Wednesday, February 18, 2009 - The Progress & Freedom Foundation Blog

And We Wonder Why We're In An Economic Crisis?

Congress seems anxious to blame business executives for the current economic downturn, perhaps to divert attention from their own contributory actions creating federal policies that resulted in, or required, uneconomic commercial activity. Such policies are bad enough in good times when business activity is robust, companies are flush, and unemployment is low. They are inexcusable, however, when times are tough, as they are now; when credit is tight, the economy is contracting, and unemployment is on the rise.

Enter Congressman Bart Stupak (D-Mich.). He has introduced a bill that would require DIRECTV and EchoStar to carry local TV stations in the 30 smallest markets. Sadly, some analysts handicap the bill's chances of becoming law at nearly 50%.

Because Congress does not have the power to repeal the laws of physics, there are only two ways in which a satellite company might comply with such a mandate: 1) it may add capacity (i.e., launch new satellites and build associated ground equipment), or 2) it may convert capacity currently used for other purposes to local television carriage in the most sparsely populated parts of the country. Neither approach makes economic sense. That is, Mr. Stupak's bill, if it were to become law, would impose considerable costs on satellite operators while generating no appreciable revenue.

Building and launching new satellites in order to comply with Mr. Stupak's mandate would of course cost hundreds of millions of dollars, while the return on such an investment, without any doubt, would be negligible. On the other hand, satellite television operators make capacity decisions in order to maximize net revenue. If they are required to delete program services that are profitable to make room for those that are less so, they necessarily lose in the transaction. Indeed, if delivering local television signals in the smallest markets made sound business sense, the satellite companies would be doing so already and no legal mandate would be necessary.

But Mr. Stupak's bill does not make sound business sense. He is, in this difficult economic climate, proposing that two DBS companies, DIRECTV and EchoStar, incur significant costs for little or no return. And what is the great national concern that warrants such a heavy-handed and uneconomic mandate? Apparently it is a matter of national urgency to Mr. Stupak that viewers in the smallest markets receive their local TV programs via satellite rather than through a cable or by use of a traditional antenna. Does that interest strike any sensible person as a warrant to visit further mischief upon our struggling economy?

posted by W. Kenneth Ferree @ 12:03 PM | Communications , Digital TV