The Senate Commerce Committee held a hearing yesterday where a number of Senators as well as Julius Genachowski, the new Chairman of the Federal Communications Commission, did a lot of fretting about the state of the modern children’s television programming marketplace.  According to the Wall Street Journal, Senate Commerce Committee Chairman Jay Rockefeller (D-WV):

suggested that a “little red button” be required on TVs so that a child could push the button to find out how a show is rated. Democratic Sen. Mark Pryor of Arkansas agreed that a red button might help since parents often have difficulties figuring out which shows are appropriate for their children to watch.

Well, I have some good news for the Senators: There are already quite a few little buttons on every remote control made today, and at least one of those buttons can pull up an on-screen guide to get more program info! (Another of them can turn the TV off!) Moreover, the ratings for just about every program already appear at the beginning of each show, and sometimes in between. And you can find out plenty more online about every TV show under the sun if you care to look.  So, I’m not sure what that fuss is all about, and we certainly don’t need to mandate “little red buttons” on every TV set when program information can be found in so many other ways.

What is more troubling about all the hand-wringing taking place at the hearing, as well as the talk of reopening the Children’s Television Act of 1990 to potentially impose more content mandates on video programmers and distributors, is that: (1) there doesn’t seem to be much appreciation for just how much wonderful children’s programming is out there today compared to the past, and (2) there doesn’t seem to be much recognition of the serious First Amendment issues at stake when government gets involved in the messy business of regulating video programming.

On that first point, let me just reiterate what I have found after conducting an exhaustive survey of the market for children’s programming in my ongoing PFF special report, Parental Controls & Online Child Protection: A Survey of Tools & Methods.  I found that the overall market for family and children’s programming options continues to expand quite rapidly. Thirty years ago, families had a limited number of children’s television programming options at their disposal on broadcast TV.  Today, by contrast, there exists a broad and growing diversity of children’s television options from which families can choose. The list below highlights just some of the more popular family- or child-oriented networks available on cable, telco, and satellite television today. And this list continues to grow rapidly.

• ABC Family Channel (http://abcfamily.go.com)
• Animal Planet (http://animal.discovery.com)
• Anime Network (www.theanimenetwork.com)
• Black Family Channel (www.blackfamilychannel.com)
• Boomerang (www.cartoonnetwork.com/tv_shows/boomerang)
• Cartoon Network (www.cartoonnetwork.com)
• Discovery Channel (www.discovery.com)
• Discovery Kids (http://kids.discovery.com)
• Disney Channel (www.disney.go.com/disneychannel)
• Encore WAM!
• Familyland Television Network (www.familyland.org/content/Content.aspx?CategoryID=51)
• FUNimation (www.funimation.com)
• Hallmark Channel (www.hallmarkchannel.com)
• Hallmark Movie Channel (www.hallmarkmoviechannel.com)
• HBO Family (www.hbofamily.com)
• History Channel (www.history.com)
• KTV – Kids & Teens Television (www.ktvzone.com)
• Learning Channel (http://tlc.discovery.com)
• National Geographic Channel (http://channel.nationalgeographic.com/channel)
• Nickelodeon (www.nick.com)
• Nick 2
• Nick Toons (http://nicktoonsnetwork.nick.com/home.html)
• Noggin (www.noggin.com)
• N Channel (www.the-n.com)
• PBS (www.pbs.org)
• PBS Kids (http://pbskids.org/go)
• Science Channel (http://science.discovery.com)
• Showtime Family Zone
• Sprout (www.sproutonline.com)
• Starz! Kids and Family (http://www.starz.com/appmanager/seg/s?_nfpb=true&_pageLabel=starz_kids_family)
• Toon Disney (http://psc.disney.go.com/abcnetworks/toondisney)
• Varsity World (www.varsityworld.com)

Importantly, this list does not include the growing universe of religious / spiritual television networks. Nor does it include the many family or educational programs that traditional TV broadcasters offer. Finally, the list does not include the massive market for interactive computer software or websites for children.  All of this begs the obvious question: What more is it that policymakers want?

More offerings are always welcome, of course.  But, on a personal note, as the parents of two young kids (ages 5 and 7), my wife and I regularly struggle to sort through all the wonderful video programming options at our disposal.  We often find ourselves swimming through an ocean of choices available from our local broadcasters and multichannel video provider. Moreover, our kids are spending an increasing amount of time watching snippets of video via kid-oriented online search portals like KidZui and Glubble. Such online walled gardens offer a safe place for parents to find terrific online content for their kids.

I have to admit, all the choices my kids have today have left me a bit jealous!  I grew up in small central Illinois town with a couple of crummy (Iowa-based!) broadcast stations that were barely visible on our TV (and usually only when my Dad made me hold the antenna and stick my arms up in the air to get reception!) There was also one local cinema in town that usually showed old movies from the ‘50s and ‘60s that few kids cared to see.  And that was generally the extent of video choices for kids in our town.  Sure, the 1970s brought us Sesame Street as well as Mister Rogers (if that was your cup of tea).  Today, however, we still have those shows and much, much more.  Our kids now enjoy an unprecedented cornucopia of media alternatives and, contrary to what some policymakers would have us believe, many of them are extremely high-quality in nature.  My parents would have likely given anything to just have even one network as incredibly enriching as Noggin at their disposal in the ‘60s and ‘70s.  Instead, on the occasions that the TV had to become a babysitter and nothing worthwhile was on the tube, I usually ended up watching trashy soap operas.  (Don’t even get me started on “Days of Our Lives.” I could write a short history of the show’s 1975-1982 seasons!)

Speaking of trashy shows, there was a lot of talk at yesterday’s hearing about the “need to protect our children from harmful content,” as Sen. Rockefeller began the hearing by arguing.  But as I have shown in my parental controls report, not only are there more and better quality options to steer your kids toward today, but it is easier than ever before to steer them right to those preferred options and lock down everything else in sight.  As I concluded in that report:

there has never been a time in our nation’s history when parents have had more tools and methods at their disposal to help them decide what constitutes acceptable media content in their homes and in the lives of their children. […] parents now have [many tools and techniques] at their disposal to better control media content and raise their children as they see fit. That is not to say that media and communications technologies don’t continue to play a major role in our society and culture. But… parents have been empowered with tools, controls, strategies, and information, that can help them devise and then enforce a media plan for their families that is in line with their own values.

So, again, it must be asked: What is the problem here?

Finally, it should be noted that any effort by Congress or the FCC to tinker with video programming marketplace will eventually run up against serious First Amendment concerns and eventual court challenges.  In a previous session of Congress, before he became Chairman of the Senate Commerce Committee, Sen. Rockefeller aggressively pushed for expanded content controls, not just for broadcast television, but for cable and satellite platforms as well.  In a 2005 PFF report on Sen. Rockefeller’s “Indecent and Gratuitous and Excessively Violent Programming Control Act of 2005,” First Amendment attorney Robert Corn-Revere of the law firm Davis Wright Tremaine argued that efforts to expand the horizons of FCC regulation to cover more content and platforms “would be almost certain to fail a constitutional challenge.”  Likewise, in a 2007 PFF white paper, constitutional law expert Laurence H. Tribe of the Harvard Law School, noted that the old “it’s-for-the-children” rationale for such content regulation is exactly backwards:

the malleability of children—how easy it is to mold their minds and to influence them—counts against and not in favor of centralized governmental controls. One of the arguments that you will often find is, yes, it’s all very well to believe in free speech between consenting adults but we’re talking about kids here and their minds are like plastic and they are being molded and shaped and, therefore, we have greater power to protect them. Therefore, you should keep your hands off them because they are so easy to shape. No, no, no. The argument is not that kids are malleable and therefore, Big Brother should be empowered. The argument is that kids are malleable and, therefore, families should be empowered. Parental authority should be at the center of decision making.

Indeed. And, as already noted, parents have more tools and strategies to exercise that authority than ever before, as well as more programming options to choose from. Policymakers should be celebrating these modern media marketplace developments, not bemoaning them.  We are blessed to be living in the Golden Age of children’s video programming.

Ken Ferree and I just filed an amicus brief with the D.C. Circuit in what could be among the most important First Amendment cases involving economic regulation in years:  Comcast’s challenge to the FCC’s cap on the maximum size of a cable operator’s nationwide subscriber-audience.  While few may feel righteous indignation at limitations targeted at large corporations such as Comcast or Time Warner, the larger principle at stake here is deeply important: Will the First Amendment provide a meaningful check on what USC law professor Chris Yoo has called “architectural censorship” (i.e., so-called “structural” regulations that “have the unintended consequence of reducing the quantity, quality, and diversity of media content”).

In a nutshell, we argue that that:

1. The provisions of the 1992 Cable Act authorizing the FCC to impose a “cable cap” are outdated in world of media abundance and vibrant platform competition.
2. Because cable is no longer the unique “bottleneck” or “gatekeeper” that it was in 1992, these statutory provisions (not just the FCC’s 30% rule) must be subject to strict scrutiny under the First Amendment as a limitation on free speech.
3. Because there are “less restrictive means” of ensuring cable operators do not impede the flow of video programming to consumers, the court should strike down these provisions.
4. Even if the court upholds the statute, it should nonetheless strike down the cap issued by the FCC in December 2007 (30% of all Multichannel Video Programming (MVPD)  subscribers as based on an outdated model of the video marketplace.

I encourage you to read our brief (below).  I’ve provided a summary below, along with some additional commentary we just couldn’t cover under our 3500 word limit.

Strict Scrutiny.  Yoo’s article Architectural Censorship and the FCC is essential reading for anyone who believes that government regulations on the size and shape of the “soapbox” can have huge effects on speech itself.   Yoo argues that the First Amendment should check this kind of regulation–however “content-neutral” it might seem–under “strict scrutiny”, which requires that the government show that a regulation is the “least restrictive means” available for advancing a “compelling government interest.”  But Yoo ultimately concludes (pp. 713-718, PDF pp. 45-50) that, under existing precedent, most “architectural censorship will be effectively insulated from meaningful judicial review.”  Yoo explains that the Supreme Court’s 1983 decision in Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, “appeared to entertain the possibility of subjecting structural restrictions to strict scrutiny even in the absence of facial content discrimination or content-based motive.”  But in its 1991 Leathers v. Medlock decision, the Court “foreclose[d] any prospect that Minneapolis Star and its progeny would serve as a check on architectural censorship” by limiting the Minneapolis Star line of precedents to cases where “a statute of general application affects a small number of speakers.”  The Court reaffirmed this position in its 1994 Turner I decision, when it applied intermediate, rather than strict, scrutiny to the Cable Act’s “must-carry provisions,” which require nearly all cable operators to carry certain television broadcast signals.  Intermediate scrutiny requires only that important governmental interests that are furthered by “substantially related means.”

Unfortunate as the Leathers/Turner I line of cases is for those concerned about architectural censorship, the cable cap is exactly the sort of regulation that falls within the reduced scope of Minneapolis Star as “affect[ing] a small number of speakers” because, unlike the Cable Act’s must-carry provisions, the cap limits the speech of only the very largest cable operators.  So the question of whether the Court should default to intermediate scrutiny as it did in its 2000 Time Warner I decision (when the cap was first challenged) should turn entirely on the question of whether cable still has the “special characteristic” of “bottleneck” or “gateekeeper” power despite all the changes in the media marketplace since 1992 and even in just the last eight years.

The Modern Media Marketplace.  The subscriber limitation provisions of the Cable Act were intended to prevent cable operators from “unfairly impeding the flow of video programming.”  Yet each of the key premises behind these provisions has been disproven:

1. Increased horizontal concentration of the cable industry has, far from reducing media choices, been accompanied by an explosive growth in the amount and diversity of video content available to consumers.
2. The rate of “vertical integration” (i.e., ownership of cable programmers by cable operators), which Congress feared would cause cable operators to discriminate against unaffiliated programmers, has plummeted.
3. Cable’s share of the MVPD market has also plummeted dramatically, with the two DBS providers now sharing 1/3 of the MVPD market and representing the second and third largest MVPDs

Two charts say it all.  First, from Adam Thierer’s excellent book Media Metrics, the number of programming services (cable channels) has grown by nearly six-fold by 1992, while the rate of vertical integration has plummeted:

(That chart stops in 2006 (based on 2005 data) because the FCC still has not released the 2007 Video Competition Report, which it approved in December 2007.  Since then, Time Warner Cable has been spun off of Time Warner’s content empire, so the actual affiliation rate today is likely less than 10%.)

Second, cable’s share of the MVPD market has fallen from 95% in 1992 to ~64% today:

In 1992, when consumers had only a single MVPD option, cable might fairly have been considered a “bottleneck” or “gatekeeper.”  But today, every American has at least three MVPD choices (their local cable franchisee + two DBS operators), and can also subscribe to a Telco video service such as Verizon’s FiOS.  (“Over-building” where two cable operators serve the same area is rare.)

Internet Video.  We also describe how the availability of TV content online provides yet another distribution channel for programmers:

The last two years have seen growing numbers of Americans increasingly substituting consumption of online video for MVPD video and the Internet driving popularity of MVPD content, rather than vice versa.  But only in the last year, since the adoption of the [FCC’s December 2007 order issuing the 30% cap], has the large-scale delivery of television  content online become a reality, as large numbers of programmers have begun distributing increasing numbers of complete episodes and entire series through their own websites and/or through a new class of rapidly-growing Internet Video Programming Distributor (IVPD) websites such as Netflix, Hulu, Amazon Video on Demand, iTunes, Vuze, Sony Playstation Store, the Microsoft Xbox 360 Marketplace, Joost and Veoh.  These IVPDs already offer a staggering, and growing, library of currently-airing and archived content—as much as 90% of broadcast shows and 20% of cable shows.  These sites are supported by a growing number of set-top devices (e.g., Netflix Player by Roku, TiVo) and wildly popular game consoles (e.g., Microsoft Xbox 360, Sony PlayStation 3) that allow users to play IVPD content from broadcast and cable programmers on demand on their television, while TiVo allows users to seamlessly switch between IVPD, MVPD and OTA content.

The FCC’s decision to exclude Internet video from its analysis is hardly surprising when one considers that the economic model behind the new 30% cap comes from a 2005 study based on cable market data from 1984-2001 and that the last official data released by the agency about the video marketplace date to June 2005.  But nine months later, the agency waxed ecstatic about the promise of IVPDs when doing so supported Kevin Martin’s attempts to enforce the FCC’s non-binding 2005 “Net Neutrality” policy statement:

In August 2008, the FCC even cited [the rapid emergence of IVPDs] in support of its claim of jurisdiction over Comcast’s broadband network management practices (because of alleged harm to an IVPD that distributes content through peer-to-peer file sharing):  “consumers with [broadband] service will have available a source of video programming (much of it free) that could rapidly become an alternative to cable television.”  But the immediate competitive impact of IVPDs comes not from the fact that some IVPD users are already canceling their MVPD subscriptions, but in the ease with which IVPDs can supplement an MVPD subscription—because most IVPDs are free, while those that charge for content do so on a per-episode/show basis.  Furthermore, IVPDs have little—if any—incentive not to offer a particular program because they are not subject to the same capacity constraints as MVPDs.  Thus, even if IVPD video consumption remains relatively small in its early years, IVPDs already offer programmers a strong alternative distribution channel capable of reaching all broadband users.

Less Restrictive Means. Of course, the fact that cable no longer has a special characteristic of gateekeeper or bottleneck power does not automatically render the Cable Act’s subscriber limits provisions unconstitutional; this merely means that the government must show that no less restrictive means are available to satisfy a compelling government interest.  We suggest a variety less restrictive means that could ensure competitive video distribution and programming markets.  These include dispute resolution assisted by the FCC, enforcement of existing antitrust laws, and crafting “special obligations on cable operators with more than 30% of the MVPD market to ensure that they do not unfairly impede the flow of video programming.”

Challenging The FCC’s Rule. Besides attacking the statute, we argue that the 30% cap imposed by the FCC last year is even more obviously unconstitutional than when the D.C. Circuit struck down the same limit seven years ago in Time Warner II. To many lay observers, this argument may seem like a “no-brainer” given how much more competitive the video marketplace is than it was in 2001.  But one must understand that when the Court struck down the 30% cap the first time, it did so on the grounds that the FCC’s own rationale justified not a 30% cap but a 60% cap.  The FCC had decided that the average video programmer (network) needed an “open field” of 40% of the MVPD market to be viable.  The FCC leapt from that conclusion to a 30% cap so that even if the two largest cable companies denied carriage, the programmer would still have the required 40% “open field.”  The court found that there was no evidence that the leading two cable operators would collude to deny carriage and that the statute did not “protect programmers against the risk of completely independent rejections by two or more companies.”  In other words, the purpose of the statute was not to guarantee carriage even if, for example, a cable operator decided (exercising the same constitutionally-protected “editorial discretion” enjoyed by all media) spend part of its limited system capacity carrying a network with questionable appeal, or to raise subscription rates to cover the marginal cost of carrying the network.

But the FCC has since come up with a new “open field” model that the court must consider anew.  This time, the model more clearly supports a 30% cap–but only if one accepts the premises underlying the model and the accuracy of the data put into the model, which we do not.  We argue that their model is “based on flawed assumptions about the nature of competition for video programming” and is thus incapable of “accurately reflect[ing] cable’s present (or future) bottleneck power.”

Click the button at the top right of Scribd’s handy iPaper display to switch to full page display of the brief–or click on the top left to download the PDF itself.

PFF Amicus Brief – Cable Ownership Cap http://documents.scribd.com/ScribdViewer.swf?document_id=8630011&access_key=key-2obr4z2ohtozi1gabbay&page=1&version=1&viewMode=

So, if Tim Wu’s thesis is correct that the broadband marketplace is “a cartel,” should we be reading headlines in today’s Wall Street Journal and CNET News.com like this: “Price War Erupts For High-Speed Internet Service” and “Broadband Price War Brews“? From the WSJ story:

The battle between cable and phone companies to sign up new customers for high-speed Internet service is heating up, creating fresh opportunities for consumers to cut their bills. […] While the most generous offers are coming from the phone companies, some analysts expect cable companies will also become more aggressive in their own promotions as they compete to retain customers.

Geez, if that’s a cartel, give me more of them!