Friday, March 30, 2012

A Truly Free Market TV Marketplace

The American Conservative Union is perfectly free, of course, to take whatever public policy positions it wishes to take. But it should not feel free to suggest a marketplace is free when, in fact, it is heavily regulated. That is what the ACU has done in a letter opposing the deregulatory "Next Generation Television Marketplace Act" introduced in the Senate by Sen. Jim DeMint and in the House of Representatives by Rep. Steve Scalise.

As I said in a blog shortly after its introduction, the Next Generation Act would "eliminate the obsolete regulatory regime in which the government requires that multichannel video operators 'must carry' certain kinds of channels with particular kinds of program content, restricts the number and kinds of media outlets that may be commonly owned, and establishes a compulsory license regarding retransmission of certain kinds programming by cable operators, all the while offending free market and free speech principles."

Indeed, the DeMint-Scalise bill, premised on the fact that the video marketplace now is indisputably competitive, is so consistent with free market principles that the blog in which I singled it out for special mention was lovingly entitled: "Hayek, Liberty, and the Communications Policy Reform Agenda."

The ACU objects to the fact that the Next Generation Act would eliminate the "retransmission consent" regime in which cable companies and broadcasters negotiate over the right of the pay-TV providers to use the local broadcaster's signal – assuming the broadcaster has not exercised its statutory "must carry" right to elect to have the cable operator carry its signal without compensation. It is true that there is an element of a market negotiation in the current retransmission consent regime, which is why, I suppose, that the ACU calls it a "marketplace." But in light of all the various legacy laws and regulations that together overlay the video marketplace – must carry, network non-duplication and syndicated exclusivity, compulsory licensing, and others -- the retransmission regime operates in the overall context of an "unfree" market.

I explained all this back in October 2010 in a Perspectives piece entitled, "Broadcast Retransmission Negotiations and Free Markets," and the Mercatus Center's Adam Thierer also did a very nice job of doing so in his blog posted yesterday.

One statement in the ACU letter bears particular mention because it gets to the heart of the matter. The ACU says, "[b]y stripping away the right to compensation for the use of the signal the government would be tipping the scales heavily to the side of the pay-tv companies." This is not true, of course. If the Next Generation Act were to be adopted, all of the legacy – and, now, hopelessly outdated – regulations, including the compulsory license that benefits cable companies, would be eliminated. Broadcasters and pay-TV providers then would negotiate for carriage rights in a true free marketplace. Broadcasters would, of course, continue to be paid for carriage of their signals – unless they choose to withhold the carriage rights because they don't like the amount of compensation offered.

In my October 2010 Perspectives piece I said this:

"At the Free State Foundation, we aspire to play second-fiddle to no one in favoring unfettered bargaining between private parties in a true competitive, free market context. Private bargaining, in which the parties know their own interests, and can contract freely to place a market value on their interests, benefits consumers more than a regime in which government substitutes its judgment for that of the private parties and handicaps the negotiations. But, at FSF, we know a free market when we see one. And under the existing legal and regulatory regime, retransmission consent negotiations simply don't take place in a free market setting."

Because I know a free market when I see one, I commend Senator DeMint and Rep. Scalise for introducing the "Next Generation Television Marketplace Act." The bill certainly represents the direction in which policy needs to go.