DTV Mandate Tally Could Grow Again With Upcoming Multicasting Decision

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Officials at the Federal Communications Commission are onceagain considering rules that would supposedly help salvage thedigital television (DTV) transition and preserve a future forover-the-air (OTA) broadcasting. The latest chapter in this ongoingregulatory saga focuses on whether the FCC should require cableoperators to carry multiple signals aired by televisionbroadcasters. By digitally transmitting their OTA signals to thepublic, broadcasters now have the ability to condense their oldanalog signal into a much smaller amount of spectrum and thensimultaneously "multicast" a few more signals as well. For example,a local NBC television affiliate that broadcasts an analog signalon channel 4 in a regional market will now be able to broadcastmultiple digital channels of programming on channels 4.1, 4.2, oreven 4.3. DTV sets and tuners will be needed to receive suchsignals, of course.

While broadcasters already possess "must-carry" rights on cablesystems for their old analog TV stations, they now want the FCC toexpand those rights to include mandatory cable carriage of theirmulticast digital signals if and when they decide to start airingthem. Despite being constitutionally suspect on both First andFifth Amendment grounds, analog must-carry mandates have beensustained by the Supreme Court reasoning that preserving "free,over-the-air" broadcasting was a compelling government interest.But the analog must-carry free ride wasn't enough for thebroadcasters and so now they're back asking for a digital free rideas well in what can only be labeled a massive land grab of cablecapacity.

DTV and OTA at Any Price. As a previous TechKnowledge installmentlamented, the FCC has repeatedly shown it is willing to bend overbackward and do whatever it takes to advance DTV and guarantee afuture for OTA broadcasting. A partial tally of the mandates theFCC has already put in place to advance the DTV transition wouldinclude: transmission and receiver standards; DTVbuild-out rules and construction delay penalties; digital tuner mandates; "plug-and-play" cable compatibility rules; andjust a few weeks ago, the adoption of "broadcast flag" copy protection regulations.The FCC compiles all of its DTV regulatory proceedings on a specialDTVweb page and lists 50 rules or proceedings since they startedputting documents online in 1995. But if the FCC's online archivesincluded all the rules and proceedings going back to the beginningof this almost 20 year industrial policy, the list would besignificantly longer.

Despite all the FCC efforts to facilitate the DTV transition,only a very small percentage of households receive digital signalstoday. Proponents of the regulatory schemes claim that the mandatesare starting to pay off and that DTV is set to explode. Perhaps,but we don't need all of these FCC mandates to make the digitaltelevision transition a reality. "Digital transitions" arehappening all around us today in almost every sector of oureconomy. Even the oldest industry sectors, including agricultureand manufacturing, are being revolutionized by digital transitionsas advanced computing and communications technologies have helpedreinvent the way business is done. And almost every other segmentof America's more modern service sector has been transformed bydigital transitions of one variety or another.

Why the Endless Favors for Broadcasting? Whythen are policymakers treating the digital transition inbroadcasting as special or unique? Moreover, why did policymakersloan broadcasters tens of billions worth of DTV licenses in themid-1990s when many other companies were willing to buy thatspectrum for other purposes? And finally, why should otherindustries or consumers be forced to bear the costs of preservingthe OTA broadcast business model when more than 85 percent ofhouseholds have already opted to move to subscription-based cableor satellite services? There are no good legal or economic answersto those questions. The answers are purely political: policymakershave come to believe that every American has the right to "free" over-the-air broadcast TV, andbroadcasters are a very powerful political constituency that havedone everything in their power to preserve the old way of doingbusiness.

If broadcasters can find a way to continue to retain viewers andsustain their old advertising-supported OTA business model, that'sfine. Some critics will bemoan the fact that broadcastersare allowed to continue to use so much spectrum to transmit videoprogramming at all, claiming it is a massively inefficient use ofthis scarce resource. There's some truth to that, but ifbroadcasters were forced to compete in a truly free market forvideo programming without any regulatory assistance they wouldquickly discover the true opportunity costs of continuing tooperate in this way. Many broadcasters would likely get out of thebusiness voluntarily and sell their spectrum to someone who couldput it to better use. Some broadcasters-especially the largenetwork programmers-could go into the programming business fulltime and sell their fare directly to cable and satellitedistributors.

This scenario is not going to develop anytime soon, however,since both policymakers and broadcasters see substantial benefitsin propping up this dying and increasingly inefficient videodelivery method. Broadcasters understand that "public interestregulation" gives broadcasters almost all benefits and few costs byproviding access to rent-free spectrum and other special favors,such as must-carry mandates and other DTV assistance, discussedearlier. Policymakers believe they are directing the content orcharacter of broadcasting toward a more noble end, or at leastensuring that every citizen is receiving some sort of videoprogramming in their homes. However, there are few benefits for thepublic in this persistent regulatory effort to sustain OTAbroadcasting at any cost.

Viewed in that light, multicast must-carry proposals are merelythe latest in the long string of misguided attempts to pass alongthe costs of propping up the OTA broadcasting business model tosomeone other than the broadcasters themselves. But what makesmust-carry particularly insidious is that it represents asubstantial indirect tax on cable operators and their customers,who are forced to do without some channels or services whilebroadcasters grab several cable channels for their programming.Worse yet, broadcasters don't even air much original fare on theirmulticast channels; it's mostly the same programming found on theiranalog station that is digitally converted to look a little better.When asked how they might use those extra channels in the future ifgiven expanded must-carry rights on cable systems, somebroadcasters talk of a dedicated weather station or of offeringprogramming on a time-shifted basis. Apparently they've never heardof the Weather Channel or personal video recorders, which alreadyhandle those tasks quite nicely. But where is the compellinggovernment interest in making cable operators give broadcastersfree channels anyway? Why shouldn't broadcasters compete with thedozens of other programmers that are currentlyfighting for space on cable systems?

If the FCC passes any variation of the multicast must carryproposal, it will be sure sign that there is no end in sight forsuch special interest favoritism of the broadcast sector. Ofcourse, policymakers could take the opposite path and finally admitthat over-the-air broadcasting isn't worth saving, at least notthrough costly government dictates like multicast must carry.