The Temptation of Media Regulation: Why Not Unbundle Episodes or Innings?
Owen, Bruce M., Regulation
Regarding mass media policy, the bookends of the political spectrum often find common ground. Left and right agree that mass media content is not satisfactory and that more or better federal regulation is the solution. The right seeks to reduce the availability, both to themselves and others, of objectionable media content that threatens family values. The left sees powerful "media barons" dominating an increasingly concentrated industry and distorting media content to serve their own corporate or political interests. Both perspectives find traction with the public, in part because mass media content is, by its nature, highly "available" to public awareness and often intended to trigger strong emotional responses.
Also, while many people can be persuaded that the price of wheat is determined by supply and demand, it is much more difficult to think of television programs or movies in terms of market forces. Objectionable outcomes are easier to ascribe to conspiracy or malign intent when instinctive moral standards seem threatened. All this makes fertile ground for bloggers, radio talk shows, and opportunistic politicians. Rational regulatory policy often seems an impossible goal.
Some markets, of course, are far from perfect. It is easy to find examples of market failure. But regulation also is imperfect. The issue for policymakers is whether intervention will improve matters. Unlike at least some market failures, regulation tends to be permanent. Regulation often creates economic rents that would disappear if regulation were withdrawn, and this distorts the political decision whether to persist in a failed attempt to use regulation to repair a market failure. An alternative to regulation is to provide opportunities for changes in technology or entrepreneurial initiative to remedy market failure endogenously, and to limit regulatory interventions to cases where there are clear indications that imperfect regulation will deliver better value than imperfect markets.
U.S. economic policy has a longstanding presumption in favor of competitive market solutions, where feasible. As recently as 1996, for example, Congress opted for increased reliance on competition and deregulation in the media industries. In the years following the 1996 Telecommunications Act, there was a substantial increase in retail video competition, especially from new technologies such as satellite broadcasting and broadband Internet service. This competition continues to grow. Most households a generation ago received only four TV channels (the three networks plus public broadcasting). Today most households can receive a dozen or more over-the-air stations and literally hundreds more on cable, satellite, and the Internet, supplemented by stored content available from video rental stores.
Scarcity of channels was the original constitutional rationale for federal regulation of broadcasting, as established by such rulings as National Broadcasting, Co. v. United States (1943) and Red Lion Broadcasting Co., Inc. v. Federal Communications Commission (1969). The truth is that there never was any more scarcity of stations or channels than the federal government (with helpful advice from industry lobbyists) decided there should be. Today, of course, it is nonsensical to speak of channel scarcity. Nevertheless, deregulation of the media has made little progress. It seems that regulation of the media reflects not merely broad acceptance of, but insistence on, political rather than market-determined outcomes.
Four years ago, the Federal Communications Commission voted to bring more rational economics-based standards to bear on the issue of media concentration, and thereby to ease obsolete limits on ownership. That effort to rely on market competition was overturned in Prometheus Radio Project v. Federal Communications Commission (2004). A majority of the Third Circuit panel criticized as arbitrary the way the FCC proposed to define and measure diversity--as if there is some accepted method. …