State Intrusion in Programming Disputes would Result in "Must-Carry" Obligation
WASHINGTON D.C. - Efforts to push state legislation mandating arbitration in carriage disputes between cable companies and content providers are unnecessary and would result in "must-carry" obligations, explains Senior Fellow Barbara Esbin in "State Mandates for Program Carriage Dispute Resolution: Welcome to the Wide World of Regulation," released by The Progress & Freedom Foundation.
In her paper, Esbin explains that the current dispute between the NFL Network and cable operators over carriage arrangements is a sign the market is working rather than failing. Proposed state legislation mandating arbitration for these disputes negates the programming distributor's ability to negotiate price, terms and conditions. "The bills virtually assure submission of carriage disputes to arbitration by the independent programmer because they contain absolutely no incentive for the programmer to continue to negotiate if its initial offer is rejected," Esbin explains. The requirement to carry the programming in dispute at a rate determined by a third party would be a "must-carry" obligation.
Esbin also disputes five arguments offered by the NFL Network to justify proposed state legislation:
Programmer carriage choices may not reflect consumer preferences. Simple substitution of cable operator carriage choices with programmer choices is less likely than current framework of market negotiations to protect consumers.
Mandatory arbitration is government intervention. Despite claims that it is a "process remedy" for failed negotiations, mandatory arbitration where one party alone determines carriage terms and condition is government intervention.
Current federal remedies are effective to address competitive harms. Program carriage rules administered by the Federal Communications Commission are sufficient to address allegations of discrimination and competitive harm. The recent complaint to the FCC filed by the NFL Network claiming discrimination by a cable operator illustrates there is no need for state intervention.
Behavior addressed by the proposed state legislation would be preempted by federal regulation. Section 616 of the Communications Act, giving the FCC jurisdiction over program carriage disputes, was enacted to address fears of anticompetitive discrimination by vertically-integrated cable operators.
"Arbitrate and carry" rules would violate the First Amendment rights of cable operators. The proposed state legislation would impose carriage obligations which are not sufficiently well tailored to serve an important government interest.
Esbin urges government officials to make clear they will not intervene in disputes between the NFL Network and cable operators so negotiations between the two parties will resume. "The market, rather that the legislature, is the best place to decide this matter," Esbin concludes.
"State Mandates for Program Carriage Dispute Resolution: Welcome to the Wide World of Regulation" is available on the PFF website.
The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.