Back in the early 1990s, Congress feared that the cable industry posed a major threat to over-the-air broadcasting and needed to be regulated. Lawmakers passed a law that governs how cable and satellite companies carry signals from TV broadcasters, called retransmission consent, in the Cable Television Consumer Protection and Competition Act of 1992. While a truly free market would not regulate this area, the regulation itself does not hinder marketplace competition or copyright holders’ ability to protect their property.
How it works
TV broadcasters have two options when deciding how their content will be distributed. They can select the “must carry” option, which requires local video distributors to carry their programming, or they can choose “retransmission consent,” which requires video distributors to purchase licenses from broadcasters in order to retransmit their content.
Although separate from retransmission consent, the must carry option is an example of government overreach by allowing broadcasters to force their content upon local video distributors. In retransmission consent, the government grants a license to video distributors once both parties agree on a price, which is then retransmitted to cable and satellite customers. The licensing process allows broadcasters and copyright holders to receive fair payments for the distribution of their property. If video distributors and broadcasters fail to reach a licensing agreement, customers may experience blackouts.
Issues with retransmission consent
One issue from the consumer prospective is the chance of programs being blacked out. If broadcasters and video service providers are unable to reach licensing agreements, then consumers may miss out on programming until a deal is reached.
Many parties, especially video service providers, have been unhappy with the current retransmission consent structure and have called for changes to the system. These opponents claim that drawn out licensing negotiations and high consent fees constitute market failures. They also claim that there is no longer competition in the market.
These claims are misguided, however. If this were the case, then consumers’ television bills would reflect the “high cost” of licensing fees. Furthermore, broadcasters actually charge less for licensing than what video service providers charge for content they own—61 percent less in 2012. In fact, increased competition in the video service provider market has led to higher retransmission consent fees. This paints a different picture than what opponents suggest—the retransmission consent market is competitive and successful.
Current Legislative Activity
Currently a number of bills sit in Congress that would make changes to the retransmission consent regime. Representative Steve Scalise introduced the Next Generation Television Marketplace Act (H.R. 3720) earlier this session—although it includes a number of laudable reforms for broadcast television regulation, one drawback is that it would repeal broadcast retransmission consent.
This week, the House Energy and Commerce Committee will hold a hearing on reauthorizing the Satellite Television and Extension of Localism Act (STELA). Lawmakers on the committee will also consider making changes to the retransmission consent negotiation process. AFP sent a letter to Capitol Hill on the issue, encouraging committee members to oppose such changes in favor of free market principles.
Whether its airwaves or video content, physical or intellectual property, the free market calls for freedom in property ownership. Evidence indicates that retransmission consent has not had a negative impact on competition or property rights. More government meddling in this area of the broadcast and video content markets will hinder the competition the markets currently enjoy.