Sinclair Broadcasting Group has agreed to buy 21 regional sports
networks and Fox College Sports from Disney.
As predictably as a proverbial knee-jerk, some competitors
in the video marketplace quickly announced their opposition to the deal. Matt
Polka, CEO of America's Communications Association, a trade group representing
smaller cable operators and telecommunications providers, has already called on
the Department of Justice to reject the transaction.
I'll say right up front that I have questions regarding
whether the DOJ's Antitrust Division, at least when it comes to the
communications, information services, and video markets, appreciates the extent
to which ongoing transformations and convergences are altering the competitive
landscape so that traditional legacy product and market definitions no longer
hold.
I certainly don't doubt that those at the Antitrust Division
are acting in good faith. But I hope the Department will not lightly dismiss
the judicial rebuke it received when U. S. District Court Judge Richard Leon refused
its request to block the AT&T/Time Warner merger. The trial court's
decision, affirmed by the D.C. Circuit's recent
opinion in United States v. AT&T,
Inc., repeatedly faulted DOJ for refusing to credit the "real-world
evidence" of the "tectonic" changes occurring in the video
marketplace. Foremost among these changes is the quick rise of major online
video streaming services like those offered by Netflix, Amazon, Hulu, and the
like. And the court also took into account the extent to which digital web
giants like Google and Facebook increasingly are cutting into advertising
revenues heretofore garnered by traditional video distributors such as cable
operators and broadcasters.
Regarding a
current FCC proceeding to determine whether, pursuant to Section 623 of the
Communications Act, "effective competition" exists in particular
local video markets so as to relieve Charter from rate regulation, just last
week I said this in "The
Metaphysics of Video Competition":
"This one 'effective
competition' determination proceeding demonstrates yet again why Congress needs
to update the Communications Act. Whatever Congress may have been thinking when
it adopted the "effective competition" provision in 1992, it
certainly didn’t have in mind today's myriad – and still proliferating –
Internet video streaming services. I need not name them all here or say more
here about their competitive impact."
I understand that the FCC,
in the "effective competition" proceeding, is acting in the context
of the Communications Act's provisions which, aside from the outcome of any
particular proceeding, are in need of updating when it comes to regulations
applicable to the video marketplace. That's why I said:
"A good place at least
to start considering an update of the Communications Act video provisions is
Rep. Steve Scalise's deregulatory 'Next Generation Television Marketplace Act,'
first introduced in 2011. The bill made sense then and it makes even more sense
now, when the video marketplace is much more competitive today than it was
eight years ago."
But now back to the Sinclair-Disney
transaction and Sinclair's acquisition of the regional sports networks. I hope
DOJ will be cognizant of the extent to which consumers already have – and
increasingly so – choices available with regard to both video distributors and
video programs.
It's no surprise that there
will be claims of potential foreclosure, or diminishment of competition, by
those seeking to prevent consummation of a merger or acquisition of assets, or
at least to have conditions imposed. That's as sure a bet as wagering that the
sun will rise in the East tomorrow. Most often these claims come from
competitors, or those purporting to represent consumers, who forget that the
antitrust laws are intended to enhance consumer welfare, not protect
competitors.
One final note: It is likely
that the Antitrust Division will be importuned to interfere with the Sinclair-Disney
transaction based on the claim that the regional sports network programming somehow
is "must have" programming – presumably meaning, in this age of media
abundance, that a platform that doesn't offer the very same sports programming
at the very same time, and in the very same format, ipso facto is rendered non-competitive. No matter that there is
more sports programming available on more platforms than ever before.
In the context of commenting over the years on the FCC's program access regulations, in essence a
form of compelled speech that in and of themselves raise First Amendment
concerns, I have said that FCC enforcement actions relying on agency-defined
"must-have" categories of programming, such as sports networks,
amount to content-based speech controls.
Were the Department of Justice to base its actions on judgments
regarding whether particular programming is or is not "must have"
content, the First Amendment concerns are not materially different than they
are cross-town when the FCC engages in such content-based determinations. Absent
a video marketplace in which consumers' choices of viewing platforms and
programming are demonstrably shrinking, rather than expanding, I'd prefer to
leave the choice of what programs consumers "must have" to the
marketplace, rather than the government.
Such an approach would be better for consumers – and for
respecting the First Amendment as well.
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