Facing blackouts and Higher Programming Costs, Consumers Lose Due to Congressional Inaction

Just last week, a 2-month long dispute over carriage fees between Cablevision and Tribune Company was settled.  The settlement brings to an end the blackout of Fox and other Tribune TV stations in the tri-state area during the World Series.  When disputes between broadcasters and cable companies like these crop up (and they do with regularity) it’s important to remember the impact these disputes have on consumers, and what causes the disputes to happen in the first place.

Blackouts like the one we just saw arise because of disagreements over retransmission fees.  Due to a series of laws implemented by Congress in the early 90’s, broadcasters have 2 options when negotiation the carriage of their channels by the cable operators.  In 1992, a law was passed by Congress that enacted something called must-carry.  Must-carry means that the broadcaster can force the cable operator to carry their channel (NBC, CBS, ABC, Fox) for free, without any money changing hands between the parties.

In 1994, however, a new law was passed that gave broadcasters another option—now as an option, they could opt-out of must carry and enter into negotiations with the cable company, forcing the cable operator to pay to carry their channels.  The broadcasters have the leverage in this situation, because the local broadcast channels have a product that the cable operators need and can’t get elsewhere (the cable operators can’t enter into agreements to carry a different broadcast affiliate if their local one won’t budge on price).  So, quite often, large sporting events (like the World Series) or popular television shows are used as leverage to get cable operators to cave to the demands of the local broadcasters.  So, broadcasters are put into the position of being able to demand higher prices, passing the increased costs onto consumers.

This situation might been acceptable 20 years ago, when the options for viewing and information dissemination were much more limited.  At that time, most people received their important announcements and news from the broadcast networks. But today, we’re inundated with information from cable news and the Internet, in addition to broadcast television and radio.

Under the current rules, cable operators are handcuffed by the rules and regulations passed by Congress and the FCC, giving the upper hand to broadcasters in these negotiations and making consumers pay dearly for what is broadcasted over the air for free. This is in contract to the negotiating atmosphere that exists between the cable operators and cable channels, where carriage fees are negotiated in an open market, free of the heavy hand of the government and its regulations.  In this latter scenario, consumers win.  The advantage given to broadcasters is no longer necessary given the wide availability of information sources for the average consumer.

The television market is changing.  Less than 10% still get their television over the airwaves.  More and more people are “cutting the cord,” relying on services such as Netflix and iTunes for their favorite television shows.  And recently, we’ve seen the success of many Internet-based channels springing up, with Huffington Post and The Blaze both launching Internet television networks within the last year.  The Blaze has found such success with its enterprise that they were able to secure it’s own channel on Dish Network, an incredible reversal of how cable channels usually get started.  

Blackouts and higher costs are the problem and free negotiations are the solution.  It’s time that Congress and the FCC pay attention to the changing marketplace and fix the messiness and poor conditions that we’ve seen in the broadcast television marketplace for the sake of consumers.

Zack Christenson is a digital tech writer for the American Consumer Institute

 

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