This week in National Review Online, Cesar Conda and Lawrence Spivak ran an editorial entitled “Kevin Martin’s Pro-Market FCC,” arguing that the current FCC has generally been deregulatory and free market-oriented. Today, James Gattuso and I have set the record straight regarding just how off-the-rails this current FCC has really gone…
______________________________________
November 29, 2007
TV Train Wreck
Martin, markets, and the potential for regulatory disaster.
By James Gattuso & Adam Thierer
Like cops shooing away onlookers at the scene of an accident, Cesar Conda and Lawrence Spivak argue (“Kevin Martin’s Pro-Market FCC”) that there’s no reason for conservatives to be concerned about the Federal Communications Commission (FCC). Under Chairman Kevin Martin, they say, the FCC has been “characterized by a consistent pro-entry/pro-consumer welfare mandate, the very hallmark of economic conservatism.”
In other words: “Just move along. Nothing to see here.”
Despite Conda and Spivak’s exhortations, however, there is much for the curious crowd to see in the train wreck that is the FCC. The most recent derailment began earlier this month, when Martin leaked plans to invoke an obscure provision of the Communications Act, and to assert nearly unlimited powers to regulate cable television if more than 70 percent of households subscribe to cable.
Continue reading →
New York Times business columnist Joe Nocera penned a lengthy column on the potential dangers of a la carte regulation over the weekend. He summarized why–as we have pointed out here before–despite the best of intentions, a la carte regulation is certain to backfire:
À la carte. It sounds so appealing, doesn’t it? Instead of having to accept — and pay for — all the channels bundled by your cable company, you could pick from a menu and pay for only the ones you watch. … Yet as appealing as the idea might seem at first glance, there is a reason that Congress has not taken the bait and passed an à la carte law. À la carte would be a consumer disaster. For those of you who yearn for it, this is a classic case of “be careful what you wish for.”
Nocera goes on to show that, contrary to what a la carte regulatory advocates believe, prices for most customers would rise in the long-run:
Continue reading →
The casual observer can be excused for being a bit confused by the on-going cable imbroglio at the FCC. Throw away your old-fashioned ideological assumptions about who should line up where — the players on this one have been as jumbled as a flight schedule on a holiday weekend. A Republican chairman of the FCC, with support from leftish activist groups and AT&T, is pushing for massive regulation. He is being challenged by fellow Republicans on the commission, as well as Republicans in Congress. Now comes one more voice against new cable regulation: Jesse Jackson’s.
That’s right. Jesse Jackson, the founder of the Rainbow Coalition, thinks FCC Chairman Kevin Martin is going too far:
“There is virtually no political support from either progressives or conservatives for such pet policies as a la carte pricing, which would raise prices for consumers and hurt most programmers, or for the various ‘leased-access’ programs that will squeeze out channel space for minority-owned programmers,” Jackson said in comments earlier this week.
“Rather than work through the democratic process in Congress, a bureaucratic agency should not be using a 20-year-old-legal clause to implement wholesale policy changes that hurt consumers and hurt minority television programmers.”
And he’s right. Despite the rhetoric, regulation isn’t the friend of diversity — it more often suppresses it than fosters it.
Welcome to the deregulatory coalition, Rev. Jackson. You can sit over there, where Mr. Martin used to sit.
Well, it won’t happen, but it would be a Good Thing nonetheless. Case in point: Commissioner McDowell took on the current chairman’s plans for regulation of the cable industry in remarks before the Media Institute yesterday, saying:
“I have a lot of questions that need answering. 
Why is the FCC suddenly changing its evidentiary standard and methodology just for this one industry? How will this abrupt and radical departure affect other analyses and proceedings? Doesn’t this shift weaken arguments for updating the cross ownership ban? Does our proposed change affect our analysis of the proposed XM-Sirius merger? How do we reconcile decades of data showing more convergence and more competition among more delivery platforms with this sudden reversal? I am searching for credible answers to these and many other questions—thus far to no avail.”
He also defended the FCC’s moves to reform media ownership, ridiculing the idea that after 11 years of deliberation, it is rushing to judgment on this issue.
Good stuff.
Here’s the whole speech.
Chairman Kevin Martin’s attempt to assert broad – and virtually unlimited — powers over cable television has sparked a real imbroglio over at the FCC. The key question: has the cable industry reached the magic 70 percent penetration rate required to trigger new regulatory powers? Martin says yes, apparently using numbers from Warren Communications (the owner of Communications Daily). Warren Communications itself, however, has said its data shows no such thing. Fellow GOP commissioners Robert McDowell and Deborah Tate – apparently feeling a bit betrayed by Martin — on Thursday took the unusual step of writing directly to Warren Publishing for “any and all information” regarding the data.
Warren hasn’t responded yet, but that hasn’t stopped a handful of regulation supporters from weighing in in defense of the FCC’s attempted power grab. Among them: Free Press, the Media Access Project, Consumers Union, the Consumer Federation of America, AT&T…
Whoa! What’s AT&T doing in this motley group?
Continue reading →
Last week, the big news inside the Beltway was how FCC Chairman Kevin Martin was stepping up what many have labeled his “war on cable” by proposing still more regulations for the cable sector. Craig Moffett, a senior analyst with Sanford Bernstein & Co, summarizes the economic regs currently being proposed: “Over the past year, the Chairman has adopted an almost uniformly anti-cable stance on issues ranging from set-top boxes (CableCards), digital must carry requirements, cable ownership caps, video franchising rules, and the abrogation of exclusive service contracts with [apartment owners].” And in a short PFF paper last week, I also outlined the content / speech regulations that the Martin FCC has proposed for cable (as well as satellite and telco) operators.
As Jon Hemingway’s cover story in this week’s Broadcasting & Cable magazine points out, the FCC’s war on cable appears to now be having an impact in the stock market. Investors are turning against cable operators fearing that the regulatory reign of terror at the FCC will limit cable’s ability to respond to rising competitive threats. Here’s a summary of the bad news from the B&C story:
Continue reading →
EarthLink appears to be getting out of the muni wi-fi business for good. The company is at least is abandoning the major Philadelphia experiment it was in charge of. According to today’s press release:
“After thorough review and analysis of our municipal wireless business we have decided that making significant further investments in this business could be inconsistent with our objective of maximizing shareholder value,” said Rolla P. Huff, EarthLink president and CEO. “Accordingly, at this time, we are considering our strategic alternatives with respect to this business,” Huff added. EarthLink will seek to work closely with the municipalities in which it has operations as it considers these alternatives. The net book value of the assets attributable to EarthLink’s municipal wireless business is approximately $40 million.
A few years ago, many folks were telling us that muni wi-fi was like manna from heaven; the ultimate free lunch that would give us a broadband nirvana. As some of us predicted–reality often proves more complicated. Indeed, one lesson from this experiment is that demand counts. There was always a bit of “if-you-build-it-they-will-come” reasoning behind the Philly deal and other muni wi-fi proposals. But you can’t build a network without a customer base, and recent news reports indicated that demand was lacking.
Continue reading →
Comcast’s decision to limit Internet traffic from the peer-to-peer software BitTorrent would be against the law if Democratic presidential hopeful Barack Obama had his way, an aide to the Democratic Senator said Thursday.
In a conference call organized by the campaign for Sen. Obama, D-Ill., high-profile technology experts Lawrence Lessig, Beth Noveck and Julius Genachowski endorsed the technology and innovation agenda that Obama released on Wednesday. Also on the lines were three Obama aides, who declined to speak for attribution.
“What I find compelling about the Senator’s [stance] is a strong commitment to Net neutrality,” said Lessig, a law professor at Stanford University, referring to the notion that broadband providers be barred from favoring business partners with speedier Internet delivery.
Obama “addresses the problem of Net neutrality in a way that could actually be enforced,” said Lessig. By contrast, Democratic hopeful Hillary Clinton “can’t stand up for Net neutrality.”
Continue reading →
[James and Hance already commented on this issue, but here’s my take on the FCC opening another front in its ongoing “war on cable” … ]
Despite steadily increasing video competition and consumer programming choices, the Federal Communications Commission (FCC)–or at least current Chairman Kevin Martin–seems to be pursuing what many journalists and market analysts have described as a “war on cable.” As Craig Moffett, a senior analyst with Sanford Bernstein & Co, says, “Over the past year, the Chairman has adopted an almost uniformly anti-cable stance on issues ranging from set-top boxes (CableCards), digital must carry requirements, cable ownership caps, video franchising rules, and the abrogation of exclusive service contracts with [apartment owners].”
And Moffett is only summarizing the economic regulation that Martin’s FCC is currently pursuing against cable. Chairman Martin has also proposed the unprecedented step of imposing content controls on pay TV providers. He wants to extend broadcast industry “indecency” regulations to cable and satellite operators, even though the constitutionality of those rules is being questioned in court. And Chairman Martin has also suggested that “excessively violent” programming on pay TV should be regulated in some fashion. Finally, he has strong-armed cable operators into offering “family-friendly tiers” of programming even though there was no demand for them and consumers have shown little interest in them now that they have been offered.
And more cable regulation appears to be in the works. According to recent press reports, Chairman Martin is considering breathing new life into a little-known provision of the Cable Communications Act of 1984 known as the “70/70 rule.” Under the 70/70 rule, if the Commission finds that cable service is available to 70% of households and 70% of those homes subscribe, then the FCC can “promulgate any additional rule necessary to provide diversity of information sources.”
Chairman Martin apparently believes that cable has crossed both 70/70 thresholds and that comprehensive regulation of the cable industry is now warranted. What that means in practice remains to be seen, but it could include common carriage-like price controls on cable systems. The Wall Street Journal reports that a significant reduction (perhaps 75%) in the rates cable operators charge programmers for leased access might be the end result. In the long run, an FCC declaration that the 70/70 rule has been triggered could also lead to the imposition of some of the other regulatory proposals mentioned above.
Continue reading →
Kevin J. Martin, politically-savvy and a highly effective chairman of the Federal Communications Commission, has a strong free-market orientation. So why would the New York Times report that the FCC may be on the verge of enacting new regulation which would:
- Force the largest cable networks to be offered to the rivals of the big cable companies on an individual, rather than packaged, basis;
- Make it easier for independent programmers, which are often small operations, to lease access to cable channels; and
- Set a cap on the size of the nation’s largest cable companies so that no company could control more than 30 percent of the market?
Martin believes “[i]t is important that we continue to do all we can to make sure that consumers have more opportunities in terms of their programming and that people who have access to the platform assure there are diverse voices,” according to the New York Times article. In other words, regulators (i.e., philosopher kings) should intervene to improve on the free market.
There are already plenty of opportunities for independent programmers to lease access to spare cable channels. The independent programmers aren’t excluded from cable networks. Making it “easier” for independent programmers to lease access to cable channels, according to one report, is code for a government-mandated rate reduction of 75 percent.
Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.