The Hill 

February 18, 2016

 

The Federal Communications Commission has a bad case of cognitive dissonance when it comes to assessing the competitiveness of today's video marketplace. Not surprisingly for a federal agency with a built-in pro-regulatory bent, the Commission's malady leads to regulatory policy run amok.

 

FCC Chairman Tom Wheeler recently announced a rulemaking proposal, which the full Commission is set to consider on February 18, to regulate the design features and functionalities of set-top TV navigation devices. This proposal currently is Exhibit A in showing the agency's cognitive dissonance.

 

Back in June 2015, the Commission adopted a rule establishing a presumption that local video markets, on a nationwide basis, are subject to "effective competition." The practical result of this commendable action is to prevent local franchising authorities from regulating basic cable television rates and associated equipment, such as TV set-top devices, unless the local authority rebuts the competitive presumption.

 

In defending adoption of the newly-adopted competitive presumption, the Commission pointed to the dramatic changes that have occurred in the video marketplace since the FCC started regulating basic cable rates after passage of the Cable Act of 1992. As the agency explained in a brief filed in the court of appeals on February 2, 2016, two decades ago, in most locations, a single cable operator often was the only purveyor of multichannel video service. Now, the Commission concedes in its appellate brief that there has been a "transformation" of the multichannel video marketplace, acknowledging that "consumers have alternatives to cable," and "cable's market share has sharply declined."

 

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But, of course, you don't need to be a videophile to know that consumers now have many video choices available other than the traditional cable, satellite, and telephone video offerings. Due to technological and marketplace innovation, rapidly proliferating online video services, streaming video devices, gaming consoles, and Smart TVs render Wheeler's proposal entirely unnecessary. In today's video environment, consumers may choose among a multitude of services and devices, such as Netflix, Hulu, Amazon Fire TV, Google Chromecast, Apple TV, and Roku. And they are doing so in exponentially increasing numbers. Indeed, online video subscriptions, led by Amazon Prime and Netlflix, now total 100 million - equal to, or even greater than, the number of subscriptions to traditional video distributors.

 

The FCC needs to resolve its case of cognitive dissonance. And it needs to resolve it in a way that leads to abandonment of the agency's ill-conceived proposal for a costly new government-mandated and government-designed video navigation device. Otherwise, this will be another prime example of regulatory policy run amok.

 

* Randolph J. May is President of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland. FCC's Cognitive Dissonance Leads to Regulatory Policy Run Amok was published in The Hill on February 18, 2016.

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