Consumer Welfare and TV Program Regulation

There are few alleyways of the administrative state more obscure or more littered with obstacles to efficient markets and improvements in consumer welfare than the interventions regulating ownership and licensing of TV stations and programs. What distinguishes TV programs from other mass media content, including both traditional print and new online media, is the extreme eagerness of Washington to engage in efforts to prevent markets from working freely, often in response to interest group pressures and opportunities for political advantage and with almost complete indifference to the welfare of consumers.

This paper first briefly describes some unusual economic features of media content and the characteristics of free markets in media content and then lists some of the legacy interventions that prevent video markets from operating to the advantage of consumers. Lastly, it considers what reforms will be required to eliminate the distortions currently impairing these markets.

From the public’s perspective, getting rid of obsolete regulation of broadcast and MVPD video programming is essential to the efficient operation of a market that has long been an important (but could have been a much more important) source of consumer welfare. Consumers today pay more than $100 billion annually for MVPD services, implying a willingness to pay (actual payments plus consumer surplus) well in excess of that amount. MVPD or equivalent services that increase video program distribution capacity were delayed and suppressed for many years, and this consumer value was lost. This was in the effort to protect initial broadcast licensees from competition in the (nominal) pursuit of ill-defined and ephemeral public interest and localism objectives.

It's past time to stop extending interventions originally intended for an old technology (broadcasting) to a range of new competitive media. Even if one thought the restrictions on competition and entry that have existed from 1927 to the present day were originally justified by assumptions about spectrum scarcity and vague notions of the public interest in local content or sources, it is now clear these assumptions are incorrect. No longer is there any rational public policy basis for a government agency or its legislative overseers to dictate how much or what content the viewing public can see, any more than there ever has been for printed media. There is no market failure to which the current regulatory framework is responsive. There is no reason to think that regulators can improve on even less-than-perfect market outcomes in this sector of the economy. Most important, there is no reason for FCC bureaucrats to decide how much of the spectrum should be used for each of many existing and potential commercial services.

Program producers, aggregators (cable and former broadcast networks), and local distributors (MVPDs) should be allowed to reach agreements among themselves for the creation and delivery of programs and audiences in competitive markets without regard to which technology is used to produce or deliver their goods. Their freedom of contract will promote an efficient and expanding supply of video content to compete for advertising revenue and viewers’ dollars. An adequate supply of tradable rights in spectrum will reveal how much competition is possible among traditional wired and wireless, analog and digital, and fixed and mobile delivery services. Judging by the patterns of history, regulating in the expectation that competition will be inadequate will only help ensure that very result.

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