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Tuesday, December 13, 2005

A "Voluntary" Charade: The "Family-Friendly Tier" Case Study
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After 15 years of covering communications and media policy in Washington, I have found that the most important book to keep handy is not any book of law or economics, but rather a good dictionary. That's because I constantly need to reassure myself that I haven't forgotten the true meaning of some words in the English language after hearing how they are used (and abused) by Washington policymakers.

Take the word "voluntary," for example. It's a fairly simply word that most of us learned very early in life. I didn't really feel that I needed to look it up in my dictionary until I started working in Washington. Here in Washington, you see, "voluntary" appears to mean something very different that what we learned long ago in school. Consider this week's announcement that the cable industry will "voluntarily" be adopting "family-friendly" tiers of programming.

I guess you could make the argument that the move was a response to consumers clamoring for such a thing, but the problem is that there isn't any evidence to suggest that that is the case. Indeed, a few years ago, DirecTV offered a "Family Choice" tier with about ten channels for just $5 dollars per month, but few subscribers were interested and it was abandoned fairly quickly. Apparently there wasn't any consumer backlash to the move either. DirecTV spokesman Bob Marsocci told Satellite Business News in May that "We didn't hear anything from our subscribers that they missed in any way the standalone tier." So, why would the cable industry want to "voluntarily" adopt something that no one is asking for?

Moreover, industry experts will tell you that cable and satellite operators often don't have as much say as you might think regarding some of the TV networks they carry and how those channels are packaged together. As a condition of the deals they cut with content providers, cable and satellite distributors are often required to bundle some channels alongside others. So, why would cable operators "voluntary" agree to offer family-friendly tiers that could violate those contracts and get them in hot water with video programmers?

Finally, in "voluntary" offering a family-friendly tier, cable operators are setting themselves up for a major catfight with many programmers who will insist on being part of the new tier. "Hey, my channel is family-friendly too!" many programmers will exclaim. Everyone from religious broadcasters to cartoon channels to female- and minority-oriented cable channels will start lining up for carriage on the new family tiers. This creates a real dilemma for cable operators, of course, because it means that many programmers are going to have to be turned away while others are let in the door. Those shut out of the party will cry foul and potentially even claim unjust censorship of their diverse views. Meanwhile, it wouldn't be at all surprising if some members of Congress started jawboning cable operators to include their favorite channels in the family-friendly mix and exclude others that they don't like. The problem for cable operators is that if they respond to those protests (from either the networks or policymakers) and agree to let a lot of networks pile onto the family-friendly tier, it's just going to raise the overall cost of the tier and lead to consumer protests instead! So, again, it's a lose-lose scenario for cable operators.

In sum, there doesn't appear to be a logical reason for the cable industry to adopt a "family-friendly" tier at this time. Why, then, are all the headlines this week talking about the industry's "voluntary" move to do so?

The answer, of course, is that the cable industry's move to offer family-friendly tiers is not voluntary in any sense of the word. This result has been not-so-subtly coerced by lawmakers and FCC regulators. The cable industry's actions in this case were only "voluntary" in the sense that they voluntary agreed to do something in exchange for clemency from a much harsher punishment. Specifically, the industry was trying to escape the direct application of indecency controls on the basic tier or the creation of an "a la carte" regulatory regime for all cable channels.

Consider, for example, what happened at the Senate Commerce Committee's "Open Forum on Decency," which took place just over two weeks ago. While billed as an open forum, the event quickly became a "let's-beat-up-on-cable" session. One lawmaker and "family group" after another called for new regulatory controls on cable and satellite content. Even some broadcast industry competitors took shots at cable arguing that cable shouldn't get a free pass from all the regulations that broadcasters already face. And proposals to extend indecency controls or impose a la carte regulation on cable were floated by several participants.

The most notable of those participants was FCC Chairman Kevin Martin, who kicked off the session by announcing that the FCC would soon be releasing a report praising a la carte. Importantly, Martin said this report would refute a report the agency put out just a year ago that panned a la carte mandates. Chairman Martin ended his remarks to the crowd by telling the Senators assembled there that "I also share your belief that the best solution would be for the industry to voluntarily take action to address the issue. But I do believe that something needs to be done."

"Something needs to be done." When America's top regulator says something like that, you listen. You listen very closely. And when he prefaces that comment by noting that the agency he heads is about to release a new report endorsing a comprehensive new regulatory regime for your industry, well then, you REALLY listen closely. And you probably act by doing something like "voluntarily" adopting a less onerous plan to keep regulators and lawmakers at bay.

Meanwhile, it is vitally important to remember that two of the leading video distributors involved in this saga -- Comcast and Time Warner -- are in the midst of a major regulatory proceeding at the FCC seeking to gain permission to take over Adelphia Communications' cable systems. Adelphia's bankruptcy fiasco resulted in the sale of the company and Comcast and Time Warner won the bid to takeover the struggling company, split it in two, and then revitalize its lackluster infrastructure. But Comcast and Time Warner need the FCC's blessing to get the deal wrapped up and the agency has been delaying approval. In fact, the agency has a 180-day "shot-clock" it is suppose to abide by when approving mergers and it is now over 190 days into this proceeding. Apparently, the FCC believes it's OK to keep playing a game after time has expired. Let's do a little detective work here and see if we can figure out what is going on here: (A) Two major cable operators are seeking the FCC's blessing to consummate a business deal; (B) The FCC Chairman is actively jawboning the cable industry to "voluntarily" adopt new content-related rules or tiers for basic programming; (C) The approval of a cable merger is being held up by the agency. You don't need to be Sherlock Holmes to figure out what was going to happen next. Don't be surprised if the FCC expeditiously approves the sale of the Adelphia properties to the companies now that Comcast and Time Warner have "voluntarily" agreed to adopt a family-friendly tier.

All this led me back to that trusty dictionary sitting here on my desk. After watching this fiasco unfold, I just had to go back and double-check the definition of "voluntary." Here's what it said:

* "Arising from one's own free will."
* "Acting by choice and without coercion."
* "Not by accident. Intentional."
* "The operation of unforced choice."

That doesn't exactly sound like the same definition of the term that Washington policymakers have in mind. Far from being an unforced choice, the cable industry's decision to "voluntary" adopt a family-friendly tier was the product of blatant regulatory coercion.

P.S. The perversion of the English language that takes place in our regulatory and legislative process is bad enough, but equally troubling was the way that Sen. Ted Stevens, the Republican Chairman of the Senate Commerce Committee, greeted the news of the cable industry's "voluntary" plan. At a Senate hearing yesterday, he told them that they should not delay implementation of the family tier and should be very careful about the prices they charge for the new tier. "I think time is a consideration, and costs will be a consideration," he said. Suddenly, cable rate regulation appears to be on the table again! Haven't we learned anything from the mistakes of the past?

posted by Adam Thierer @ 2:57 PM | Cable , Free Speech , Mass Media

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