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Thursday, March 3, 2005

Telco Video and Digital Must Carry: Making a "Problem" Worse
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Recent reports suggest that the broadcast industry will ask Congress to reverse the FCC's recent decision to limit required carriage of digital broadcasts to one (of potentially many) video streams that can be broadcast over a chunk of spectrum that once could support only one analog TV channel. These efforts to obtain digital multicast "must carry" can be criticized simply on equity grounds. In addition to the possibility of broadcasting all of their programming over the air, broadcasters are guaranteed carriage of at least one "primary" video stream on the local cable system -- special treatment of which most video programmers can only dream. Thus, it seems more than fair to require broadcasters, using the programming and distribution resources already at their disposal, to make the remaining video streams that digital tranmission will permit sufficiently attractive that cable operators and other video distributors will want to carry those streams.

But proposals like multicast must carry that force video platform owners to carry other programmers' channels also can be faulted for another reason: they don't improve programmers' long-term prospects for enjoying the most competing outlets for distributing their video content. These mandates do nothing to encourage investment in newer ways to distribute video, such as telephone companies' efforts to provide video over fiber.

Where mandates affording access to video platforms do not apply, broadcasters and other video programmers are better off to the extent there are more companies competing to distribute their product. Among other things, additional distributors give programmers another place to go in the event the cable operator does not want to carry the programming.

But this "going elsewhere" is not just good for programmers; it's also good for newer video platforms. It assures that they have more programming available and makes it more likely that programmers will understand they have an economic stake in helping the newer platforms become viable long-term competitors to cable and DBS. Such a stake will bolster the prospects of companies still deciding how they will earn adequate return on large investments in new video platforms such as telco fiber networks.

Of course, one might argue that broadcasters and other programmers are at a significant disadvantage to the extent their programming is not carried on the video platform to which the greatest proportion of households in an area subscribe. This result could be seen as favoring programs that do make it onto the cable system, whether the cable operator's own programming or the vast majority of programming the FCC suggests comes from other sources. Further, one could argue that such "favoritism" might deny broadcasters or other programmers the number of "eyeballs" they need to justify creating the programming in the first place.

Yet the great number of video programmers alone seems to belie this argument. In its latest video competition report, the FCC noted nearly 400 video programming networks, fewer than 30% of which are affiliated with the cable company and nearly half of which muddle through without even the benefit of being distributed by one of the big broadcast networks. These networks somehow figured out how to survive and thrive without mandated access to the cable plant, and it seems difficult to understand why broadcasters -- with years of experience in video programming -- should fare considerably worse.

But that's beside the point. Even if one accepts (for the sake of argument) that broadcasters will be significantly disadvantaged without mandated access to cable systems, that fails to explain how such mandates will help increase the number of viewers subscribing to distribution services other than cable. Those other services will garner subscribers faster to the extent more programmers flock to them. Mandating access to cable systems does nothing to encourage such movement by programmers. Certainly, if programmers know they don't have a legal right to be carried on the cable system, they will face stronger incentives to support the development of other video platforms, such as telcos' emerging video over fiber offerings.

There is much to suggest that efforts to impose multicast must carry pursue a solution for which there is no problem. But to the extent this "problem" is rooted in broadcasters enjoying too few outlets for their programming, adding this kind of mandate probably wouldn't fix it. And it might make things worse.

posted by Kyle Dixon @ 5:54 PM | Broadband , Cable , Communications

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