The NFL's campaign to enlist Hill folks to pressure Comcast and Time Warner to carry the NFL network on terms other than those reached by voluntary negotiations in the marketplace is an exhibition of sheer chutzpah. (The classic definition of the Yiddish chutzpah is that given by Leo Rosten: "That quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.") Broadcasting & Cable reports that yesterday another group of legislators urged FCC Chairman Kevin Martin to impose some type of arbitration mechanism on cable program carriage disputes. This follows NFL Commissioner Roger Goodell's proposals to the same effect for mandating "baseball-syle" arbitration to settle the carriage issues.
I wrote here last week in "Peace, Prosperity, and the NFL Network" that I did not understand why politicians "would take time to intervene in a dispute the marketplace is perfectly capable of resolving in a way that maximizes consumer welfare -- at least until the weighty national issues of peace abroad and prosperity at home have all been resolved to everyone’s satisfaction." A week later, I still don't understand why some politicians think they need to inject themselves into a dispute that ought to be settled in the marketplace by private negotiations. Surely there must be more important work for the legislators to do in areas where the government has a legitmate role to play. Surely the FCC has more important work to do.
Back to chutzpah: According to Communications Daily [subscription required], in his latest letter to Time Warner Cable CEO Glenn Britt, the NFL's Goodell states: "The objective is to have a neutral third party determine the price and tier for NFL Network distribution...We view it as a way to make sure that your customers can view our programming on fair terms."
If the NFL thinks it is so important, so much a matter of the national interest, that all Americans be able to watch its games it can opt to have them carried on a broadcast network. Presto! Problem solved.
With an antitrust exemption already in hand, short of a willingness to have itself declared a traditional "essential facility," perhaps on the theory the NFL is "essential to maintain the American way of life," the NFL should quickly back off its full court press to engage politicians in the business of deciding carriage terms. If the NFL keeps it up, at some point the league may convince the politicians that the NFL should be regulated as a public utility "in the public interest."
As I said last week, with competition now the rule among video providers, private negotiations in a marketplace setting are perfectly capable of resolving disputes between the owners of programming, including "high value" programming, and the owners of the facilities used to distribute such programming. Back to chutzpah. For Goodell to say to Time Warner that he views arbitration as a way "to make sure that your customers can view our programming on fair terms," well, that takes chutzpah. Why does Goodell think he knows more about what will best serve Time Warner's customers than does Time Warner? In today's competitive video marketplace, you can be sure that Time Warner, and Comcast too, are attentive to the desires of their customers.
In this instance, one of the customer desires that the cable operators are probably attending to is not overpaying for NFL programming that they perceive may be desired by a certain segment of their customers, but not by all. The politicians ought to let them tend to this business themselves and reject the NFL's pleas for government intervention.
Friday, December 21, 2007
Wednesday, December 19, 2007
Maryland's Looming Employee Benefits Deficit
In a commentary in the Baltimore Sun on August 30 of this year, I warned that, despite Maryland’s looming budget deficit of $1.5 billion, “almost no attention has been paid to unfunded health benefit liabilities for government employees that will cost the state billions of dollars into the future.”
Now comes the Washington Post story on December 19 reporting on a new study conducted by the Pew Charitable Trust Center for the States which calculates the unfunded liabilities owed by the states for retirement and health care benefits for state employees.
Note this at the outset of the story:
“Maryland, which has about 90,000 state employees, is facing a particularly high liability for its health insurance promise, $14.5 billion, compared with the $2.3 billion that Virginia owes its 100,000 employees, according to the report released yesterday. The difference is that Maryland is more generous to its retirees than Virginia is, researchers said.”
With roughly the same number of employees, the difference in the size of the liability for benefits between Maryland and Virginia is huge, and not in the direction that inspires confidence in Maryland’s fiscal discipline. The General Assembly just completed a special session to deal with the state’s budget deficit without taking any meaningful steps to address the huge projected budget liability attributable to benefits promised to public sector employees.
A state official is quoted in the Post story to the effect that the Pew study failed to account for $100 million the state put away this year to cover public employee benefit expense. This is $100 million is a small fraction of the estimated $14 billion in liability.
The official is also quoted to the effect: “We’re trying to figure out what we should do,” noting that retiree benefit cuts are likely to be seen as part of a solution.
The governor and General Assembly do need to begin to take seriously the task of figuring out what they should do about this huge unfunded liability. The figuring will require a commitment to fiscal discipline, especially on the spending side of the equation, which, more often than not, has been lacking in Annapolis.
Now comes the Washington Post story on December 19 reporting on a new study conducted by the Pew Charitable Trust Center for the States which calculates the unfunded liabilities owed by the states for retirement and health care benefits for state employees.
Note this at the outset of the story:
“Maryland, which has about 90,000 state employees, is facing a particularly high liability for its health insurance promise, $14.5 billion, compared with the $2.3 billion that Virginia owes its 100,000 employees, according to the report released yesterday. The difference is that Maryland is more generous to its retirees than Virginia is, researchers said.”
With roughly the same number of employees, the difference in the size of the liability for benefits between Maryland and Virginia is huge, and not in the direction that inspires confidence in Maryland’s fiscal discipline. The General Assembly just completed a special session to deal with the state’s budget deficit without taking any meaningful steps to address the huge projected budget liability attributable to benefits promised to public sector employees.
A state official is quoted in the Post story to the effect that the Pew study failed to account for $100 million the state put away this year to cover public employee benefit expense. This is $100 million is a small fraction of the estimated $14 billion in liability.
The official is also quoted to the effect: “We’re trying to figure out what we should do,” noting that retiree benefit cuts are likely to be seen as part of a solution.
The governor and General Assembly do need to begin to take seriously the task of figuring out what they should do about this huge unfunded liability. The figuring will require a commitment to fiscal discipline, especially on the spending side of the equation, which, more often than not, has been lacking in Annapolis.
Thursday, December 13, 2007
Peace, Prosperity, and the NFL Network
In one sense it (almost, but not really) reassures me to know Sen. John Kerry is seeking to intervene in the dispute between the NFL Network, on the one hand, and Comcast and Time Warner, on the other, regarding the carriage of the NFL Network’s games on the cable operators’ systems. The NFL Network already is carried on the cable operators’ sports package tier for which subscribers pay an extra fee, but the league wants to have its package of a few selected football games carried on the lower-priced basic expanded tier.
According to a Broadcasting & Cable report, Sen. Kerry has called for a meeting between high-level Comcast, Time Warner, and NFL Network executives at which he proposes to mediate the carriage dispute. The sense in which Sen. Kerry’s efforts (almost, but not really) reassure me is that I could be lulled into supposing all the issues surrounding the Iraq war, climate change, health care, the subprime lending mess, and even the overall economy have been resolved. After all, these are the weighty issues that usually preoccupy Sen. Kerry. If he has time to worry about whether NFL Football games are carried on one cable tier or another, then perhaps the country is in much better shape than he usually portrays it to be.
The sense in which I am not reassured is wondering why Sen. Kerry thinks the government, in this instance in the person of a senior member of the Senate Commerce Committee, should intervene in this dispute between the football league and the cable operators. Doesn’t Sen. Kerry understand that, ultimately, someone has to pay for the NFL’s high-priced programming (unless the government decides to subsidize it, or, perhaps as a matter of the national interest, simply nationalize the National Football League)? Doesn’t Sen. Kerry understand that the NFL already enjoys a significant government benefit in the form of an exemption from the normal operation of the antitrust laws?
In this case, Comcast has made a business judgment that those football fans who desire to watch the extra NFL games should pay more so that the larger body of cable subscribers who don’t value watching these particular selected games as much won’t be burdened with paying the higher costs. This may or may not be a sound business judgment, or one that stays the same for all time. But Comcast’s decision surely is a business judgment about the use of its property that ought to be left to the marketplace. It is a decision that the private sector parties should be left free to negotiate without Sen. Kerry (or any other government official) intervening. Such government intervention, even if initially under the rubric of simple mediation, almost inevitably leads to coercion of one side or the other.
I understand that Sen. Kerry's interest here is that he may believe it is of paramount national interest that all Americans be able to watch -- as cheaply as possible -- the New England Patriots make their stretch run to a potentially undefeated season. If the NFL wishes, on its own accord it could resolve Sen. Kerry's Patriots' problem by moving the Patriots' game to broadcast TV and replacing it on the NFL Network with another game. But instead of doing this, what the NFL wants to do, if it can, is to enlist the government in putting pressure on Comcast and Time Warner so that the league can enrich itself as much as possible at the cable operators’ expense. In the league’s eyes, why be satisfied with an antitrust exemption?
What I don’t understand is why Sen. Kerry, or any other government official, would take time to intervene in a dispute the marketplace is perfectly capable of resolving in a way that maximizes consumer welfare -- at least until the weighty national issues of peace abroad and prosperity at home have all been resolved to everyone’s satisfaction.
According to a Broadcasting & Cable report, Sen. Kerry has called for a meeting between high-level Comcast, Time Warner, and NFL Network executives at which he proposes to mediate the carriage dispute. The sense in which Sen. Kerry’s efforts (almost, but not really) reassure me is that I could be lulled into supposing all the issues surrounding the Iraq war, climate change, health care, the subprime lending mess, and even the overall economy have been resolved. After all, these are the weighty issues that usually preoccupy Sen. Kerry. If he has time to worry about whether NFL Football games are carried on one cable tier or another, then perhaps the country is in much better shape than he usually portrays it to be.
The sense in which I am not reassured is wondering why Sen. Kerry thinks the government, in this instance in the person of a senior member of the Senate Commerce Committee, should intervene in this dispute between the football league and the cable operators. Doesn’t Sen. Kerry understand that, ultimately, someone has to pay for the NFL’s high-priced programming (unless the government decides to subsidize it, or, perhaps as a matter of the national interest, simply nationalize the National Football League)? Doesn’t Sen. Kerry understand that the NFL already enjoys a significant government benefit in the form of an exemption from the normal operation of the antitrust laws?
In this case, Comcast has made a business judgment that those football fans who desire to watch the extra NFL games should pay more so that the larger body of cable subscribers who don’t value watching these particular selected games as much won’t be burdened with paying the higher costs. This may or may not be a sound business judgment, or one that stays the same for all time. But Comcast’s decision surely is a business judgment about the use of its property that ought to be left to the marketplace. It is a decision that the private sector parties should be left free to negotiate without Sen. Kerry (or any other government official) intervening. Such government intervention, even if initially under the rubric of simple mediation, almost inevitably leads to coercion of one side or the other.
I understand that Sen. Kerry's interest here is that he may believe it is of paramount national interest that all Americans be able to watch -- as cheaply as possible -- the New England Patriots make their stretch run to a potentially undefeated season. If the NFL wishes, on its own accord it could resolve Sen. Kerry's Patriots' problem by moving the Patriots' game to broadcast TV and replacing it on the NFL Network with another game. But instead of doing this, what the NFL wants to do, if it can, is to enlist the government in putting pressure on Comcast and Time Warner so that the league can enrich itself as much as possible at the cable operators’ expense. In the league’s eyes, why be satisfied with an antitrust exemption?
What I don’t understand is why Sen. Kerry, or any other government official, would take time to intervene in a dispute the marketplace is perfectly capable of resolving in a way that maximizes consumer welfare -- at least until the weighty national issues of peace abroad and prosperity at home have all been resolved to everyone’s satisfaction.
Friday, December 07, 2007
Burying Communications Law Relics
Rep. Marsha Blackburn introduced a bill yesterday that would bury a relic of communications law that may have made sense when adopted but no longer does. The Consumer Freedom of Choice in Cable Act would repeal the FCC's authority to impose new regulations on cable operators under the so-called 70-70 provision of Section 612(g) of the Communications Act. Under this provision, the FCC is given discretion to impose additional regulations if it finds cable is subscribed to by 70% of the households to which it is available. Reps. Edolphus Towns and Joe Barton are co-sponsors.
A good case can be made for comprehensive reform of our communications laws in a way that replaces the current market-distorting techno-functional regulatory regime with one based on post hoc determinations grounded in competitive marketplace realities. But, in the meantime, there is something to be said for reform one step at a time, especially with repsect to a measure that has been as contentious as the 70-70 rule.
The way the brouhaha evolved in the last two weeks over whether the FCC should, or could, find that the 70-70 test was met did not do the agency much credit. And the truth is that it never should have happened. Despite the different and ambiguous ways in which the data may be constructed and interpreted, everyone knows that cable operators face vigorous competition in the video segment of the larger broadband market from two satellite providers, and, increasingly, from the telephone companies. Cable's share of the video segment has been declining, not increasing. Rep. Blackburn's bill, if enacted, would ensure that this or a future FCC doesn't use the 70-70 rule as a basis to impose new regulations on the cable industry at a time when the agency should be adhering to the agency policy pronouncement adopted five years ago: Broadband operators, regardless of the technology platform employed, should be subject to a "minimal regulatory environment."
The statutory provision that Rep. Blackburn's bill would repeal authorizes the FCC to impose additional regulations, even assuming that the 70-70 finding were made, only if "necessary to provide diversity of information sources." In 1984, when the statute was enacted, policymakers may have had a legitmate concern about the availability of a diversity of information sources. In today's environment of media abundance, it is fanciful to suggest there is a lack of information diversity.
Rep. Blackburn has a good understanding of the difference between the media and communications environment now and then. She delivered an excellent Keynote Address at the recent Free State Foundation/Institute for Poilicy Innovation communications policy conference, and I commend the full text to you. But note this line which presages her action on the 70-70 rule: “It should be the free market that decides what works and what does not work, not government intrusion. And, as the process unfolds, it is going to be critical for the United States Congress and for the Commission to hold the line on light touch regulation. And to resist the urge to unbundle what is already working in the free market system.”
Repealing the provision giving the FCC authority to impose additional regulation on cable providers makes sense in today's competitive broadband environment. And taking the free market-oriented philosophy embodied in Rep. Blackburn's keynote address and making it central to an ongoing effort to envision a new competition-centered communications law that puts marketplace realities at its core also makes sense.
A good case can be made for comprehensive reform of our communications laws in a way that replaces the current market-distorting techno-functional regulatory regime with one based on post hoc determinations grounded in competitive marketplace realities. But, in the meantime, there is something to be said for reform one step at a time, especially with repsect to a measure that has been as contentious as the 70-70 rule.
The way the brouhaha evolved in the last two weeks over whether the FCC should, or could, find that the 70-70 test was met did not do the agency much credit. And the truth is that it never should have happened. Despite the different and ambiguous ways in which the data may be constructed and interpreted, everyone knows that cable operators face vigorous competition in the video segment of the larger broadband market from two satellite providers, and, increasingly, from the telephone companies. Cable's share of the video segment has been declining, not increasing. Rep. Blackburn's bill, if enacted, would ensure that this or a future FCC doesn't use the 70-70 rule as a basis to impose new regulations on the cable industry at a time when the agency should be adhering to the agency policy pronouncement adopted five years ago: Broadband operators, regardless of the technology platform employed, should be subject to a "minimal regulatory environment."
The statutory provision that Rep. Blackburn's bill would repeal authorizes the FCC to impose additional regulations, even assuming that the 70-70 finding were made, only if "necessary to provide diversity of information sources." In 1984, when the statute was enacted, policymakers may have had a legitmate concern about the availability of a diversity of information sources. In today's environment of media abundance, it is fanciful to suggest there is a lack of information diversity.
Rep. Blackburn has a good understanding of the difference between the media and communications environment now and then. She delivered an excellent Keynote Address at the recent Free State Foundation/Institute for Poilicy Innovation communications policy conference, and I commend the full text to you. But note this line which presages her action on the 70-70 rule: “It should be the free market that decides what works and what does not work, not government intrusion. And, as the process unfolds, it is going to be critical for the United States Congress and for the Commission to hold the line on light touch regulation. And to resist the urge to unbundle what is already working in the free market system.”
Repealing the provision giving the FCC authority to impose additional regulation on cable providers makes sense in today's competitive broadband environment. And taking the free market-oriented philosophy embodied in Rep. Blackburn's keynote address and making it central to an ongoing effort to envision a new competition-centered communications law that puts marketplace realities at its core also makes sense.
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