Blackmail to Avoid Blackouts is Not Sound Policy | Citizens Against Government Waste

Blackmail to Avoid Blackouts is Not Sound Policy

The WasteWatcher

Imagine that you’re settling in to watch your favorite must-see-TV when your station de jour abruptly goes black. You suddenly can’t watch the big game, or the American Idol finale or (fill in your “can’t-live-without-it” show here). How could this possibly happen? You try rebooting your cable box as you frantically flip through the TV guide to make sure it’s really Super Bowl Sunday.

There’s nothing wrong with your electronics and you haven’t lost your mind. It turns out that the broadcaster is holding your favorite show hostage in an effort to force cable providers to cough up exorbitant fees or carry extra channels on its basic tier. Cable providers have no choice but to give in or else lose millions of customers. Although the channel eventually comes back on, you’re left frustrated knowing that you have missed your show and that your cable bill just went up to cover the broadcaster’s ransom.

This nightmare has been a reality for millions of consumers. In October 2010, more than three million Cablevision customers in the New York area experienced a 16-day blackout of Fox programming, which prevented them from watching the first two games of the World Series. In March 2010, New York customers lost their ABC station right before the Oscars. Viewers missed the first 15 minutes of the awards show before Cablevision reached a deal with Disney.

The twisted negotiation process between broadcasters and cable providers is due to an antiquated retransmission framework. In 1992, Congress amended the Communications Act of 1934 to give broadcasters the upper hand in negotiations with monopoly cable providers. Broadcasters can demand that a cable company carry their program signals, or elect to negotiate a payment for consent to retransmit that signal. The law allows broadcasters to make a new election between these two options every three years.

The marketplace, however, has greatly evolved since 1992. Broadcasters no longer deal with a cable monopoly; on the contrary, broadcasters can often chose among multiple providers ranging from cable to satellite to new fiber optic networks. As a result, broadcasters now brandish enormous negotiating power under old retransmission consent rules; this power has led to service disruptions and increases in the cost of service for consumers.

Consumers should not have to be victims of a system that allows broadcasters to pit one cable provider against another, threatening to withhold consent for its signal if demands are not met. Old retransmission consent rules inhibit the free market, reduce competition by undercutting smaller providers’ ability to compete on price, increase costs for consumers, and frustrate millions of Americans by shutting off popular programming at peak viewing periods.

The time is ripe to revisit these ill-structured rules and revise them to reflect the modern, competitive pay television marketplace. On March 3, 2011, the Federal Communications Commission (FCC) will hold an open meeting to clarify its rules regarding retransmission consent and will consider a Notice of Proposed Rulemaking in an effort to reform and streamline the rules governing negotiations between broadcasters and cable providers.

Government rules and regulations should drive businesses into the twenty-first century, not hold them back. The FCC should work toward a solution that revises old retransmission consent rules and the entire framework of broadcaster regulatory benefits in order to reflect the modern marketplace and limit government involvement and favoritism in private negotiations. A government policy that allows one private industry to blackmail another, while turning innocent consumers into victims of blackouts and price gouging, is a policy in desperate need of repair.

-- Erica Gordon