Thursday, August 08, 2013

The TWC - CBS 'Retrans' Fight: Moving from Short Term Pain to Long Term Consumer Gain

As the dispute between Time Warner Cable and CBS drags on, obviously there is some pain being experienced by TWC's consumers as they are deprived of access to CBS content.

This "pain" is exacerbated by CBS's decision to block access by all Time Warner Cable broadband customers to the video programming available on CBS's Internet site. In a novel twist, this Internet blocking even affects TWC's broadband customers who do not subscribe to TWC's cable programming.

I am not a supporter of the FCC's net neutrality rules. In any event, by their own terms these regulations don't apply to blocking actions by Internet content providers such as CBS, only to the broadband Internet providers. Do not misunderstand. I am not suggesting any regulatory remedy here for CBS's blocking action. Aside from anything else, I believe that CBS – just like the broadband providers themselves – has a First Amendment right to grant or not grant access to its content. Nevertheless, if nothing else, CBS's action does illustrate the radical transformation the communications marketplace has undergone since Congress adopted the "must carry-retransmission regime" in the Cable Television Act of 1992.

Indeed, such a radical transformation that the Internet, as we know it today, was just a gleam in Al Gore's eye in 1992, along with a few other far-sighted technologically-savvy cognoscenti. Of course, today, as the FCC itself just recognized in its Fifteenth Video Competition Report, online ("over-the-top") Internet video is becoming increasingly prevalent, and, hence, an increasingly potent source of competition across the video marketplace. For lots of facts and figures concerning competition in the video marketplace, see the blog, "FCC Report Reconfirms the Reality of Video Market's Competitiveness," by Seth Cooper, my FSF colleague.

I can actually remember much of the debate surrounding adoption of the 1992 Cable Act. As anyone else who was around then knows, or who simply researches the legislative history, the principal justification for the must carry-retransmission regime (the two were linked together) was the presumed need at the time to protect local broadcasters and the local broadcast signal. Indeed, even a cursory reading of the Supreme Court's 5-4 decision in Turner Broadcasting System v. FCC will show that, but for the Court's acceptance of the argument that Congress intended to protect the signals of local broadcast stations from what the Court then called cable's "bottleneck" power, the must carry regime would have been declared inconsistent with Turner's First Amendment rights.

With the principal justification for the must carry-retransmission regime the protection of the viability of local broadcast stations, it is somewhat odd that the current TWC-CBS "retrans" battle, along with other present-day similar ones, reportedly turns on disputes regarding the terms of carriage of non-local broadcast station programming, such as various cable TV networks, along with increasingly important digital distribution rights. I submit that the negotiations going on now could not have been imagined by the framers of the 1992 Cable Act.

My point here – and I have been consistent on this point throughout – is not to argue in favor of some regulatory "fix" or the other that tweaks the current regime to favor one party or the other. At the outset I spoke of the (hopefully) short-term "pain" being experienced by current TWC subscribers deprived of their CBS programming. But hopefully out of this experience, and similar "retrans" fights, there will be a long-term "gain" for consumers. This gain would come in the form of a realization that, in today's digital broadband Internet environment, with a competitive video marketplace, it is time to get rid of all the decades-old legacy video regulations that were put in place in an analog era when consumer choice was limited in a way not imaginable today.

Deregulation of the video marketplace, along the lines of the DeMint-Scalise "Next Generation Television Marketplace Act" introduced in the last Congress, is the ultimate solution to ensuring that consumer welfare is enhanced by negotiations between programming suppliers and program distributors in a truly free marketplace. With all the legacy regulatory backstops in place, what we're witnessing now is not what I'd call a free market negotiation.

For further reading on this point, see my July 25 blog immediately below, with still more links embedded therein for even further readings.
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Thursday, July 25, 2013
Today I have been reading bits and pieces about the "retrans dispute" between CBS and Time Warner Cable. These retransmission disputes have a way of turning nasty and leaving pay TV viewers -- such as Time Warner Cable's subscribers in this instance -- in the dark. 

And by "in the dark" I mean the pay TV subscribers are threatened with the loss of programming on their local TV station, or actually lose it, and they generally are in the dark as to what's behind the dispute.

Here's a good post on the Madery Ridge website that is useful in explaining what's behind the dispute. I don't mean to endorse every assertion and interpretation contained in the post, but it does shed light on the problematic nature of CBS's claims -- and the claims that are often made by the broadcast television networks in these retransmission disputes.

Even in the face of sharply rising retransmission fees paid to broadcasters by pay TV providers, I certainly don't want to presume to judge what the right "negotiated" price should be to resolve the TWC - CBS dispute -- in other words, how much TWC must pay to continue to carry CBS's broadcast programming. But, as I have said many times in the context of discussing similar retransmission disputes, please don't assume that what is taking place in LA is a "free market" negotiation as the broadcasters often claim. The broadcasters retain many legacy regulatory privileges -- adopted decades ago in a much different video marketplace environment -- that provide an overlay to the negotiations. These legacy regulations prevent the bargaining from being characterized as truly free market. That's why "negotiated" above is placed in quotes.

And the fact that broadcasters have obtained their spectrum for free is no small matter. In fact, it's a big deal in a world in which only 10% of American households still obtain their television programming free "over-the-air."

Along with other FSF scholars, I have written several pieces explaining why the "retrans negotiations" are not truly free market negotiations. If you need a refresher on this important point as you try to figure out the current TWC - CBS brouhaha, see herehere, and here.
Posted by Randolph J. May at 7:45 PM, July 25, 2013