How can businesses ‘regulate their rivals’ in a bill eliminating regulations?

Fred Campbell, executive director of a new group called the Center for Boundless Innovation in Technology, had a curious piece on retransmission consent on The Hill’s Congress Blog earlier this week. Campbell — the former head of the Competitive Enterprise Institute’s Communications Liberty & Innovation Project — says a couple of very peculiar things that I thought were worthy of a response, given my own history working on this issue.

The oddest thing about Campbell’s piece is its characterization of the Rep. Steve Scalise-sponsored Next Generation Television Marketplace Act as an effort to add regulatory burdens for broadcasters. He repeats this claim in various forms throughout the piece, but I simply cannot see how it is justified. The purpose of the Scalise bill is to eliminate existing regulations that have been layered over top of one another to create the incomprehensible thicket we have today. There’s not a single thing in there adding new restrictions on anyone in any portion of the television market.

To refresh your memory, the bill has five major deregulatory planks: elimination of retransmission consent rules; ending “network non-duplication” and “syndicated exclusivity” mandates; repealing “must carry” designations; eliminating compulsory licensing of content; and ending media ownership restrictions.

Some of Campbell’s criticism is rooted in conflation (hopefully not intentional) between the Scalise bill and another related to the issue from Rep. Anna Eshoo, which Campbell also mentions in his piece. Her bill, the Video CHOICE Act, takes precisely the opposite course from Scalise by prescribing yet more government intervention into a market that isn’t serving consumers as well as it could. It does this in several ways, most notably by further empowering the Federal Communications Commission to act as arbiter between negotiators and by manipulating channel placement for those electing a must carry designation.

To be perfectly clear, I am no fan of Eshoo’s approach and some of Campbell’s assertions are perfectly true of that flawed legislation, but they’re simply not true of the Scalise bill. Via Twitter, Campbell pointed me to a piece he wrote in December that further explains his views, which is quite interesting, but also, in my opinion, inadequate to the task of justifying a defense of retransmission consent regulations from a free-market perspective.

For example, he asserts that “the existence of ‘must carry’ wouldn’t provide the broadcaster any pricing advantage in negotiations with for-pay video distributors, whose goal is to carry the programming at the lowest possible cost (which must carry sets at zero).” But this overlooks the fact that “must carry” denies the right of a service provider to withhold the use of its distribution system which broadcasters seek to disseminate their programming in order to get ads in front of eyeballs. If they’re forced to carry programming, distributors have less leverage than they otherwise might.

Campbell also gives short shrift to the Scalise bill’s elimination of the onerous compulsory licensing regime, which forces broadcasters to deal their content at government-mandated prices. He says this is “an issue that merits additional discussion,” but that hardly captures the importance of ending a regulatory scheme that has been the bane of many a broadcaster’s existence for three decades. This provision was put into the bill specifically to address concerns that simply eliminating re-trans without proportional deregulation of broadcasters would be unfair.

He also suggests two ways the Scalise bill doesn’t go far enough: it does not eliminate must-carry for religious and educational broadcasters, and most importantly, it doesn’t eliminate the public interest obligations with which broadcasters must comply. But here we find out just how deep this particular rabbit hole goes.

The public interest obligations exist because Congress gave away valuable spectrum (good for broadcasters!) and demanded certain kinds of programming in return (bad for broadcasters!). Then Congress instituted a compulsory licensing regime (bad for broadcasters!) forcing them to deal their content at government-mandated prices and later layered on top of it the myriad regulations of re-trans/must carry/territorial exclusivity/etc. (good for broadcasters!). Needless to say, this is a gross simplification of decades of legislative and regulatory interventions that have created the tenuous status quo, but you get the idea.

I, too, would like to see a bill that goes further in a deregulatory direction, given how much more competitive and vibrant both sides of the television market are today they were when most of these rules were crafted. For example, I’m enough of a libertarian that I’d love to address what I see as overbearing responses to indecency, like the ongoing saga of “fleeting expletives” and fines associated with airing them. But frankly, I’m not sure it’s possible to completely unwind the ways in which government has screwed things up over the years in one piece of legislation.

I want to emphasize that, though I don’t really know him personally (I think we shared a lunch table once at a conference), Campbell and I agree on the vast majority of policy matters. This is not the sort of personal or political food fight one normally sees, just an honest disagreement about an important issue. The Scalise bill is certainly imperfect in the sense that it doesn’t solve every last problem, but it has that in common with virtually every piece of legislation ever introduced. What the Scalise bill does is address a known problem in a consistent, deregulatory, free market manner without inappropriately advantaging or disadvantaging one market participant over another. I’d like it to go further, sure, but it’s a good bill that I hope sees action soon.

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