• Cable Industry Is Feeding Alligators, Hoping To Be Eaten Last

    In the dog eat dog world of crony capitalism, it is not often you find an industry gnawing at its own leg but that is what some cable-tv lobbyists have chosen to do by endorsing a proposal by Sen. Jay Rockefeller (D-WV) and Sen. John Thune (R-SD) to force consumers to pay separately for broadcast television stations as part of their cable or satellite tv packages.

    The cable industry, with the support of many free market economists, has long warned consumers about the pitfalls and hidden costs associated with legislative and regulatory proposals that would force companies to offer cable channels in an à la carte pricing model as Rockefeller and Thune hope to do with broadcast channels.

    They have consistently and successfully argued that picking and choosing stations is not economically efficient and will ultimately lead to reduced choices and higher prices for consumers. When the Bush administration’s Federal Communications Commission proposed an à la carte pricing scheme, the American Cable Association (ACA) testified before the commission that the costs of implementing à la carte were a “financial impossibility.”

    Yet, now that the à la carte gun is pointed at broadcasters instead of the cable industry, ACA has become an enthusiastic supporter of it saying Sen. Rockefeller and Sen. Thune, “deserve the highest praise for offering a legislative proposal designed to advance the public interest in the receipt of over-the-air local broadcast stations from pay-tv providers.”

    This sudden shift in ACA’s position should be a red flag for conservatives. The economic tenets that underpinned ACA’s original arguments haven’t changed. The negative impact of government mandated “consumer choice” remains the same. The only thing that has changed is the economic benefit the government is proposing to give the cable providers that ACA represents.

    By invalidating the broadcasters’ retransmission rights and prohibiting market negotiations between distributors and content creators, the bill creates a substantial price break for cable and satellite providers. With lower costs and the continued ability to jack up rates for the rest of the bundled programming they offer, profits will rise at the expense of consumers who pay more while getting less.

    Despite the short-term economic benefits ACA’s support of the Local Choice act is imprudent and shortsighted. There is little moral authority or precedent for government intrusion into the product and pricing decisions for tv services. Enactment of the Rockefeller-Thune legislation would open the door for a cascade of populist sounding government mandates. The justification being used today will at a minimum be used to validate the imposition of à la carte programming for pay tv as well. It’s just a matter of time. After all, if consumer benefit demands the ability to choose between four major stations that offer locally relevant content, then surely it also demands that consumers be empowered to reject specialty channels offering advice on finding gold in Alaska, extreme couponing and preparation for doomsday.

    More immediately, the bill would inject the government into private market transactions by mandating that the FCC inject itself into what little negotiations remain permissible between content creators and tv providers to make and enforce their own “good faith” criteria. The bill even authorizes the FCC to determine whether or not broadcasters should be required to offer their content online against their own wishes.

    These same cable providers who today are supporting “Local Choice” will find themselves in a fight for their own life. It is clear that the industry feels like they have the political muscle to stick it to the broadcasters while fending off the same regulatory regime for themselves. Of course, it’s important to remember that ACA is a lobbying outfit, not a tv provider. So really there is only upside for them in that such a battle would be a full employment act for the hired guns of the cable world.

    As with all inside the beltway crony capitalist ploys, consumers end up footing the bill while a few well-connected corporatists get all the benefit. Forcing this new price structure on consumers and expanding the FCC authority to tip the scales in their favor might be a nice short-term boon to the cable industry but will do little to satisfy the needs or desires of TV customers.

    Roberto Escoban

    Roberto Escoban is the pen name of a conservative activist who spent 20 years working in Washington including a decade on Capitol Hill.

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