The FCC's retransmission rules now perversely cause consumers to suffer unnecessary collateral damage in retransmission negotiations -- the exact opposite outcome the FCC wants -- in large part because the FCC's retransmission rules have not kept pace with dramatic competitive and technology changes over the last two decades.
- The FCC should, and easily can, protect consumers from becoming unnecessary collateral damage in retransmission negotiations by simply updating their nearly twenty-year-old FCC regulations with petitioned common sense modifications that ensure consumers never find themselves unnecessarily in the "bulls-eye" of the FCC's out-dated retransmission rules again.
To better understand how rules that possibly made sense in 1992, could produce predictably perverse and dysfunctional consumer outcomes today, think of the retransmission rules, like a regulatory "gun" that was originally and permanently pointed directly at a 1992 cable monopoly and no one else.
- However, over almost twenty years, innovation and competition have dramatically transformed the video marketplace from that original 1992 monopoly fixed "target," into a competitive video market place according to the FCC.
- This means that the FCC's retransmission "gun" is now no longer pointed directly at a cable monopoly, but it is aimed at only one of many video competitors and their completely innocent customer base. This means cable's customer base is increasingly becoming unnecessary collateral damage because of increasingly ill-aimed retransmission negotiation tactics allowed and condoned by the FCC.
- The FCC has the authority and the obligation to protect consumers here by updating the FCC's Section 325 rules with a functional dispute resolution framework and a mandatory interim carriage requirement during negotiations -- so that the current retransmission regulatory "gun" is no longer aimed directly at innocent consumer bystanders, and so that consumers no longer have to be collateral damage in someone else's battle.
So why is the current retransmission negotiation dynamic so dysfunctional?
First, retransmission is a completely artificial construct created for an ancient regulated monopoly market that has long since become a competitive video market. The construct now incorrectly assumes that the market could never bring supply and demand into equilibrium for consumers, so the government must rig the game to produce a one-sided outcome.
Second, now that the monopoly predicate of the retransmission construct is no longer true, the design of this artificial construct predictably produces serious market distortions and dysfunction.
- When a construct has no penalty and all reward for arbitraging consumer welfare, broadcasters predictably will arbitrage consumer welfare with impunity... and consumers lose.
- When a construct inherently discourages mutual benefit or win-win outcomes, the construct will predictably produce lose-lose outcomes... and consumers lose.
- When a construct assumes that someone else's consumers are cost-free pawns to be used for competitive advantage, predictably consumers will be treated like pawns by the regulatory-advantaged party... and consumers lose.
- When a construct is designed to always produce a brinksmanship negotiation dynamic, predictably consumers will be whipsawed by brinkmanship tactics at the worst possible time... and consumers lose.
- When an FCC regulatory construct nonsensically puts consumers' interests last, consumers get unpredictable loss of the most popular programming and predictable higher costs of programming... and consumers lose.
- When a construct is inherently uneconomic without any competitive supply and demand discipline or equilibrium, the construct predictably yields uneconomic outcomes of ever-increasing prices for programming... and consumers lose.
Third, unfortunately this artifical Government-skewed retransmission dynamic is currently producing exactly what the FCC rules perversely encourage -- i.e. broadcasters extract ever-spiraling carriage costs from cable operators that are either passed on to consumers or consumers suffer from the threat of lost popular programming at the worst possible time.
- A skewed mechanism predictably produces skewed outcomes.
- A retransmission regulatory mechanism that ignores the possibility of negative outcomes for consumers, while also incenting the abuse of someone else's customers under the unwitting protection of the FCC, predictably yields an unnecessary rotten outcome for consumers.
In sum, the FCC's outdated rules have now become the problem.
- They are dysfunctional because they do not recognize market reality and because they are not designed to protect consumers, but force consumers to pay higher than market prices for programming because the rules won't allow mutual-benefit, market-based negotiations on the merits.
- Now that the FCC understands there is a consumer problem, and that there are simple common sense solutions to protect consumers from the problem, the burden is on the FCC to fix the problem without delay.
- The ball is now in the FCC's court.