Friday, October 23, 2009

Video Competition Alive And Well

House Subcommittee on Communications, Technology, and the Internet hearing

There is no denying that there are more things available to watch now than ever before, especially for those who remember the days of three networks, PBS and maybe an indy or two. But still, a House panel found fodder for dispute.

The key battle remains access to must-have regional sports programming – a particularly thorny problem for telcos trying to compete in new markets with cable incumbents.

Another issue is the loss of independent production companies – a writer/producer said that it is only natural for big program distributors to look first to related program sources before seeing what may be available elsewhere. That, combined with the high costs of being competitive with big producers, has made it very difficult for indies to survive and indeed, most of them have not.

Still, many witnesses argued that there has never been more competition and that the government need not step in. That was certainly the point of the lone watchdog on the witness panel.

House Subcommittee on Communications, Technology, and the Internet Chairman Rick Boucher (D-VA) admitted at the outset he had no legislation in mind as the hearing was being kicked off. But there is no denying that the legislation currently on the books is ancient, so the panel looked into the matter, grilling various MVPD and programming providers, along with one free market watchdog.In general, Democrats were concerned with making sure all video platforms and small companies in the video arena are given a chance to compete, and that the consumer is put first in all decision making.

Many Republicans felt that the underlying issue was in fact network neutrality – once again labeled a regulatory fix for a problem that does not exist, and one that will stifle the investment necessary to support a robust internet marketplace.

One Republican, Nathan Deal (R-GA), challenged the upper hand given by the government to broadcasters when it comes to retransmission consent negotiation. This was no doubt music to the ears of cable operators, while of course being fighting words in the halls of the NAB.Joe Barton (R-TX) came in late and said he had no idea why the hearing was even on the schedule. He said that there is plenty of competition now, and that the only problem he could see was that perhaps some of the players didn't like the way the competition was going.

He suggested all players go to lunch and negotiate. As for the thorny sports programming issue, he suggested that companies that desire to broadcast such programming go out and do what's necessary to get the rights to it. He even suggested buying the NFL Washington Redskins -- get the team itself, and then control its programming rights.

Here are summaries of the testimony of the six witnesses.

* Thomas Rutledge, Cablevision: State of competition is healthy, and consumers have been the primary beneficiaries. Offers all households an array of services at significant savings. Program access rules are no longer relevant. In places like New York, companies should have incentive to compete in the marketplace, not the regulatory arena. Cablevision competes against phone companies that are much larger, and seeks ways to differentiate itself to compete with them. This includes services, content. Cablevision has been making risky investments and developing programming; and it no longer makes competitive sense to allow other platforms access to it. Program access rules need to be put to bed, and efforts to expand access be rejected.

* Benjamin Pyne, Disney Media Networks: There has never been a more competitive marketplace – never. Most have three, four or more MVPD choices. Competition is also fierce on the programming side. 500 national programming services, all while vertical integration has decreased.

Smallest cable operators are most in need of help, and Disney is granting free retransmission to many of them for three years, and cutting them a break for its cable offerings. Broadband: ESPN 360 puts long-form sports out there for a fee. Net neutrality – this is a network management issue. Must guard against program pirating, ISPs need to help curb stolen content. Competition is thriving; no further government intervention is required.

* Patrick Knorr, Sunflower Broadband: Testifying or ACA. Do not believe those who say the sky will fall if the competitive situation is improved. For example, retransmission consent fees are expected to skyrocket. Higher prices for local TV make it hard for small cable systems to provide other quality programming. DBS has become dominant in many rural markets, and have regulatory advantages in dealing with broadcasters than exist for cable in the same places. Internet: ESPN is exploring a closed internet model, buy it or get nothing. ACA thinks if other outlets follow this model it will be a disaster for consumers. Net neutrality must not be limited to providers, but must guard against exclusivity abuses from programmers. Small cable must be able to tier broadcast to give it retrans negotiation leverage.

* Ronald Moore, "Battlestar Galactica": Since he’s been active in TV the marketplace has changed and not for the better. Vast majority of broadcast programming and cable programming is coming from a small group of highly consolidated companies. 1989: there were 18 significant production companies. In 2009 there are eight. Fewer voices and fewer players creates a more homogenized product for the audience.

Monoculture has been allowed to take over commercial TV. Open internet promises to be competitive marketplace for next generation of creators. Traditional media has access to homes; examine bundling of channels; eliminate “filler” channels that simply keep competition off the dial. Companies are not evil, they’re doing what make sense for them financially. That must be dealt with via regulation – they need rules that promote competition and avoid the monopolization of market power.

* Terrence Denson, Verizon: Investing in wireline and wireless broadband networks. FiOS is providing first competition for cable in many markets. Providing “widgets” -- interactive television services. Big challenge is getting access to critical local sports programming. Some of the incumbents do all they can to deny access, using “terrestrial loophole.” Cable uses loophole to handicap competitors. Cablevision denies access to MSG, MSG+ networks in New York. Potential customers won’t switch because of the MSG issue.

* Adam Thierer, Progress and Freedom Foundation: Do citizens have more news and entertainment at their disposal now than in the past? Yes. Consumers can get whatever they want whenever they want. More options than ever before. Most of us remember having nothing but a handful of over-air television stations – no longer the case. Marketplace should be viewed as a pro-consumer success story.

RBR-TVBR observation: As a practical matter, it would seem that any actual legislative action in this arena is a long way off – if indeed there will be any at all.

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