Wednesday, November 17, 2010

Broadcasters and Cable Operators: Hypocrites on the Hill

Broadcasters and cable operators are facing off today in hearings at the U.S. Congress over compensation for broadcast retransmission rights and the ability of broadcasters to withhold their programming from cable, satellite and IPTV service providers. The broadcasters are being represented by Fox/News Corp. and Univision, and the cable operators by Cablevision and Time Warner Cable.

Today's hearings were triggered by the standoff between Fox and Cablevision that led to Fox's television stations and most of its cable channels being unavailable to Cablevision subscribers for almost two weeks. The broadcasters, led by Chase Carey of News Corporation, want the government to keep out of the negotiations and impose no requirements for binding arbitration. The cable operators want broadcasters to be required to make their programming available so long as negotiations are continuing, and want binding arbitration at a minimum, if not outright controls on the prices that broadcasters can charge for retransmission rights.

Let's take the broadcasters' side first. They don't want any government interference in or controls on their negotiations. However, their right to set prices for and control retransmission of their programming was established by the U.S. Government in the 1996 Telecommunications Act. Prior to that, they had no choice but to provide their programming to any cable operator who wanted it and was willing to pay the U.S. Copyright Office for the right to use it. If the government hadn't "interfered", broadcasters wouldn't have the rights that it doesn't want the government to interfere with.

In addition, other than a modest fee for a license issued by the U.S. Government, broadcasters don't pay a penny for the bandwidth that they use. If they had to pay the true market value for the bandwidth they use, broadcasters might have a stronger argument, but they're getting the bandwidth that makes their businesses possible for free.

Now, consider the cable operators. The rates that consumers pay for cable service have been going up steadily for years, faster than the rate of inflation, even before the current round of retransmission negotiations. Cable operators have managed to rid themselves of most local controls over their pricing, and they steadfastly refuse to implement a la carte pricing, which would allow consumers to pay for only the channels that they want to watch. The result is that cable (as well as satellite and IPTV) subscribers are forced to pay for dozens of channels that they never watch and wouldn't miss if they weren't available.

Broadcasters want the U.S. Government to subsidize their bandwidth and give them the right to charge for their programming, but they don't want government interference in their negotiations with cable operators. Cable operators plead poverty but have been raising rates for years, and refuse to give their customers the right to pay for only the channels that they want to watch. Both sides are hypocrites.
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