The McCain Cable Bill Can Only Do So Much; Real Change Is Market-Driven

from the it's-innovators-who-need-freedom dept

There's a lot of buzz about Sen. John McCain's proposed Television Consumer Freedom Act (pdf and embedded below), a bill designed to encourage cable companies to unbundle the TV stations they offer, and force the networks to do the same. It also takes away the weak bargaining chip that some networks have attempted to play against Aereo, in which they threaten to pull their broadcasts from the open air, by making them sacrifice broadcast licenses in order to do so.

Everyone on the consumer side agrees that they'd like to have à la carte choices from cable companies, but beyond that there's no shortage of debate as to how effective the bill is likely to be and whether the end result would actually be any better for those consumers. The television market is badly distorted at all levels by monopoly interests and those whiffs of not-quite-collusion by groups of companies with a shared interest in maintaining the status quo, but is this bill capable of overcoming that? And is the practice of bundling really at the heart of the problem, or just a good public face for the deeper issues?

This is hardly the first attempt to stop the practice at either the network or cable provider level. Some courts have already found bundling by cable providers to be legal and not anticompetitive; meanwhile Cablevision is currently pursuing an antitrust suit against Viacom for the network's bundling of stations that it sells to providers. Most of the details of the latter are under seal, but one notable point is Viacom's claim that it already offers channels individually, they just cost way more. If that's true of all Viacom's content, then it wouldn't be affected by McCain's bill anyway, which still permits bundling as long as there is an à la carte option.

And even if it's not true, it just underlines the core problem of this approach: the bill doesn't give networks any reason to make individual channels affordable or desirable. They either already offer an expensive à la carte menu that nobody orders from, or they could easily do so. Moreover, it's not as though the justification for bundling offered by the networks is completely falsified: they can spend more money on niche channels and programs by subsidizing them with the revenue from more broadly popular fare. Of course, it's not as though that justification isn't exaggerated and twisted to suit their needs either, nor is it true that the same fundamental idea couldn't exist without bundling. Networks get more value from niche programs than just transmission fees: they care about audience reach, brand-building, competing with other forms of content, accumulating accolades for prestige shows and even, believe it or not, making good television. There's no reason their businesses could not be structured to continue subsidizing niche programming with popular programming in a slightly less direct manner.

So the final solution, as always, needs to be found in the market — and that's already happening. Basically every single noticeable trend in media consumption habits, not just in television but in music and publishing and every format, points towards a more à la carte world. It's not news that the networks and cable providers have dragged their heels on this in the hope of milking their incumbent position a bit longer, nor is it news that they are privately a lot more freaked out by the cord-cutting movement than their public statements admit. Ultimately, it will be consumers making choices that force these companies to either adapt or perish.

But for that to happen, innovators do need to be able to actually give the consumers those choices. If the market has become so badly distorted that innovators are being locked out, then legal action and new laws are needed. And that's why the aspect of the bill that is likely to be the most effective (not to mention the most interesting) is the way it all seems to come back to Aereo.

The fight that Aereo started sits at the core of almost everything in the bill. Network owners don't like Aereo because they don't want to lose their retransmission fees from cable providers. Cable providers don't like Aereo because they don't want to lose the appeal of the major networks which, despite the ascendence of cable channels, still sit at the core of their service bundles — and because, generally, they don't want cord-cutters to have more options. McCain's bill basically says: Aereo or no Aereo, consumers need choices, and they're going to get them, whether you like it or not.

Is it a worthwhile step? Yes — or, at least, it's hard to see how it could do any harm, even if it does prove ineffectual. Is it the best approach? No. It almost feels like a bet on Aereo's failure. If Aereo were permitted to innovate, rather than being forced to jump through endless technological hoops and still spend more time in court than in the workshop or the boardroom, then the market would already be giving consumers what they want and pushing the networks and cable providers to become more competitive. If there is to be legal reform, it shouldn't be another layer of conditions and caveats on broadcast licenses and the retransmission fee structure that attempts to force the hand of the networks and cable companies, it should be a clarification (and probably a relaxation) of the rules, removing the legal and regulatory uncertainty that holds disruptive startups back. Television doesn't need a Consumer Freedom Act — consumers already have lots of freedom, they just don't have many choices in how they exercise it. The heart of McCain's bill is in the right place, but a Television Innovator Freedom Act is what we really need.

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Filed Under: a la carte, bundles, cable tv, innovation, john mccain, policy, technology

Companies: aereo