The explosive rise of online streaming video services like Netflix, Hulu and YouTube has dramatically altered the consumer experience for video content unlike anything seen since the advent of color television. And while gallons of ink have been spilled analyzing streamers’ threat to the cable TV business, streaming has also massively disrupted local television broadcasters’ economics — both in terms of advertising revenue and fees for retransmission rights.
Tough circumstances have caused some parties to seek refuge via government protections at the Federal Communications Commission, arguing Internet streamers should be captured within the agency’s grips akin to old-school cable operators, which would improperly give broadcasters exponentially more leverage in content and carriage negotiations. Aside from being an absolutely horrible policy decision, the FCC has no authority to do so. Commissioners should flatly reject calls to (re)explore such a misguided direction.
Broadcasters Must Adjust to Changes
As a long-time defender of local television broadcasters, I respect the valuable contributions that individual stations and their network partners bring to viewers and their respective communities. But the current market realities cannot be ignored: technological advances and consumer viewing patterns have changed dramatically. eMarketer estimates that almost 36% of families have cut the traditional cable video cord, choosing to get programming through the internet and other means. And Barron’s estimates that internet streaming time already has surpassed hours spent watching cable or local broadcast stations. Broadcasters, like all industries challenged by progress, will need to alter their practices and counter competitors in the market.
The best response from affected parties and government agencies would be to seek to completely deregulate almost every aspect of local broadcasting. Rather than continuing as a regulatory piñata, broadcasters should push regulators vehemently to eliminate every burden in which they are treated differently than their streaming counterparts. Media ownership limits on the national or local level? Expensive record keeping and licensing reviews? There is no logical defense in today’s radically remade video marketplace to maintain regulations designed for a 1970s industry.
Those seeking to pursue the regulatory state as local broadcasting’s savior, rather than the nemesis it can be, are fundamentally missing or intentionally ignoring the fact that the market is already working. This is particularly relevant for those demanding the government interfere in the content negotiations between Internet streamers and television networks. Market forces and private-sector negotiations are already doing just fine on their own: the networks (and their programming partnerships) who hold rights to certain programming get to determine how the content is sold or carried by Internet streamers. If local broadcasters are being neglected or ignored in these negotiations, they’re free to work out those disagreements via their affiliate contracts with the networks. The commission inserting new rules and regulations would create new rights where none exist today.
To the extent that internet streamers seek to carry the entirety of a local broadcaster’s signal, broadcasters are free to negotiate that right to render the proper price point and conditions. But they must be aware that what they are selling can be mostly replicated by other broadcasters or the networks themselves. There is no market scarcity, much less market exclusivity, in an always-on video world of thousands upon thousands of programming options.
Congress’s Key Role
Equally important, Congress hasn’t authorized the FCC to insert itself into these negotiations. The definitions and language Congress wrote into current statutory provisions do not extend to internet streamers.
While my good friend and former FCC commissioner Rob McDowell recently argued that this omission is a loophole or quirk in the regulations, that is just not accurate. When serving at the commission, I extensively reviewed the previous proceeding’s record and took all the meetings in which these exact jurisdictional issues — a specialty of mine — were explored. The argument is without merit, no matter whatever legal gymnastics lawyers seek to pursue. Simply put, the commission is precluded from acting without subsequent authority granted by Congress.
Reopening a dead proceeding — even if the FCC is just examining if it has authority to act — breathes a hint of hope that the government might extend its fishing expedition, eventually to be rejected by the courts. By that time, however, the commission’s unlawful overreach would already be distorting the video marketplace by generating unfair leverage in private negotiations.
Internet streaming is a wonder for consumers, despite how troublesome it may be for the traditional industry participants. The government, in this case the FCC, should avoid interfering in a working market and reject calls to examine its nonexistent authority to intervene. To paraphrase Ronald Reagan, government is not the solution to the problem; government would become the problem.
