Why Rules Need to Change
The market has changed dramatically since 1992, but the rules governing broadcast television have stayed the same
- From the digital transition to the Internet revolution, there has been a tremendous innovation in how consumers view traditionally “free” over-the-air broadcast programming, while rules governing the industry have stayed the same.
- The explosion of new means of access available to consumers has also transformed the market landscape. Two decades ago most consumers had only one choice for pay TV service – cable, but today consumers have many choices, and alternative online TV distribution services are on the horizon.
- Broadcasters are increasingly making shows available online for free while demanding hefty retransmission fees from distributors for the same programming.
- The world has changed while the rules governing a large and vibrant industry have not. The FCC must change the broadcast television rules to protect consumers and keep up with the innovations and changes in the market.
The current system creates an artificial market that favors one industry over another
- The playing field is not level – the “Big 4”broadcasters – ABC, CBS, NBC and FOX- and their local station affiliates have a guaranteed monopoly for their must-have programming because of retransmission consent rules and other unique government-provided privileges.
- The existing negotiating environment is lopsided. There is only one option for shows consumers expect to be able to view, but fierce competition among distributors. This allows broadcasters to play distributors against each other in local markets while threatening service to consumers.
- The Office of Advocacy of the Small Business Administration has found that many small cable operators have little choice but to capitulate to the “take it or leave it” demands of bigger and better funded broadcasters. And the larger video distributors are in no better position to resist when broadcasters threaten to withhold their “must-have” programming.
Broadcasters are putting consumers in the middle during retransmission negotiations
- By timing the expiration of carriage agreements before big television events, broadcasters hold viewers hostage by threatening to shut off access to content in order to demand an extortion rate from distributors. FOX and ABC used this tactic earlier this year, creating anxiety and uncertainty in viewers on the eves of the Super Bowl and the Oscars. In early 2007, station owner group Sinclair followed through on threats to blackout the NFL playoffs from Mediacom customers. Sinclair again threatened to withhold the NFL playoffs from Mediacom customers in early 2010.
- Broadcasters disregard the inconvenience and costs they could cause for consumers when access is threatened, suggesting subscribers turn back the hands of time by buying “rabbit ear” antennas to pull in local stations or take time off of work to arrange installation from a different pay TV provider. Switching may not even matter, because the new provider may have a similar dispute in the future.
- To offset swelling retransmission fees, distributors will be forced to scale back capital investment and/or raise consumer prices. Most at risk are low income and elderly populations that rely on the entry TV packages and rural communities desperate for access to broadband Internet. Programming diversity also stands to suffer as independent programming and distributor-funded public access channels will face the chopping block if television providers continue to face expanding retransmission costs.