Cable’s Dying, The FCC’s Killing It
The cable industry’s in trouble, and the FCC isn’t all that interested in helping it. Six cable networks are suing the Federal agency in an attempt to block "dual must-carry" requirements set to take effect in 2009. The nuances of the issue highlight that cable just isn’t keeping up with the competition in terms of capacity, and it appears the FCC is very content to help telephone and satellite companies steamroll an entire industry.
The digital revolution is scheduled for 2009, when broadcasters are required to switch to all-digital formats. The revolution was originally scheduled for 2006, but not enough people in the US had made the transition to digitally enabled televisions. The required transition frees up a lot of that broadcast spectrum in the 700 MHz band, which big companies like Google, AT&T, and Verizon are currently bidding on in order to provide better wireless coverage.
Note who’s not bidding in the auction: cable companies. They’re kind of busy right now try to save their business model from the potential government destruction on the horizon. Unfortunately, it may not be saved anyway, since they’re just not keeping up, and their business model has never been a really smart one.
So the FCC, led by Chairman Kevin Martin, who is generally opposed to regulating the telecommunications industry, but is quite keen on telling cable what to do, recently enacted a dual-must carry rule for the cable industry, stipulating that they must carry both analog and digital signals from broadcast networks until 2012, when the whole country really should be completely transitioned to digital via new TVs or set-top decoders.
That must-carry rule includes high-definition broadcasts where offered, which means that your local cable company could have to provide up to three versions of the same broadcast on three different channels, and maybe the set-top boxes as well. The original must-carry rule, enacted in 1992, made it so that cable companies had to carry local programming. Rules like these are enacted with the lower-classes in mind, to ensure they have access to local programming.
These rules fail to acknowledge that TV is not a Constitutional right, not even in America, but most of us subscribers were pretty glad that first rule was in place. This dual must-carry rule though, means cable companies will reallocate capacity (of which they are already running short) to follow the government mandate.
That means there is a distinct possibility (likelihood) that lower-return cable channels like C-SPAN will be dropped. C-SPAN, along with Discovery, A&E, The Weather Channel, TV One, and Scripps Network have filed suit against the FCC to stop the dual must-carry rule.
The American Cable Association voiced its support for the lawsuit via a press release this morning, calling the dual must-carry rule a violation of the First Amendment. The ACA represents 1,100 of the nation’s cable operators and are asking the FCC for an exemption for small and/or rural operators with a limited subscriber base.
“The FCC’s dual-carriage rule, as it stands today, puts an unreasonable and unnecessary strain on small operators’ system capacity,” said Matthew M. Polka, ACA president and CEO.
“The requirement, which does not include an exemption for even the smallest operators in terms of MHz or subscribers, will force hundreds of operators to either drop channels their customers want to watch or prevent the addition of new channels, in order to carry duplicates of channels they already offer, all while costing each operator tens of thousands of dollars in equipment upgrades."
Polka said capacity constraints and the cost of compliance will make it difficult, if not impossible, for small cable operators.
The flipside of this is that the cable industry has run itself rather poorly for years. Under a free-market theory, the market would dictate that consumers demand something and companies respond. There has been large support for a-la carte programming in the market, where customers could choose which channels they’d like to subscribe to rather than having packages with 30, 40, 100 channels they don’t want. Cable and satellite make a lot of money by stacking their packages with shopping channels and such, even though most don’t watch. Most watch about 15 channels regularly.
A-la-carte programming could be a viable solution to the problem the dual must-carry rule presents – after all, this is a pickle for both the government and the cable industry. A-la-carte programming would not only allow customers to choose which channels they want in their packages, they could also choose which ones to drop, thereby freeing up the capacity taken up by all those worthless forced channels. It would also keep Kevin Martin’s censorship brigade out of cable programming.
But cable doesn’t want to that either. Cable likes trying to make you watch stuff you don’t need or want. It’s part of how they make their money. And no competitor within the industry has stepped up to let the free-market economy do its work. Like oil companies, and phone companies, consumers’ choices are limited, and the industries collude to maximize profit.
But something’s going to have to give, probably a little on both sides.
All of these sudden conundrums cable finds itself in points to a larger issue: when it comes to keeping up with telecoms and satellite providers, cable just can’t keep up and is in big, big trouble. Their biggest problem is capacity. The recent scandal over Comcast blocking BitTorrent? Lack of capacity. When the phone companies are offering TV, Internet access, and phone service all together over fiber, cable’s toast, or at least relegated to the status dial-up is now.
Unless something drastic happens, cable’s days are numbered, and it’s a bit disturbing to see how eager the FCC is to speed along its extinction.