Showing posts with label FCC. Show all posts
Showing posts with label FCC. Show all posts

Tuesday, December 18, 2007

FCC Chairman Makes Lemonade from Lemon (at least for now)

The Federal Communications Commission today voted to tighten regulation of cable companies, and ease regulation of newspaper and broadcast companies. The votes are a triumph for FCC Chairman Kevin J. Martin, who last month suffered a temporary defeat when he brought the cable proposal up for a vote.

Today's victory on the cable issue may also be temporary given strong and continuing industry resistance. But for now Martin appears to have reconciled the complex array of competing interests at stake in both of these votes.

The importance of competition

Competition is at the heart of all the arguments voted on today. Newspaper companies argued increasing competition for advertising revenue makes obsolete a rule against owning a broadcast station in the same market. Huge numbers of readers disagreed, arguing the restriction preserved competition covering local news, increasing the range of information and ideas available in those markets.

The FCC voted to ease the cross-ownership restriction in the 20 largest markets.

Cable companies argued they need to get larger because subscribers have more and more alternatives in the new media world. Consumer groups and Chairman Martin disagreed, arguing cable rates keep rising and subscribers don't have access to the full range of possible program choices.

The FCC voted to keep individual cable companies from reaching more than 30 percent of the national market. This is expected to have an immediate effect on Comcast.

Reasons to be skeptical on cross-ownership

My immediate reaction is mostly to the cross-ownership vote. The competitive problem for newspapers is not local radio or television stations, but new forms of media such as the Internet and cell phones. Putting resources into broadcast stations is an odd response, especially when you consider some newspaper companies such as The New York Times and Belo recently divested their television stations.

The expense of acquiring radio and television stations will also force newspaper companies to cut operating costs, so be skeptical of claims that these companies will increase news coverage in these markets.

More broadly, the competition arguments rely on differing definitions and models. Newspaper companies, and both sides in the cable argument, are using economic models concerned with efficient use of limited resources, and providing goods and services at the lowest possible cost.

Supporters of cross-ownership restrictions are using a First Amendment model concerned with expanding the range of ideas, and the emergence of a workable consensus on matters of public concern.

Wednesday, November 28, 2007

FCC Chairman Caves, Economics of Lobbying Prevail (sort of)

The effort to impose new cable television regulations that renewed discussion of selling subscriptions to individual channels has apparently collapsed under strong pressure from cable companies.

However, potential changes in ownership restrictions and other regulations, not the sale of individual channels, were behind the collapse. Reports this morning say a Nov. 27 meeting of the Federal Communications Commission delayed a decision on the new rules because of a dispute over data showing how many people actually subscribe to cable.

If more than 70 percent of consumers have access to cable -- a number that is not in dispute -- and more than 70 percent of them subscribe, the FCC will have legal authority to limit ownership of cable companies. FCC Chairman Kevin J. Martin argues the 70 percent subscriber threshold has been met, but the industry and other members of the commission disagree. (Chloe Albanesius at does a good job explaining details of this argument about subscriber data.)

A Battle to Capture the FCC

The cable companies' effort to block new regulations at first appears to be a textbook example of why regulators often favor the interests of the industry they regulate. However, this is a case where the interests of three major media industries are at stake.

Clearly, if you own a cable company, you don't favor regulations that restrict which systems you can buy. Cable companies are also a relatively small group compared to millions of subscribers and advertisers also affected by ownership rules.

That means there are relatively low costs of organizing cable companies to talk to each other, negotiate a common position on the proposed regulations, and then hire people to contact government officials and argue their case. What I've just described, of course, is an industry association. Cable is represented by the National Cable & Telecommunications Association.
It costs far more for consumers or advertisers to create similar organizations. Advertisers tend to consider themselves part of an industry represented by an industry association, and not the larger group of all businesses that advertise on cable.

There are too many consumers to organize into a single group, even with instant communication. Some Washington groups, like the Consumers Union, do represent consumers and have been active on this issue. But these groups don't represent cable subscribers and their interests in the exclusive way that the industry association represents cable owners.

The difference means the industry probably has more focus, and resources, available to lobby the FCC. The effort to block new regulations included a meeting with top White House officials.

There are More Than Two Sides in This Fight

Groups representing another powerful industry are also in this fight. Chairman Martin says the new cable regulations will increase competition, lowering prices and increasing the range of voices on cable television.

However, Martin separately wants to change a long-standing regulation limiting newspaper company ownership of broadcast television stations. This rule prohibits a newspaper from owning a television station in the same market to ensure there are multiple media voices with diverse views.

Martin accepts newspaper industry arguments that the cross-ownership rule should be relaxed because of competition from new forms of media. The newspaper industry, of course, has its own association to lobby for its interests, the Newspaper Association of America.

Commissioners like Jonathan S. Adelstein, who might agree with Martin on cable, suspect he will use the cable changes to also push for a relaxation of the cross-ownership rule, decreasing competition in newspaper and broadcast markets.

Cross-ownership also evokes a strong response from the public. Consumer groups, such as the Media Education Foundation and Common Cause, are working to keep the cross-ownership rule. But consumer groups also support Martin's proposed changes for cable.

So, perhaps yesterday's collapse was inevitable. This is not a case where just one industry is trying to capture the FCC. Instead, multiple well-organized industries are competing against each other to capture the FCC. Meanwhile, less well-organized consumers are taking different sides depending on the issue in dispute.