Enabling Television Competition in a Converged Market
In the 1950s, broadcast television overtook radio as the dominant mass medium in our culture and economy. (1) In the 1970s, cable technologies emerged as a new method of television programming delivery, (2) and over time--and after battling through regulatory standoffs with broadcasters--it became the dominant medium in television. (3) The 1980s saw the growing potential of satellite as a rival delivery mechanism and its attendant regulatory and legislative wrangling, (4) though it has not managed to displace cable. We now may be entering yet another phase change in the way video programming reaches our homes. Increasingly, consumers and distributors rely on the Internet to access or disseminate traditional television programming. (5) Just as the emergence of cable and satellite necessitated shifts in the regulatory conception of the market for television, so too will the emergence of online video distribution. As online video distribution becomes more prevalent and the television market continues to evolve, currently dominant television distribution services--in particular incumbent cable providers--may entrench themselves, leading to higher prices, reduced innovation, and less diversity in programming. (6) These incumbents can do so because in addition to dominating the market for television subscription, they also dominate the market for broadband Internet--the means by which the new online competitors reach customers' homes--and, increasingly, the programming new competitors need in order to thrive.
In October 2012, the Federal Communications Commission (FCC) declined to renew the program access rules (PARs) originally put in place by the Cable Television Consumer Protection and Competition Act of 1992 (7) (1992 Cable Act) to address the satellite phase change. These rules presumptively barred exclusive contracts between vertically integrated cable or satellite television providers and video programmers and required the FCC's permission for these entities to enter exclusive contracts rather than to license the content to competitors at competitive rates. The rules--intended to be temporary measures--aimed to encourage competitiveness in the market for subscription television services, particularly with regard to satellite entrants. The sunset of the PARs is premature; just as a new category of competitive video service is emerging, the FCC has abandoned a measure that would protect these services from actions by vertically integrated incumbents that would undermine the viability of the new competitors. Though the 2012 Sunset Order (8) operated within the intended market boundaries of the 1992 Cable Act, which was enacted with only cable and satellite services in mind, these boundaries fail to appreciate that the market for television services is shifting in important ways. This shift comprises two major phenomena: First, the market for subscription television services no longer operates in isolation, but rather as a multiproduct bundle with broadband Internet. Second, incumbents have seen the development of competition in online video distributors (OVDs). (9) Thus, the nature of the product that incumbents sell has changed, and they face new and developing competitors. The regulatory approach should adapt to the new landscape.
When one considers the ways the market for video delivery has evolved--particularly as a result of the convergence of television and Internet services--it becomes clear that vertically integrated incumbent cable companies are in a position to preserve their television dominance through conduct that suppresses the growth of new entrant OVDs. This Note argues that the FCC can and should account for these market changes in a way that promotes competition within the bounds of the 1992 Cable Act. First, it should classify certain OVDs within the same regulatory category as traditional cable and satellite television providers. These new entrants would then be subject to procompetitive FCC rules, and their inclusion in the market would inject a much needed competitive jolt into the industry. …