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.

FCC Process Reform Bill

Yesterday the House passed the FCC Process Reform bill in a 247 - 174 vote, largely along party lines. Not very likely that Senate will even take it up, which is a shame. But the bill lays down a good marker for ongoing efforts to reform the FCC.

Back in June 2011, I testified at a hearing before the House Commerce Committee on the bill. While I questioned the need for a couple of its provisions, my testimony, on the whole, was genrally favorable towards most of the bill. My testimony is here.

Overburdening Wireless With by Overlapping Taxes

A study released in January by scholars at the Mercatus Center focuses on the high levels of taxation that wireless services and wireless consumers are faced with today. We've blogged about this unfortunate situation in prior posts.

In their study, "Wireless Taxes and Fees: A Tragedy of the Anticommons," Matthew Mitchell and Thomas Stratmann point out that combined federal, state and local taxes on wireless are about twice as high as the average retail sales tax. As the title suggests, the authors persuasively contend that wireless tax policy suffers from a "tragedy of the anticommons." That is, too many governments have the ability to tax wireless services, creating high levels of taxation for services for which consumers show a high degree of price sensitivity. In the authors' words:

When numerous interests are allowed to tax a single base, each does so without regard to the effect of its tax on the others. The problem can lead to over-taxation of the resource and to underutilization of the good or service being taxed. The problem is exacerbated when numerous levels of government have access to the same tax base.

The study offers another reminder about the need for tax reforms at the federal and state levels. For instance, FCC reforms of USF contributions are necessary to reduce the surcharge (that is effectively a tax) imposed on wireless consumers' monthly bills. Meanwhile, states need to better coordinate and streamline the multiple taxes assessed by tax jurisdictions within their borders and to bring overall tax rates on wireless services into line with general sales tax rates. States also need to ensure that so-called fees imposed on wireless services are not imposed for extraneous governmental purposes.

Repurposing the FCC

Pardon my French, but it's de rigueur these days to talk about "repurposing" spectrum to address what Federal Communications Commission Chairman Julius Genachowski calls the coming "spectrum crunch" for wireless operators.

The need for more spectrum capacity for mobile broadband operators is real. Hence, the need for repurposing spectrum is real.

So here's an idea: The FCC should repurpose itself institutionally in order to more effectively accomplish repurposing of spectrum.

Repurposing spectrum refers to the FCC (or some other entity such as Congress or NTIA) taking action to allow spectrum currently used for one purpose, say, broadcasting, to be used for another purpose, say, wireless mobile. The spectrum incentive auctions Congress just authorized, and which the FCC must now implement, are intended to repurpose spectrum currently used for broadcast TV to use for mobile services.

Without belaboring the point, this statement on repurposing spectrum is straight out of the FCC's recently released Strategic Plan:

"The Commission’s allocation and assignment of spectrum must continue to evolve towards more flexible, market-oriented approaches to increase the opportunity for technologically innovative and efficient spectrum use and to ensure adequate spectrum is available for broadband, and other purposes. Rulemaking proceedings will be conducted to enable more flexible operations, and allow for repurposing of spectrum."

Another point that does not need belaboring is that the spectrum crunch is real. Cisco's respected tracking forecast projects that "global mobile data traffic will increase 18-fold between 2011 and 2016." And mobile data traffic is projected to grow at a compound annual growth rate of 78 percent from 2011 to 2016, reaching 10.8 exabytes per month by 2016. You can find many other forecasts to the same effect. Enough said.

Repurposing the FCC would mean the agency, as an institution, would refocus itself in a serious way to be able to accomplish, more effectively and more promptly than it does now, the repurposing of spectrum that all agree is needed.

What would this repurposing of the FCC entail? In the main, simply this: The Commission should substantially reduce the resources it has been devoting for the past several years to considering the competitiveness of the wireless market, and redirect those resources to implementing actions that will increase the amount of spectrum available for use by wireless operators.

I want to make it clear I am not suggesting the competitiveness of the wireless marketplace is not a legitimate government concern, even if I and many other observers assert the market is presently competitive. I am suggesting, however, that any such competitive concerns ought to be left primarily in the hands of the antitrust authorities for resolution under antitrust jurisprudential principles rather than under the FCC's indeterminate public interest standard.

At FSF's Fourth Annual Telecom Policy Conference last week, there was a broad consensus (with the exception of the FCC officials, whose participation I appreciate) that a substantial overlap exists in the competition examinations of the FCC and the Department of Justice. There was consensus that, in light of this overlap, the FCC should rely more heavily on DOJ to carry out this work, especially with respect to the evaluation of proposed transactions. If the FCC, in an exercise of regulatory modesty that I have urged for years, would follow this self-restraining approach, it could devote the freed-up staff time and other resources to focusing much more single-mindedly on repurposing spectrum.

In his March 21 statement accompanying release of the rulemaking notice regarding flexible use of spectrum for mobile broadband in the 2 GHz band, Chairman Genachowski noted a number of different actions the Commission has taken to "address the spectrum crunch, and to enable the continued acceleration of the mobile revolution that is driving economic growth, investment, and valuable new services for consumers and businesses."

I don't want to look backwards in this piece and criticize what might have been done differently. So I am happy here to credit Chairman Genachowski for the actions of which he takes note, and for his action last week creating an Incentive Auction Task Force to coordinate the agency's work implementing the newly-authorized incentive auctions. Regarding the task force announcement, as reported in Communications Daily, I said: "I am not as concerned, though, with putting names and boxes on a new organizational chart as I am with active, ongoing leadership to get the job done."

Repurposing the FCC so the agency can more effectively, more speedily repurpose spectrum will require active, ongoing leadership on Chairman Genachowski's part.

There is much work to do. At the top of the action list certainly should be the speedy processing of the applications for assignment of licenses resulting from Verizon Wireless's proposed acquisition of spectrum from SpectrumCo and Cox Communications. The spectrum that Verizon seeks to acquire currently lies unused. Verizon is not proposing to acquire a competitor. If the transaction is approved, there will be no fewer competitors than before approval.

While I believe the commercial agreements associated with the Verizon – SpectrumCo transaction are likely to benefit consumers by making available additional options in a convenient consumer-friendly way, I understand that concerns have been raised by some regarding the potential competitive impact of the commercial side agreements. To the extent these concerns have any merit at all, this is a perfect example of a case in which the FCC ought to defer to the antitrust authorities. The Department of Justice is fully capable of examining the merit of the claims concerning competitive impact. The FCC traditionally has not even reviewed these types of commercial sales and agency agreements.

So, if the FCC is as serious about repurposing spectrum as it claims to be – and as it should be -- it should repurpose itself to get the job done. An important element of such repurposing is reorienting itself, institutionally, so that it relies primarily on the antitrust authorities to address supposed competitive concerns regarding the wireless marketplace. Then, the Commission will be in a position to devote the freed-up resources – and its full attention – to taking further actions that will actually free up additional spectrum for mobile broadband.

And, after all, that's the whole purpose of repurposing.    

Conference Video Now Available

If you weren't able to make it to the Free State Foundation's March 20 conference at the National Press Club, the video from the various conference sessions is now available. You may access the video here at the top of BlipTV's Free State Foundation page.

Enjoy!

FCC Must Free Cableco/CLEC Mergers From Section 652 Strictures

In an FSF Perspectives paper from August, I argued that the "Section 652 Cross-Ownership Ban Shouldn't Apply to Cable Operators and CLECs." The occasion for that paper was NCTA's petitioning of the FCC for either a declaratory ruling or a forbearance ruling regarding Section 652. The FCC was urged to make clear that Section 652 does not give local franchising authorities (LFAs) a veto over mergers between cable operators and competitive local exchange carriers (CLECs).

The FCC has not yet acted on the Section 652 petitions. Meanwhile, as I mentioned in a February blog post, the FCC approved the Time Warner Cable/Insight merger since none of the LFAs objected to the deal. But the uncertainty surrounding Section 652 remains. A March 20 ex parte filing by several industry trade associations – NCTA, ACA, and COMPTEL – make the case for the FCC to finally take action to clarify what Section 652 means for Cableco/CLEC mergers.

There is no good reason for the FCC to delay a ruling on Section 652. And there is no good reason to subject cable/CLEC mergers to LFA vetos. As I wrote in my Perspectives paper: "One way or the other – through a declaratory ruling or regulatory forbearance – the FCC should make clear that Section 652's unnecessary regulatory restrictions do not apply to mergers between cable operators and CLECs."

"Terrestrialization" - A New Word in FCCland

The sentence below with the quote from Globalstar's CEO is from the March 14 edition of TR Daily.

"We believe in terrestrialization of the MSS spectrum," Jay Monroe, chairman and CEO of Globalstar, Inc., said during a session this morning at the Satellite 2012 conference in Washington. "It's important to our long-term financial health."

Anyone ever heard of that word before? Didn't think so. But we make up new words in FCCland pretty often.

The Internet World: Will It Remain Free From Public Utility Regulation?

As you probably (hopefully!) already know, the theme for the Free State Foundation's upcoming Fourth Annual Telecom Policy Conference on March 20 is, "The Internet World: Will It Remain Free From Public Utility Regulation?" And the two panels will be discussing a topic central to this theme: "Convergence, Competition, and Consumer Choice: The Right Regulatory Approaches for the Digital Age Marketplace."

When I selected the conference theme the particular year that mostly stuck in my mind was 2002. Yes, 2002. That was the year the FCC, in the first of a series of deregulatory rulings, determined that broadband Internet services "should exist in a minimal regulatory environment that promotes investment and innovation in a competitive environment." At the same time, the Commission emphasized it would "avoid simply extending existing rules that were crafted to govern legacy services provided over legacy networks." The Commission defended its decisions establishing a minimal regulatory environment for broadband all the way up to the Supreme Court – and won, in the landmark 2005 Brand X decision.

The regime that the Michael Powell-led Commission in 2002 wanted to avoid applying to broadband Internet services was the legacy common carrier regime, or traditional public utility regulation, which has as its hallmark a prohibition against unreasonable discrimination and regulation of prices. As then-FCC Chairman Bill Kennard put it colorfully in 1999, he didn't want the FCC to “pick up this whole morass of regulation and dump it wholesale" on broadband. To do so, he said, “would not be good for America.”

So, back to this year's annual conference theme: "The Internet World: Will It Remain Free From Public Utility Regulation?" I understand, of course, there are differing perspectives. But in my view, it is certainly not at all settled that the Internet will remain free from public utility-type regulation. Consider the FCC's recently adopted net neutrality mandates, with the common carrier-like nondiscrimination obligation, at their very core. Or consider FCC proposals to extend further already suspect program carriage obligations and to adopt new regulations governing the functionality and features of set-top video navigation devices. Or rules to regulate the rates for data roaming for smartphones. Or requirements imposed in connection with the Comcast-NBC Universal transaction regulating the terms and conditions for access to Comcast-NBCU's proprietary programming by Internet video providers. And so forth and so on.

So, there is plenty of fodder for a lively and informative discussion at FSF's conference concerning Internet regulatory policy. And that is what I anticipate.

In thinking about the conference over the last several days, and especially the panel topic, "Convergence, Competition, and Consumer Choice," I found myself going back in my mind to Ithiel de Sola Pool's ground-breaking book, Technologies of Freedom, published in 1983. Not only did I find myself going back to it in my mind; I pulled it off the bookshelf.

If I could assign only one pre-conference reading assignment, it would be de Sola Pool's prescient book. (Don't worry! I understand I can't hand out reading assignments.)

Keep in mind that Technologies of Freedom was written almost three decades ago. But already there was emerging what de Sola Pool – and others -- saw as a increasing diversity of communications and media outlets resulting from new electronic technologies. In other words, he saw increasing "convergence, competition, and consumer choice."

What makes Technologies of Freedom so powerful – and relevant today – is that de Sola Pool recognized it was entirely possible, even with more competition and more consumer choice, for the government, rather than deregulating and according free speech protection to the new communications technologies, to take the opposite course: Regulate all the media with legacy common carrier-like, speech-restrictive regimes.

Assuming you can't read the entire book, here are a few excerpts, especially relevant to the conference theme, that are well worth considering:

"The electronic modes of twentieth century communication, whether they be carriers or broadcasters, have lost a large part of the eighteenth and nineteenth century constitutional protections of no prior restraint, no licenses, no special taxes, no regulations, and no laws."

* * *

"The FCC claims the right to control which broadcast stations a cablecaster must carry...Telephone bills are taxed. A public network interconnecting computers must be licensed and, according to present interpretations of the 1934 Communications Act may be denied a license if the government does not believe that it serves 'the public convenience, interest, or necessity.'"

* * *

"The mystery is how the clear intent of the Constitution, so well and strictly enforced in the domain of print, has been neglected in the electronic revolution. The answer lies partly in changes in the prevailing concerns and historical circumstances from the time of the founding fathers to the world of today; but it lies at least as much in the failure of Congress and the courts to understand the character of new technologies."

* * *
"Historically, the various media that are now converging have been differently organized and differently treated under the law. The outcome to be feared is that communications in the future may be unnecessarily regulated under the unfree tradition that has been applied so far to the electronic media. The clash between the print, common carrier, and broadcast models is likely to a vehement communications policy issue in the next decades."

Just so. Although de Sola Pool was writing even before the rise of the Internet, he was surely prescient in his worry that "[t]he outcome to be feared is that communications in the future may be unnecessarily regulated under the unfree tradition that has been applied so far to the electronic media." And he was correct in predicting, at the time he wrote in the early 1980s, that the clash between the free and the unfree models was likely to be with us for decades to come.

The clash is surely still with us in 2012. And that is why I think this year's annual telecom policy conference will be so important in elucidating the issues. I am very proud of our entire line-up of outstanding speakers, including our keynoters, the Wall Street Journal's Steve Moore, FCC Commissioner Mignon Clyburn, and White House Deputy CTO for Internet Policy Danny Weitzner. I am confident the program sessions will be educational and informative, as well as lively and entertaining.

I have my own opinions, of course. Like de Sola Pool, I think the "outcome to be feared is that communications in the future may be unnecessarily regulated under the unfree tradition." But I am always excited about hearing differing perspectives, learning more, and questioning conventional wisdom. I know you are as well, and that's why I hope to see you at next Tuesday's conference at the National Press Club.

The conference agenda is here. In order to attend, you must register by rsvp-ing to Kathee Baker at: kbaker@freestatefoundation.org

PS – There will be plenty of food for thought. But, in addition, for those who have registered in advance, we will be serving a complimentary continental breakfast and lunch.

Tennis Channel Carriage Ruling a False Start Under First Amendment

In a December blog post titled "Tennis Channel Ruling: No Mere Foot Fault," FSF President Randolph May described the Tennis Channel's Section 616 "program carriage" complaint. An administrative law judge (ALJ) ruled it was unfair discrimination when Comcast said no to the Tennis Channel's request – made during an existing contract term – to be included in the same programming tier as the Comcast-affiliated Golf Channel and Versus (now NBC Sports Network). The ALJ ordered Comcast to carry the Tennis Channel on terms similar to the Golf Channel and Versus.

The ALJ's Tennis Channel ruling raises serious First Amendment problems. It has now been appealed to the full FCC for review. Hopefully, the Commissioners will take First Amendment principles seriously and reverse the ALJ's ruling.

Section 616 prevents multichannel video programming distributors (MVPDs) from preferring affiliated video programming over non-affiliated programming if it "unreasonably restrain[s] the ability of an unaffiliated video programming vendor to compete fairly." Whatever the FCC's obligations under Section 616, its actions must still be consistent with the First Amendment. This includes the Constitution's general prohibition of government censorship of speech based on content.

Content-based restrictions are presumptively unconstitutional and the government bears the burden of justifying them. The government is also generally prohibited from telling people what they must say. And it is well established that MVPDs are entitled to First Amendment protections like any other association or individual.

The ALJ's Tennis Channel ruling is especially problematic because it is unmistakably content-based. The ALJ analyzed and compared the respective programming of the Tennis Channel with the Golf Channel and Versus. This included the extent of overlap between the respective channels in terms of programming genres, target audiences, advertisers, and ratings. Deeming the Tennis Channel "similarly situated" to Versus and the Golf Channel, the ALJ concluded unfair discrimination against Tennis Channel resulted from certain business and editorial decisions made by Comcast, such as channel and tier placement. Comcast's Washington D.C. system, for instance, carries Versus on channel 7 and the Golf Channel on channel 11, but places the Tennis Channel on 735. And Comcast places Versus and the Golf Channel on its Expanded Basic or Digital Starter tiers while placing the Tennis Channel on its less popular Sports Tier.

As a remedy, the ALJ's ruling "requires Comcast to carry Tennis Channel at the same level of distribution that it carries the Golf Channel and Versus. Comcast Cable otherwise has full discretion in determining the level it chooses to carry the three channels." It also requires Comcast "to provide Tennis Channel with equitable treatment (vis-à-vis the Golf Channel and Versus) as to Channel placement."

In so doing, the ALJ's ruling gives very short shrift to First Amendment's protections for a speaker's editorial judgments. Newspapers, for instance, are protected from government intrusion on their editorial judgments about the numbers of pages for each issue, what sections they will include, what articles they will run, and what ads they will print. The U.S. Supreme Court's ruling in Miami Herald Publishing Company v. Tornillo (1974) recognized the protected status of such editorial judgments. It struck down a statute requiring newspapers to give equal space to political candidates to reply to published criticisms.

Here the ALJ tried to brush aside concerns about rights of editorial discretion. The ALJ asserted Comcast could still choose not to carry any of those three channels – but if it did choose to carry either of its affiliated channels then it would have to carry the Tennis Channel on similar terms. However, this attempted work-around won't work at all if First Amendment requirements are taken seriously.

The Supreme Court's political campaign speech rulings in Davis v. FEC (2008) and Arizona Free Enterprise Club's Freedom Club PAC v. Bennett (2010) held that First Amendment limits are not avoided just because government gives speakers the ability to avoid speech restrictions and penalties by abandoning or altering the content of their speech.

The conditional nature of the ALJ order's remedy also undermines any claim that restrictions on Comcast's editorial discretion are justified by its promotion of diversity and competition in the video programming market. How could the ALJ's order be said to promote programming diversity if Comcast drops the Tennis Channel along with its affiliated channels?

Lastly, it's worth considering that the entire program carriage regulatory framework stands on shaky ground. 1990s analog-era cable regulations were upheld from First Amendment challenge on the basis of a perceived local cable "bottleneck." But as I explained in my blog post "Video Competition Should Lead FCC to End Old Regulation," the days when cable providers enjoyed a 90% market share are long gone.

Cable's market share has fallen to about 60% of video subscribers. Two nationwide direct broadcast satellite (DBS) providers serve over 30 million. Telco entrants serve approximately 6.5 million. Meanwhile, online video delivery from websites or video gaming console apps via broadband offers explosive platforms for video programming. Availability of unaffiliated video programming to consumers has also grown. And the number of vertically integrated video programming has declined from more than 50% of all cable programming in prior years to less than 20% today. These rapid, disruptive changes in the video market belie bottleneck rationales for reducing free speech protections for MVPDs.

The Constitution sets the basic framework and limits on the implementation of the Communications Act. For the FCC, this means that First Amendment protections must be its first-order concern in reviewing Section 616 program carriage complaints like the Tennis Channel's. If the Commissioners take free speech protections seriously, they should reverse the ALJ's ruling.

Commitments and Conditions in the Comcast-NBC Universal Transaction

I believe that commitments, once made, should be kept.

And I believe the FCC's transaction review process needs reforming.

These two beliefs of mine were called to mind in recent days by two events: (1) Comcast-NBC Universal's filing with the Federal Communications Commission detailing its compliance with the conditions imposed when the agency approved the combination of the two companies in January 2011; and (2) the controversy that has broken out concerning implementation of the online video distribution condition by the FCC. (I may refer to Comcast-NBC Universal here as "Comcast." Don't worry, it is just shorthand.)

With respect to the first point, even a cursory review of Comcast's compliance report indicates the company appears to have gone "above and beyond" in its efforts to comply with the FCC's conditions. Comcast's efforts, in many instances costly, regarding expansion of local news programming, children's programming, broadband deployment and adoption, carriage of new independent networks, and so forth, are impressive.

I haven't gone back over all of the FCC's lengthy approval order, and the more than twenty-five pages of fine-print conditions. And absent someone holding a gun to my head, I won't, at least not now. But it certainly appears as if Comcast has kept its commitments. Keeping commitments, once made, is commendable.

Now, as to the second point, regular readers of this space know that I have serious, long-standing concerns regarding the way the FCC reviews license transfer applications. I've written often over the years about what I see as the frequent, unprincipled abuse of the review process. Here's a Legal Times piece, "Any Volunteers," from 2000, and here's one, "Reform the Process," from the National Law Journal published in 2005. There are many other more recent pieces I've written too.

In essence, the FCC uses the vagueness of the "public interest" standard, under which it reviews transactions, to impose conditions that are not closely related to core concerns implicated by the specific transaction and which should be considered, if at all, in generic rulemaking proceedings. As decision time for the FCC draws nigh, the applicants (supplicants, really) offer up so-called "voluntary" commitments that then are adopted by the FCC as conditions in the order approving the transaction. In other words, the agency engages in "regulation by condition." Just look at the plethora of various conditions extracted in connection with approval of the Comcast-NBC Universal transaction.

Speaking of which. When the FCC was considering the Comcast-NBC Universal transaction, I published an essay, "The FCC Risks Over-Conditioning the Comcast-NBCU Merger," criticizing the online video distribution condition the Commission was considering extracting from the applicants as the price for transaction approval. I called the online condition "problematical," especially with regard to requirements that Comcast's proprietary programming assets be shared with unaffiliated entities on "non-discriminatory" terms, and that "comparable programming" be made available to online distributors at "economically equivalent prices." In my view, such mandatory sharing conditions at government-reviewed prices, in a market as effectively competitive as the video distribution market, have the effect of stifling investment in new programming assets. And conditions that depend on the exercise of broad discretion to decide whether programming is "comparable" to other programming, and to decide whether such programming is offered at "economically equivalent prices," invite government-sanctioned favoritism for some entities over others under the guise of leveling playing fields. And, importantly, such decisions examining programming for "comparableness" are constitutionally suspect as well under the First Amendment.

So, one predictable result of such a regulatory regime is the likelihood of lots of implementation disputes concerning comparable programming and equivalent prices. Comcast-NBC Universal presently is engaged in one such (preliminary) dispute with unaffiliated content programmers regarding Comcast's ability to access licensing agreements the content providers have with other video distributors. The present dispute concerns fashioning a confidentiality agreement under which the details of the licensing deals will be disclosed to Comcast so it can determine for itself the terms on which it must offer "comparable" programming.

I don't have any interest here in opining on the current dispute, except to say that such controversies, and there are likely to be many more, were all quite foreseeable. And they were avoidable, because, in the context of video marketplace competitiveness, there was no evidence – as opposed to mere supposition -- that the costs imposed by the online video condition would not outweigh its benefits. As I pointed out in the January 2011 "Over-Conditioning" piece, "the commissioners should be acutely aware of the limits of their ability to predict future marketplace developments."

Well, I can't say that since then the commissioners have become acutely aware of their limits in predicting future marketplace developments. And I can't say the FCC transaction review process has been reformed – not yet.

But I can say that it looks like Comcast-NBC Universal is meeting the commitments it made, and that's something worth noting, and saying too.  

On Usage-Sensitive Pricing Policy

I was quoted, accurately, in today's edition of Communications Daily [subscription required] to this effect: "It is way past time for the consumer groups to get over knee-jerk opposition to usage-based pricing." I was responding to a story concerning Public Knowledge's potential concern about a possible AT&T plan to allow content providers and app developers to pay for the mobile data its customers use.

Well, I heard from my friend Gigi Sohn, Public Knowledge's President, that PK's position concerning usage-pricing pricing is not knee-jerk, but more nuanced than I represented. Without delving here into past positions or particular controversies, I am perfectly happy to credit PK's more nuanced position -- and to welcome and encourage its further development.

Indeed, I see that in his blog concerning Time Warner Cable's newly-announced "Internet Essentials" usage-sensitive broadband plan, PK's Harold Feld is receptive to that particular usage-sensitive plan, as is Andy Schwartzman in his blog. I am too, so we're all in seeming agreement. (By the way, like Gigi, I consider Harold and Andy friends as well.)

In the Communications Daily report, I was also quoted to the effect that "providers must have the flexibility to experiment with different pricing models that make sense from an economic and efficiency standpoint." This I firmly believe, and I've held this position consistently for a very long time.

I don't expect that Harold, Andy, Gigi, and I will agree all the time, or even most of the time regarding particular cases. This is because I am sure I have a considerably different view than they do regarding the costs and benefits of FCC regulation in the current marketplace environment. But if a more nuanced position on usage-sensitive pricing has replaced what I consider to have been, in the past, "knee-jerk"opposition, I welcome the change. Indeed, I will happily withdraw the "knee jerk" opposition characterization -- if I see a real openness to usage-sensitive pricing going forward.