Cable TV and the Collateral Damage from Local Choice

Senators Thune and Rockefeller are suggesting a proposal to require local TV broadcasting channels, such ABC and CBS, be offered on an “à la carte” basis to cable TV viewers. The idea, referred to as Local Choice, would allow consumers the option to pick and pay only for the TV broadcast channels they want, instead of having them offered as part of a basic cable TV package. By making TV programming optional, the plan hopes to end programming content negotiations between TV broadcasters and cable TV providers, thereby eliminating blackouts to cable TV viewers.

The idea is novel and the goal of eliminating programming blackouts on first appearance seems like a good goal, but the timing and collateral damage that could result suggests that the proposal is premature and needs to be part of a bigger legislative effort.

For one, Senator Thune should be concerned about how his proposal opens the doors to a slippery slope when juxtaposed to his positions on other technology policy issues.  For one, a number of free-market and technology policy experts have assailed the bill as being pro-big government and others see it as being inconsistent with the “ideals of constitutional government.”  The bill does not address other programming content costs or channels, such as ESPN or Discovery, and therefore appears to be targeting only TV broadcasters. This means that the proposal will not affect content negotiations with non-TV broadcasters and its will not prevent potential blackouts of these other content providers.

Another troubling issue is that the proposal appears to put Senator Thune in the same camp with net neutrality supporters, like Senator Rockefeller, thereby confusing Senator Thune’s views. For example, the proposal would make the cable network look like a “dumb pipe” that would skirt the need for private negotiations between cable companies and TV broadcasters, as well as remove cable TV’s involvement in pricing, packaging and content. As it pertains to TV broadcast channels, cable companies would simply be a conduit for this content, which makes the proposal sound a bit like the traffic regulations that net neutrality would create. In this way, the proposal is duplicitous and it aligns too closely with Senator Rockefeller’s views of applying common carrier regulations on communications networks.

Over the years, there have been calls to impose à la carte pricing regulations onto cable providers. The arguments against this regulation have included that à la carte pricing would reduce savings from economies of scale and robust packaging, which would lead to higher costs for consumers — so that buying less could ultimately cost more. Because, as mentioned earlier, the proposal only applies to broadcast TV stations, it could eventually open the door to more widespread à la carte pricing – exactly what the cable TV industry has fought to prevent, but in this instant appears to support.

In short, the bill does not completely give consumers choice, it does not address potential blackouts from non-TV broadcasters, and it flies in the face of providing network owners full flexibility to price, target and package consumer services. While is not necessarily a bad start and could be part of a broader policy discussion, the proposal is premature and incomplete.

So, what needs to be done? Policymakers need to look to addressing comprehensive communications reform, like the work and discussions already started by Congressmen Walden and Upton, instead of archaic patchwork solutions that only put another regulatory layer upon an existing one.

This is where Senator Thune’s focus should be – taking the time to deliberate and fully discuss more extensive communications reform and to look for ways to get regulators out of the business of refereeing negotiations, picking marketplace outcomes, managing network traffic, and deciding what consumers want. Congress needs to enact significant reforms across the video, telecommunications and Internet service marketplace, and not look for piecemeal solutions that keep old regulations in force.

Comprehensive reforms will take time, which makes this proposal premature. Proposals that apply only one of the many players in the dynamically competitive marketplace could inadvertently jeopardize much needed comprehensive reforms elsewhere down the road. That broader look is where the focus needs to be.

 

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