[Mb-hair] Broadcast TV on life support

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Thomas W. Hazlett: Broadcast TV on life support
>By Thomas W. Hazlett
>Published: June 2 2005 17:17 | Last updated: June 2 2005 17:17
>>

Broadcast television is fading into oblivion. Just two web sites, Google and
Yahoo!, now account for more advertising revenues than do the prime time
schedules of the three traditional television networks - ABC, CBS, and NBC -
combined. In contrast to the explosion in e-commerce, broadcast TV viewers
are fleeing to cable programming, which now easily beats broadcast TV in the
ratings. And those left to watch broadcast programs don¹t stick around for
the commercials. Remote controls, VCRs, and the growing popularity of
personal digital recorders are rendering the 60-second TV spot a quaint
black and white video clip.

In some ways, however, the dinosaurs of the early TV era are remarkable for
their longevity. The network Big Three dominated an earlier time under rules
crafted by the US federal government in 1952. By perversely applying a
doctrine of ³localism,² Federal Communications Commission regulators ended
up killing a fledgling fourth network then operating - DuMont - and
precluded new competition for decades. This was achieved via spectrum
policy, denying entrants the licenses they needed to compete.

This audaciously anti-competitive gambit was couched in the language of high
principle. Excluding all but a few was said to serve the ³public interest,²
providing not only for ³localism² but for ³fairness² and ³educational²
programs, to boot. Even as FCC regulators railed famously against the ³vast
wasteland² that their cosy network triopoly had wrought, as did FCC chairman
Newton Minow in a 1961 speech, the Commission moved to block alternative
media providing higher quality programs and a broader range of consumer
choice. Minow¹s FCC moved to suppress the emergence of cable TV, which
regulators declared could never be more than a niche fill-in for
broadcasting. ³Educational² goals were threatened, it determined, if cable
³siphoned² viewers.

But consumers wanted more video programmes, and entrepreneurs sought
innovative ways to deliver them. Cable TV ­ ³spectrum in a tube² ­ was a
regulatory bypass, recreating the transmission capacity FCC policies denied.
It too was blocked by FCC barriers; when it won deregulation in the late
1970s, new programmes were soon unleashed, and most US households subscribed
by 1988. By then, CNN had achieved the impossible: in just seven years, it
had become a profitable, mass market, 24/7 all-news network ­ just what
regulators had declared impractical and virtually illegal. Liberalising US
TV rules literally changed the world. When, in 1991, CNN cameras captured
Boris Yeltsin jumping on a Soviet tank, an empire was toppled ­ and a ³vast
wasteland² buried.

But the first generation cable success of CNN was not an equilibrium. New
rivalry came, once more, in the form of new spectrum. Digital satellite TV
systems launched by DirecTV in 1994 and EchoStar in 1996 were greeted as the
³death star² by cable incumbents, as they beamed 200-channel video bundles
to subscribers. Cable, scrambling to respond,spent $80bn to upgrade their
systems. The unregulated capacity competition triggered a new content boom.

One upstart to gain carriage in 1996 was the Fox News Channel. It made an
overt ideological appeal with its ³Fair and Balanced² slogan, hitting CNN
and the broadcast networks as slanted left. In contrast to news shows that
interviewed Ralph Nader activists as default experts, FNC featured talking
heads from the (Republican) Heritage Foundation. Critics cried foul,
portraying the new channel as a right-wing front ­ further advancing Fox
News as ³fair and balanced² and attacked by elite purveyors of opinion.

Fox News now garners more than the combined audience size of CNN and its
sister network, Headline News. But FNC (owned by Rupert Murdoch¹s News Corp)
receives only 25 cents per month for the average subscriber in homes it
serves (about 80m), below the 40 cents paid for the CNN/HN tandem. In new
carriage agreements, Fox is reportedly asking for at least 50 cents. This
shows a stunning turnaround: Just nine years ago, Fox News paid cable
systems over $300m in aggregate (or $12 per new subscriber) to gain initial
carriage. ³Fair and balanced² had to pay to play.

The gold discovered in these hills is prompting innovative counter measures
from both established networks and entrants such as the network headed by
former vice president Al Gore. The battlefield extends to radio, where the
meteoric rise of conservative talk shows (following the abolition of the
Fairness Doctrine in 1987) has triggered counter-counter liberal talk, in
the form of Al Franken¹s Air America.

Today¹s markets deliver diverse choices far beyond what the ³public
interest² in broadcasting delivered. With the transition to the
post-broadcasting television world ninety-percent complete, courtesy of
households paying for cable and satellite delivery, it is time cancel the
1952 TV Allocation Table ­ the longest run ratings bomb in US TV history. If
station licensees were given the right to use allotted frequencies for their
highest and best use, over-the-air broadcasting would quickly migrate to
more efficient platforms, and TV band frequencies would be redeployed for
mobile telephony and broadband ­ wireless services customers yearn to enjoy
and are willing to pay for. Once the radio spectrum is made available for
productive use by market competitors, additional generations of innovative
video content ­ and free speech - are yet before us.

This writer is a senior fellow at the Manhattan Institute for Policy
Research
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