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 PCMag.com 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.