Consumer Welfare and Television Program Regulation

June 13, 2012

Getting rid of obsolete regulation of the broadcast and distribution of video programming is essential to the efficient operation of a market that has the potential to greatly increase the benefits to consumers.  Services that increase video program distribution capacity have been delayed and suppressed for many years -- a problem the Federal Communications Commission (FCC) has further exacerbated with additional interventions, says Bruce M. Owen, director of the Stanford University Public Policy Program.

Federal control of the electromagnetic spectrum, for one, has resulted in numerous inefficiencies and losses to the general consumer audience since it began in 1927.

  • In making spectrum allocation decisions, the FCC has been heavily influenced by industry interests.
  • For example, for decades the FCC made first radio and then television licenses artificially scarce to protect the economic interests of broadcast networks and big-city stations.
  • The evidence for this is found in the extremely high prices at which broadcast licenses were bought and sold, reflecting the capitalization of scarcity rents.
  • Most economists agree that the private market could just as easily allocate the spectrum (provided minimal government property protection), avoiding opportunities for corruption.

General FCC regulations, furthermore, have been fraught with shortsightedness and a lack of consideration for aggregate impacts.  Its rulings have routinely hampered the development of market-optimal video programming, and its patchwork of property rights policies has often unfairly chosen winners and losers.

The Scalise-DeMint Next Generation Television Marketplace Act, however, would seek to eliminate much of this unnecessary regulation and reduce the FCC's distortionary impact in the broadcast sector.

  • The bill would repeal compulsory licenses, must-carry rules, retransmission consent and a variety of other mandates on regulated entities, including ownership rules.
  • Further reforms in this area would liberalize the electromagnetic spectrum and allow only for a property rights enforcement role for the FCC.
  • Combined with the Scalise-DeMint bill, such reforms would free up the video programming sector, likely resulting in more programming options for consumers and an optimal level of investment in the sector by producers.

Source: Bruce M. Owen, "Consumer Welfare and TV Program Regulation," Mercatus Center, May 2012.

For text:

http://mercatus.org/publication/consumer-welfare-and-tv-program-regulation

 

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