House Examines Regulation of the Video Market
This week there were two hearings in the House on video service. The House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a hearing called “Satellite Television Laws in Title 17” on Tuesday September 10th, and the subcommittee on Communications and Technology conducted a hearing entitled “Innovation Versus Regulation in the Video Marketplace,” on Wednesday September 11th.
Testifying before both committees were industry experts ranging from lawyers to media executives addressing the potential impacts of today’s regulatory environment on broadcasting, cable local exchange carrier video, and direct broadcast satellite.
The discussion centered on whether compulsory licensing requirements and retransmission consent rules should be renewed, repealed, or revised. Compulsory licensing requires copyright owners to allow satellite & cable providers to retransmit their work, while retransmission consent requires satellite and cable providers to obtain permission from broadcasters to carry their programming.
Preston Padden, former president of ABC, argued that the compulsory licensing requirements of the Copyright Act are unnecessary and distort the marketplace. Non-broadcast channels do not have any compulsory licensing requirements; instead they aggregate the rights to their programming and negotiate with cable and satellite distributors.
According to Padden,
Subject to a brief transition period, Congress should repeal the cable and satellite compulsory licenses in 17 U.S.C. Sections 111, 119 and 122. At the same time Congress should repeal the retransmission consent provision in 47 U.S.C. Section 325 (b)(1)(A) and legislatively repeal the FCC’s regulations governing network non-duplication, syndicated exclusivity, and sports blackouts. The end result of these reforms would be to put cable and satellite distribution of broadcast television programs under the same legal regime as the distribution of non-broadcast programs – namely, simple free market copyright negotiations.
In the same hearing Robert Garrett, on behalf of Major League Baseball, argued along the same lines as Padden that compulsory copyright unfairly deprives copyright owners of the right to negotiate the terms on which their copyrighted material is broadcasted by satellite and cable companies. While it seemed he agreed with Padden that content in distribution would be best served by free market negotiations, he suggested that if Congress does not remove the compulsory licensing requirement altogether, it should at least require satellite and cable providers give fair market compensation via a royalty rate adjustment mechanism.
Simple free market negotiations for content should be the aim of any discussion moving forward in the video marketplace, as outlined by Padden. Unfortunately a royalty rate adjustment mechanism sounds like another layer of regulatory meddling that would distort the video market.
Negotiations should take place freely between content providers and content distributors without government intervention. The video deregulation bill introduced in the House by Rep. Scalise last Congress would be a welcome addition to the discussion, especially as a counter weight to Rep. Eshoo's recently introduced legislation.
Earle Mackenzie, Executive Vice President and COO of Shentel, suggested that Congress should require broadcasters to continue to provide signals to network providers after the retransmission agreement expires until a new agreement is reached. Additionally, he believes that cable consumers should be given the choice of whether or not to receive broadcast retransmission channels.
Requiring broadcasters to continue to provide their channels during negotiations does not appear to be the answer. If I’m in negotiations with you over the price of a car, but I can keep driving it until we reach an agreement and the dealership cannot require me to get out of the car, I have no incentive to agree with the dealer on price ever. There are so many distribution options available that if a distributor doesn’t want to pay the price requested for the content then the content won’t be provided.
The decision of whether or not to receive broadcast signals sounds a bit like a la carte, a deal which would in the end not be helpful to consumers. Consumers can receive broadcast channels over the air rather than through cable or satellite subscriptions, but many consumers don't know the difference between the delivery platforms; it’s all just TV. Plus after the digital television transition most of us don’t have the equivalent of rabbit ears lying around the house any more. Broadcasters are held to stricter standards as far as programing by the FCC because the broadcasters are supposed to function in the public interest. Key themes are localism and universal access. Cutting broadcasters via legislative fiat seems hardly in line with the deal they were cut as keepers of the public airwaves.
Stanton Dodge, of DISH Network testified at both hearings and cited the need to reform the Retransmission Consent Regime to get through the impasses between broadcasters and distributors. His suggestion is allowing providers to temporarily provide broadcast from an out of market station to their subscribers. Although consumers still wouldn’t receive local programming, they would have access to network programming and local broadcasters would be introduced to a small degree of competition.
Being able to import signals from other localities would introduce more competition into the market for the kind of content that broadcasters provide. Dodge concedes that viewers wouldn’t receive local content, like news broadcasts, which could be a problem, not for video free market negotiations, but for the FCC. One of the principles instituted by the FCC, and that broadcasters are required to uphold, is localism. Broadcasters are to carry local content. It is part of the requirement of using a broadcast signal. If other signals can be imported from other cities it hardly seems reasonable that the localism principle should exist at all.
If cable or satellite distributors were really concerned with the fact that their viewers weren’t receiving programing, they would remind their customers that the broadcast channels are free over-the-air. Customers don’t have to be deprived of broadcast content during negotiations.
There have been so many changes in the video marketplace. Congress should tread lightly when getting involved. If these two hearings say anything, it’s that regulations trying to control the market actually distort it and end up causing more problems down the road.
If Congress removed all of its price-setting requirements for carriage we would be in a much better position. Again, Congress should look to the principles out lined in Rep. Scalise’s video deregulation bill from the 112th Congress.