start to unravel.

Congress, to its great credit, largely has left alone Internet-based TV (namely, IPTV and vMVPDs) which has created a novel “problem”–too much TV. Internet-based TV, however, for years has put stress on the kludge-y legacy legal system we have, particularly the impenetrable mix of communications and copyright laws that regulates broadcast TV distribution.

Internet-based TV does two things–it undermines the current system with regulatory arbitrage but also shows how tons of diverse TV programming can be distributed to millions of households without Congress (and the FCC and the Copyright Office) injecting politics into the TV marketplace.

Locast TV is the latest Internet-based TV distributor to threaten to unravel parts the current system. In July, broadcast programmers sued Locast (its founder, David Goodfriend) and in September, Locast filed its own suit against the broadcast programmers.

A portion of US TV regulations.

Many readers will remember the 2014 Aereo decision from the Supreme Court. Much like Aereo, Locast TV captures free broadcast TV signals in the markets it operates and transmits the programming via the Internet to viewers in that market. That said, Locast isn’t Aereo.

Aereo’s position was that it could relay broadcast signals without paying broadcasters because it wasn’t a “cable company” (a critical category in copyright law). The majority of the Supreme Court disagreed; Aereo closed up shop.

Locast has a different position: it says it can relay broadcast signals without paying because it is a nonprofit.

It’s a plausible argument. Federal copyright law has a carveout allowing “nonprofit organizations” to relay broadcast signals without payment so long as the nonprofit operates “without any purpose of direct or indirect commercial advantage.”

The broadcasters are focusing on this latter provision, that any nonprofit taking advantage of the carveout mustn’t have commercial purpose. David Goodfriend, the Locast founder, is a lawyer and professor who, apparently, sought to abide by the law. However, the broadcasters argue, his past employment and commercial ties to pay-TV companies mean that the nonprofit is operating for commercial advantage.

It’s hard to say how a court will rule. Assuming a court takes up the major issues, judges will have to decide what “indirect commercial advantage” means. That’s a fact-intensive inquiry. The broadcasters will likely search for hot docs or other evidence that Locast is not a “real” nonprofit. Whatever the facts are, Locast’s arbitrage of the existing regulations is one that could be replicated.

Nobody likes the existing legacy TV regulation system: Broadcasters dislike being subject to compulsory licenses; Cable and satellite operators dislike being forced to carry some broadcast TV and to pay for a bizarre “retransmission” right. Copyright holders are largely sidelined in these artificial commercial negotiations. Wholesale reform–so that programming negotiations look more like the free-market world of Netflix and Hulu programming–would mean every party has give up something they like improve the overall system.

The Internet’s effect on traditional providers’ market share has been modest to date, but hopefully Congress will anticipate the changing marketplace before regulatory distortions become intolerable.

Additional reading: Adam Thierer & Brent Skorup, Video Marketplace Regulation: A Primer on the History of Television Regulation and Current Legislative Proposals (2014).

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Socialize Journalism in Order to Save It? https://techliberation.com/2019/09/09/socialize-journalism-in-order-to-save-it/ https://techliberation.com/2019/09/09/socialize-journalism-in-order-to-save-it/#comments Mon, 09 Sep 2019 18:39:50 +0000 https://techliberation.com/?p=76590

Originally published on 9/9/19 at The Bridge as, “Beware Calls for Government to ‘Save the Press‘”
—– by Adam Thierer & Andrea O’Sullivan Anytime someone proposes a top-down, government-directed “plan for journalism,” we should be a little wary. Journalism should not be treated like it’s a New Deal-era public works program or a struggling business sector requiring bailouts or an industrial policy plan. Such ideas are both dangerous and unnecessary. Journalism is still thriving in America, and people have more access to more news content than ever before. The news business faces serious challenges and upheaval, but that does not mean central planning for journalism makes sense. Unfortunately, some politicians and academics are once again insisting we need government action to “save journalism.” Senator and presidential candidate Bernie Sanders (D-VT) recently penned an op-ed for the  Columbia Journalism Review that adds media consolidation and lack of union representation to the parade of horrors that is apparently destroying journalism. And a recent University of Chicago report warns that “digital platforms” like Facebook and Google “present formidable new threats to the news media that market forces, left to their own devices, will not be sufficient” to continue providing high-quality journalism. Critics of the current media landscape are quick to offer policy interventions. “The Sanders scheme would add layers of regulatory supervision to the news business,” notes media critic Jack Shafer. Sanders promises to prevent or rollback media mergers, increase regulations on who can own what kinds of platforms, flex antitrust muscles against online distributors, and extend privileges to those employed by media outlets. The academics who penned the University of Chicago report recommend public funding for journalism, regulations that “ensure necessary transparency regarding information flows and algorithms,” and rolling back liability protections for platforms afforded through Section 230 of the Communications Decency Act. Both plans feature government subsidies, too. Sen. Sanders proposes “taxing targeted ads and using the revenue to fund nonprofit civic-minded media” as part of a broader effort “to substantially increase funding for programs that support public media’s news-gathering operations at the local level.” The Chicago plan proposed a taxpayer-funded $50 media voucher that each citizen will then be able to spend on an eligible media operation of their choice. Such ideas have been floated before and the problems are still numerous. Apparently, “saving journalism” requires that media be placed on the public dole and become a ward of the state. Socializing media in order to save it seems like a bad plan in a country that cherishes the First Amendment. Forcing taxpayers to fund media outlets will lead to endless political fights. Those fights will grow worse once government officials are forced to decide which outlets qualify as “high-quality news” that can receive the money. Finally, and most problematic, is the fact that government money often comes with strings attached, and that means political meddling with the free speech rights or editorial discretion of journalists and news organizations. Internet: Friend or Foe? Grand plans to “save journalism” are peculiar because they come at a time when citizens enjoy unprecedented access to a veritable cornucopia of media platforms and inputs. A generation ago, critics lamented life in a world of media scarcity; today they complain about “information overload.” But if you asked Americans whether the internet gives them more or less access to media, most would probably quickly respond that it is a no-brainer: The internet provides us with access to content than ever before. Whether it’s accessing traditional platforms like newspapers on their websites or broadcast media on YouTube or browsing new forms of internet-native content like social media reporting and podcasts, we suffer from no shortage of cheap and abundant data sources. The proliferation of smart devices means we can almost always plug in; so long as we have an internet connection, we can learn what’s going on in the world. Given the choice between the abundance of information we have today—messy as it can be—and an era when a handful of anchors delivered just a half-hour of news each evening on one of the Big Three (ABC, CBS, NBC) television networks, and when many communities lacked access to other major news sources, how many of us would actually roll back the clock? Nobody in small town America ever got to read the  New York Times, Wall Street Journal, or other national or global news sources before the internet came along. Despite this virtual ocean of news content for consumers, many in politics, academia, and the media fret that journalism’s best days are behind us. Many of their concerns are actually quite old, however. People were fretting about the “death of news” long before the internet came along. The corresponding policy suggestions were also proposed in the past. Now, as then, these “problems” may be misdiagnosed and the subsequent “solutions” are unlikely to be beneficial. The Long Death of Media Today, many are worried about the effect that Facebook and Google are having on the media landscape. It is true that the social media platforms currently earn around 60 percent of advertising revenues—income that traditional media outlets had traditionally relied upon to shore up subscription revenues. But as many media scholars point out, journalism has always been something of a fraught economic endeavor. Although it is tempting to reminisce over a “golden age” of well-funded journalism, where handsomely paid dirt-diggers held power to account and brought truth to the public, in reality, journalist platforms have long had to adapt and rely on innovative funding sources and business models to stay afloat. Market changes may make some outlets more profitable or sustainable in the short term, but the tendency is generally that journalism struggles to keep the press rolling. We should not, therefore, expect that policies can “fix” a journalism market that was never “fixable” to begin with. The economics of news production and dissemination remain challenging as ever and outlets will constantly need to reinvent themselves and their business models. Similar concerns about the viability of journalism accompanied the rise of yesterday’s technologies: radiotelevision, and even at-home printing were all at one point thought to be the death knell of traditional print journalism. Yet print has remained, in one form or the other, and outlets learned to use disruptive new technologies to augment their reporting and better serve their audiences. Consumers have more options than ever despite lawmakers’ failure to act on the policy solutions that were offered during previous predictions of the same “death of journalism.” Government Involvement Risks Dependence and Control Proposals to subsidize media, even through a seemingly “decentralized” channel of taxpayer-directed (and funded) vouchers, is tempting for many of those worried about the future of a free press. Ironically, introducing government funding into the provision of media actually increases the risk that the media will be compromised. Journalism subsidy proposals have been suggested for many years. Such plans inevitably invite greater government meddling with a free press. Consider the simple issue of determining which outlets should qualify for a government subsidy. After all, you can’t just allow people to hand out money to anyone. But if you allow a regulator to define eligible “journalists” or “news” you grant government greater power over the press. Controversies will ensue. Should, say, Alex Jones be allowed to receive journalism vouchers? His supporters would think so, and they would have a strong First Amendment argument on their side. What about outfits associated with foreign governments or terrorist-designated groups? Each iteration grants more opportunity for ideological conflict. And what if someone does not want their tax dollars to go to any platform at all? Should they be allowed to just get a tax rebate? Would this not defeat the entire purpose of the program? The political and legal complexities of this seemingly straightforward proposal quickly become clear. Nor are the dangers with government control of media strictly hypothetical. We have several decades of case studies in the form of old Federal Communications Commission (FCC) policies. Whether its merger reviews, media ownership rules, or the fairness doctrine, history shows that when political appointees are granted the power to dictate content control—no matter how roundabout—they will often succumb. Nor or this a partisan phenomenon; authorities in both political parties have taken advantage when they could. A “Solution” Should Not Exacerbate the Problem It Seeks to Overcome Although the internet has increased the content options for consumers, it has also generated new challenges for news providers. This is not a new phenomenon, nor is it insurmountable. It will take time and ingenuity, but innovative news outlets will learn to survive and thrive in this new environment. Patience is difficult, but it is a virtue. We should not allow our anxieties about the current state of a changing market to dictate policies that will ultimately cement government control of media content decisions. Soon enough, innovators will discover a new model that brings new sustainability for journalism for the next little while. And then, when that starts to wane, we’ll hear more calls for the government to get involved once again. It’s tempting, but ultimately self-defeating, and we should reject it now just as we have in the past.
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The “A La Carte” Wars Come to an End https://techliberation.com/2019/04/12/the-a-la-carte-wars-come-to-an-end/ https://techliberation.com/2019/04/12/the-a-la-carte-wars-come-to-an-end/#comments Fri, 12 Apr 2019 14:26:38 +0000 https://techliberation.com/?p=76476

A decade ago, a heated debate raged over the benefits of “a la carte” (or “unbundling”) mandates for cable and satellite TV operators. Regulatory advocates said consumers wanted to buy all TV channels individually to lower costs. The FCC under former Republican Chairman Kevin Martin got close to mandating a la carte regulation.

But the math just didn’t add up. A la carte mandates, many economists noted, would actually cost consumers just as much (or even more) once they repurchased all the individual channels they desired. And it wasn’t clear people really wanted a completely atomized one-by-one content shopping experience anyway.

Throughout media history, bundles of all different sorts had been used across many different sectors (books, newspapers, music, etc.). This was because consumers often enjoyed the benefits of getting a package of diverse content delivered to them in an all-in-one package. Bundling also helped media operators create and sustain a diversity of content using creative cross-subsidization schemes. The traditional newspaper format and business is perhaps the greatest example of media bundling. The classifieds and sports sections helped cross-subsidize hard news (especially local reporting). See this 2008 essay by Jeff Eisenach and me for details for more details on the economics of a la carte.

Yet, with the rise of cable and satellite television, some critics protested the use of bundles for delivering content. Even though it was clear that the incredible diversity of 500+ channels on pay TV was directly attributable to strong channels cross-subsidizing weaker ones, many regulatory advocates said we would be better off without bundles. Moreover, they said, online video markets could show us the path forward in the form of radically atomized content options and cheaper prices.

Flash-forward to today. As this Wall Street Journal article points out, online video providers are rejecting a la carte and recreating content bundles to keep a diversity of programming flowing. This happened in unregulated markets without any FCC rules. YouTube, Hulu, PlayStation, and many other online video providers are creating new bundles and monetization schemes.

It is also worth noting that this same sort of “re-bundling” of content is happening with online news sources and other digital platforms as various sites struggle to find content monetization schemes that can sustain diverse, high-quality content in the Digital Era. Content bundling and various paywall schemes are helping them do so.

The lesson here is that the economics of content creation and delivery are quite dynamic, challenging, and extremely hard to predict. Mandating “a la carte” unbundling of content sounded smart and well-intentioned to many people a decade ago, but it proved to be problematic even in highly competitive online markets. Thankfully, we did not mandate unbundling by law. We waited and watched to see how it naturally played out in various markets. We now have a better feel for how big of a mistake mandatory a la carte would have likely been in practice.

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No, the Telecom Act didn’t destroy phone and TV competition https://techliberation.com/2016/08/16/no-the-telecom-act-didnt-destroy-phone-and-tv-competition/ https://techliberation.com/2016/08/16/no-the-telecom-act-didnt-destroy-phone-and-tv-competition/#comments Tue, 16 Aug 2016 15:18:28 +0000 https://techliberation.com/?p=76067

I came across an article last week in the AV Club that caught my eye. The title is: “The Telecommunications Act of 1996 gave us shitty cell service, expensive cable.” The Telecom Act is the largest update to the regulatory framework set up in the 1934 Communications Act. The basic thrust of the Act was to update the telephone laws because the AT&T long-distance monopoly had been broken up for a decade. The AV Club is not a policy publication but it does feature serious reporting on media. This analysis of the Telecom Act and its effects, however, omits or obfuscates important information about dynamics in media since the 1990s.

The AV Club article offers an illustrative collection of left-of-center critiques of the Telecom Act. Similar to Glass-Steagall  repeal or Citizens United, many on the left are apparently citing the Telecom Act as a kind of shorthand for deregulatory ideology run amuck. And like Glass-Steagall repeal and Citizens United, most of the critics fundamentally misstate the effects and purposes of the law. Inexplicably, the AV Club article relies heavily on a Common Cause white paper from 2005. Now, Common Cause typically does careful work but the paper is hopelessly outdated today. Eleven years ago Netflix was a small DVD-by-mail service. There was no 4G LTE (2010). No iPhone or Google Android (2007). And no Pandora, IPTV, and a dozen other technologies and services that have revolutionized communications and media. None of the competitive churn since 2005, outlined below, is even hinted at in the AV Club piece. The actual data undermine the dire diagnoses about the state of communications and media from the various critics cited in the piece. 

Competition in Telephone Service

Let’s consider the article’s provocative claim that the Act gave us “the continuing rise of cable, cellphone, and internet pricing.” Despite this empirical statement, no data are provided to support this. Instead, the article mostly quotes progressive platitudes about the evils of industry consolidation. I suppose platitudes are necessary because on most measures there’s been substantial, measurable improvements in phone and Internet service since the 1990s. In fact, the cost-per-minute of phone service has plummeted, in part, because of the competition unleashed by the Telecom Act. (Relatedly, there’s been a 50-fold increase in Internet bandwidth with no price increase.)

The Telecom Act undid much of the damage caused by decades of monopoly protection of telephone and cable companies by federal and state governments. For decades it was accepted that local telephone and cable TV service were natural monopolies. Regulators therefore prohibited competitive entry. The Telecom Act (mostly) repudiated that assumption and opened the door for cable companies and others to enter the telephone marketplace. The competitive results were transformative. According to FCC data, incumbent telephone companies, the ones given monopoly protection for decades, have lost over 100 million residential subscribers since 2000. Most of those households went wireless only but new competitors (mostly cable companies) have added over 32 million residential phone customers and may soon overtake the incumbents. The chart below breaks out connections by technology (VoIP, wireless, POTs), not incumbency, but the churn between competitors is apparent.

Phone Connections 11.7.14

Further, while the Telecom Act was mostly about local landlines, not cellular networks, we can also dispense with the AV Club claim that dominant phone companies are increasing cellphone bills. Again, no data are cited. In fact, in quality-adjusted terms, the price of cell service has plummeted. In 1999, for instance, a typical cell plan was for regional coverage and offered 200 voice minutes for about $55 per month (2015 dollars). Until about 2000, there was no texting (1999 was the first year texting between carriers worked) and no data included. In comparison, for that same price today you can find a popular plan that includes, for all of North America, unlimited texting and voice minutes, plus 10 GB of 4G LTE data. Carriers spend tens of billions of dollars annually on maintaining and upgrading cellular networks and as a result, millions of US households are dropping landline connections (voice and broadband) for smartphones alone.

Competition in Television and Media

The critics of cable deregulation completely misunderstand and misstate the role of competition in the TV industry. Media quality is harder to measure, but its not a stretch to say that quality is higher than ever. Few dispute that we are in the Golden Age of Media, resulting from the proliferation of niche programming provided by Netflix, podcasts, Hulu, HBO, FX, and others. This virtual explosion in programming came about largely because there are more buyers (distributors) of programming and more cutthroat competition for eyeballs.

Again, the AV Club quotes the Common Cause report: “Roughly 98 percent of households with access to cable are served by only one cable company.”  Quite simply, this is useless stat. Why do we care how many coaxial cable companies are in a neighborhood? Consumers care about outputs–price, programming, quality, customer service–and number of competitors, regardless of the type of transmission network, which can be cellular, satellite, coaxial cable, fiber, or copper.

Look beyond the contrived “number of coaxial competitors” measure and it’s clear that m ost c able companies face substantial competition. The Telecom Act is a major source of the additional competition, particularly telco TV. Since passage of the Telecom Act, cable TV’s share of the subscription TV market fell from 95% to nearly 50%.

Pay TV Market Share PT

The Telecom Act repealed a decades-old federal policy that largely prohibited telephone companies from competing with cable TV providers. Not much changed for telco TV until the mid-2000s, when broadband technology improved and when the FCC freed phone companies from “unbundling” rules that forced telcos to lease their networks to competitors at regulated rates. In this investment-friendly environment, telephone companies began upgrading their networks for TV service and began purchasing and distributing programming. Since 2005, telcos have attracted about 13 million households and cable TV’s market share fell from about 70% to 53%. Further, much of consumer dissatisfaction with TV is caused by legacy regulations, not the Telecom Act. If cable, satellite, and phone companies were as free as Netflix and Hulu to bundle, price, and purchase content, we’d see lower prices and smaller bundles. 

TV regs chart small

The AV Club’s focus on Clear Channel [sic] and now-broken up media companies is puzzling and must be because of the article’s reliance on the 2005 Common Cause report. The bête noire of media access organizations circa 2005 was Clear Channel, ostensibly the sort of corporate media behemoth created by the Telecom Act. The hysteria proved unfounded.

Clear Channel broadcasting was rebranded in 2014 to iHeartRadio and its operations in the last decade do not resemble the picture described in the AV Club piece, that of a “radio giant” with “more than 1200 stations.” While still a major player in radio, since 2005 iHeartRadio’s parent company went private, sold all of its TV stations and hundreds of its radio station, and shed thousands of employees. The firm has serious financial challenges because of the competitive nature of the radio industry, which has seen entry from the likes of Pandora, Spotify, Google, and Apple.

The nostalgia for Cold War-era radio is also strange for an article written in the age of Pandora, Spotify, iTunes, and Google Play. The piece quotes media access scholar Robert McChesney about radio in the 1960s:

Fifty years ago when you drove from New York to California, every station would have a whole different sound to it because there would be different people talking. You’d learn a lot about the local community through the radio, and that’s all gone now. They destroyed radio. It was assassinated by the FCC and corporate lobbyists.

This oblique way of assessing competition–driving across the country–is necessary because local competition was actually relatively scarce in the 1960s. There were only about 5000 commercial radio stations in the US, which sounds like a lot except when you consider the choice and competition today. Today, largely because of digital advancements and channel splitting, there are more than 10 times as many available broadcast channels, as well as hundreds of low-power stations. Combined with streaming platforms, competition and choice is much more common today. Everyone in the US can, with an inexpensive 3G plan and a radio, access millions of niche podcasts and radio programs featuring music, hobbies, entertainment, news, and politics.

The piece quotes the 2005 report, alarmed that “ just five companies—Viacom, the parent of CBS, Disney, owner of ABC, News Corp, NBC and AOL, owner of Time Warner—now control 75 percent of all primetime viewing.” Again, I don’t understand why the article quotes decade-old articles about market share without updates. There is no mention that Viacom and CBS split up in 2005 and NewsCorp. and Fox split in 2013. The hysteria surrounding NBC, AOL, and Time Warner’s failed commercial relationships has been thoroughly explored and discredited by my colleague Adam Thierer and I’ll point you to his piece. As Adam has also documented, broadcast networks have been losing primetime audience share since at least the late 1970s, first to cable channels, then to streaming video. And nearly all networks, broadcast and cable, are seeing significant drops in audience as consumers turn to Internet streaming and gaming. Market power and profits in media is often short lived.

The article then decries the loss of local and state news reporting. It’s strange to blame the Telecom Act for newspaper woes since shrinking newsrooms is a global, not American, phenomenon with well-understood causes (loss of classifieds and increased competition with Web reporting). And, as I’ve pointed out, the greatest source of local and state reporting is local papers, but the FCC has largely prohibited papers from owning radio and TV broadcasters (which would provide papers a piece of TV’s lucrative ad and retrans revenue) for decades, even as local newspapers downsize and fail. 

The article was a fascinating read if only because it reveals how many left-of-center prognostications about media aged poorly. Those on the right have their own problems with the Act, namely its vastly different regulatory regimes (“telecommunications,” “wireless,” “television”) in a world of broadband and convergence. But useful reform means diagnosing what inhibits competition and choice in media and communications markets. Much of the competitive problems in fact arise from the enforcement of natural monopoly restrictions in the past. Media and communications has seen huge quality improvements since 1996 because the Telecom Act rejected the natural monopoly justifications for regulation. The Telecom Act has proven unwieldy but it cannot be blamed for nonexistent problems in phone and TV.

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Skorup and Thierer paper on TV Regulation https://techliberation.com/2014/05/05/skorup-and-thierer-paper-on-tv-regulation/ https://techliberation.com/2014/05/05/skorup-and-thierer-paper-on-tv-regulation/#comments Mon, 05 May 2014 17:24:22 +0000 http://techliberation.com/?p=74501

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.

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The Bizarre World of TV and Aereo https://techliberation.com/2014/04/24/the-bizarro-world-of-tv-and-aereo/ https://techliberation.com/2014/04/24/the-bizarro-world-of-tv-and-aereo/#comments Thu, 24 Apr 2014 13:24:11 +0000 http://techliberation.com/?p=74436

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.

The FCC, and Congress to a lesser extent, has gone to great lengths to protect broadcasters from competition from other television distributors, as the Copyright Office has said. There is nothing magical about free broadcast television. It’s simply another distribution platform that competes with several other TV platforms, including cable, satellite, IPTV (like AT&T U-Verse), and, increasingly, over-the-top streaming (like Netflix and Amazon Prime Instant Video).

Hundreds of channels and thousands of copyrighted programs are distributed by these non-broadcast distributors (mostly) through marketplace negotiations.

Strange things happen to copyrights when programs are delivered via the circuitous route 1) through a broadcast tower and 2) to a cable/satellite operator. Namely, copyright owners, by law, lose direct control over their intellectual property when local broadcasters transmit it. At that point, regulators, not copyright holders, determine the nature of bargaining and the prices paid.

Distribution of non-local broadcast programming

Right away, an oddity arises. Copyright treatment of local broadcasts differs from distant (non-local) broadcasts. Cable and satellite companies have never paid copyright royalties for signals from a local broadcast. (This is one reason the broadcast lawyer denied that Aereo is a cable company during Supreme Court oral arguments–Aereo merely transmits local broadcast signals.) But if a cable or satellite company retransmits signals from a non-local (“distant”) broadcaster, the company pays the Copyright Office for a copyright license. However, this license is not bargained for with the copyright holder; it is a compulsory license. Programmers are compelled to license their program and in return receive the price set by the panel of Copyright Office officials.

The Copyright Office has asked Congress for over 30 years to eliminate the compulsory license system for distant broadcasts. There are few major distant broadcasters carried by cable companies but the most popular is WGN, a Chicago broadcaster that is carried on many cable systems across the country. The programmers complain they’re underpaid and the Copyright Office has the impossible task of deciding a fair price for a compulsory copyright license. Alleged underpayment is partly why TBS, in 1998, converted from a distant broadcast network to a pure cable network, where TBS could bargain with cable and satellite companies directly.

Distribution of local broadcast programming

Yet things get even stranger when you examine how local broadcasts are treated. Copyright is, as best as I can tell, a nullity when a program is broadcast by a local broadcaster and then retransmitted by a cable company. Until 1992, no payments passed from cable companies to either the broadcaster or copyright holder of broadcast programs. Congress made the retransmission of locally-broadcasted programs royalty-free. Cable companies captured the free over-the-air signals and sold those channels along with cable channels to subscribers.

Why would broadcasters and programmers stand for this? They tolerated this for decades because the FCC requires broadcasts to be “free”–that is, funded by ads. Local broadcasters and programmers benefited from cable distribution because cable TV reaches more viewers that broadcasters can’t reach.

Then in 1992, as cable TV grew, Congress decided to rebalance the competitive scales. Congress created a new property right that ensured local broadcasters got paid by cable companies–the retransmission right. Congress did not require a copyright royalty payment. So cable (and later satellite) still didn’t pay copyright royalties for local broadcasts. The “retransmission right” is held by, not the copyright owner, but the owner of the broadcast tower. This is a bizarre situation where, as the Copyright Office says, Congress accords a “licensee of copyrighted works (broadcasters) greater proprietary rights than the owner of copyright.”

Welcome to the bizarro world of broadcast television that Aereo finds itself. On the bright side, perhaps the very public outcry over Aereo means the laws that permitted Aereo’s regulatory arbitrage will be scrutinized and rationalized. In the short term, I’m hoping the Supreme Court, as Downes mentions, punts the case to a lower court for more fact-finding. Aereo is a communications law case disguised as a copyright case. These issues really need to be before the FCC for a determination about what is a “cable operator” and an “MVPD.” A finding that Aereo is either one would end this copyright dispute.

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Bailout for the First Amendment vs. Preservation of Competing Biases https://techliberation.com/2010/02/17/bailout-for-the-first-amendment-vs-preservation-of-competing-biases/ https://techliberation.com/2010/02/17/bailout-for-the-first-amendment-vs-preservation-of-competing-biases/#comments Wed, 17 Feb 2010 17:02:03 +0000 http://techliberation.com/?p=26201

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,” We actually resolved the question of “What Government Should Do,” in a manner that influenced the entire world, with passage of the Bill of Rights and its First Amendment. The Constitution was ratified by nine states on June 21, 1788.  Georgetown, your conference host, was founded January 23, 1789.  As far as I can tell, Georgetown didn’t hold a “Crisis In Journalism” conference that week, even though there was little national media industry to speak of and thus much more of a prevailing crisis situation than today, when you stop and think of it. 

Then the Bill of Rights was ratified on December 15, 1791–and still no Georgetown conference. Amazingly, at the time, our ancestors thought it appropriate for the federal government to establish a First Amendment and step aside, even though there were no TVs or radios, or Internet and websites, iPods, or stories broken by Twitter.  There wasn’t even an FCC yet to ponder a “sustainable 19th century model for journalism in the United States.” 

Media at that time barely existed compared to what we have today. Yet there was no crisis.  Nor is there a crisis today.

What this feigned crisis signifies is, on the one hand, pure indulgence of a wealthy society struggling with “creative destruction” in media; and, on the other, the desire for more political control of information flows and public opinion rather than enshrinement of the only condition appropriate to a free society—the preservation of competing biases.  These are ultimately far more important than pretended objectivity in both the preservation of our liberties and in the creation of “information wealth.”  Too often, the class interest of intellectuals is statism (continue reading Schumpeter for details, I’m not doing it here);  and the journalism industry, far from alone among myriad economic endeavors, is highly vulnerable to those same collectivist impulses. 

Convincing the public and policymakers that media is in crisis is essential for progressives to maintain influence now: while progressives long since successfully established government agencies with broad political control over communications, today they find themselves desperate to maintain that slipping control in the era in which media abundance undermines those agencies’ very reason for being.

Outrageous and demeaning calls for public funding of journalism, public spaces, information commons, artificial “crises” and other such manipulative indulgences draw their energy from the flawed premise that capitalism and freedom are inimical to civil society and the diffusion of ideas, when they are instead the prerequisites.  America established a First Amendment precisely because government and political machinery can threaten these precious values. Competition in creation of goods and services creates tangible wealth; competition in creation of ideas (including scientific research, yet another notion to discuss later) ultimately does the same and enhances liberties. Government funding removes the element of competition, on purpose.

This crisis is phony, except obviously for the specific businesses that are being upended.  Media, information, journalism, whatever it gets called, can only be irreparably damaged by censorship, the only crisis to which journalism is ever vulnerable.  But it also counts as censorship if progressives control information or succeed in funding it politically and prevent proprietary business models in the content, reporting and infrastructure of the future.  A Bailout for the First Amendment is catastrophic policy, even if it’s advocates’ stated goals are merely to make us all enlightened (somewhat left-leaning?) citizens.

(Hat tip to my colleague Alex Nowrasteh for helping me find ratification dates.)

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