The question of whether recording artists should have performance rights as to analog broadcasts is again pending before the U.S. Senate. As a result, I had planned to revise or supplement my 2008 paper on performance rights, A Performance Right for Recording Artists: Sound Policy at Home and Abroad. But as I struggled to do so, I realized that I faced an intractable problem: I had nothing new to say. From every perspective--copyright policy, property-rights policy, technology policy, or raw national self-interest--a performance right for recording artists remained the obviously correct answer.

Granted, my 2008 paper on performance rights is highly imperfect. Indeed, re-reading it was no different than most re-readings of any year-old paper: its adequacies merely failed to offend while every misstep or circumlocution grated like a kneecap on concrete. Fortunately, the arguments for and against a full performance right for recording artists are so lopsided that even an analysis more flawed than mine would have been more than adequate.

The brute facts are painfully simple: enacting a general performance right for recording artists will grow the U.S. economy, reduce the U.S. trade deficit and eliminate or reduce discrimination against digital broadcast technologies. The United States is the world's most successful creator and exporter of popular music. Consequently, other nations annually withhold hundreds of millions of dollars in broadcasting-related performance royalties from U.S. artists because U.S. analog broadcasters fail to pay any performance royalties to foreign artists.

Both sound copyright policy and a due respect for property rights should thus compel the United States to correct this self-destructive gap in U.S. law. Enacting a full performance right for recording artists would immediately grow the U.S. economy and reduce our trade deficit.

Is it politically difficult to achieve this solution that would best serve the public interests of the United States? Absolutely--but only because this otherwise optimal solution would disserve a few private interests that happen to be important to every elected federal legislator. Nevertheless, the right answers are often politically inconvenient. Indeed, that is why we taxpayers expend so much effort trying to ensure that we elect the right people to represent us in Congress.

I agree that absolutely critical and extremely difficult questions can arise when we enquire how we can best reconcile the proven generative potential of copyright protection with the equally obvious generative potential of the Internet. But the question of a full performance right for recording artists is not one of them. It is a public-policy no-brainer that respects the legitimate interests of artists, the legitimate interests of the risk-taking venture capitalists known as "record labels," and the national interests of the United States.

I could say more, but on this issue, I see nothing more worth saying.

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?

Reuters reports:

A nine-car NASCAR pileup may have wrecked a vehicle sponsored by the Federal Communications Commission, but it gave the agency more mileage in advertising the imminent switch to digital TV signals, the FCC's chief said Monday . . . . Asked if it was a bad omen for the switch, FCC Chairman Kevin Martin told reporters it was more of a silver lining. "Except for the cars that win the races, the cars that are in wrecks get a lot of attention," he said.

Similarly, according to TV Week, the Chairman stated:

"Except for the car that wins the race, the cars that crash get a lot of attention during the race itself," he said. "From our perspective, it would be better if he won, but he gets quite a bit of attention. ... [T]he cameras focus on it. What we are trying to do is get all the attention on this car. So we appreciate all his efforts to do that."

Seriously. Are we to believe that driver David Gilliland made a special effort to draw attention to the "DTV Transition" message on the front hood of No. 38 by maneuvering it into a picturesque nine-car pile up (viewable via link in my previous post) to "get all the attention on this car"? Does this not instead illustrate the folly of this use of taxpayer funds that were supposed to be directed to help educate the millions of Americans who rely on analog over-the-air broadcasting about the digital transition that is now a mere 100 days away?

Members of Congress are apparently quite concerned about the progress to date in readying the American public for the transition. In a recent letter to the FCC, NTIA, the NAB, and TV networks and their affiliates, Reps. John D. Dingell (D., Mich.) and Edward J. Markey (D., Mass.), the chairman, respectively of the House Energy and Commerce Committee and its telecommunications and the Internet subcommittee, asked how the agencies and groups were responding to lessons learned from the September early DTV transition in Wilmington, N.C. The letter to Chairman Martin identifies three problem areas: rescanning converter boxes; antenna issues; and signal contour revealed by the Wilmington test and asks what specifically the FCC is doing to address each. Judging by the letter, there appears to be a lot of serious work to be undertaken to ensure a smooth transition to digital broadcasting. So, let us hope that the NASCAR pile up is not an omen about the success of the DTV transition and that the leadership changes now underway in Washington will act swiftly to address this other important 2009 transition without additional waste of taxpayer resources.

Senator William Proxmire (D-WI) must be smiling somewhere in the sweet hereafter. His Golden Fleece Award for government waste, restored with the consent of his estate in 2000 by the non-profit group Tax Payers for Common Sense, has a new contender for 2008. On Oct. 17, 2008, the office of FCC Chairman Kevin Martin, a Charlotte NC area native, announced that the agency was spending $350,000 of taxpayer funds appropriated to advance DTV transition eduction efforts to sponsor a middle of the pack NASCAR racing car driver's No. 38 car "as a high-speed billboard promoting the February 2009 national tansition to digital television." I kid you not. Not to worry, the FCC received a $100, 000 government discount on the deal. This investment, in the words of Terry Malloy, could be "a contender." Setting aside the obvious question of whether the demographic for watching NASCAR racing is among the most at-risk populations for what former FCC Chairman William Kennard called the impending train wreck of the DTV transition (obviously he had got the transportation metaphor wrong). That is, did the FCC's evidence indicate that stock car racing fans are more likely than the average citizen to rely on over-the-air television? One would imagine just the opposite, as avid sports fan in general -- and there is no reason to assume NASCAR fans are different -- seem more likely to be purchasers of cable and DBS services for expanded sports offerings than they are to rely on over-the-air television signals for their entertainment needs.

High-definition set-top boxes are selling too fast:

Verizon appears to be hardest hit. Its delay has been in place for about two weeks and affects customers placing new orders for the equipment, said Verizon spokesman Eric Rabe.

The shortage follows a spike in orders for HD boxes during the holiday season, likely a result of consumers receiving new TV sets as gifts as well as upgrading TV sets in anticipation of the Super Bowl, says Mr. Rabe. The jump in orders likely was aggravated, ironically, by a promotional offer in which Verizon is giving away high-definition TV sets to new FiOS customers. The offer has been so successful the company has renewed it three times.

On February 15th, PFF will be hosting a congressional seminar on the DTV transition.
For more info and to register, click here.

I'm listening to a Webcast of the Senate Commerce Committee's hearing on the Cyren Call proposal.

The idea, put forward by former Nextel Vice Chair Morgan O'Brien, is for Congress to take 30 MHz of (formerly analog TV) spectrum in the 700 MHz band, which is currently scheduled to be auctioned early next, and give it to a "Public Safety Broadband Trust" that would be managed by his new company, Cyren Call. Cyren Call would lease the spectrum to commercial wireless companies, which would build out a nationwide network and use it for commercial services, but public safety agencies would get to use it more or less for free.

Cyren Call has lobbied the plan on the basis that it's needed for public safety interoperability and broadband. Not surprisingly, public safety seems to think it's a great idea too. A study I co-authored (Full disclosure: It was funded by the High Tech DTV Coalition and CEA.) shows the plan isn't likely to work, for lots of reasons. (See http://www.criterioneconomics.com/news/070206.php.)

The thing I found really striking about today's hearing is that Mr. O'Brien came right out and said his real goal here is to create a new cell phone company, which (he argues) would benefit consumers. Did I miss something, or did we just go through a round of much-needed consolidation in the wireless industry? And, if things have changed and we really do need another carrier, what's stopping Cyren Call (or anyone else) from buying the spectrum at the auction?

The history of farming the FCC for free spectrum is long and sordid. Auctions seem to have gotten the problem under control. Hopefully, Mr. O'Brien's laudable candor will help Congress to see the Cyren Call plan for what it is.

Among the corollaries that fall out of the Coase Theorem is that, when property rights are ill-defined or uncertain, commercial transactions cannot take place because no party know what they own and the price system cannot function. It also follows from this corollary that parties will spend a great deal of time, money and effort to define property rights, inevitably in their favor. This modest point came to me last week while reviewing Jim's POP on the fight between cable and content companies over the extent of the Sony fair use principle and it applicability to head-end DVR-like technology.
But it is also a broader point that encompasses many of the current regulatory battles: uncertain property rights preclude private bargaining, but also inspire intense (and socially wasteful) amounts of rentseeking to define the property right. This is net neutrality, this is fair use, it is must carry, this was the unbundling fight surrounding the '96 Act. it is the intercarrier compensation debate; heck, it is a reductive tour de force of all regulatory behavior in the digital space. If property rights are ill-defined, or can be relatively easily re-defined, then parties will invest in getting the government to make these changes.
In the Cablevision case, the "fair use" principle precludes content and cable companies from quickly reaching a licensing deal for this admittedly new way to package and time shift content. In a Coaseian world, if one or the other party had a clear property right, a deal would quickly be struck. (For now, nevermind the productive effects.)

Member companies of the High-Tech DTV Coalition Thursday will be demonstrating digital-to-analog converter boxes, offering briefing materials on the DTV transition and pushing for a date-certain on conversion. This event, open to the public, runs from 9 am to 1 pm in 2322 Rayburn.