Tuesday, September 25, 2007

Media Ownership Questions

The FCC just held another in a series of public hearings on media ownership, this time in Chicago. I am struck by the opening statements of Commissioner Michael Copps and Chairman Kevin Martin.

I expect Commissioner Copps to carry on his campaign declaiming the lack of diversity in our media. No surprise here in his statement. He says there are many critically important issues troubling America right now –“Iraq, finding and keeping good jobs, making sure families have health insurance, educating our kids, creating equal opportunity.” He says all of these issues “are increasingly being funneled through the filter of big media” and “might just benefit from a little more diversity and competition.”

Questions for Mr. Copps: Which of the issues you identified do you believe are not being addressed in the media today? Which specific issues do you believe are not being addressed in a way in which a diversity of views is being presented? Which ones do you believe are being presented in a way that suppresses what you call diversity of viewpoint? Iraq? Job? Health Insurance? What specific viewpoints on the issues you identified do you believe are not available because of what you claim is a lack of diversity? On the issues you identified, do you believe “liberal” viewpoints are not available? Or, are you troubled that “conservative” viewpoints are not available to the American people? Is it possible that in your zeal to regulate in ways that, in your view, ensure “fairness” in the media that you are “filtering” out the incredible diversity of views available to the American people through their national and local newspapers, magazines, radio and television broadcast stations, 300+ channel cable and satellite television services, satellite radio, the Internet, and so on?

I was disappointed to see the statement that Chairman Martin issued. He failed to use the hearing as an opportunity to educate concerning the way in which today’s media environment is incredibly –in the truest sense of the word– more diverse than it was 30, 20, even 10 years ago. He could have used the forum --should have used the forum-- to articulate why, in light of the technological and marketplace changes that have occurred creating the abundance and diversity of information available to the American people, the FCC’s current media ownership restrictions are sadly out of date. Instead, Chairman Martin used the occasion to argue for more media regulation.

Mr. Martin once again argued for cable a la carte regulation, this time in these terms:

"Eliminating tying and giving consumers more choice would be an important step toward leveling the playing field between independent programming voices – those not affiliated with the large broadcast, cable and satellite distributors – and competing channels that are owned by cable and satellite. Under the current system, many cable and satellite-owned networks are bundled into the offerings not necessarily because viewers are demanding them, but because the distributor has a financial interest in maximizing their distribution. Under a system in which viewers do the choosing, those channels that do not benefit from a corporate parent will be able to attract viewers on a more equal footing." (Emphasis added.)

Then Mr. Martin added:

"But you don’t have to take my word on it. In a joint letter to the U.S. Congress Consumers Union, Consumer Federation of America, Free Press and Communications Workers of America said it the best: 'Cable companies act as gatekeepers over the programming allowed into the expanded basic package, preventing independent content producers from reaching viewers. By allowing consumers to vote with their wallets rather than forcing them to buy channels they never watch, the marketplace will responding by providing more diverse and higher quality programming that consumers demand.'”

Take my word for it. There is a problem, one that runs deeper than just an irony, with a supposedly free market-oriented FCC Chairman relying on CU, CFA, and Free Press as authority on communications policy matters. Like Commissioner Copps, these groups have an entrenched pro-regulatory mindset and an unshakeable view that the current communications marketplace is dominated by old-fashioned monopoly “gatekeepers,” rather than characterized by an increasingly vigorous competitive dynamism.

It makes a difference, or ought to, as to which view of the marketplace you hold as to whether you even would consider, apart from First Amendment considerations, imposing a la carte mandates on cable and satellite operators. If cable or satellite operators could exercise monopoly power, there might be a legitimate concern about whether they were leveraging their market power as video distributors to deny consumers access to programming content produced by unaffiliated firms. But note that Chairman Martin does not rest his anti-bundling campaign on an assertion that the market for video programming distribution is not competitive. Even CU, CFA, and the Free Press, at least in the statement relied upon by Mr. Martin for authority, do not make that assertion. They simply say that “cable companies act as gatekeepers over the programming allowed into the expanded basic package.” No kidding. Just as the Washington Post and the New York Times act as gatekeepers over the material allowed into their newspapers and Time and Newsweek act as gatekeepers over the content allowed in their magazines and the Free Press and Consumers Union act as gatekeepers over the material allowed on their websites. The fact that cable operators act as “gatekeepers” over the product they offer for sale to the American public is true enough, but unremarkable and irrelevant.

When considering consumer choice, ignoring the competitive realities of the marketplace is a big mistake. True enough, in some theoretical sense, and at least for some transient period of time, if the government were to mandate that all cable channels must be offered on an a la carte basis, consumers might have more choice. (This assumes, of course, that the government controlled the price of individual channels to ensure that the choice is “meaningful” based on the government’s inevitable assessment of what consumers are willing and able to pay for whatever channels they would wish to choose individually. And I say “transient” because, unless the government is going to require cable operators to continue to carry channels that, because of low subscribership, are uneconomic to carry on a stand-alone basis, the number of individual channels now available to subscribers actually may diminish, substantially curtailing consumer choice.)

If the video programming marketplace is competitive, cable and satellite operative will have every incentive to satisfy consumer demands. They will do this with programming regardless whether it is independently-produced or produced by an affiliated entity. They will bundle programming in packages —or unbundle programming and make it available on some a la carte basis— in a way that gives them a competitive edge by satisfying consumer demand.

In 2006, in the FCC’s most recent in its series of annual Video Competition reports, the FCC stated: “The market for the delivery of video programming services is served by a number of operators using a wide range of distribution technologies.” Non-cable providers—the two satellite television providers, the telephone companies, and alternative broadband providers—now have approximately a third of the multichannel video market, considerably more than only a few years ago. And the share of the non-cable providers has been growing steadily. Moreover, the most recent Video Competition report indicates by 2005 only 22% of cable networks were owned by cable operators, whereas in 1992 48% of the national programming services were vertically integrated.

So, some questions for Mr. Martin: Even assuming for present purposes that the video services segment is separate from the broader broadband services marketplace, and despite the findings in the Commission’s own recent Video Competition reports, do you believe that the video marketplace is better characterized as competitive or monopolistic? If you believe the marketplace is better characterized as competitive, do you still believe the government can do a better job determining which business models satisfy consumer demand than the service providers? Like Mr. Copps, do you believe the American people suffer from a lack of diversity in the viewpoints available to them through the media?